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Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thanks for your continued patience. The meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Please stand by. Your meeting is about to begin. Hello, and welcome everyone joining today's Clean Energy Fuels Corp. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please press 1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Chief Financial Officer, Robert Vreeland. Please go ahead. Thank you, operator. Robert Vreeland: Earlier this afternoon, Clean Energy Fuels Corp. released financial results for the fourth quarter and year ending 12/31/2025. If you did not receive the release, it is available on the Investor Relations section of the company's website where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we would like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of Clean Energy Fuels Corp.'s Form 10-Ks, being filed today. These forward-looking statements speak only as of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA, and a reconciliation to these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-Ks today. With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair. Andrew Littlefair: Thank you, Bob. I am pleased to report that we closed the fourth quarter and the year with strong results. Q4 marked another period of solid execution across our business, with continued strength in our fueling operations and exciting progress in our upstream RNG production platform. For the full year 2025, our performance exceeded the high end of our guidance range, reflecting the resilience of our business model and the value of our diversified customer base. During the fourth quarter, we also took an important balance sheet action by repaying $65 million of debt. This reduction in leverage lowers our future interest expense while maintaining ample cash to fund our growth initiatives. Speaking of growth initiatives, our upstream RNG business achieved two very significant miles in the last few months. As many of you know, our South Fork Dairy project in Texas has been a long journey for our team and for our dairy partner, Frank Brandt. As you may recall, three years ago, the facility suffered a fire, set back the farmer's operation and our project schedule. But the resilience of our team and the commitment from the dairy kept this project moving forward. In the fourth quarter, we completed construction and brought South Fork online. When it entered service, it became the largest operating RNG project in our portfolio and one of the largest RNG dairy digesters in the country. I am pleased to report that even since the project's completion, Frank has added to his herd count, and we are considering expanding our production facilities. Another reason this is such a great milestone is that this is a 100% Clean Energy Fuels Corp.-constructed project, and we control all RNG operations. So the financial results are fully consolidated in our financial statements and not part of our JVs. We were able to leverage our many years of experience in engineering and construction and oversee a project that was completed on time and on budget. Hats off to our talented Clean Energy Fuels Corp. team. But South Fork is not our only major recent accomplishment. I am excited to announce we have begun injecting gas in our East Valley Dairy project in Idaho, the largest RNG project in our portfolio. This project is part of our JV with BP and processes manure from over 37,000 milking cows. Final project completion is on track for this spring. In the span of just three months, we brought online two of the largest dairy RNG projects in the country. These additions bring our total number of operating projects to eight, with an additional three projects in construction through our partnership with Moss Energy Works. I will remind you that all of this low-carbon fuel from these projects will find its way into Clean Energy Fuels Corp.'s fueling infrastructure. Our work is far from done. It takes time for new sites to ramp up and optimize production, as is typical in the industry. But this is a major milestone for Clean Energy Fuels Corp. as we continue to execute against our dairy RNG production plan. We now have scale and a clear line of sight to growing volumes in 2026 and beyond. It is never a dull moment in the RNG policy world, but 2026 has begun with encouraging signals across the major regulatory programs that affect our business. RNG is a domestically produced, waste-based biofuel with compelling environmental and economic benefits for our feedstock partners, whether at landfills, dairy farms, or other sources, many of which are located in rural communities. For commercial vehicle fleets, RNG provides a practical, low-cost, low-emissions alternative to diesel that is commercially available today. RNG offers this win-win solution while utilizing the existing network of natural gas pipeline infrastructure here in the U.S. This positive economic and environmental impact that RNG has on such diverse geographic and industry markets makes it easier to advocate for policies that recognize the full value of RNG and support sustainable industry growth. We feel good about the current policy backdrop. A few weeks ago, the California Air Resources Board released Q3 2025 LCFS data, which showed the first net deficit since 2021 driven by CARB’s program changes to accelerate emission reductions. This is a constructive development for LCFS fundamentals going forward. Regarding D3 RINs, we expect EPA to continue acknowledging the strong growth trajectory of RNG production and its critical role in meeting federal renewable fuel targets. The 45Z clean fuel production credit rulemaking is progressing. Like the rest of the industry, we are awaiting the updated 45Z GREET model. We remain optimistic that Treasury and the Department of Energy will recognize the avoided methane emissions and deeply negative life-cycle emissions of dairy RNG as directed by Congress and reinforced throughout recent rulemaking documents. My last comment regarding policy issues is regarding the announcement of EPA a few weeks ago that the administration is rescinding the endangerment finding under the Clean Air Act. We believe this is good because this action removes any lingering potential that there is or will be a mandate for fleets by one and only one technology. We hear repeatedly from operators that they continue to have a desire for a cleaner alternative than diesel for their fleets, and RNG provides that affordably and conveniently today. Collectively, these dynamics support the economic value of RNG and reinforce the importance of our integrated RNG strategy. Turning to our downstream operations, our fuel distribution business delivered another solid quarter. Volumes across our transit, refuse, and trucking customers grew, reflecting long-standing relationships and the essential nature of the services they provide. The strength and success of RNG as the premier clean transportation fuel was demonstrated by agreements that we have signed over the last several months with the likes of waste giant WM, which extended our partnership to provide services for 85 of their stations to keep their fleet of 8,000 refuse trucks fueled with RNG. The cities of Scottsdale, Phoenix, Washington, D.C., Nashville, Arlington, Virginia, and Fort Smith, Arkansas awarded Clean Energy Fuels Corp. the opportunity to flip their CNG to RNG, build stations, maintain stations, or provide their airport shuttle operations with RNG. Heavy-duty truck adoption of the Cummins X15N engine was a little slower in 2025 than we anticipated, but the fundamentals are improving. Challenging freight market dynamics forced many fleets to delay not only alternative fuel decisions but overall truck purchases of any type. Some of those headwinds have begun to ease. In its full year on the road, the X15N showed excellent performance with similar power, torque, and drivability to diesel for those first customers to test drive demo trucks and purchase the beginnings of a fleet of trucks equipped with the new engine. As we talk to fleets, the message continues to resonate. RNG is the best available solution today for fleets looking to lower emissions while using a reliable fuel, while reducing operating cost and achieving a lower total cost of ownership than diesel. The engine technology works, the infrastructure is built, and the fuel is widely available at a lower cost than diesel. We are currently working with a number of third-party carrier customers which are actively using their RNG-operated X15N trucks as a sales tool to attract those hundreds of shipper clients that are looking to address their Scope 3 emissions goals. We see good momentum for heavy-duty adoption and believe that will continue throughout 2026. Before turning the call over to Bob, I want to provide a few high-level comments on our 2026 outlook. We expect continued growth in RNG volumes, both the third-party supplied RNG we deliver through our stations and the RNG we produce at our dairy RNG facilities. Our overall results are expected to improve over 2025 with a range of adjusted EBITDA of $70 million to $75 million. Bob will share more of the details, but our plan reflects moderate volume growth in line with gradual adoption of trucks utilizing the X15N, some extensions of multiyear major fueling contracts, a constructive view of environmental credit prices, significant progress in financial improvements at our dairy RNG production facilities, and a concerted effort at driving down operating costs. We are pursuing growth across our fully integrated RNG model while evaluating opportunities to optimize costs and streamline our operations. We are scaling our own production of negative-emissions dairy RNG while supporting customer adoption of low-emissions, low-cost RNG fuel across the U.S. and Canada. Clean Energy Fuels Corp. is well positioned for 2026 and beyond. With that, I will hand the call over to Bob. Robert Vreeland: Thank you, Andrew, and good afternoon, everyone. We finished 2025 mostly in line with our expectations. Our GAAP loss for the year of $222 million was slightly higher than expected, principally from non-cash interest charges in the fourth quarter associated with our paydown of debt and the expiration of our delayed draw loan. Adjusted EBITDA for 2025 was $67.6 million, which exceeded the top end of our guidance of $65 million. As I have mentioned on our previous calls this year, please remember that the alternative fuel tax credit expired at the end of 2024, so the results of 2025 do not include any meaningful alternative fuel tax credit revenue or income. In 2024, for example, our EBITDA of $76.6 million included $24 million in alternative fuel tax credit income. So, on an apples-to-apples basis, a nice increase in 2025 adjusted EBITDA. For the fourth quarter, the alternative fuel tax credit amount in 2024 was $6 million to consider when comparing results to 2025. RNG delivered in 2025 was 237.4 million gallons, about 97% of our target. The slight shortfall really goes back to the first quarter where extreme weather hampered RNG supply. We were able to make up a lot, but not all, of the Q1 shortfall during the rest of 2025. In Q4 2025, we delivered 64.1 million gallons of RNG, which was approximately 5% increase over Q3 2025 and approximately 3% higher than a year ago in the fourth quarter. Also in the fourth quarter, we saw improved financial performance by our RNG upstream business, and we expect that trend to continue going into 2026. The results of our fuel distribution business, particularly at the gross margin level, were on par with what we have seen during the first three quarters, with the exception being our SG&A expenses in the fourth quarter were approximately $4 million above our normal run rate, due to one-off personnel and station exit costs. For 2026, our SG&A expenses will trend significantly lower. We ended 2025 with $156.1 million in cash and investments after having paid down $65 million in debt in the fourth quarter. At present, we do not have plans for additional paydowns of our debt in 2026. Looking further at 2026, we are expecting to deliver 250 million gallons of RNG with total fuel volumes of around 324 million gallons. Our RNG upstream business is expected to produce 7 million to 9 million gallons from eight operating dairies. Revenues for 2026 are expected to range from $420 million to $440 million with a GAAP net loss of $71 million to $66 million and adjusted EBITDA of $70 million to $75 million. We have a further breakdown of our guidance for GAAP and non-GAAP in our press release between our fuel distribution and RNG upstream businesses. For 2026, we expect to see significant improvements in our RNG upstream business, which is expected to have lower GAAP losses and positive adjusted EBITDA for 2026. Our fuel distribution business will see significant improvement in its GAAP net loss with adjusted EBITDA coming off from a robust 2025 performance due to anticipated lower but still very adequate fuel margins adjusting for normal pricing and market conditions, including impacts of some significant contract renewals and the amount of environmental credit value retained by us. We are maintaining a cautious view on the spread of natural gas to oil for 2026, but certainly short of a negative view. Having said that, we are constructive on RIN and LCFS credit prices for 2026 with an expectation that the RIN and California LCFS credit prices will continue at prices like we have seen to begin 2026. We also include 45Z credit values in our results for 2026 pertaining to the RNG production volumes in our JVs, as well as the South Fork Dairy which we fully consolidate. As I mentioned, we are expecting our SG&A expenses to come down by about 10% or over $10 million in 2026. That may be a run rate of about $25 million a quarter, and that includes the stock comp in there. Our capital expenditures should remain steady at approximately $25 million for our fuel distribution business, which includes maintenance CapEx as well as additional station build-outs, keeping in mind that in 2023 and 2024 combined, we spent $153 million in CapEx for our fuel distribution business, primarily for the build-out of our 19 Amazon purpose-built stations. We have now come down to a more normalized rate of $25 million, which was similar to 2025. Investments into our RNG upstream business for 2026 are expected to be around $40 million, solely related to our continued construction and eventual completion of our three Moss Energy Works dairy projects. We are using cash that we have on our balance sheet and cash generated from operations to fund the fuel distribution CapEx and our RNG upstream investments for 2026. We do not have any borrowings contemplated for 2026. We are expecting to generate around $50 million in operating cash flow in 2026. For comparison purposes, recall that in 2025, we PIK’d interest of $15 million, which benefited our operating cash flows in 2025. In 2026, we do not intend to PIK any interest, although our interest payments will be reduced by approximately $6 million for the year since we paid down $65 million of debt in December. With that, operator, we can open the call to questions. Operator: Thank you. If you would like to ask a question, please press 1 then 2. Once again, that is 1 then 2 to ask a question. We will take our first question from Rob Brown with Lake Street Capital Markets. Your line is now open. Good afternoon. Rob Brown: Good to see the upstream business starting to get to EBITDA positive. That is great news. Just a sense of the ramp trajectory of the eight facilities you have now open and operating and generating fuel. I think you have some metrics on the gallon volume, but how do you see the ramp trajectory to full capacity there playing out? Robert Vreeland: There will be a bit of a ramp. It is not a dramatic ramp, but certainly, mostly the second half of the year is a little better. You are not right out of the gate in Q1, but certainly much better than what it has been in Q1, and then it kind of ramps up each quarter. It is a significant improvement. We have a range of $3 million to $5 million of adjusted EBITDA, so you are going to ramp that over four quarters. Rob Brown: Okay, great. And then on the 15-liter engine and the truck market, I know it is a tough year. You said some signs of maybe spilling there. What are you hearing from customers in terms of the interest in buying trucks and interest in the 15-liter over this year? Andrew Littlefair: I think, Rob, you are seeing some of the macro issues that plagued the trucking industry clearing up. That is a healthier backdrop. We are engaged with a lot of the largest fleets. I continue to be encouraged that customers, even with rolling back of various mandates and different policies, are showing a great deal of interest in fleets wanting to be clean, environmental, and have lower-carbon, sustainable trucks. We are seeing and hearing from their customers, the shippers, that this is still of interest. We are working hard to come up with a total cost of ownership, which we can do in our business because we can price very aggressively to give them a good economic return on that natural gas investment, and then they have dramatic savings going forward. I am optimistic. We have demo trucks; not just Clean Energy Fuels Corp., others in the industry have stepped forward. We have the largest fleets in America demoing trucks. We are beginning to see some orders—still small but very instructive—coming. The final thing is the engine seems to be working really well. As I mentioned in my remarks, the torque and horsepower, drivability, even the mileage, is really improved from what we have seen before in the 12-liter. We have to work it hard, and there is a lot of policy turmoil that people are beginning to understand, but I feel better in 2026 than I did in 2025. Rob Brown: Okay. That is great color. Thank you. I will turn it over. Operator: Thank you. We will go next to Derrick Whitfield with Texas Capital. Your line is now open. Derrick Whitfield: Hey, guys. Good afternoon, and thanks for your time. First, thank you for offering both upstream and downstream guidance for your business. Maybe just on the upstream side, I know you touched on the prepared remarks about 45Z. Could you advise how you are accounting for it in your guidance, both on volumes and average CI? Robert Vreeland: We are accounting for it. We are accruing for it as we produce volume. We anticipate that where that would get recorded will be a reduction of cost of sales. In our plan, we are more optimistic than what is currently in the legislation for us to reflect CIs with dairy manure. I will not get into the specifics of exact scores because that varies at every dairy, and, frankly, the legislation is still forthcoming on that. But we are generally a bit more optimistic than what is currently in legislation, and we will record that as we go along in the year according to what is out there in legislation, but we anticipate that it will improve when the final rules come out. Derrick Whitfield: Maybe to put a button on that, if legislation were in the negative 50 territory, that is kind of where you would be today even though you believe that negative 200 might be the ultimate reading on average. Am I saying that correctly? Andrew Littlefair: I do not know that we told you it would be minus 200, but we agree that when this finally shakes out, when a 45Z GREET model finally gets adopted, and when we look at the legislation and from the engagement that we have had, we think that it should improve from that minus 50. Derrick Whitfield: Fantastic. And then leaning further on the upstream side, while I realize LCFS credits are not back to the levels where most of these projects were underwritten, we are seeing progress as you highlighted in LCFS and also potential through 45Z to further enhance economics. Outside of what you are doing with Moss at present, are the prices and 45Z getting back to a level where it might make sense to revisit some of the growth opportunities in your backlog? Andrew Littlefair: Not yet, Derrick. We are optimistic and constructive on where we see, and our partners as well, the LCFS trending over time. Just to remind the audience, we underwrote some of these projects when it was $150 or $180, so we have some room to grow there. I do not think you will see us underwriting any projects right now. We are very focused on bringing these on, having them contribute. We are pleased with that. We have to watch how some of the markets break before we invest more. We have three more projects we are very excited about. We will end the year with 10, breaking over early 2027 for our 11 projects, and we feel pretty good about that. We now have dry powder in case we see one that we have to have. But right now, consider that we are going to take a breather and make sure that what we have under construction and what we have operating get optimized. Derrick Whitfield: Perfect. Very helpful. Thanks for your time. Andrew Littlefair: Thank you. Operator: Thank you. We will go next to Matthew Blair with TPH. Your line is now open. Matthew Blair: Thank you. Hello, Andrew and Bob, and congrats on beating the top end of your 2025 guidance range. For 2026, in fuel distribution, you mentioned the impacts of some significant contract renewals. I think you also mentioned it sounds like you are retaining fewer of the credits in these renewals. Could you talk about the drivers here? Is this just a function of more competition in the market, or what is really causing this? Robert Vreeland: It is twofold. Absolutely, there is competition in the RNG world, and that is what it is. We are in a good place for that, but you cannot deny that there are a lot of folks wanting to put RNG places, and we have a lot of those places to put RNG, but we have to maintain our market share, and it comes at a price. On the contract renewals, that is a reality, but it is a very positive aspect of our model. It is a recurring revenue model, and we have a lot of renewals. We have had some major ones come up where we are reflecting where we are at with current market conditions, prices, other competitors, as well as what we have spent on CapEx in prior years versus where we are headed going forward. That will be reflected. This is very positive because we are talking about renewals, in my view, and the resulting margins are still very adequate for us. They are very good. We are coming off a robust 2025, I will say. We are not necessarily repeating that, but we are accommodating these renewals, and that is part of it. Matthew Blair: You touched on the weather issues from a year ago, Q1 2025. Are there any weather challenges so far this quarter that we should be thinking about? Robert Vreeland: A little bit. Not to the extent that we saw last year. There have been some freezes, but we are going to go mostly normal course on that. I am not anticipating coming out with Andrew Littlefair: some of our facilities saw minus 40 degrees. You have some operating challenges during that, but nothing like last year. We dodged that in terms of a perfect storm of production that came offline from our third parties. We did not see that this year, so that is good. Robert Vreeland: It is anticipated somewhat in our plan anyway, because it is going to get winter here and get darn cold, and maybe colder than what you would think. Matthew Blair: That is helpful. Thank you. Operator: Thank you. We will take our next question from Betty Zhang with Scotiabank. Your line is now open. Betty Zhang: Hi, Andrew. Hi, Bob. Thanks for taking my question. Could you give us an update on your JVs with BP and TotalEnergies? Is there appetite for growth from your partners? And if I heard correctly, it seems your upstream investments this year are solely related to the Moss Energy Works projects, so just wondering how those JVs are looking. Andrew Littlefair: That is right. The CapEx on the RNG is for those Moss projects, the completion of the three. We have that money, and that will get spent throughout the remainder of this year. Two of those projects will be finished, one in the spring, one a little later than that, and then the third project in 2027. That is all we have anticipated with our partners right now, Betty. Our partners—BP has a lot of landfill gas they bring on with their other investments. I think all of us are very interested in bringing East Valley, which is really a significant investment, a very large dairy, on and have it operate correctly. We have our hands full, and I think all of us feel good about where we are. We are always looking at opportunities, as I said on the last question, but right now, we do not have any hard plans or any other investments that we are ready to pull the trigger on. That would be the case with all of our partners. Betty Zhang: Makes sense. For my follow-up, would you be able to give us some color on 2026 RNG volumes as well as your own upstream production volumes? Robert Vreeland: Our RNG volumes are anticipated to be 250 million gallons, and the RNG production volumes from our RNG upstream JVs and South Fork are 7 million to 9 million gallons. I will add a little side note on that for everyone's information. That 7 million to 9 million gallons that will be produced at those dairies—all of that gas comes to us. That does also flow through our fuel distribution business. The economics on that can change. In everything except South Fork, it is kind of a 50/50 type share in the economics. When you are looking at that production volume, we get about 50% of the economics on seven of those, and the South Fork is fully consolidated, so we get all the economics there. Betty Zhang: Perfect. Thank you. Operator: Thank you. We will go next to Craig Shere with Tuohy Brothers. Your line is now open. Craig Shere: Good afternoon. I understand you are more optimistic heading into 2026 on the new advanced CNG truck sales flow. But given the narrowing spreads between diesel and CNG, is it reasonable to think that the payback period for the fuel savings for the fleet customer is getting a little elongated here? I understand they are trying to cut costs for the additional upfront cost of the CNG trucks over time, but are we at risk of any elongated payback period and that creating a headwind to this growth outlook? Andrew Littlefair: Of course, if the spreads narrowed significantly, you would see that payback period getting elongated. We do not see that yet. As Bob mentioned in his remarks, we are not necessarily optimistic about that spread widening, but we are constructive. We believe we may not quite see the spreads we saw in 2025, but we will have good spreads on natural gas versus oil price. Obviously, there is geopolitics at work here, but that is not an issue that has come up where we are seeing alarm. We can discount our fuel significantly and allow for about a two-year payback. We have to always work with our channel partners and with Cummins and with the dealers and with the OEMs to make sure that we are putting the best price of that package forward, because there is probably always work to be done on that, and the more of those we sell, the better that will get. We are working on that hard with all of those people. We have seen a little bit of tightening of the spread in the Central, South, and Eastern United States, but since January 1, that has widened a little bit. We are okay right now, Craig, but it is something that we keep our eye on constantly. Craig Shere: Is 2025 an all-time record RNG volume through the downstream, and how do you anticipate opportunities to source third-party RNG to continue to grow that over the next two to three years? Robert Vreeland: We would mark it down as a record quarter. It is probably gold medal worthy. Andrew Littlefair: On the last part of your question, everybody wants into the transportation sector, and there is a lot of RNG available. We have very good relations with the industry. We source from 90 suppliers today. There is plenty of RNG. What all of us need in the business is more transportation volume, and we are on the tip of the spear there working hard every day to create it. There is a lot of RNG available. All of us could use a little bit more adoption and more volume in transportation because the alternative markets are tough right now. Everybody wants in, and we are in an enviable place because we have all those nozzle clips. There is no shortage of RNG at present, and, frankly, not for the next couple of years, I would imagine. Craig Shere: I hope there will be soon. Great. Thank you. Operator: Thank you. We will go next to Eric Stine with Craig-Hallum. Your line is now open. Eric Stine: Hi, Andrew. How are you? Just sneaking a few in here at the end. Hopefully, no repeat. Following up on that last question, I know some time ago you had set the goal that it would be all RNG through your Clean Energy Fuels Corp.-owned stations, and I know that 100% of the volume in California is RNG. Where do we stand towards that goal? I know you talked about that in 2026, you expect about 250 million gallons of RNG. Andrew Littlefair: Maybe this, Eric: through our infrastructure, we are at 89%. Eric Stine: To get to 100, as you said, you have really no limitations in terms of RNG supply. Correct? Andrew Littlefair: Some of that 89% is because we have seen some conventional fossil natural gas go up. We sort of work against ourselves once in a while on that. We have done a good job moving almost all of the fuel to dairy in California. A few years ago, we talked about someday we would like to see that go from 10% to 30%. It is almost at 100. Maybe in 2026, it will be. We are doing well on that goal, and it will continue to be high like this, I would think, from here on in. Eric Stine: In terms of stations where you do O&M, there are cases where you are involved in the supply of the RNG as well. Is that correct? Andrew Littlefair: That is something that we see as an advantage. We have long-term relationships where we have built that station. There could have been a time in the past where a transit property got their natural gas from the local utility. Because we know them, and because we are experts in RNG, we have been able to flip transit properties from buying CNG from a utility to where we are now supplying the RNG. That is what I was talking about in my remarks. We have a big list right now of candidates in 2026 where we hope to work that relationship and move them from a competitor supplier—CNG from a utility—and move them over to RNG. We have a workforce, a team of people; that is what they do. We hope to add that. Wish us well on that. Eric Stine: It sounds like that would probably be the bigger objective than getting through your stations where it is at 89% up to 95% to 100%. Is that fair? Andrew Littlefair: That will help. If we land 4 million gallons or 5 million gallons as an adder where we were doing the maintenance but we were not supplying the gas, and we can flip that to RNG that we are supplying, that is one of the ways that number comes up. Eric Stine: Last one for me. You talked a little bit about the 45Z and waiting on the guidance to be dialed in some, but what conversations are you having in terms of, at some point, monetizing those credits with a third party? Robert Vreeland: Our expectation is to get into routine monetization. We have already been in the market with the ITC monetizing that, and our team is well connected with third parties there as well. That is the plan. We also work with our partners on that. We are in a good spot, and there is definitely an appetite out there for the 45Z credits. Eric Stine: Thank you very much. Andrew Littlefair: Thank you, Eric. Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to Andrew Littlefair. Andrew Littlefair: Thank you, operator, and thank you, everyone, for joining us. We look forward to speaking with you next time on our first quarter results. Have a good day. Betty Zhang: Thank you. Operator: This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good morning, and welcome to the Helix Energy Solutions Fourth Quarter and Full Year 2025 Earnings Conference Call. I am Frans, and I'll be the operator assisting you today. [Operator Instructions] I would now like to turn the call over to Brent Arriaga, Vice President of Finance and Accounting. Please go ahead. Brent Arriaga: Good morning, everyone, and thank you for joining us today on our conference call, where we will be reviewing our fourth quarter and full year 2025 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO; Scotty Sparks, our COO; Erik Staffeldt, our CFO; Ken Neikirk, our General Counsel; Daniel Stuart, our Vice President, Commercial; and myself. Hopefully, you've had an opportunity to review our press release and the related slide presentation released last night. If you do not have a copy of these materials, both can be accessed through the Investor Relations page on our website at www.helixesg.com. The press release and slides can be accessed under the News and Events tab. Before we begin our prepared remarks, Ken Neikirk will make a statement regarding forward-looking information. Ken? Kenneth Neikirk: During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations and assumptions as of today. Such forward-looking statements may include projections and estimates of future events, business or industry trends or business or financial results. All statements in this conference call or in the associated presentation other than statements of historical fact are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual and future results may differ materially from our projections and forward-looking statements due to a number and variety of risks, uncertainties, assumptions and factors, including those set forth in Slide 2 of our presentation and our most recently filed annual report on Form 10-K, our quarterly reports on Form 10-Q and in our other filings with the SEC. You should not place undue reliance on forward-looking statements, and we do not undertake any duty to update any forward-looking statement. We disclaim any written or oral statements made by any third party regarding the subject matter of this conference call. Also during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slides of our presentation provide reconciliations of certain non-GAAP measures to comparable GAAP financial measures. These reconciliations, along with this presentation, the earnings press release, our annual report on Form 10-K and a replay of this broadcast will be available under the -- for the Investors section of our website at www.helixesg.com. Please remember that information on this conference call speaks only as of today, February 24, 2026, and therefore, you are advised that any time-sensitive information may no longer be accurate as of any replay of this call. Scott? Scott Sparks: Thanks, Ken. Good morning, everyone. Thank you for joining our call today. We hope everybody is doing well. This morning, we will review our fourth quarter and full year 2025 results, financial performance and operations. We'll provide our view of the current market and provide guidance for 2026. Our teams offshore and onshore safely delivered another well-executed quarter. The fourth quarter turned out to be much stronger than we anticipated even with some segments being in a softer market condition and return into winter seasonal conditions that usually drive down utilization. In terms of earnings, the fourth quarter was our highest fourth quarter since 2013, so congratulations to our teams. Moving on to the presentation, Slides 5, 6 and 7 provide a high-level summary of our results and key highlights for the quarter and for the year. As mentioned, our fourth quarter results were better than expected despite the continued low cost stacking of the Seawell and lower utilization for the Q4000 in the Gulf of America. Revenues for the fourth quarter were $334 million, with a gross profit of $51 million and a net income of $8 million. Adjusted EBITDA was $74 million for the quarter, and we had positive operating cash flow of $113 million, resulting in positive free cash flow of $107 million. Highlights for the quarter include improved results in the Gulf of America shelf with good late-season utilization, including work in the Epic Hedron late into December. The successful transition of the Sea Helix 1 to its 3-year Petrobras contracts and securing a multiyear P&A contract in the North Sea that should enable both vessels in the region to be utilized in 2026, bringing the Seawell out of stacking. The year ended with revenues of $1.3 billion with a gross profit of $159 million and a net income of $31 million, generating an adjusted EBITDA of $272 million, and we had positive operating cash flow of $137 million, resulting in positive free cash flow of $120 million. Our cash and liquidity remains strong with increased cash and cash equivalents of $445 million and increased liquidity of $554 million at year-end. Highlights for the year include: a strong year in the Robotics segment working 6 trenches, 7 vessels and 3 boulder grabs with market conditions allowing for further increased rates. Three vessels on long-term contracts in Brazil, the SH1 and SH2 both finished the year under 3-year contracts with Petrobras at higher rates, and the Q7000 is on a 400-day contract with Shell and significant year-over-year improvement for the shallow water abandonment results. Over to Slide 9. Slide 9 provides a more detailed review of our segment results and segment utilization. In the fourth quarter, we continued to operate globally with minimal operational disruption with operations in Europe, Asia Pacific, Brazil, the Gulf of America and the U.S. East Coast. Slide 10 provides further detail of our Well Intervention segment. In the Gulf of America, the Q5000 achieved high utilization, completing work on a multi-well campaign for Shell and then commenced work on a 2-scope program for BP. The Q4000 had some gaps in the schedule in Q4, working on lower rates RV decommissioning projects for Murphy for a good portion of the quarter and returned to contracted works at well intervention level rates last month. In the North Sea, the Well Enhancer had 70% utilization during the quarter, working for 2 customers. The Seawell remained on warm stacked for the quarter, and we reactivated the vessel in January and commenced work earlier this month. In Q4, the Q7000 completed work on numerous wells for Shell on the 400-day decommissioning campaign in Brazil with 100% utilization. The SH1 had 61% utilization during the quarter. The vessel completed decommissioning contract for Trident and then completed inspections and acceptance prior to commencing its 3-year Petrobras contract. The SH 2 had a very strong quarter with 100% utilization for Petrobras. The stand-alone 15K IRS was on hire in Brazil contracted to SLB in the quarter, achieving 75% utilization in the quarter prior to returning to the U.S.A. Moving to Slide 11. Slide 11 provides further detail of our Robotics business. Robotics had another strong quarter and a very good year. The business performed at high standards, operating 6 vessels during the quarter, working between trenching, ROV support and site survey work on renewables and oil and gas-related projects globally. Robotics worked 4 vessels on renewables-related projects during the quarter and had strong vessel utilization overall, with 2 vessels working on trenching projects and 2 vessels working on site clearance. 5 trenches and 2 IROV boulder grabs were utilized during the quarter. We operated 2 vessel trenching spreads in Europe, including the GC Free and the North Sea enabler. The Glomar Wave and the Trym support vessels worked on renewable site clearance projects utilizing the IROV boulder grabs in Europe. We returned the Glomar Wave to its owners in late December following the expiration of its charter and replaced the vessel with the high-spec vessel, the Patriot in January. The Shelia Bordelon along completed ROV works in the Gulf of America, where she is currently undertaking ROV support works prior to being scheduled to head back to the U.S. East Coast. Also in renewables, the T1400-1 trencher completed work on a longer-term contract from a client-provided vessel off Taiwan and the T-1400-2 works from a client-provided vessel for a longer-term contract in the Mediterranean, which has now been extended to the end of Q1 2027. The GC II in the Asia Pacific region performed oil and gas support work offshore Malaysia during the quarter. Our renewables and trenching outlook continues to remain very robust with numerous sizable contracted works in 2026 through 2030 with a solid pipeline of tender activity as far out as 2032 with an improving rates year-over-year. Slide 12 provides detail of our shallow water abandonment business. Q4 is usually seasonally low in terms of utilization for the shallow water abandonment business. However, in Q4, the Hedron heavy lift barge worked well into December with 92% utilization. The dive boats completed 54% utilization and the lift boats 53% utilization. P&A spreads work in offshore totaling 538 days of utilization and the coil tubing systems at 83 days of utilization. In summary, whilst the year was softer than expected at the start, we finished relatively strong. We're encouraged by our strong Robotics and Brazil segments and see improving market conditions in the later half of 2026 and into 2027. I would like to thank our employees for their efforts, delivering again safely at a high level of execution, producing one of our best years in regards of MPT and our safety statistics continue to remain among our best on record. Before I turn the call over, I would be remiss if I did not address the announcement we made in December when Owen, our long-time CEO, announced his intent to retire. Our Board is focused on selecting the next CEO for Helix, following a long-established succession plan, working with outside advisers and Owen. We, the management team, the Board and Owen are committed to business continuity in a smooth transition. We are grateful that we can benefit from Owen's expertise and perspective during this transition as Helix is well positioned with a strong balance sheet that affords opportunities for future growth. On a personal note, I've worked with Owen for over 25 years. He has been a pioneer in intervention, providing leadership and vision to build Helix and drive long-term value creation. On behalf of Helix family, thank you, Owen. To continue our call, I'll now turn the call over to Brent. Brent Arriaga: Thanks, Scotty. Moving to Slide 14. It outlines our key balance sheet metrics as of December 31. At year-end, we had $445 million of cash and liquidity of $554 million, including the availability on our ABL facility. Our total funded debt was $315 million, and we had negative net debt of $137 million at year-end. Our cash -- our balance sheet remains strong, and we expect to continue adding to our war chest of cash as we anticipate generating meaningful free cash flow in 2026 with minimal debt repayment obligations between now and 2029. I'll now turn the call over to Erik for a discussion on our outlook. Erik Staffeldt: Thanks, Brent. We are pleased with the strong finish to 2025 delivered by our team. Our operating season extended deep into the fourth quarter before the winter season slowdown. As we enter 2026, we see conflicting signals. We have a strong backlog for the year and a base level of activity in our markets, which remain supportive and constructive. However, we also have a market that lacks conviction or direction. The macroeconomic cross currents allow an uncertain environment to persist, driven by geopolitics, regional conflicts and conflicting supply and demand and pricing dynamics. Despite these challenges, momentum is building as producers signal expanding operations and activity in late '26 or early '27. The global renewables market continues to be robust. Our outlook remains positive despite these near-term headwinds. As we provide our outlook for '26, it is supported by contracts for several of our key well intervention assets and trenching contracts in our Robotics segment. Our outlook for '26 is impacted by 2 distinct events causing year-over-year EBITDA reductions in the range of $40 million. Earlier this month, we completed the successful workover of the Thunder Hawk Field at an estimated cost of $16 million. This will impact our Q1 results. Midyear '26, the Sea Helix 1 is scheduled to perform its 10-year recertification, impacting our results by more than $20 million. Absent these events and despite the fact that various macro challenges from '25 continue into '26, we nonetheless see an environment that is better than '25. We are providing guidance of certain key financial metrics from our '26 forecast. revenue of $1.2 billion to $1.4 billion, revenues in line with 2025. EBITDA of $230 million to $290 million, as mentioned, impacted by Thunder Hawk workover and the Sea Helix 1 docking. CapEx of $70 million to $80 million. Our 2026 spending plans are primarily a mix of regulatory maintenance on our vessels and intervention systems and fleet renewal of our robotics ROVs. Free cash flow, $100 million to $160 million, continued meaningful free cash flow generation with variability driven by ultimate working capital movements. These ranges include some key assumptions and estimates. Any significant variation for these assumptions and estimates could cause our results to fall outside the ranges provided. Key drivers -- forecast drivers for our annual guidance include second half utilization on the Q4000 and Q7000, recovery of the North Sea well intervention market, strong markets for our robotics fleet and a stable shallow water abandonment segment. Overall, as shown on Slide 16, our guidance highlights our reliable EBITDA margins and free cash flow generation. This slide highlights our consistent and healthy cash conversion rates and attractive yields. Our quarterly results will continue to be impacted by seasonal weather in the North Sea and U.S. Gulf Shelf, primarily in the first and fourth quarters. In addition, the Thunder Hawk workover and timing of our vessel maintenance period will cause variances between quarters. Our quarterly financial performance in '26 is expected to follow the same cadence as our previous year's results. The second and third quarter being our most active quarters and the first and fourth quarters impacted by winter weather. With seasonal quarterly impacts and capital spending expected to be front-loaded, the timing of our free cash flow generation is likely skewed to the second half of the year. Providing key assumptions by segment and region starting on Slide 18. First with our Well Intervention segment. The U.S. Gulf of America continues to be a mixed bag. The Q5000 has good contract coverage with white space to fill in her Q3 schedule. The Q4000 is starting the year with contracted work into Q2 with white space in the second half of '26. Utilization on the Q4000 is one of our key areas of focus for '26. We're seeing a nice rebound in the U.K. North Sea well intervention market, albeit with some lower margin work. We have secured almost 400 days of work in the region with several additional opportunities. The Seawell has been reactivated and is currently working. We expect good utilization for the Seawell this year. The well enhancer season is expected to start in March. We are pleased with the recent level of activity in the market and are expecting a solid multiyear recovery. The Q7000 is currently in Brazil, completing its project for Shell. Short-term opportunities for the vessel in Brazil and West Africa are being developed. Utilization on the Q7000 is another one of our key areas of focus this year. The Sea Helix 1 and Siem Helix 2 are contracted to work for Petrobras throughout the year. The Sea Helix 1 has the scheduled 10-year docking midyear with a significant impact to our '26 outlook. Moving to robotics. The robotics trenching market continues to be a bright spot for Helix, specifically in Europe. In 2025, we announced multiple significant trenching contracts in the North Sea that form a foundation of our strong outlook. Bidding activity has been and continues to be extremely active. The APAC market is expected to be softer in '26 with plans to complete trenching projects in Taiwan and relocate the GC2 to the North Sea for trenching projects there. In the North Sea, the Grand Canyon III, Horizon Enabler and GC II are expected to have strong trenching utilization in '26. The GC III does have a docking in Q1 and the GC II has the transit to the North Sea in Q2. The site clearance vessels are forecasted to have good utilization. The T-1400-2 is contracted for the year on a project in the Mediterranean. In the U.S., the Shelia Bordelon line utilization will likely be lumpy with the forecasted combination of work in the U.S. Gulf Coast and U.S. East Coast. Moving on to production facilities. The HP I is on contract for the balance of '26, recently extended to June of '27 with no current expected change. We expect variability with production as Droshky field continues to deplete and the successful Thunder Hawk field workover expected to result in production in Q2. The workover expense of $60 million will impact our Q1 results. Continuing to Alliance, we are expecting to have a traditional seasonality in our shallow water abandonment segment with greater impacts during Q1 and Q4. Once again, we believe results will be ultimately driven by the length of the good weather season. We're seeing improvements in marine offshore and increased competition in the energy services, diving and heavy lift. We expect the Marine Offshore business to maintain good utilization on up to 7 liftboats with some variability and seasonality on the OSVs and crew boats. The Energy Services should have good utilization for 4 to 7 P&A spreads and 1 to 2 coiled tubing units. There is seasonality in diving and heavy lift business that the Hedron is currently completing its docking and is expected to remain idle with limited winter opportunities, after which we do expect an active season during Q2 and Q3. Moving to Slide 19. Our CapEx profile for '26 is heavily impacted by dry docks and maintenance periods on our vessels. The Hedron is currently completing a docking. The Sea Helix 1 has a 45-day docking scheduled midyear. Our CapEx range for '26 is currently $70 million to $80 million. The majority of our CapEx continues to be maintenance and project related, which primarily falls into our operating cash flow. Reviewing our balance sheet, our funded debt of $315 million is expected to decrease by $10 million in '26 with scheduled principal payments on our MAR debt. We expect to continue our share repurchase program with a target repurchases of 25% of free cash flow. At this time, I will turn the call back to Owen for a discussion on our outlook for '22 and beyond and for closing comments. Owen? Owen Kratz: Thanks, Eric. 2025 has been softer than 2024 with impact on both rates and utilization over revenue down 5% and EBITDA down 10%. However, this is better than expected and better than our revised guidance following the unexpected collapse of work in the U.K. The Gulf of America intervention results were impacted as a result of accelerating the timing of the Q4000 dry dock from 2026 into 2025. We did this to take advantage of what could be a stronger year in 2026 versus the softer second half of '25. The rest of the company showed flat to marginal improved results over expectations in our other segments, highlighted by much improved results in shallow water abandonment and Droshky production. However, Thunder Hawk remains offline for the entire year as partners decided to defer the required intervention until 2026. On the production side, there are some positive developments. Droshky continues to produce much better than expected. The Thunder Hawk intervention completed in February with successful results. The host facility operated by others is experiencing issues that don't allow us to immediately start production, but production is expected to start in early April. Absorbing the cost of the intervention and the slower-than-desired start-up will see EBITDA negatively affected for 2025, but it's a good intervention result with positive future impacts. All in all, it was not a bad performance for the year, allowing us to beat our revised guidance of $255 million of EBITDA, which was set following the unexpected shutdown of activity in the North Sea. Going forward into 2026, we expect the macro outlook to continue to be on the soft side with ongoing uncertainties. We expect the North Sea to start to become more active, led by decommissioning activities. We've reactivated the Seawell and expect market improvements. Likewise, we expect the well operations U.S. business to marginally improve. These expected improvements will be offset by the Q7000 results as it transitions between contracts. In Brazil, we have a 5-year special survey dry dock due on the SH1 before we -- therefore, we expect well operations in Brazil -- we expect operations in Brazil, the results to be meaningfully impacted as we see the SH I out of service and unavailable for approximately 45 days. Robotics should continue to show strong performance with long visibility on sustainable strong results. In shallow water abandonment, we have expected for a while that decommissioning should increase markedly in 2027. In 2026, we expect increased competitive pressures as contractors position for the expected improved market of '27. Therefore, we are expecting a flat to marginal drop in results compared to 2025. Production facilities HP I performance should continue unabated for 2026. There are a few give and takes, but we could see full year -- a full year in 2026 with similar overall results as 2025 as we get set for what we anticipate will be a stronger 2027 all around. Just a note on our guidance for 2026. We're expensing the Thunder Hawk intervention, and we have a 5-year special survey dry dock on the SH1 scheduled for 45 days out of service, as Erik had mentioned. Combined, these 2 events represent $40 million of EBITDA. You can do the math, with this highlights how strong and improving our core business is, and we anticipate a strengthening of the market into and through 2027. We have a lot of cash on the balance sheet and more to come. It should be time to put some of this cash to work. We exit 2025 with the strong balance sheet, as mentioned, with negative net debt and a significant cash position. Helix financial strength continues as we expect another year of strong free cash flow generation, leading to a potential cash balance approaching $600 million by the end of 2026. The market continues to be a bit soft with uncertainties. These 2 events combined create conditions that mean 2026 could be a year to consider meaningful M&A activities or capital investments, which could positively impact the company's shareholder value. We remain a market leader in intervention, [ dcom ] and robotics. We continue to demonstrate our resilience, our ability to deliver results even in a challenging market environment, and we're well positioned for the future. So with that, I'll hand it back to you, Erik. Erik Staffeldt: Thanks, Owen. Operator, at this time, we'll take any questions. . Operator: [Operator Instructions] And your first question comes from Jim Rollyson from Raymond James. Connor Jensen: This is Connor Jensen for Jim at Raymond James. I was just wondering kind of as you mentioned, a lot of cash on the balance sheet, more free cash flow expected in 2026. Maybe just talk about your preference of using that for repurchases versus M&A? And then if there's -- how the M&A market is looking at this time and if there's any actionable opportunities out there? Owen Kratz: There are actionable opportunities. Right now, I'd say that the Board management, myself, are all collaborating on looking at all the options. Of course, I think with my retirement and a new CEO coming in, there needs to be some buy-in and participation with the new CEO. So I think right now, all I can say is that there are opportunities and they're being assessed. Connor Jensen: Got it. Makes sense. And then you noted you reactivated the Seawell and expect strong utilization there. I was just wondering how the North Sea market was looking at this point and what you're hearing from operators there after the weaker activity this year or last year? Scott Sparks: We are seeing much better activity in 2026 than we did in 2025. In 2025, there's a lot of mergers of oil companies that put of operators that put a lot of things on hold. There has been a sizable change towards decommissioning. We've landed a couple of large size decommissioning projects. And so we're seeing this year that both the Seawell and the Well Enhancer will have very active seasons. And we're also already starting to see activity into 2027. So it's definitely an improved market, that's certainly a swing towards decommissioning over production enhancement. Operator: And your next question comes from James Schumm from TD Cowen. James Schumm: First, I just want to say, Owen, I just want to wish you the best in retirement. Thank you for all the support over the last several years. You'll be missed, and I hope to see you again soon. And then just maybe on the robotics revenue guidance, it's about flat year-over-year. Can you talk about some of the components of that? For example, is the oil and gas portion up, down or flat? Is offshore wind up this year? And then I thought trenching activity was supposed to be higher or stronger in 2026, but perhaps you could give some color there as well. Scott Sparks: Yes, sure. So we expect the oil and gas side for robotics to remain flat. If anything, it will go down from moving the GC II from the Asia market to the North Sea for the trenching contract for the NKT announcement that we put out there. So trenching is going to increase. Rates are increasing on the trenching side, but there's a lot of moving parts. The GC II is going to come up from APAC and establish itself in the North Sea. Then we have to swap out trenches from the enabler to the GC2 and then put the T1400-1 from originally working in Taiwan last year back to the North Sea and put that on to the Enabler. So there's quite a few moving parts of inter-regional transitions and then mobilization to various vessels that should set us up very well for '27 onwards. But it's still going to be a very good year in trenching and rates are improving year-over-year, and we've got a very solid outlook for Trenching. James Schumm: Okay. And then maybe just on Q1, I think maybe you give a good idea to sort of level set expectations so your stock doesn't get whipsawed in April. The consensus, I show $47 million of EBITDA. I mean, should we think about -- I don't think anybody had modeled those 2 issues. I mean I don't know if we can just haircut $40 million from $47 million, that would be only $7 million of EBITDA in the first quarter. Is there any help you can give to us to get some sort of, I don't know, reasonable expectations? Erik Staffeldt: Yes. Thanks for the question, Jim. I think we tried to highlight that the impact of the workover expense that we incurred will be a Q1 event, and that's the estimated $16 million. So that is a Q1 event. The S Helix 1 right now, we expect that to be a Q2 event. It could slip a little bit into Q3, but it's definitely not a Q1 event. But I think modeling the impact of the Thunder Hawk workover into the Q1 is appropriate. I think when you look at our historical performance for the last several years, Q1 is our lowest quarter naturally from a seasonal standpoint. And of course, we have the -- now this year, the impact of the Thunder Hawk. So that's the right way to model and think about Q1. Operator: And your next question comes from Josh Jayne from Daniel Energy Partners. Joshua Jayne: First question is just on the Q7000. The slide deck highlights additional opportunities in Brazil, but also that you could see some potential utilization gaps. Could you just elaborate what you're expecting from that asset in the back half of the year? And then also just speak generally to the intervention market today in Brazil, that would be helpful. Scott Sparks: The intervention market in Brazil is our strongest market. There's the most activity. We have the 2 long-term contracts with the SH I and SH II for Petrobras, both coming into this year with 3-year contracts. And those contracts have options for Petrobras to extend and there are better rates than we had previously. So Brazil is looking good. The Q7000 is currently contracted into April, May time frame with Shell. And then we're looking at opportunities within Brazil. There's a few smaller clients there that have some our work, but if that work doesn't come to fruition, we're probably going to send the vessel to Africa. We're very close to a larger contract for a good client in Nigeria. And so we've got targets in Brazil and targets in West Africa. There's also potential for opening up Angola. We've never really worked in Angola and we've had quite a bit of bid opportunity in Angola in recent times. So I think Q7000 will be utilized. There may be some gaps in schedule, but it will probably bounce between Africa and Brazil in the coming years. Joshua Jayne: And I think in Owen's -- towards the end of the prepared remarks, Owen, you talked about, I guess, a little bit more of a competitive nature within the Well Intervention segment. For the assets that have gotten utilization, how much of this is do you think, driven by a bit more competitive environment versus potential operators shifting some of their CapEx programs more towards exploration instead of well intervention type activities. Could you elaborate that a little bit more and how you potentially could see a recovery in 2027 after a lull this year? Owen Kratz: Just to clarify, and then I'll turn it back over. The comment that I made about the competitive -- increased competition was specifically meant to address the shallow water market. Yes, that's going to continue to be soft for '26 with -- we anticipate strong 2027, as a result, there's more competitors coming into the market and competition will be pretty stiff as everyone positions for the next year. Scott Sparks: Competition on the Well Intervention side is generally minimal. We compete mostly against rig white space. So we're seeing some rig white space in the Gulf, for instance, and that's given us a flatter look at the Q4000 for this year. . But I think everybody knows going into the latter part of 2026 and 2027, the drillers are expecting to have high utilization, and therefore, operators will switch their white space intervention work from rigs and hope back to us guys, and that should lead to a better 2027, so. Joshua Jayne: So just one last follow-up on that point. So is that -- just given that backdrop, is it fair to say that the outlook for example, for the Q4 is probably better in '27 than it is in '26. Is that fair? Scott Sparks: Yes. I think the Q4, for instance, we have a good first half of the year. We've got some white space in the second half of the year. We may end up chasing decommissioning work like we did in the latter part of 2025 for the Q4 but 2027, we should see a more solid year. Operator: [Operator Instructions] And your next question comes from John Basler from Basler Capital. . John Basler: I'm just curious what types of gaps in your portfolio would you be looking to address or scale to be gained through M&A? Owen Kratz: Well, there's quite a few. I wouldn't call them gaps. I think strategically, looking forward, we're sort of at a crossroads here, where for the -- since we started -- basically started building the company following the '08 financial collapse. The focus has been on building out a fundamental fleet that puts us in a leadership role for Well Intervention, which we consider the most essential tool for the post-PDP section of the market. Having done that, we completed that, spent the COVID years and focused on paying down the debt and strengthening the balance sheet again to the point now where we have a very strong balance sheet. Now the next phase of growth will be to increase the value received on our assets by increasing our capabilities to become more and more of a solutions provider rather than simply a commoditized service provider, that would be one direction. I think there's still some geographic expansion for us to look at. So there's a number of pathways that we're looking at here. John Basler: And if I could ask one more. Is there any metrics or scenarios that you would look to, to determine whether you would revisit a strategic review as opposed to M&A? Owen Kratz: I'm not sure I understand it. Erik Staffeldt: I think from our strategy, I think we have positioned the company to obviously, to have a strong balance sheet and are well positioned from, you could say, a standpoint of M&A or capital investment. I think the Board and management team has been open to either direction. I think having the strong balance sheet and strong performance over the last several years has really positioned us for this. I think we see the benefit of, as Owen mentioned, adding different solutions and geographic expansion, but we also understand the benefits associated with scale. So I think from that standpoint, I think we're open to both. Operator: And your next question comes from James Schumm from TD Cowen. James Schumm: Just one more for me. Can you give us a sense of the out-of-service time like dry docks out of service days for 2025, 2026 and then what you have sort of scheduled for 2027. And I'm not looking for 2027 guidance or anything, but I'm just trying to get a sense of -- you've got this SH I headwind, do we have a similar headwind in -- for the SH II in 2027? Just what are the things that -- as we sit here today, we know that there's some potential headwinds or tailwinds for next year. Erik Staffeldt: Yes. I think you'll find most of the information on our '25 already in our results there, but we had the Q7000, the Q5000 and the Q4000 at different times in '25 drydock. As we look at '26, the assets that are impacting our results specifically, and that means being out of service during potential revenue generating, really, this year is the SH I, an example of the Hedron is in dock right now, but absent being in the dock, it still wouldn't be working because of the winter weather. So that is negatively impacting us in '26. I don't recall if there's another one in '26 that is negatively impacting us. As we look at '27, we do have the SH II that will be out of service right now that's expected to be early in '27 from a document standpoint. And I think I'd have to get back to you on any other of the larger assets that would have a docking later in '27. But the SH II will have one early in '27. Scott Sparks: The Seawell and the Well Enhancer will have some time in '27, but it will be in the off-season. So again, it will not affect our EBITDA generation. It will be in the early part of the year. Operator: And your next question comes from Ben Sommers from BTIG. Benjamin Sommers: So sorry if I missed this earlier, but just kind of thinking about the expected improving market environment kind of late '26, early '27. Just kind of any thoughts around potential pricing for well intervention work and then maybe specific basins that you think could really maybe see a market improvement and maybe be able to push pricing for some of that work? Scott Sparks: Yes. I think as we go into '27, I mentioned earlier that we believe that the drillers will have high utilization. And if that's the case, then their rates will increase we usually fall behind the drilling rates, but as they increase, we tend to increase slightly as well. So I think we'll see improved rates in the U.S. Gulf of Mexico. And when then the North Sea, we should see more decommissioning work that should lead to slightly improved rates. So I don't think there'll be a big jump in rates in the North Sea because we don't really follow the drilling market in North Sea. And then obviously -- and then it's where can we take the Q7000 if it's in Brazil, probably have higher rates if we have to chose work in Nigeria or Angola Equator Guinea, we'll have to see what the market conditions allow for. So it's going to be a bit of a mixed bag, but I'd like to think slightly improved. Benjamin Sommers: Awesome. And then just kind of on the Gulf there. Just kind of curious what you see in terms of like near-term utilization. Obviously, we have some pockets for the Q5000 Q4000 this year. So just kind of curious for any more color there and kind of the '26 outlook for that market? Scott Sparks: Yes. So the Q5000 is pretty well taken care of for the first half of the year, and we have some gaps in Q3 but then a solid Q4 for the Q5000. The first half of the year for the Q4000 is looking relatively good. And then like I said, it gets a bit lumpy up there, there's 2 or 3 intervention jobs that we're chasing for the Q4000 in the second half of the year, but then we might have to start going back to decommissioning work or some construction work. But it's early days for the year, but certainly, we have some space to fill on the Q4000 in the second half of the year. Operator: There are no further questions at this time. And now I'll give back the floor to the company for the closing remarks. Please go ahead. Erik Staffeldt: Thanks for joining us today. We very much appreciate your interest and participation and look forward to having you on our first quarter 2026 call in April. Thank you.
Operator: Greetings, and welcome to the Astronics Corporation fourth quarter and fiscal year 2025 financial results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. It is now my pleasure to introduce your host, Deborah Kay Pawlowski, Investor Relations for Astronics Corporation. Thank you. You may begin. Deborah Kay Pawlowski: Thanks, Shamali, and good afternoon, everyone. We certainly appreciate your time today and your interest in Astronics Corporation. On the call with me are Peter J. Gundermann, our Chairman, President, and CEO, and Nancy L. Hedges, our Chief Financial Officer. You should have a copy of our fourth quarter and full year 2025 results which crossed the wires after the market closed today. If you do not have the release, you can find it on our website at astronics.com. As you are aware, we may make some forward-looking statements during the formal discussion and the Q&A session of this conference call. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with Securities and Exchange Commission. You can find those documents on our website as well or at sec.gov. During today's call, we will discuss some non-GAAP measures which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release. So with that, I will turn it over to Pete to begin. Pete? Peter J. Gundermann: Hello, everybody, and welcome to our fourth quarter 2025 year-end call. We closed the year on a very strong note, and are happy to share the results. I will start off with a summary of the headlines for the quarter, then Nancy will go through the financials in some detail, then we will discuss our early look at 2026, finally, we will open the lines for questions. Simply put, our fourth quarter was very strong. Revenue of $240,000,000 easily set a new record, besting our previous high watermark set in 2018 by almost 13%. Sales were up on the comparator 2024 by 15% and the preceding quarter also by 13.5%. Sales growth was due to the strong market conditions we see across our business and solid execution across our operations. The strong sales volume combined with a number of efficiency, pricing, and productivity initiatives that we have implemented across the business resulted in a much improved Q4 margin profile for the quarter. We also benefited from a favorable mix in the quarter. Operating income was 14.8% and adjusted EBITDA was 19% for the quarter, both post-pandemic records. The improved margins drove improved cash flow, with $27,600,000 cash from operations for the quarter. We also completed a planned transition from an ABL line of credit to a cash flow revolver. At the end of the quarter, we had available liquidity of $231,000,000. To top it all off, we had total bookings in the quarter of $257,000,000, for a book-to-bill of 1.07, leaving us with a year-end backlog of $674,500,000, another new record. All in all, our fourth quarter was an excellent close to the year. I will turn it over to Nancy now to cover a range of specifics on the quarter. Nancy L. Hedges: Thanks, Pete, and good afternoon, everyone. I will walk through our fourth quarter and full year results in more detail, provide some color by segment, review cash flow and the balance sheet, and then close with key financial priorities. As Pete noted, we delivered on our expectations of a step change improvement in revenue growth in the fourth quarter. The 15.1% revenue growth also drove strong operational results. Gross profit increased nearly 29% to $80,000,000 and gross margin expanded 350 basis points year over year to 33.3%. The majority of margin expansion was the result of higher volume and favorable mix. This included a surge in aircraft spares orders that we expect will benefit the first quarter as well. The 2025 period also benefited year over year from repricing actions taken throughout 2025. Margin was also supported by some normal course catch-up pricing on a couple programs, overall productivity gains, and the benefit of earlier Test Systems restructuring actions, which more than offset the $2,900,000 of increased tariff expenses. R&D expense was $10,600,000 or 4.4% of sales, which is within an expected 4% to 5% run rate. Levels can vary from quarter to quarter based on the timing of projects. The $7,300,000 decline in SG&A expense was primarily the result of a $9,000,000 reduction in legal reserves and litigation-related expenses. SG&A included the incremental SG&A expense gained from the Buehler acquisition as well as the one-time legal and accounting costs related to it. At 14.1% of sales, we were at the lower end of our historic operating rate of 14% to 15% of sales. We expect to continue to benefit from lower litigation expenses and the cost saving measures we have implemented. Stronger gross profit and lower operating expenses flow through to operating income, which was $35,500,000, up sharply from $8,900,000 a year ago, and operating margin expansion of 10.5 points to 14.8%. On an adjusted basis, which excludes the acquisition expenses and continued litigation costs, operating income was $38,300,000 and adjusted operating margin expanded 450 basis points to 16%. We had solid conversion to net income, which was $29,000,000 or $0.78 per diluted share in the quarter, compared with a loss in the prior year period. I do want to point out that our diluted shares for the 2025 fourth quarter included 1,400,000 shares associated with the assumed shares underlying the remaining 5.5% convertible bonds, as the average share price for the quarter was above the conversion price on those bonds. However, there was no diluted EPS effect in the quarter related to the 0% new convertible bonds, as the average share price was below the $54.87 conversion price. As a reminder, we do have a capped call in place, which means that there is no actual potential dilution unless and until our share price exceeds $83.41, after which potential dilution comes on gradually beyond that price. Nonetheless, the calculation for the diluted average weighted share count will reflect the implicated shares associated only with the premium on the bonds, as long as the quarter's average share price exceeds the $54.87 conversion price. Adjusted net income was $28,500,000 or $0.75 per diluted share, which is lower than the GAAP reported net income as a result of normalizing the quarter's tax rate. The volume, mix, reduced litigation expenses, and pricing recovery benefited Aerospace operating profit in the quarter, which was $41,700,000 or about 2.5 times greater than the prior year period, and resulted in operating margin of 19% of sales. On an adjusted basis, Aerospace operating profit margin expanded 380 basis points to 19%. Even on a relatively low level of sales, Test Systems produced operating profit of $1,100,000 compared with slightly below breakeven results a year ago. The improvement reflects the benefit of simplification and restructuring actions taken in 2024 and 2025, partially offset by continued unfavorable mix and under-absorption of fixed costs at our current volume. We expect profitability to improve meaningfully once production on the U.S. Army radio test program ramps. Before we turn to the balance sheet, I wanted to touch on tariffs for a moment. As you all know, the U.S. Supreme Court held a imposed under the International Emergency Economic Powers Act or IEEPA exceeded the authority granted by that statute. We are reviewing this decision with our advisers to understand any implications for previously paid tariffs, and our go-forward cost structure, but at this time, we are not assuming any benefit in the outlook. To date, we have treated these tariffs as a normal cost of doing business, and have not recognized any asset for potential refunds. Time will tell if there will be an opportunity to recoup any or all of the approximately $8,000,000 in incremental tariffs previously paid. We will, of course, be monitoring the situation closely. Now moving on to cash and the balance sheet. We had a strong cash quarter and generated $27,600,000 in cash from operations in the quarter, and $74,800,000 for the year. Strong cash earnings in the quarter were partially offset by higher working capital to support increased order volume. Operating cash flow also included a tenant improvement allowance reimbursement of $5,000,000 for the quarter, which is offset by the CapEx in the buildout and consolidation for our new Redmond, Washington facility. For the year, we had $8,000,000 in reimbursements. Capital expenditures were $11,800,000 in the quarter, and $31,700,000 for the year. We still have some work to do on the Seattle facility consolidation, so there will be carryover into 2026. We are expecting CapEx of $40,000,000 to $50,000,000 for 2026. Not included in that number is approximately $14,000,000 to $18,000,000 of investment into a global enterprise resource planning system. Because of the accounting treatment for those types of projects, that spend will not be reflected in CapEx, but instead will come through as cash outflow from operations. We are planning a staged implementation of the ERP. Excuse me. And the project is projected to take approximately five years to complete, with the cost expected to be heaviest in 2026. We will be relying on both outside resources and a dedicated team to execute on the implementation. We closed the year with $18,200,000 in cash and cash equivalents, net debt was $324,800,000 at the end of the year, up from $156,600,000 at the end of 2024. The increase reflects the refinancing actions that we executed in September 2025 that included the repurchase of 80% of the $165,000,000 principal 5.5% convertible bonds, which required $285,800,000 given how far in the money those bonds were at the time. We also purchased a capped call for $26,900,000 which elevated the strike price on the new bonds issued to $83.41. To pay for the repurchase in the capped call, we issued $225,000,000 of 0% convertible bonds, we borrowed on our revolver, and we used cash on hand. As Pete mentioned, in October, we also entered into a new $300,000,000 senior secured cash-flow-based revolving credit facility, of which we had $85,000,000 drawn at year end. We closed the year with $231,000,000 in available liquidity, including the remaining available on the revolver and $18,000,000 in cash. Our capital allocation priorities remain oriented on funding organic growth and critical capacity and infrastructure investments, while maintaining a prudent and flexible balance sheet. We believe our current capital structure, improved profitability, and healthy liquidity position us well to execute on these priorities. Our financial priorities for 2026 include to deliver on our revenue outlook, supported by a record backlog and strong demand in Aerospace, drive further operating margin expansion with an emphasis on achieving sustainable high-teens operating margins or better over time, improved Test Systems profitability as volume ramps on the Army Radio Test Set Program, and to maintain a strong liquidity position while investing in our future. With that, we are pleased with the progress we made in 2025 and the foundation that we have built for 2026 and beyond. Pete, I will turn it back to you to discuss our outlook. Thank you, Nancy. Peter J. Gundermann: One more comment on 2025. It was, in retrospect, very much a year that played out as we originally expected. When it began, we thought it would be a year of more modest growth compared to the three years prior, but it would also be one where we would dial in and fine tune our efficiency initiatives and cost structure while realizing the benefit of pricing actions to bring about significantly improved margins. And that is pretty much what happened. Growth in 2025 was 8.4%, down from an average of over 20% for the three years prior, as we clawed ourselves out of the pandemic. But the more manageable growth we saw in 2025 allowed us to work on our margins, which today are much improved over the prior year. 2025 saw adjusted operating margin of 12.2%, up from 7.7% in 2024. Adjusted EBITDA was 15.6%, up from 12.1% in 2024. It is now time to talk about 2026, and we think 2026 is shaping up to be a very good year for our company. Long story short, we anticipate growth picking up significantly over 2025, and we believe our margin journey has plenty more room to run. A few weeks ago, we issued preliminary 2026 revenue guidance of $950,000,000 to $990,000,000. The midpoint of that range, $970,000,000, would represent growth of 12.5%. The high end of the range, $990,000,000, would represent growth of nearly 15%. This level of growth is a solid step up from 2025, but not as crazy and challenging as the years before that. As for margins, we do not issue bottom line guidance, but we believe that the broad range of initiatives that helped us make progress in 2025 remain in place, and we expect to see continued progress given the higher sales volume we expect to see in 2026. As for cadence, our current expectation is that first quarter sales will be in the range of $220,000,000 to $230,000,000. We expect a modest step up from there in subsequent quarters such that the second half of the year will see quarterly sales above $250,000,000. We expect that the sales volume will play well with our evolving cost structure and efficiency initiatives. There are of course some risks. The most prominent of those includes geopolitical risks, which are wide ranging and macroeconomic in nature, tariffs are another question mark, which is as unpredictable as ever. Closer to home, we continue to wait for the U.S. Army to turn us on for volume production of our 4549T radio test program. The government shutdown late last year did not do us any favors in this regard. We now believe that we will get the long-sought-after turn-on early in 2026 or shortly thereafter. In summary, we expect 2026 to be a remarkable year for our company. We expect to post strong growth and continued progress with our bottom line. We look forward to updating you regularly on our progress as we work through the year. And that ends our formal. Shamali, we can open up the line for questions now. Operator: Sure. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. If participants use speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. And our first comes from the line of Jonathan E. Tanwanteng with CJS Securities. Please proceed with your question. Will (for Jonathan E. Tanwanteng): Hi. This is Will on for Jonathan E. Tanwanteng. Assuming you achieved the midpoint of your Q1 full year revenue guidance, you will be doing $245,000,000 to $250,000,000 in quarterly revenue on average in Q2 to Q4. Can you do a similar 19% to 20% EBITDA margin in those quarters? Peter J. Gundermann: That would be a goal. That is what we are thinking. We are shooting for. I would point out that the fourth quarter, the quarter we are reporting on today, was a little bit unprecedented. We had not been at that volume before, and it did benefit from a strong lineup of tailwinds. So, you know, we are hoping to repeat that kind of performance as we move through the year and as we go further. One of the other questions that we will answer as the year progresses is what our marginal on incremental revenue dollars might be. We have consistently in the past been in the 40% to 45%, 50% range. And that thesis will be tested as we move through the year into those higher volume levels. But at this point, that is our goal. Thank you. Super helpful. And then just one more. Can you add some color to what you are hearing from the Army radio test program? And is that the biggest swing factor in terms of achieving the high or low end of your revenue guidance? Peter J. Gundermann: It is less and less of a swing factor as we move through the year. We have discounted a little bit. We originally thought it would get started, you know, right around year end 2025. The government shutdown pushed it out, and the wheels are in motion, I guess, I would say. We believe it is a matter of when and not if. We believe that most of the task items that have to be accomplished in order to get a green light on the project have been or are being completed. So we think the user community is definitely in line to get it going, and we expect that to happen shortly here. But again, it is a little bit hard for us to predict when and how the Army will act on this kind of matter. But we are planning a second quarter turn-on. Will (for Jonathan E. Tanwanteng): Thank you. Operator: Our next question comes from the line of Gautam Khanna with TD Cowen. Proceed with your question. Gautam Khanna: Yeah. Just wondering if you could characterize the order influx in Q4. Was it concentrated in any specific product areas? Was it broad based? Maybe you could talk about some of the customers. Was it aftermarket orientation or OE? Etcetera. Peter J. Gundermann: Yeah. I would tell you that there was nothing singly outstanding or specific. It was pretty broad based and across the board, both for linefit and aftermarket, pretty consistent with our revenue base. That being said, there are a few pretty significant programs out there that we were waiting for, hoping to bring in in the fourth quarter. Had we done that, it would have been a blowout fourth quarter bookings number, but as it is, we feel like, you know, there is pretty good targets for the first quarter and second quarter as we work to pursue those things that have maybe slipped a little bit. But nothing really special, I would say, that drove fourth quarter bookings. It was just rising tide, you know, lifts all ships, and we were beneficiaries of that. Gautam Khanna: And that leads me to my follow-up, which is just can you characterize what you are seeing in Q1 and the pipeline beyond Q1 with respect to orders? Peter J. Gundermann: Yes. We are pretty optimistic. I mean, you know, we obviously have to keep bookings above shipments to some extent in order to achieve kind of a 10% to 15% growth rate in 2026. But at this point, obviously it is early in the year, but we feel pretty optimistic we have got kind of a target-rich environment that we are working in that we should be able to convert into revenue dollars in plenty of time to achieve that growth. So at this point, of all the things we kind of sweat about, the bookings and the demand in the market is not really one of them. Gautam Khanna: Terrific. And then just lastly, on pricing broadly, I do not know if you could characterize how that is trending and I do not know if you are willing to comment beyond 2026, but with respect to pricing opportunities for the overall portfolio. Peter J. Gundermann: That is a good question. I think I am pretty pleased with the achievements we have had kind of repricing our business mix on the heels of the inflation that we saw over the last few years. That definitely has been beneficial to our results. And I would tell you that if I look across the book of business, this is a kind of a hard thing to estimate, but we are probably somewhere in the 70% to 80% complete range there. We have a few major programs that will be coming due over the next year, year and a half, and we will, you know, execute on those as we have on the others. But for the most part, you know, we have kind of fixed the deficit that we found ourselves in when inflation kicked up costs faster than we could raise prices. I think we are catching up. We are well on our way. We have got a little bit further to go, but for the most part, I would say we are 70% to 80% done. Gautam Khanna: Terrific. Thank you. Peter J. Gundermann: Thank you. Operator: Our next question comes from the line of Michael Frank Ciarmoli with Truist Securities. Proceed with your question. Michael Frank Ciarmoli: Hey. Evening, guys. Nice results. Thanks for taking my question here. Apologies for the background noise. I am on the news. Just Peter, Nancy, on the Aero margins, you know, really great performance. I mean, you maybe just unpack that a bit? I mean, obviously, it sounds like you got a pretty big tailwind from reduced litigation and reserves. But then I think I heard you call out a pretty significant order for spares. You got the pricing. You know, I am assuming we are not going to take this and run-rate it forward, but maybe if you kind of remove some of those items, you know, I am thinking litigation and spares, you know, are you still trending, you know, above that maybe, you know, high 16%, 17%, or do you think you kind of do better than that going forward here with these volumes? Nancy L. Hedges: No. I think there is definitely, you saw, Mike, our adjusted table in the back, which removes the litigation and the, you know, the nonstandard types of items. So we are at 19.8% on an adjusted basis for Aerospace. There is obviously mix was beneficial in there, and we had some of those repricing actions that we mentioned. But we still think that high teens is achievable. You know, we have, you know, we have been in that mid to high teens all year. You know, this quarter was quite favorable. We think some of that mix is going to continue on into Q1, as we mentioned. So, yeah, there could be some puts and takes quarter to quarter, but, yeah, I mean, that mid to high teens is where we expect to run. I would also add, Michael, that one of the things that excites me about our situation right now is it is not one thing. It is not one program. It is not one driver that is really producing the results. It is more a groundswell of things all across the board, and we do not dive into them all in too much specificity. But the strength of the results is based on a real broad-based set of drivers, which gives us a lot of confidence that it is going to continue. So just wanted to throw that in there. Michael Frank Ciarmoli: Okay. Okay. And, Nancy, yeah, I was looking at that table. I guess the press release talked about a $9,300,000 decrease in litigation. And, I mean, we could probably take it offline because I see the $1,400,000 in there. But was there any way to quantify the benefit to the margins from the spares? Nancy L. Hedges: Yeah. It is terms of quantify, we could probably quant. It was just a favorable aftermarket environment, Mike. So there is not necessarily one program. It is just, it was, like Pete said, we got some broad-based tailwinds that were behind us, and it happened to be a particularly, you know, a particularly strong quarter in terms of aftermarket. Right. And if I add a little color to that, we are not a business that generally has a whole lot of spares and repairs kind of aftermarket business. We do a lot of retrofit business, but as you know, Michael, for us, that is pretty consistent with how we sell to OEM applications also. So it is not a retrofit. It is this quarter benefited from kind of a spares and repairs element, which is a little bit over and above what we typically see. So that is why we called it out. Michael Frank Ciarmoli: Okay. That helps. And then, Pete, if I may, just on the outlook for 2026, any, maybe can you give us a sense of what kind of production rates you are thinking about? I mean, obviously, we heard, you know, from Boeing, there might be two rating reasons on the MAX. It sounds like, you know, maybe the bigger content wide bodies are certainly moving in the right direction. But any sort of assumptions underpinning kind of the revenue guidance? Peter J. Gundermann: I guess what I would tell you is that we get the same message from the OEMs that everybody else does, and we are planning and spooling accordingly. But when we publish our numbers, we are discounting that a little bit. We are sliding some of those rate increases three or four months, not as though we will be unable to keep up if, you know, if they do that, but, you know, just to be conservative, we feel like it is appropriate to discount it just a little bit. So there is some conservatism built into the numbers there. Michael Frank Ciarmoli: Okay. And then last one on 2026 and maybe just cadence of one program. Any general update on the MV-75? And then kind of where things stand with that opportunity and that ramp? Peter J. Gundermann: We are chugging away with it. You know, again, it is a little bit of a situation where the Army is pretty public in saying that they want to accelerate that program. We understand that that is not always an easy thing to do. I can tell you that we will not be the holdup if they want to accelerate the program. We think we are on schedule to do it as they want. In terms of revenue for the year, do not have this exactly in front of me, but I believe that we generated something like $30,000,000 of revenue in 2025 on that program, approximately $20,000,000 the year before that, and we expect to step up this year to somewhere in the neighborhood of $40,000,000. So it becomes a bigger portion of our overall task list. We expect that we are going to be done with the development phase of the program in 2027. So largely done by the end of this year. Michael Frank Ciarmoli: That is helpful. Thanks a lot, guys. I will jump back in the queue. Peter J. Gundermann: Alright. Thanks. Operator: Thank you. Next question comes from the line of Greg Palm with Craig-Hallum Capital Group. Please proceed with your question. Greg Palm: Yes. Thanks. Congrats on a good way to finish the year. Maybe just looking back, you talked a little bit about Q4 specifically, but as it relates to kind of the Commercial Aero segment, can you give us a sense on how both OE and retrofit performed for the year, like, an absolute and maybe relative to one another, and just based on your expectations for this year, any change in how both of those perform relative to one another? Peter J. Gundermann: Our sense is that they are both going to continue to be pretty strong, Greg. The production rates are well publicized. You know, they are well discussed in the industry. We do not have any insight beyond those, beyond what I have already talked about. If they can build the airplanes, we will ship the product. There is no question about that. And, otherwise, we continue to benefit from what I describe as a secular trend where people, they travel, have almost an insatiable desire to be connected and entertained. So there is pressure on the airlines in the aftermarket to keep up with people's desires, you know, passenger desires when they step on board a commercial airplane. And that is half our business is basically in-flight entertainment and connectivity. And we continue to see strong tailwinds both on the OE rate side and the aftermarket side. And we benefit also, as you know, that, you know, the technology life cycles in that part of the Aerospace industry are pretty short. So even though product may be functional, perfectly fine, just as intended, it becomes technically obsolete and needs to be updated. So we are in a constant position where we get the opportunity to try to, you know, replace ourselves really with newer product that keeps up with consumer electronics. So it continues to be a pretty good picture. I cannot tell you there is a meaningful shift one way or the other in terms of aftermarket versus OE production rates. We are fairly optimistic on both at this point. Greg Palm: And, yeah, that is good color. And on the retrofit, you know, specifically, as I think about, you know, some of that that you sort of alluded to, there is a lot of new things, you know, going on inside the plane. I mean, I can think about, you know, how we access to the Internet and, you know, Wi-Fi and how that might change, you know, from GEO to LEO, maybe even, you know, the exact way we charge our phones. So how does, how might that impact you this year? What type of opportunities might, you know, sort of emerge over the coming years? Peter J. Gundermann: Well, it is an interesting question. I do not know how much time we have on this call, but that is a big part of what we live for at Astronics Corporation. And I can think off the top of my head there are all kinds of things happening with satellite geometries or geologies, architectures, and the carrier systems, and the security protocols on wireless access points, even electrical power. I mean, people think of that as relatively staid, but it has not been too long since we moved from 110 volts AC to USB Type-A to USB Type-C. And now there is pressure for new wireless kind of protocols for charging in airplanes. So it is, again, a target-rich environment, and we have a pretty comprehensive product line that addresses all those product areas. And one of our challenges is to see where consumer electronics is going and stay in front of it and find a way to get it offerable and commercialized so it can get on airplanes. And we have a pretty good road map in a range of areas to address those opportunities. So, you know, it takes some time for some of those to play out, but I expect 2026 will be a meaningful year, you know, get a little firmer and we will talk about those developments as they down the road in our regular calls. But we think it is an optimistic setup for the year for sure. Greg Palm: Yeah. Okay. And I guess just last one. I wanted to just spend a minute on flight critical power. And you mentioned FLIRA, but, you know, just given the attention, some of the interest, and I know, like, unmanned aircraft, CCAs, it just seems like maybe there is an opportunity that is emerging there that could provide some additional opportunities as well. I just wanted to get your thought. Peter J. Gundermann: It is a very good question, and it is an exciting topic. It is one of our main strategic thrusts, flight-critical electrical power, and we have become specialists basically in designing electrical power generation and distribution systems primarily for smaller aircraft. And we do work across the board, but in that particular product line, we are specialists in small aircraft. We started off primarily focused in business jets. We have found our way into military programs, the FLRAA program or the MV-75 being the, you know, the kind of the big highlight, you know, so far that we are really excited about. That is a transformational program for our business. But while we are busy doing these things, these other class of aircraft have come up, like eVTOL, which are, again, small, electrically intensive aircraft, and drones. Not the, you know, the smaller dispensable drones that, you know, may or may not come back to fly a second mission, but the higher-end ones, the CCAs, like you mentioned, those are right up our alley. We have technologies that make our very well suited for these smaller remotely piloted or autonomous aircraft. And we are heavily involved in a range of development programs right now. But most of them are, you know, unofficial and not programs of record at this point. We cannot go into a whole lot of detail, and there are more questions than answers. But we are very excited about where that business is going to go. It is about 10% of our total right now, but it is one of the most potentially explosive growth areas in our business. So we are excited to see how it plays out. MV-75 gets the big headlines. It will continue to get the big headlines this year. But kind of in the background, there are going to be a number of other development programs that, and things we can maybe talk about more freely when the time comes, that could be pretty exciting for our company. Greg Palm: I am sure we all look forward to hearing more. I will leave it there. Thanks. Peter J. Gundermann: Alright. Thanks, Greg. Operator: Thank you. And ladies and gentlemen, this does conclude today's question-and-answer session, and this also concludes today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a great day.
Operator: Ladies and gentlemen, welcome to the Temenos Q4 2025 Results Conference Call and Live Webcast. I am Moradi, Chorus Call operator. [Operator Instructions] The conference has been recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Adam Snyder, Director of Corporate Affairs. Please go ahead, sir. Adam Snyder: Thank you very much. Thanks for joining us for our Q4 and full year '25 results call. Before I hand over to Takis, I'd just like to flag that we're hosting our Capital Markets Day tomorrow in London and virtually. You can still register on our website to attend if you've not done so already. I will be taking questions as usual at the end of this call related to the fourth quarter and fiscal year 2025 as well as our outlook for 2026. I'd ask if you could please kindly keep your questions related to strategy for the CMD tomorrow, where we'll also be talking much more extensively about our approach to AI. With that, I'll hand over to Takis. Panagiotis Spiliopoulos: Thank you, Adam. Good afternoon, good evening. I will talk you through our key performance and operational highlights for the quarter before updating you on our operational and financial performance. As Adam mentioned, we will go into more depth on our strategic execution and road map tomorrow at our Capital Markets Day, also covering AI, where we feel very well positioned with a strong moat for Temenos giving us a structural competitive advantage. Starting on Slide 6. We achieved all our 2025 guidance metrics and delivered product revenue, constant currency growth of 11% in the first year of our strategic plan, which is above the market growth of 7%. The sales environment remained stable throughout the quarter and we saw strong demand across regions and client tiers, including several wins with Tier 1 banks globally. We also continue to see strong signings for premium maintenance and this drove very strong maintenance growth in the quarter and full year. We invested across the business in both sales and product, in line with our strategic road map, in particular, growing our sales quarter carrier headcount by 60% to over 140 by year-end. And we executed well on our AI strategy across product, process and people that we will be talking more about tomorrow. We announced our 2026 guidance, which is based on the stable sales environment, our strong pipeline and are confident in maintaining business momentum through our focus on execution. And given the strong first year of execution on our strategic road map, we have raised our 2028 targets, reflecting the confidence in our strategic positioning and our good levels of visibility. Moving to Slide 7. We signed a number of deals with Tier 1 clients in the quarter. This is a client segment we are particularly focused on, given their size and scale, the diversity of business lines and their global reach. We have invested in dedicated global strategic sales, focus on Tier 1 and 2 banks, and it was encouraging to see us expanding our footprint in the fourth quarter. I would highlight 2 deals in particular. We signed a Tier 1 U.S. bank for composable core banking across multiple international markets and the Japanese Tier 1 bank expanding their Temenos platform for core banking and payments to 3 new countries. These successes demonstrate the strength and scalability of our platform and the value and trust our clients place in Temenos and our deep domain expertise. Turning to Slide 8. It is important for us to demonstrate the value we bring to our customers. A highlight this quarter is VPBank in Vietnam, serving over 30 million customers. They completed one of the largest and most complex core banking upgrades in the region moving to a hybrid architecture with Temenos Core and AWS for scalability. VPBank has been a Temenos core customer since 2006. Our platform scalability, functionality and local knowledge are key differentiators. The core banking platform now handles double the daily volume with 0 incidents, business processing speeds are 30% faster and payment transaction volumes are up 40%. This shows the value of our platform and trust our customers place in us and our extensive domain expertise. On Slide 9, our product and technology road map continues to be validated as market-leading by industry analysts. We were particularly pleased to be named a leader by IDC MarketScape for North American retail digital banking solutions. Given our focus on delivering our U.S. road map, which is a key part of our U.S. growth ambition. We also won best core banking system of the 2025 Banking Tech Awards, and we were recognized for customer experience in Asset and Wealth management. Moving to Slide 10. We executed well against our strategic road map, which translated into tangible results across the business and a strong financial performance in 2025. We reorganized our product and tech function into agile teams and hire senior talent, which strengthened our ability to deliver our road map. We launched multiple new products on our platform in the year, including a number of AI solutions. Our sales organization grew significantly with individual quota carrier headcount increasing around 60% to over 140 individuals across all regions. We invested in sales operations and enablement, which resulted in strong pipeline growth and strong signings, especially with new logos. Looking at the U.S. specifically, we also made good progress on our U.S. expansion strategy, increasing sales headcount to over 20 individuals and opening our U.S. innovation hub hiring 70 developers to roll out our U.S. product road map. Our U.S. pipeline has grown nicely, and we expect to close more deals in 2026. Turning to the next slide. We will be talking about our approach to AI, our competitive positioning and our AI strategy extensively tomorrow at our CMD. To summarize, we have a clearly defined AI strategy across product, process and people. This is focused on lowering total cost of ownership for our customers, speeding up delivery and empowering our people to leverage AI and enable greater productivity. As an example, we are also rolling out Anthropic tools across our entire software development life cycle. The adoption threshold for AI in the banking sector is very high due to high product complexity and significant risk aversion. This, combined with our deep customer trust and domain knowledge, creates a strong competitive moat for Temenos and gives us the right to win in the AI era. I will now run through our Q4 and 2025 financial highlights. Focusing on constant currency and non-IFRS financials, which are pro forma, excluding any contribution from Multifonds. On Slide 13, we delivered strong ARR growth of 12% with ARR now representing over 90% of product revenue. The growth in ARR was driven by growth in all our recurring revenue lines, both subscription and SaaS as well as maintenance. Our ARR growth gives excellent visibility on recurring revenue and future cash flows, supporting our long-term growth targets. Our product revenue, which is subscription and SaaS and maintenance grew 11%, well above the market growth rate of 7% in the first year of our strategic plan. On the next slide, we exceeded our 2025 subscription and SaaS revenue growth target with 9% growth year-on-year. We also delivered strong total revenue growth of 9% in the quarter and 10% for the full year. Growth was broad-based, reflecting robust demand across geographies and client tiers for our platform and products. On the next slide, non-IFRS EBIT grew 21% for the year and non-IFRS EPS grew 25%. While we made significant investments in our business product, [ GTM ] and operations, this was largely self-funded through our cost efficiency program. We have good operational leverage in our business. And saw the strong revenue growth, in particular, premium maintenance drove our profitability. Let me highlight a few items on Slide 16. We delivered strong ARR growth of 12% year-on-year in Q4 '25 with ARR now at $860 million. Cloud ARR was 39% of total ARR, excluding any contribution from Multifonds or the BNPL client, which terminated a contract in 2025. We expect cloud ARR to increase in the mix going forward as more clients move workloads to cloud environments. Maintenance revenue grew 15% in Q4 '25 and 12% for the full year, driven by premium maintenance signings. On profitability, EBIT margin improved by 3 percentage points to 34.7% for the year, reflecting strong operating leverage and savings from cost efficiency. These results demonstrate the strength of our business model and our ability to simultaneously drive growth while investing in the future. Turning to nonoperating items on Slide 17. Net profit was up 9% in Q4 '25 and 21% for the year. EPS grew 14% in Q4 and 25% for the full year, benefiting from both profit growth and the lower share count. We had an increase across net finance charges, tax and FX losses in Q4, offset by our strong operating performance. The tax rate for the year was 17%, in line with our guidance. On Slide 18, free cash flow grew 15% year-on-year, ahead of our guidance, reaching $256 million. This was supported by strong ARR growth, disciplined capital allocation and our continued focus on operating efficiency. On Slide 19, we have our changes in group liquidity in the quarter. We generated $179 million of operating cash in the quarter and bought back $30 million worth of shares in the buyback launched in December. We also repaid a bond which matured in November 2025. We ended the year with leverage at 1.3x comfortably within our target range of 1.0 to 1.5x. Turning to Slide 20, a few comments on our debt leverage and capital allocation. We launched our second share buyback program in 2025 for a total of CHF 100 million in December 2025. This will run until December 2026 at the latest. Reported net debt stood at $605 million at year-end. Finally, the Board is proposing a dividend of CHF 1.40 for 2025, which will be voted on at the AGM in May. Our approach remains disciplined and balanced, returning capital to shareholders while maintaining flexibility for future investment. Next, we have our 2026 guidance, which is non-IFRS and in constant currencies, except EPS and free cash flow, which are reported. For 2026, we are guiding to circa 12% ARR growth, about 9% growth in subscription and SaaS, about 9% EBIT growth, about 7% EPS growth and about 16% free cash flow growth. This guidance reflects the strong foundation we built in 2025, our execution focus and confidence in our competitive positioning and also our pipeline visibility. The guidance includes the headwind from the termination of a BNPL client in 2025 which we have given on the slide. There will be no further headwind from this beyond the current year 2026. And lastly, we have raised our 2028 targets based on our strong first year of execution, confidence in our strategic positioning and good visibility. The new targets are for ARR above $1.23 billion, EBIT of about $480 million and free cash flow around $410 million. I am very pleased with our first year's execution, and I'm very confident about our strategic positioning and momentum. I look forward to sharing more at our Capital Markets Day tomorrow. Operator, please can be open for questions. Operator: [Operator Instructions] The first question comes from the line of Boulan Fred from Bank of America. Frederic Boulan: If I can ask a question around the whole kind of demand/competitive environment. Are you seeing any kind of new behavior from some customers trying to leverage, some of the new tools you actually described yourself to meet their needs around core banking software? Or it's still very much kind of business as usual in terms of competition with incumbents and some of the new vendors? Panagiotis Spiliopoulos: Fred, let me take this one. So on the demand environment first, as we said, it was pretty stable throughout the year and also in Q4. And also if I look at the first 2 months in Q1, there has been no change so far. And this is pretty consistent across all regions and across the Tiers. So really, so far, no change. In terms of -- I'll take the external competition first, still see the same trends as last year, less of, I would say, the so-called new vendors given some of the problems they're facing in terms of funding so still pretty much the same competitors both in the U.S. and outside the U.S. If there is -- the one thing we could call out is emerging markets, clearly showing a consistent positive trend with a slight improvement every quarter. Now when talking to our bank customers. Clearly, we haven't seen any trends in that direction you're mentioning. If at anything, the discussions are how you Temenos can help us with basically two things. One is with AI to have faster installation, faster deployment and easier upgrades. Because if we can help clients do that, they would substantially save on implementation time frames. But in terms of anything regarding the core banking space, we don't see any trends in that direction. Always keep in mind, there is two elements or two dimensions, which we need to be aware of. The customer risk erosion, which is very high with banks is a mission-critical systems. There is zero tolerance for hallucinations. You need to have as a bank always deterministic decision making and not probabilistic, which if you get it wrong, there is a very high cost to errors. And on the other side, we are seeing as a trusted domain expert. We're facing very highly complex workflows, which are very difficult to replicate. So from that perspective, we're going to talk more about tomorrow. So far, not seen an impact. Operator: The next question comes from the line of Charlie Brennan from Jefferies. Charles Brennan: Two, if I could. Firstly, on the guidance, I'm pleasantly surprised by how confident you are for 2026. If I add back the BNPL contract, it looks like you're targeting an acceleration in ARR growth in '26. We're not seeing many software companies more broadly taking these market conditions as an opportunity to point to accelerating growth. Can you just give us some visibility into pipeline coverage maybe versus last year or level of confidence from the known renewal of 10-year licensing deals from prior years versus new logo requirements that just shape your confidence in 2026. And then separately, just on the maintenance, obviously, very, very strong growth. Can you just remind us what customers actually get for the premium maintenance option? And is this a onetime uplift to your maintenance revenues? Or is it more of a sustainable source of growth going forward. Panagiotis Spiliopoulos: Charlie, on guidance, so first, if you look at the performance in 2025, where we absorbed already some of the headwind from this BNPL client downsell. We have mentioned throughout the year, on one hand, the stable sales environment. But on the other hand, we've also been investing a lot in additional quota carriers, which we have hired throughout the year. And clearly, that has helped the pipeline evolution. That's one thing, and you would also expect this not to be yet visible in signings in '25, but this should happen in 2026, given the usual 12 to 18 months lead time. That's one thing. So clearly, we feel pretty good about the pipeline given the investments we have done, specifically also in the U.S., clearly, we started with a relatively low number of salespeople, and we're now at 20-plus and they have substantially built a good pipeline, which we are now about to execute to sign deals throughout 2026. The next one to highlight our confidence is we've done a lot of investments also in how we qualify the pipeline, how we track it. And as part of that, you've also seen now a number of quarters delivered as planned or as predicted. So we have not only better visibility and also the quality of the pipeline is much better understood. And the third element I would put, and we always made it clear that there is also a number of large deals included in our guidance, our approach, taking a weighted approach in terms of the risk proved the correct one. And clearly also for 2026, we have quite a number of larger deals included in the pipeline. So overall, it's a mix of, let's say, internal process improvement and a good market environment, which is giving us that confidence. And yes, you're right, we would expect, excluding this impact to have 15% on ARR growth. Now the renewal pool -- let's put it like this. We have talked about the special situation of what we see and what we have in terms of situation on 2027, where we get basically the 2 things coming together, the 10-year renewals from 2017 and the first time renewals from 2022. And clearly, that's helping in terms of our confidence. However, and I think this is an important element. We do not, today, I think there is a specific revenue benefit included in 2026 guidance. The majority of the revenue we would still expect to happen in 2027 from the respective pool. Clearly provides some sort of safety net. And what we can say is the combined renewal pool for 2027 is definitely something attractive. But this is the same case also for '28 and the years beyond, yes. And this is quite sizable, but let's leave it there. Finally, on the maintenance part, what do clients get? I mean the premium maintenance, these are basically -- this is referring to two main areas. The one is you get enhanced support offerings designed for banks using Transact or other Temenos platforms who want a higher service level than the standard maintenance packages, faster response times and so on. So that's one thing. And the other one is extended support which is basically for customers who are staying on older versions for a bit longer and are not yet ready to upgrade, but we want to continue maintenance for this. Now clearly, we put a lot of effort into selling this to our existing customers. We have seen some good -- very good traction in the last 2 years. We would expect eventually this to slow down, given we have not an unlimited pool. So let's say, 7%, 8% is probably the appropriate growth for 2026. And then we expect this over the next 2 years to tail down to maybe 6%. I think this is a fair assumption, putting the potential of this pool together. Operator: The next question comes from the line of Sven Merkt from Barclays. Sven Merkt: It would be great if you could comment a bit further on the U.S. progress. In the release, it reads a lot like coming from improved sales capacity and better execution. And is there anything else you would call out, especially maybe from a competitive perspective? And how much of this progress is already reflected in the guidance? Panagiotis Spiliopoulos: Sven, yes, let me comment on the U.S. situation. Clearly, we have seen a nice buildup in our pipeline in the U.S. And clearly, as we mentioned, the majority of signed deals, we expect to see the impact in 2026. So this is unchanged. And hopefully, we'll have good news to report. Now there is an element of U.S. growth, obviously embedded in 2026 guidance and in our entire midterm plan to 2028. So this is -- we've taken clearly a prudent approach to how much we reflect. In terms of competition, we are clearly getting now into more RFPs and our win rate is improving. And I think we have -- we're really tackling a huge market with a real need and a long runway for banks to modernize. And I think we also have a much better value proposition in terms of our strategic road map versus where we were a year ago, both on the product side. We have the Orlando innovation Hub. So we're developing U.S. product for U.S. customers that can come in, co-innovate. So this is really helping also from a perception point of view. I think we're very well on track for the U.S. market in terms of specific products. So that's -- we've already been launching some and more will happen throughout the year. But clearly, we have been able already to start selling this. We can also see -- and maybe there is some anecdotal evidence. We can also see competitors becoming more aware of Temenos, maybe as a difference to 1 or 2 years ago. You'll hear more on this from Will and Barb tomorrow at our CMD. They're going to share updates on multiple fronts of our U.S. strategy, product pipeline, go-to-market initiatives. Operator: The next question comes from the line of Toby Ogg from JPMorgan. Toby Ogg: A couple from me. Just on -- just firstly, on the BNPL headwind, which you've mentioned in 2026 is 5 points of headwind on the subscription and SaaS, and 4 points on the EBIT and EPS. Is there any reason to think that revenue growth and EBIT growth wouldn't mechanically accelerate in 2027, given there is no further headwind from the BNPL headwind after FY '26? And then just secondly, just on the FY '28 upgrades, it looks like low single-digit upgrade on ARR, 7% on EBIT and low single digit on free cash flow. What was the main driver of the EBIT upgrade? And also, why is the upgrade a bit bigger than the free cash flow upgrade? Panagiotis Spiliopoulos: Yes. Toby, on BNPL, I think let's get through 2026 where we are confident about before we already talk on 2027. Clearly, yes, there should be no more headwind. Now we're still taking a prudent approach to both 2026 and also our midterm targets. And we're 1 year down into our journey, and we feel confident. And I think you can do the math what this means for '27 and '28. On the upgrade for 2028, we have delivered a good 2025 with a good exit in Q4. And clearly, the upside on -- given also the accounting, the upside was higher on EBIT than it was on ARR and free cash flow. Now the maintenance or the premium maintenance growth, clearly, that will slowly tail down. But we thought this is something we feel confident that we can still deliver. We're not going to lose this. So this is why the EBIT upgrade. The ARR upgrade, I think, is a function of the visibility we see on our pipeline. And ultimately, we wanted and we said we would maintain EBIT to free cash flow conversion, as we said 1.5 years ago around 85% plus. So this is to maintain this year basically the free cash flow of $410 million, yes. So we've always been talking about ARR growth with drive free cash flow growth. So the upgrade on ARR is about 2% and on free cash flow also 2%, but it's really the EBIT to free cash flow conversion, where we say 85% is the right number unchanged from what we said last time. Operator: Next question comes from the line of Justin Forsythe from UBS. Justin Forsythe: Just a couple of questions here for me as well. So on Regions Bank, that was one of your big podium wins or a key reference client, if you will, in the U.S.? It was, I think, your second large Tier 1, 2 bank in the U.S. that you signed in 2023. It seems like they're talking about publicly a pilot in the latter part of 2026 and beginning customer conversion in 2027, which is, by my math, about what, a 4- or 5-year full rollout. So I wanted to ask if that was what your expectation was going into the project or if there have been any delays or anything that went faster? And if that would also mean a direct uplift to revenues as a result? And I just wanted to get a little bit more detail on the BNPL impact that you're mentioning. And maybe just correct me if I've got this wrong, but I think it was first mentioned back in 1Q of '24, and then we talked about maybe accelerated impact in '25. So just curious if maybe you could talk a little bit about the phasing of that. And why we're continuing to see the impact here in FY '26? Panagiotis Spiliopoulos: Justin, clearly, we can't really comment on behalf of clients, also at Regions Bank. We're clearly feel quite happy with the progress the project is taking. If the bank is talking positively in that respect, we appreciate this, but this is as much as we can say. But all large projects have a long evolution in stages, and we feel very happy with our relationship with Regions Bank. On the BNPL customer, this is correct. We initially talked about in April on the Q1 '24 results. There was the first phase of, if you want, downsell. Last year, we mentioned this that there is an impact this year, which was reflected in our original guidance, which was prudent. We ultimately overdeliver despite this headwind. And so clearly, we see that as a good success. And the reason why we bring this up now is really because ultimately, it's about transparency and because it's impacting '26. We thought it's important to understand the underlying growth. I think, it's the last year that was important, we say, okay, we want to show the impact and also show the underlying growth. There is nothing more to that. Justin Forsythe: Got it. And maybe just because the first question was one that you wouldn't answer. Just a broader question on the core versus the other services business. I think I recall in the past that you're saying revenues roughly with the old TSL line were roughly 2/3 core versus maybe 1/5-ish Infinity, which is now the, I think, what you call it digital banking and then other solutions, wealth payments, et cetera. Maybe you could just talk a little bit about if that mix has stayed similar and/or how you expect it to evolve over time, i.e., is there a certain composition of the backlog that's skewed to say, core versus digital banking or otherwise? Panagiotis Spiliopoulos: Okay. So I think what you're referring and we're going to show this tomorrow. So if we look at product revenue, which includes SaaS and subscription and maintenance, and there's almost no term license left. If you look at this, then it's more than 80% is our core banking product. Digital is about 10% and the remaining 10% is spread across basically payments and wealth. And we would expect, given the growth trajectory and we're going to launch some very exciting tools this year on the digital side with AI. But you would expect this to maybe stay stable. But given the strong traction we see on core around the world and especially also in the U.S. maybe core would probably increase even to, let's say, 85% or something. Operator: The next question comes from the line of Christian Bader from Zürcher Kantonalbank. Christian Bader: In Autumn 2024, you laid out your road map including, let's say, over investments of between $110 million and $150 million. I was wondering if that number is still or let's say, this range is still valid. And how much of the investments did you spend in 2025? And how much is embedded in terms of investments in your guidance for 2026? Panagiotis Spiliopoulos: Christian, so as you're going to see tomorrow, and I don't want to spoil the party. Our investment algorithm, and we're going to give more detail for '26 to '28 is still going to be somewhere in the same ballpark. It was a broader range, but we have invested quite a bit in 2025. So if you -- you're going to see it's the same $110 million to, let's say, $130 million, $140 million number we plan for the next 3 years. What have we invested in 2025? We ended up -- as you can see from our cost base, pretty much where we had said we would end up. So around $30 million to $35 million we have invested. Clearly, there was a lot of self-funding or basically offset by efficiencies. For 2026, we have earmarked basically a very similar investment pool somewhere between, let's say, $28 million and $35 million and again offset by some efficiency gains, but that's about it. There is a bit of a mix shift. We were earlier with the go-to-market investment in 2025 and product came only in the second half. Clearly, the focus for 2026, it's mainly going into product because we see a lot of opportunity to invest when competitors are struggling. And when we have the market demand and really want to extend out competitive advantage. The investment is to be done now, including AI, but we saw this as an opportunity to accelerate some of the investments. But the overall pool remains broadly unchanged for the next 3 years. Operator: [Operator Instructions] The next question comes from the line of Laurent Daure from Kepler Cheuvreux. Laurent Daure: I just have two questions. The first is, if you go back to your digital and wealth operation, which are close to 20% of the sales. Referring the first comment you made, you told us that clients' decision-making was not really changing. I was wondering in this particular business as Wealth and Digital, given maybe the risk of AI disruption in the long run, do you see some clients delaying process, delaying contracts? Or is it the same pattern for your three businesses? And my second question is at the end of '25 on the maintenance, would it be possible to have a rough split between the customers that have taken a premium version and the ones that are still on the old version? Panagiotis Spiliopoulos: Okay. The first one on specifically Digital and Wealth. As you have seen from our numbers, we have so far not seen any delayed decision-making regarding any topics in the banks. And this is also what we see reflected in our pipeline. The discussions so far with the banks are not about, okay, we're going to write our own code to replace your wealth system or your digital system. Clearly, there is the potential for banks also experimenting at the edges around the core. But they clearly want to do this, and we do a lot. Barb is going to talk to more about this, about core innovation. A lot of the also AI-specific use cases with co-developing with banks. I think it's -- banks wanting to develop everything in-house and then maintain everything in-house and constantly upgrade and carry the burden of all the regulatory and compliance pressure. I think this is not something we see today, whether it will come in 10 years or so. But clearly, we don't have indications for that. In terms of the mix question for premium maintenance, whether we can't give that kind of disclosure, there has been, let's say, a good take-up over the last 2 years. We would expect this eventually, you'll get to a very good percentage of clients who want to take that and have taken that. So this is why we would expect the growth to trend a bit down. As always, at the start of the year, we are prudent in terms of our financial guidance and this applies to our revenue lines. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to the company for any closing remarks. Adam Snyder: Thanks very much. Thanks, everyone, for joining the call and webcast, and we look forward to seeing many of you at the Capital Markets Day tomorrow and continuing the dialogue. Thank you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: My name is Stella, and I will be your conference operator today. Welcome to the Primoris Services Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call and webcast. [Operator Instructions] I would now like to turn the conference over to Blake Holcomb, Vice President of Investor Relations. You may begin. Blake Holcomb: Good morning, and welcome to the Primoris Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today with prepared comments are Koti Vadlamudi, President and Chief Executive Officer; and Ken Dodgen, Chief Financial Officer. Before we begin, I'd like to make everyone aware of certain language contained in our safe harbor statement. The company cautions that certain statements made during this call are forward-looking and are subject to various risks and uncertainties. Actual results may differ materially from our projections and expectations. These risks and uncertainties are discussed in our reports filed with the SEC. Our forward-looking statements represent our outlook only as of today, February 24, 2026. We disclaim any obligation to update these statements, except as may be required by law. In addition, during this conference call, we will make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures are available on the Investors section of our website and in our fourth quarter and full year 2025 earnings press release, which was issued yesterday. I would now like to turn the call over to Koti Vadlamudi. Koti Vadlamudi: Thank you, Blake. Good morning, and thank you for joining us today to discuss our fourth quarter and full year 2025 results and our initial outlook for 2026. Prior to reviewing our 2025 performance, I want to begin by providing a few thoughts and impressions from my first several months as CEO. To start, Primoris is a great company because it has great people that embody a great culture. I have spent much of my time learning from and engaging with our employees whose efforts are essential to our past and future success. There is a culture of safety and caring that promotes the health and well-being of our fellow employees. This has consistently placed Primoris well below the industry average in terms of recordable incidents even while working more than 40 million hours in 2025. There was always more work to be done to achieve 0 incidents, but those who fit in best at Primoris place a priority on visualizing and assessing risks to prevent injuring themselves or others. There is also the recently launched Primoris Promise, a non-profit charity to support our people, communities and the causes that matter, which is funded by voluntary employee contributions, company donations and public support. These aspects of our culture help build morale, attract and retain talent, execute consistently and uphold trust with our customers. I have also witnessed a culture of innovation and an entrepreneurial spirit that keeps us nimble to adapt to our dynamic end markets, promote growth, drive productivity and provide solutions to customers as a valued partner. This manifests itself in providing the existing service to a nontraditional customer, such as building a major substation for a chip manufacturer or developing a new service for existing customers in need of a solution in the case of Premier PV. This culture is also exhibited in the utilization of digital tools and technologies. Our teams are using and developing tools that can assist our teams in managing project risk and contracts, improving cost estimates and scheduling, and are increasing our productivity and predictability in the benefit of Primoris and our clients. Engaging with our customers has been another focus for me, and I am impressed with the collaboration and client partnerships that have been nurtured to achieve ambitious plans in the coming years. The scope and scale of projects, specifically in solar, natural gas generation and power delivery continue to increase and the need for trusted, experienced and quality contractors is only becoming more critical. Primoris is in a prime position to be a provider of solutions to these customers and to form partnerships with new customers we may not have historically served. In summary, I'm excited and privileged to be in a position to lead Primoris in this next chapter of growth and value creation. I want to thank the Primoris Board of Directors for entrusting me with this responsibility and thank our Chairman, David King, for stepping in during the transitional period last year. With that, I'll move on to the highlights of our 2025 performance and the state of our end markets. Primoris delivered another strong year of operational and financial performance in 2025, achieving record revenue, earnings and backlog. We also generated strong cash flow that improved our liquidity and bolstered our balance sheet. This positions us to continue deploying capital to organically grow and expand our capabilities through acquisitions. We finished the year with over $11.9 billion in total backlog, including booking nearly $3 billion of new work in the final quarter of the year. This is a testament to the tireless efforts of our employees, our valued client partnerships and the strength of our end markets. For most of the previous 2 decades, power demand had remained relatively flat. We are now seeing projections that suggest power demand could grow by 50% over the next decade and potentially double over the next 15 years. There are several reasons driving these higher estimates, including data centers, increased electrification and onshoring of critical parts of the supply chain. While the rate of growth could ebb and flow based on energy efficiency gains or other factors, there is certainly evidence that our utility customers and hyperscalers are making investments in energy infrastructure to support a significant increase in load demand. The average increase in CapEx by our largest utility customers suggests that around a 50% increase in spending over the next 5 years compared to the previous 5 years. Replacing infrastructure that is past its intended lifespan, hardening the grid to be more resilient to weather events, and building or upgrading power infrastructure to support growing demand are all high priorities for these customers. The hyperscalers project plans for cloud computing and artificial intelligence are expected to result in trillions of dollars of investment and a substantial amount of power. We believe that the power generation needed to support the expected demand growth will require an all-of-the-above energy source solution, including solar, natural gas, nuclear and others. Primoris is well positioned to assist our clients in generating power to satiate the growing demand and also provide the transmission and distribution solutions needed to deliver energy where it is needed. Given the trends we are seeing, Primoris has been and will continue to be focused on attracting, retaining, training and developing our people to help meet the ambitious goals of our clients and community shareholders. Our employees are essential to our success and our most valuable asset. To help support our growth, we increased our labor force by more than 2,800 people in 2025 and remain committed to attracting and retaining the brightest and best in the industry. While some industry labor markets are tighter than others, such as certified journeyman and lineman, we have been successful in attracting qualified craft and field labor to meet our clients' needs. We have also focused on bringing in experienced project managers and developing new project leadership in anticipation of increased demand for projects not yet in our backlog. There is growing interest in the labor market to join organizations like Primoris that have strong secular tailwinds and are doing important work that improves the lives of our communities and supports economic growth in North America. We believe our ability to self-perform the vast majority of our work will continue to be an advantage for Primoris, and we are confident that we will have a fungible labor force to continue to grow and service our customers safely, timely and with the highest quality. Now let's look at the operating segment performance in more detail. In the Utilities segment, revenue and backlog both increased double digits for the year. The revenue growth was driven by better-than-anticipated activity in gas operations and continued strength in power delivery and communications. Power delivery contract renewals and rising demand led to MSA backlog growth as we continue to see market activity accelerate to upgrade, expand and maintain the electric grid. Margins in the Utilities segment also rose for the second consecutive year despite a decrease in storm response work in 2025, which is particularly accretive to power delivery margins. We continue to focus on our growing mix of project work and increasing productivity, specifically in power delivery to improve our margins. In 2025, we made progress in both with non-MSA revenues increasing almost 30% in the segment and with increased efficiency and utilization in several key geographies. We still have work to do in getting our margins in power delivery where we aspire to be in certain areas, but I want to credit our leadership and employees who have taken ownership in achieving this goal. We have made and continue to make investments in people and equipment to prepare for what we are expecting to be a significant increase in transmission and substation opportunities in the coming years. In gas operations, we exceeded our growth expectations, reaching $1 billion in revenue for the first time. Market share gains and capital program expansions, particularly in the Midwest and Southeast, drove our record revenues as did more favorable weather conditions for much of the year. Although we are not expecting a similar growth rate in 2026 due to several large projects not expected to recur, the business is in a solid position and operating at a high level. Communications had a year of double-digit growth through market share gains and further success in winning and executing large-scale network, long-haul builds tied to data center development. We are seeing this trend continue in Q4 and year-to-date receiving $100 million in new awards that we referenced in our third quarter call. The favorable trend in this market appears to be accelerating as we are seeing more opportunities to bid over the last few months than we had seen in previous years. Our ability to sustain success in this market and perform to our standard will help support revenue and margins in this segment. Moving over to the Energy segment. Revenue grew almost 25%, primarily driven by renewables, partially offset by another challenging year in pipeline services. We are optimistic that 2025 will represent a trough in the cycle for pipeline as our funnel of opportunities has increased dramatically over the past year to over $3 billion. In recent years, we have seen our funnel trend around 1/3 of this value. However, with the rising need for natural gas to fuel power generation, increasing LNG production and a more favorable regulatory environment, we believe that our pipeline activity is poised to accelerate. This is specifically true for large diameter pipeline construction where we typically excel from an execution and margin standpoint. Contrary to many other projects in the Energy segment, pipeline projects tend to mobilize to the construction phase more quickly upon contract signing and can often be completed within the calendar year, depending on the scope. This leads us to be optimistic that pipeline could see meaningful improvement in 2026 and heading into 2027. Industrial Construction had a solid year of performance, highlighted by natural gas generation, which contributed $480 million in revenue. This helped to keep revenues mostly flat at just over $1 billion despite lower activity in Canada and the divestiture of a non-core business in Q4 2024 that created a $75 million revenue headwind in 2025. As I alluded to earlier and in previous comments, Primoris is excited about our potential growth in natural gas generation in the coming years. We are actively engaged in discussions. We're bidding on $1.5 billion to $2 billion of awards in the first half of this year, and our conversations with clients suggest the list of opportunities will continue to grow. We are prepared with the project managers and skilled labor necessary to take on more work, and we are confident that our expertise and relationships will result in a strong bookings year for natural gas generation in 2026. We remain disciplined in the types of projects we are pursuing and the terms we are willing to accept to balance risk more equitably between contractor and client and ensure the jobs are completed successfully and on schedule. Heavy Civil continued its high performance in 2025, contributing solid margins and cash flow. While not a primary driver of top line growth, the team has delivered consistent execution and is directing their efforts on projects that align with their expertise and delivering margins above their historical average. Finishing the Energy segment with renewables, it was another year of record revenue and operating income despite having to navigate an uncertain trade and regulatory environment for much of the year. These conditions led to several delays, project specification changes and redesigns. But in the end, our teams were able to respond to our customers' needs and closed out the year by booking over $1.6 billion in new projects during the fourth quarter, a huge accomplishment by our sales and support teams to get these contracts signed and over the finish line to help our clients move these projects forward. We also helped our clients accelerate project time lines and break ground on projects ahead of schedule during the year to meet their needs, a testament to the valued partnerships we have with our clients and vendors and our team's willingness to deliver our best when called upon. Of course, we did face some operational challenges during the year as well that led to higher-than-expected costs on certain projects that contributed to lower margins during the fourth quarter. One project required additional equipment and materials to overcome challenging underground conditions that were drastically different from the conditions on an adjacent project we had previously constructed. These situations can happen when you work on as many projects as we do. We believe we have worked past most of the excess costs on these projects and would expect to see margins improve in 2026 and return to the norms we expect. We have also continued to add quality people and management oversight to assist with upfront engineering, design and estimating work that will help mitigate excursions in the future. Ultimately, the demand for our solar solutions remains high, and our customers have an extensive volume of projects safe harbored in accordance with the treasury guidance. We are seeing our average project size increase and new customers continue to engage with us to build their projects. We saw tremendous growth in our battery storage business in 2025 to over $250 million and believe the market is poised to continue being a growth driver in renewables. Solar and specifically solar with battery storage remains one of the lowest cost and fastest-to-market sources of power generation, which, in our view, makes it a crucial part of helping to meet the energy demands of the future. We also recently commissioned our remote operations control center that adds asset management capacity for our O&M business. It also opens the door for deeper engagement with our clients should remediation be needed at facilities damaged by weather events or replacement of outdated components. Our eBOS business, Premier PV, built on its success in 2025, supplying components to the projects we construct and to the market. We plan to invest in a new facility for this business line in 2026 that will increase our capacity to service the market and add additional products to our portfolio to align with customer demand and preferences. Overall, Primoris had an exceptional 2025 and is set up for a successful year in 2026. The demand backdrop for our services is as good as we've seen as a company, and we are focused on the people, equipment and expertise to help our customers succeed. Now I'll hand it over to Ken for more on our financial results. Ken Dodgen: Thanks, Koti, and good morning, everyone. Our fourth quarter revenue was almost $1.9 billion, an increase of $116.4 million or almost 7% compared to the prior year. The increase was driven by growth in both the Energy and Utilities segments. Gross profit for the fourth quarter declined by $9.6 million or approximately 5% to $175 million due to lower gross margins in both segments. Overall, gross margins in the fourth quarter were 9.4% compared to 10.6% in the prior year. Looking at our results by segment, the Utilities segment revenue was up nearly $34 million compared to the prior year. The growth was across all business lines, led by increased gas operations in the Midwest and power delivery and communications activity in Texas and the Southeast. Gross profit decreased approximately $7 million or about 8% compared to the prior year due to lower gross margins. Gross margins were 10.5%, down from 12.1% in the prior year. The lower gross margins were due to a decrease in storm work in the power delivery business, partially offset by higher margins in communications. Excluding storm work, utility margins were comparable to Q4 of the prior year. Energy segment revenue increased $88 million compared to the prior year, primarily due to growth in our renewables business, partially offset by lower industrial and pipeline revenue. Gross profit decreased $2.8 million compared to the prior year as lower gross margins offset the higher revenue. Gross margins fell to 8.5% compared to 9.5% in the prior year. The lower gross margins were primarily related to certain renewables projects that experienced cost overruns due to unanticipated rock and soil conditions, which required additional labor and equipment. We believe that we have accounted for all of these increased costs and expect renewables margins to improve as we progress into 2026. Partially offsetting these declines was strong performance in our natural gas generation, industrial and Heavy Civil businesses. For the full year 2025, revenue was up $1.2 billion to almost $7.6 billion, primarily driven by double-digit growth in both segments. Gross profit increased by $110 million or approximately 16%, primarily driven by higher revenue in both segments and improved margins in our Utilities segment. Turning to performance by segment for the year. Utilities revenue was up $253 million or a little over 10% from the prior year, driven by growth across all business lines. Gross profit increased $51 million or almost 20% due to the improved gross margins, particularly in power delivery. The improvement in power delivery margins came even though gross profit from storm work declined by $18 million in 2025 compared to the prior year. Revenue growth and improved margins in our gas operations and communications businesses also benefited overall segment margins. Energy revenue grew by almost $1 billion or around 25% this year, primarily driven by growth in our renewables and natural gas generation businesses, partially offset by a decline in pipeline revenue and the wind down or divestiture of non-core industrial businesses. Renewables grew over 50% in 2025 as we had over $500 million of revenue pulled forward into 2025 from 2026 due to project re-sequencing at the request of a customer and accelerated project execution. Gross profit increased by $59 million or 13% compared to the prior year, primarily due to higher revenue, partially offset by a decline in gross margins to 10.1% versus 11% in the prior year. The gross margin decline was mainly due to lower margins on certain renewables projects, partially offset by strong performance in our natural gas generation, industrial and Heavy Civil businesses. SG&A expense in the fourth quarter was just over $97 million, essentially flat compared to the prior year. For the full year, SG&A was 5.3% of revenue, down from 6% in the prior year. We have prioritized leveraging our SG&A cost base to improve operating margins, and we are pleased with the progress we made in 2025. We plan to invest with discipline in our information technology and personnel to support growth, while continuing to drive efficiencies across the organization. For 2026, we expect that our SG&A will be in the mid- to high 5% range. Net interest expense in the fourth quarter was $6.4 million compared to $12 million in the prior year, and full year net interest expense was down almost $37 million from the prior year to just under $29 million. These decreases were due to lower debt balances and lower interest rates, along with higher interest income. Given our current debt level, we expect interest expense for 2026 to be between $23 million and $26 million. Our effective tax rate in 2025 was 28.4%, and we expect it to be 29% for 2026, but it may vary depending on the mix of tax jurisdictions in which we operate. Operating cash flows in the fourth quarter were approximately $143 million and over $470 million for the full year, demonstrating another solid year of working capital management and cash conversion, along with a little over $100 million of cash collections pulled forward from Q1 '26 into Q4. We have exceeded our operating cash flow margin goal of 4% to 5% in the past 2 years through a combination of improved billing and collections and upfront payments on new awards. Although we expect some continued progress in these areas, we anticipate cash flow from operations as a percentage of revenue is likely to trend more toward our target range of 4% to 5% in 2026. Continuing with CapEx, we invested $21.8 million in the fourth quarter and about $130 million for the full year. Consistent with 2025, we expect 2026 CapEx to be between $120 million to $140 million with equipment accounting for $90 million to $110 million and the balance spent on facilities and IT upgrades. Moving over to the balance sheet and liquidity. We ended the year with cash of $536 million, up from $456 million at the end of 2024. Total long-term debt was $470 million at year-end, giving us a net cash positive position to begin 2026. Our strong balance sheet has us well positioned to meet our working capital needs, deploy capital to our higher growth, higher-margin businesses and pursue acquisitions that align with our strategic and financial goals. These include targets that augment our power delivery capabilities and enhance our service offering on industrial, power generation and data center projects. Transitioning to backlog, we closed the year with a very strong fourth quarter of bookings like we expected that brought total backlog to over $11.9 billion. Total MSA backlog was up over 20% compared to the prior year, driven by contract renewals and anticipated spend by customers in the Utilities segment, specifically in power delivery. We see exciting potential for further backlog growth in the coming quarters across natural gas generation, renewables and pipeline construction that will drive growth in 2026 and set us up for further growth in 2027. I will conclude with our earnings guidance for 2026. We expect earnings per fully diluted share to be between $5.35 and $5.55 and our adjusted EPS to be between $5.80 and $6 per share. Our adjusted EBITDA guidance is $560 million to $580 million for 2026. I want to point out that this guidance does not include potential benefits from storm work, which contributed around $12 million of adjusted EBITDA in 2025. Additionally, our first quarter is typically our lowest quarter of the year for both revenue and net income due to seasonality, which primarily impacts our Utilities segment. As a result, we expect our Utilities segment margins to be in the 10% to 12% range for the full year, with Q1 in the 7% to 9% range. And for our Energy segment, we expect gross margins to be in the 10% to 12% range for the full year. And with that, I'll turn it back over to Koti. Koti Vadlamudi: Before we open up the call to your questions, I'd like to reiterate some of our key takeaways from prepared comments today. First, I am proud to be part of Primoris and help support our leadership team build on our successful foundation. I look forward to fostering our culture and expanding our horizons of who we can be and who we can serve as an organization. I believe we are doing work that matters to grow the economies of North America and better the lives of the communities we serve. I also look forward to engaging with our analysts and investors and sharing with them our vision for the future of Primoris in the years to come. Second, we are energized to tackle the tremendous opportunities ahead of us across our end markets. The energy infrastructure needed to not only support innovative technologies, but to sustain, upgrade or replace aging and outdated infrastructure is enormous. We believe Primoris will have an integral and vitally important role to play in supporting this demand. Finally, in pursuit of these objectives, we remain committed to improving margins, generating cash flow and being the best allocators of capital in our industry. We are exceeding the goals we laid out in 2024 and are looking forward to establishing new targets and strategic initiatives as we approach the latter part of the decade. It is our view that the success in these areas and remaining nimble and adaptable to changes in our markets are the best ways to create long-term value for our employees, our customers and our shareholders. And with that, I'll now open it up for questions. Operator: [Operator Instructions] With that, your first question comes from the line of Philip Shen with ROTH Capital. Philip Shen: First one is on the gas gen business. You talked about then the activity being in the $1.5 billion to $2 billion. I was wondering how much of that might be converted to revenues in '26 and '27? Koti Vadlamudi: Yes. Thanks for the question, Philip. I can take that. And yes, as I said in prepared remarks, the funnel of opportunities in gas generation power are really solid. The $1.5 billion to $2 billion is notionally first half of the year and would have a meaningful burn in '26. In the overall funnel, it's probably a little bit more weighted to the back half of the year with line of sight to nearly $6 billion. So a really, really strong end market with strong capital CapEx. Philip Shen: Great. Thanks, Koti and welcome to the Primoris as well. And second question here on renewables. You guys gave us some color on the margin performance in Q4. Just was wondering if you could share a little bit more on like when you guys kind of learned about the challenges? And what gives you confidence that this won't happen again? And ultimately, what changes have you guys made to avoid this from happening again? Koti Vadlamudi: Yes. I'll take that one, Philip, and then Ken can add some more color. But these were projects -- a project in an environment where we underappreciate the geo tech and soil conditions from an estimate standpoint. And mitigation measures we took didn't prove efficacious and then that cascaded with equipment and labor escalation. Despite that, this particular program is sort of at the midpoint of construction. So we feel like we have a really, really good understanding of what's left to complete. In terms of additional measures as we looked at in detail auditing the project and what was left to go, we put more investment in project leadership. This was a program in a hot market where we did have some turnover in the project staff. So with that additional focus, we feel pretty confident in the remedial measures we've taken that it will come in as we forecasted. Operator: And your next question comes from the line of Steven Fisher with UBS Financial. Steven Fisher: Congrats, Koti on taking the role. I just wanted to follow up on that last question. I mean just more broadly about execution as you move through 2026. Just curious how much of a focus or a priority for you is that in your list? One of the things -- what are some of the things you're doing more broadly just beyond that solar project? Just curious, it sounds like you have quite a bit of great prospects. I think we're just looking for more confidence in the execution as we've had a little bit of a hiccup in the last couple of quarters. Koti Vadlamudi: Yes. Thanks for the question, Steve. And so we highlighted the performance execution scrutiny in the renewables segment. There are some other areas that I would say would fall in the basket of efficiency gain through project execution, and that gets down to better estimating, better project controls, better change management. These are particular levers that will help drive better gross -- project gross margin and ultimately better predictable execution. So it will be a focus area across the enterprise. But I would have a lot of confidence based on the length of some of these client relationships, customers that are -- have confidence in giving us continuing ongoing work as well as the deep competencies we have in the services we provide. Steven Fisher: Okay. And then just as a follow-up, as it relates to your guidance, just curious for your perspectives on the coverage that you have on that in your backlog. Curious what you still think you need to book in order to hit the guidance? And then just any areas within the guidance you felt like you may be needed to leave a little room for any particular uncertainties that you see over the course of the year. Koti Vadlamudi: I'll let Ken take that one. Ken Dodgen: Yes, Steve, it's a good question. Look, I mean, we feel as comfortable with our guidance this year as we probably have any other year. Strong backlog helps with that. But just like any year, we still have to book a little bit in order to make that. And just like in every other year, we always feel like we've got some upside to our guidance as well. So I wouldn't view our guidance this year as any different than any other year from a pluses and minuses standpoint. But the one area where we probably still need to focus on some bookings to the second part of your question is in pipeline. As you know, those tend to be pretty quick book and burn type projects. We don't have all that in backlog yet. We would like to get a little bit more in backlog. But in general, between the MSA and the project work, we feel like we're right where we need to be for this year. Operator: And your next question comes from the line of Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: Koti, looking forward to working with you as well. Can you talk a little bit about both what's forthcoming here on the Utilities side? Obviously, you've got some neighbors here in your hometown that could be announcing some big things here in the short order. Can you talk a little bit about what you would expect on the back of developments in Texas? I know your prepared remarks included some commentary there. How would you expect that to shape, especially as you think about like backlog, what is, more importantly, what is not reflected? And then separately, you also had some comments in the prepared remarks around communications activity. Can you comment a little bit about what you're seeing materialize there also, again, in the vein of trying to understand what is and what is not in the backlog thus far and specifically around bids there? Koti Vadlamudi: Sure. Thanks for the question. And I'll first start out by saying Texas is a really fertile location for the energy markets, and we certainly see a lot of opportunity for power generation and by derivative, attracting data center clients and hyperscalers. So with that, we have a high conviction on the relationships we've established here locally, specifically the distribution space and substation build, we see meaningful capital where we can be a partner in the delivery of those programs on an EPC basis. So feel really strong about the backlog and the opportunity funnel. I think we highlighted in the presentation deck, the portion of our backlog of the $11.9 billion that's MSA related. I think that's about $7 billion. the majority, I think 90% of that is in the Utilities segment. So it sort of highlights the strength of our relationships as well as the market funnel. With respect to communications, we're seeing some really good indications at the start of this year with some new wins, a couple of hundred million in bookings and line of sight to additional opportunities in the year. So feel pretty good about the fiber business and the communications market in general. Julien Dumoulin-Smith: Got it. Excellent. And then just going back to the gas gen side of the equation, obviously, fairly lumpy opportunity set here. Can you comment a little bit about what you're seeing on that front? Just set expectations accordingly in what you're seeing perhaps in the near term for bookings? Obviously, there's a lot of projects that could come into your fold here. But I just want to make sure I'm hearing right how you would set those expectations specifically in the coming couple of quarters on those kind of lumpier awards? and when those might translate into revenue given the protracted timing on that front too? Koti Vadlamudi: Sure. And I think you are correct to characterize it as lumpy because these opportunities are pretty big. The investments are from a scale standpoint, measured in gigawatts. So they're multibillion-dollar investments. On the one hand, you have this push to define scope and get the estimate right. And so we're working with the clients sitting at the table with them, trying to nail down scope definition and the appropriate commensurate cost. That takes time. And then you have a driver in the other way, which is the ultimate customer is usually a power-hungry data center that has milestones for server op readiness. And so you have that push in the other way. But sort of a way of saying that there is some lumpiness to this. What gives me confidence is that we've got line of sight to that $1.5 billion, $2 billion near term. Of course, the book-to-bill is quite influenced in the quarter by -- if it crosses over the milestone at the end of the quarter, that book-to-bill could be quite skewed. So we like to look at it more like a trailing 12 months, which kind of eliminates that waviness. Operator: And your next question comes from Lee Jagoda with CJS Securities. Lee Jagoda: Welcome Koti. Just, I guess, starting with the Energy segment and the building blocks there in 2026. It sounds like implicit in the guidance is pretty nice growth in natural gas power, pretty nice growth in pipeline. How should we think about the growth in renewables in 2026? Koti Vadlamudi: Yes. So the first thing I'd say is we -- of course, last year saw a steep incline as projects accelerated and reflected in the burn. So we enjoyed a quick ramp. And those are projects that were on the books. They just hit the field earlier, and we bought equipment and ramped up labor pretty quick. Still a really strong end market for us. As I indicated in prepared remarks, in Q4, $1.6 billion of the $3 billion in new bookings was renewables. So I think it underpins our conviction that this is a market that will continue to grow. I said also in prepared remarks that it's now often a combined scope of the BESS, the battery storage with the solar modules. So our expertise, the strength of our share in this market sort of underpins our conviction and confidence that we'll continue to grow more than our fair share in this growing space. Lee Jagoda: Got it. And then I think you mentioned you're about -- you're midway through the project that had some of those issues in Q4. And you gave us sort of the look at what margin should be in the Utilities segment for Q1. Can you kind of give us any guidance on what the Q1 Energy margins might look like, again, getting to that 10% to 12% for the year? Koti Vadlamudi: Yes. I'll let Ken talk. Ken Dodgen: Yes. Yes. Lee, look, we think we've got most of that behind us. What we are going to see in Q1, though, is the projects running at those lower margins and burning off and getting wrapped up. Most of it should be wrapped up by the end of Q1. So I think in Q1 for the Energy segment, we will still be in that 10% to 12% range. We will definitely be in the bottom end of that range as we get that worked off. And then kind of starting in Q2 for the rest of the year sequentially, kind of getting back up in that 10.5% to 11.5% range with the opportunity to get above that where we have good project closeouts. Lee Jagoda: And if I could just sneak one more in on margins. Just the -- given that in the Energy segment, some of the mix sounds like it could be shifting a little bit more towards natural gas power, more towards pipeline. Can you just refresh us on a normalized basis, what do gross margins look like in the various businesses? And if the mix does shift towards a little more natural gas power, a little more pipeline, I assume that should give us more confidence in that guidance range. Ken Dodgen: Yes, it should. Lee, but as you know, I mean, our bid margins are generally run in that 10% to 12% range for the segment that we talk about. Where we always have the upside opportunity is in project closeouts. And so gas generation pipeline and in renewables always have that upside opportunity. It really just depends on which quarter we wrap up the job in or reach certain milestones in and where we are on actual cost relative to bid cost. But across all 3 of them, we always have the opportunity to exceed or at least come in the upper end of the range or exceed the 10% to 12%. Operator: And your next question comes from Sangita Jain with KeyBanc Capital Markets. Sangita Jain: If I can ask a follow-up on the gas generation question that came up earlier. Can you help us understand if you're looking still at simple cycle or maybe CCGT? And what the average project size may be in that $1.5 billion to $2 billion number that you gave us, Koti? Koti Vadlamudi: Yes, sure. Good to hear your voice again, Sangita. Yes, on the gas generation side, it's -- we're not just looking at simple cycle. It's probably notionally probably a majority in that type of scope. But just anecdotally, just a few weeks ago, we were looking at an estimate for a 1.6 giga combined-cycle plant, and it's early phases, but we have a resume for both. But notionally, I'd say the vast majority of the ones we're looking at are single cycle. And then the second part of your question, what -- I forgot, say again, please? Sangita Jain: The average project size that you expect maybe... Koti Vadlamudi: I don't have -- we don't keep a metric on average size, but just from a capacity standpoint, they're measured in gigawatts. In terms of services revenue that we might burn, that's probably a few hundred million. Sangita Jain: Got it. And then on capital allocation, Koti, there was a quote from you in the press release that talked about using the balance sheet to create value. So hoping to get color from you on where you think the capital is best going to be used and what criteria you're thinking about as you make these decisions for M&A? Koti Vadlamudi: Sure. First, I'll say I'm really pleased to come into a position where the balance sheet is strong, and that really is a testament to the management team's execution on priorities. So really, really strong cash flow generation, good position from a leverage standpoint. It does give us a lot of levers. We talked about in an earlier question, execution efficiency. So there are opportunities to invest in ourselves to the extent that people and systems and tools as we've grown can be improved to deliver more predictable execution and improved gross margins. That said, there are areas that will be catalysts for growth, either in markets where we're subscale, and we think we can accelerate our growth through acquisition and position the balance sheet to the best of our advantage. That said, we will bias our lens. Our lens and filter will be on looking for opportunities that are driven by high sustainable growth trajectory as well as a cultural fit to Primoris and the way we execute work in our markets. Operator: And your next question comes from Adam Thalhimer with Thompson, Davis. Adam Thalhimer: Congrats on the Q4 beat and Koti welcome to the call. Koti, I was hoping you could just, from a high level, give us a sense for what are some of your goals for Primoris over the next few years? Koti Vadlamudi: Yes, great question. And first, I'll double down on my earlier comments. I'm really excited to come into an organization that foundationally has a great culture. And I spoke to -- from the work we do in partnering with our clients from a safety standpoint, and attention to detail and quality. I've really been encouraged that this is a foundational aspect. The company also has this spirit of entrepreneurship from segment presidents to job superintendents, they're looking to do the right thing for our clients and help us grow. I think we talked about the balance sheet. It's really exciting to me to come in with the company with such a strong foundational culture that we can now nurture with the health of the balance sheet to drive further growth. I'm really excited about the end markets and where we play. I like the geographies. I think North America, it's our backyard to continue to drive growth in these exciting growing end markets. So really, really excited about the prospect to take us on the journey to the next step of growth. Adam Thalhimer: Okay. And then I wanted to ask about backlog growth potential this year from the standpoint of -- if you go back to 2023 and 2024, you guys grew backlog, kind of linearly throughout the year, whereas in '25 Q1, Q2, Q3 backlog flat, but then you had a surge in Q4. Just curious how you see 2026 playing out from that standpoint? Koti Vadlamudi: Yes. I think on the last -- of course, I wasn't on the last quarter call. There's a lot of focus on the backlog, and then we had indicated in narrative that Q4 would be a pretty strong bookings quarter and notionally show that quarter-over-quarter growth, that did prove out. I will go back to my earlier comment because the size of the projects are quite large, sometimes the investment decisions and the selection take a little bit longer. And if they cross over the quarter, they do make for a little bit of lumpiness. So you need to sort of smooth that out and look at it sort of more on a trailing 12 with respect to book-to-bill. Overall backlog, we feel pretty strong on the end markets, as we covered earlier, and we think should drive solid revenue growth as we implied from our EBITDA margin growth ambitions. Operator: And your next question comes from the line of Brent Thielman with D.A. Davidson. Brent Thielman: Welcome Koti as well. I just wanted to ask on -- I mean, you've done really well in terms of driving margins higher in the Utilities segment over the last few years. So it still seems like it could be a lever for you. As you go forward, could you talk through some of the key things that need to happen in order for you to continue to drive those margins higher over time? Koti Vadlamudi: Yes. I think it's a good question. And Ken, you can add some color based on history. But the team has looked -- management team specifically looked in areas where we can make improvements. Power delivery is an area where the team has been working over the past year at how we execute in the field from upfront planning to site logistics and execution, productivity, all of those are enhancements that we think are going to drive margin improvement in power delivery. This past year, we enjoyed on the gas operations, the Utilities side, some strong growth where we've been a presence in that for a long time with our customers and drove some really, really healthy margin, which improved quality of margin in the segment. So overall, I think margin efficiency in addition to growing the top line will be a focus for us going forward. Ken Dodgen: Yes. The only thing I would add is same thing, Brent, that we talked about in the past, it's also a mix issue, especially within power delivery, where we're still predominantly distribution, which is a great business. There's a ton of money being spent there. But it doesn't have the same margins as the project work on the substation and transmission side. So we've started adding leadership who has the ability to win and execute that work. And as we continue to grow that over the course of the next few years, I think that's going to also contribute to margin enhancement. Brent Thielman: Okay. Maybe one more, just on the battery side, recognize the scheme of your total revenue, it's not the big, but it's growing a lot. I mean any sort of thought on where that can go in 2026, '27? Koti Vadlamudi: Yes. I think I colored in the comments, nearly $250 million or more this past year. We do think that's a solid market for us. Often, it's now been combined with the solar module solution in installation. So you see a lot of opportunities. Most of the on-premise solutions that the hyperscalers are looking at include some form of battery storage. I wouldn't -- I think over the next couple of years, seeing that business double in size, I think, is within line of sight. Operator: And your next question comes from Adam Bubes with Goldman Sachs. Adam Bubes: Look forward to working together, Koti. One follow-up on the Utilities margins. I think you're targeting a normalized 10% to 12% in 2026 versus 11.5% gross margins in 2025. How are you just thinking about the different puts and takes for Utilities margins in '26 versus '25, and potential to get back up to the high end of that range? What could be the tailwind from more project work? Conversely, could you see any mix headwind given the strong growth in gas in 2025? Ken Dodgen: Yes. Good question, Adam. Look, I think it's purely going to be a mix issue in power deliveries. We continue to work on that. But from a margin perspective, our gas business and our communications business were as strong, if not stronger, than our power delivery margins. And that's fairly consistent with our past. So as gas and communications grow, they tend to be just as accretive to margins, if not more so, sometimes than power delivery given our mix right now. Adam Bubes: Got it. And then based on the 10-K, it looks like your hourly workforce increased 22% in 2025. We hear a lot about labor constraints. What's allowed you folks to be so flexible growing headcount? And what type of employee growth are you budgeting for in 2026? Koti Vadlamudi: Yes. I'll take -- in general, it is a constrained market for labor. This in my short tenure, I have been involved in estimate reviews and go-no-gos on project decisions. And one thing I'm really pleased with is the team has really good discipline in looking at the labor posture and understanding what we need to do to mobilize the workforce when it's required. Look at our past history, and I asked the team about this, we have not been on projects we've bid, won and executed, gated by the ability to attract the workforce. And I think that's a testament to the credibility we have in the market. So going forward, we think while that's a challenge in a constrained market, we have the wherewithal to address that challenge. Furthermore, we are making investments in creating some bench specifically in gas generation and power delivery to enable in advance of the pipeline coming to fruition. We've got the project teams that we can mobilize to support and execute. Operator: And your next question comes from Jerry Revich with Wells Fargo Securities. Jerry Revich: Koti, congratulations, and welcome. I wanted to ask in terms of the seat that you folks have at the table on the power side is really interesting, just given the breadth of capabilities that you folks have from behind-the-meter turbines, signal cycle. Can you just talk about the mix of work that you're looking at the $6 billion number that you mentioned and what proportion of that is behind-the-meter? And as you folks think about the projects that you're bidding on, how do you see bridge power versus island power developing for data centers? What's your take on what's going to be permanent within that infrastructure set? Koti Vadlamudi: Yes, Jerry, thanks for the question. I haven't analyzed the exact split between behind-the-meter and the rest, so we could follow up on that. But there is -- on the data center piece of it, there is a meaningful demand as you would expect and as people read and talk about. From a data center perspective, last year, I think we narrated what was it, $850 million in work related to -- mainly around enabling infrastructure for data center. I'd just give more of an anecdotal just in the short start of this year, we're at $350 million against $850 million, which was the full year. So it just gives a little bit of color on the aptitude of our clients to make these investments and partner with Primoris to get that piece of the equation in place for data center development. And we could follow up on the split on the on-premise. It's probably notionally around 25% to 30%-ish. Jerry Revich: Very interesting. And then can we shift gears a little bit here to talk about on the renewable side, you folks have gained significant share and have generally had positive project closeouts. The problem project that we're talking about this quarter, is it -- is it still in a profit position? Can you just give us an update on that, Ken? And just put it in perspective for us, I feel like this is the first time you called out negative variance on the project. What's the scoreboard look like in terms of positive closeouts versus negative closeouts for that line of business, just to put today's news into perspective? Ken Dodgen: Yes. Look, the vast majority of our renewables projects are very good performers have and either meet as-bid margins or above as-bid margins. So we -- and in those cases, as you know, we have good project closeouts to the upside. As Koti pointed out earlier, this was an unusual situation, a couple of projects, a couple of sister projects being built right next to each other. where we literally ran into more -- the subsurface conditions is basically a lot of rock underneath, and we ran into more rock than we've ever seen on any project we've ever executed. So it's very unusual situation. The sister projects, one is actually in a slight loss position. The other one is still a positive margin. But again, these are 2 sister projects out of 25 or 30 projects that we have ongoing at any point in time that are all, for the most part, executing very well. It just so happens that these had some larger dollars on the cost side than anything we've ever experienced in this type of situation. But in general, the renewables business is still a very solid business, and we expect really good execution in '26. Operator: And your next question comes from Manish Somaiya with Cantor. Manish Somaiya: Just a couple of things for me. First, Ken, on the working capital front, where you benefited this quarter and pull forward some working capital from Q1 '26. Is that going to be a headwind for us in '26, when we think about cash flows? And then secondly, for Koti, of course, let me add my welcome as well. Just wanted to get your thoughts around M&A versus organic growth. Obviously, you have a lot of opportunities. You talked about the opportunities that you have in front of you. How do you intend to sort of close them, especially where you feel that the company is subscale. So maybe just give us some context around the size of acquisitions that might be on the table, and how that would kind of relate to the debt target of 1.5x that you've kind of put out. Koti Vadlamudi: Yes. Well, let me just address the sort of that strategic question around capital allocation, specifically M&A and then Ken can take the second half -- the other part of the question on cash flow. But the first I'd say is the way we look at M&A is it has to comport with our strategy. We're not doing M&A just to grow top line. As I mentioned before, we're really excited about the portfolio. And over the past few years, we've intentionally biased to end markets that we think show demonstrative sustainable growth. There are some areas where we are trying to grow organically and are subscale. That said, we are prepared to put our capital to play organically where it makes sense and drive growth, albeit maybe at a slower cadence. There is opportunity, again, with the health of the balance sheet to look at M&A. There is no shortage of deal flow. I think it is a fertile market for opportunities for us. I think from a size and color standpoint, we have a lot of latitude given the growth we've seen organically over the past year. So our appetite is pretty wide and varied. I think it will be biased to end markets that were either subscale or we think with the proper investment, will catalyze or accelerate growth. Again, this has to be done with a view that there's proper cultural fit as well as really extreme good diligence in filtering out opportunities. Ken Dodgen: Yes. And then on the cash side, look, we had 2 great years. We honestly expect to have another good solid year in '26. I don't expect it to be down or below our target range just because we had a good strong '25. If anything, as I said in my prepared comments, I expect it to be just another good solid year. Operating cash flow kind of in that 4% to 5% of revenue range. And in general, from a free cash flow perspective, our goal is to be kind of at least 50% of adjusted EBITDA, if not higher, based on the working capital trajectory that we have. Operator: And your next question comes from the line of Maheep Mandloi with Mizuho. Maheep Mandloi: I'll just keep it quick. On the Premier PV or the eBOS business, can you talk about the growth there? What do you see in 2026? And then any thoughts on -- of the OEMs kind of trying to get into that business and how do you see that competition over there? Koti Vadlamudi: Yes, I'll take the first part of it. I think we are investing in that business with increasing manufacturing capacity. So it's sort of underpins our confidence that that's a sector where we can deploy the manufacture that product for our own use as well as for our clients, and it's a profitable segment. I'll let Ken maybe give a little bit of color on the... Ken Dodgen: Yes. On the growth, honestly, we ran pretty close to capacity during '25. We expect to be at capacity during '26. That's the reason we previously talked about the investment that we're making in '26 in order to expand capacity. So from '25 to '26, sequentially, we're going to be relatively flat. It's not going to be until '27 that we're going to see the next phase of growth in our eBOS solution as that expansion comes online, most likely in Q4 of '26. Operator: Thank you. And that concludes our question-and-answer session. I would like to turn it back to Koti Vadlamudi for closing remarks. Koti Vadlamudi: Thank you, operator. I want to again congratulate our employees who contributed to an outstanding year in 2025. It's the more than 20,000 men and women of Primoris that enable us to do what we do. Their focus on safety, operational and financial performance are the reasons for our success, and I look forward to their continuing contributions in 2026 and beyond. Thank you to those who joined us today. We appreciate your time and interest in Primoris and we look forward to updating you on the business next quarter. Thank you. Operator: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Welcome to the conference call on MTU Aero Engines Preliminary Full Year 2026 Results. For your information, the management presentation including the Q&A session will be audio taped and streamed live or made available on demand on the Internet. By attending the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken. The speakers of today's conference call are. Dr. Johannes Bussmann, Chief Executive Officer; and Mrs. Katja Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words. Thomas Franz: Thank you, Heidi. Good morning, and welcome to our conference call for MTU's Preliminary Full Year Results 2025. We'll begin today's session with Johannes sharing some thoughts on strategic priorities and the business review. Following that, Katja will walk you through the financials of the year 2025 as well as the guidance for 2026. To close the presentation, Johannes will summarize the key takeaways before we open the floor for your questions in the Q&A session. With that, it's my pleasure to hand over to Johannes. Johannes Bussmann: Thank you, Thomas, and a warm welcome to everybody. As already announced during the course of the Q3 call, I would like to share some key priorities of MTU's way forward with you. First of all, MTU has a communicative growth agenda, and I am completely committed to execute on that one. This means we will expand our footprint internationally and invest in even more technological capabilities. Through our expansion in Hannover, Berlin, China and especially our new LEAP facility in Fort Worth, Texas, we are leveraging our global presence. With this, we support the growth of our MRO business and increase efficiency to serve our customers even better. With the latest development of the GTF, we have the most efficient engine in the narrow-body market. We developed this technology together with our partners and we will continue to enhance this technology even further to be perfectly prepared for the NGFE. My ambition is to provide an even larger share in the upcoming program. As in addition to the conventional engine, we have entered into an agreement with Airbus to develop the Flying Fuel Cell. Due to this, we will be enabler for our client to emission-free flying in the future. Given the significant improved free cash flow generation in 2025 and our planning for the next years, we are committed to focus on shareholder value by increasing the dividend by 64% from EUR 2.20 to EUR 3.60 in 2025, representing a payout ratio of 20%. We are on our way to reach our 40% payout ratio target. Let's have a look on the next slide. Let me walk you through our major achievements in 2025, starting with an overview of our key financial results. In 2025, we delivered on our financial guidance and are pleased to report that the strongest performance in MTU's history has been reached. Revenue reached EUR 8.7 billion. EBIT increased to EUR 1.35 billion, resulting in a very strong margin of 15.5%. Free cash flow rose to EUR 378 million, also a new all-time high despite the financial impact of the GTF fleet management plan. Based on this performance, we will propose a dividend of EUR 3.60 per share to the AGM, representing an increase of 64% year-on-year. In addition, we will present our 2026 guidance today and an important next step on our way to achieve our 2030 ambition. Let's take a look at the market environment in general. In 2025, our industry continued to gain momentum. Demand again exceeded available capacity. And despite persistent supply chain challenges and a more uncertain macro environment, airlines were highly resilient. Passenger traffic grew by 5.2% and cargo volumes by 3.1%, reaffirming the sector's strong fundamentals. This performance came despite headwinds from U.S. tariffs and a weaker U.S. dollar factor we managed very successfully. The outlook remains positive. For 2026, IATA expects RPK growth of 4.9% and the cargo traffic to rise by 2.6%, both consistent with long-term structural trends. Robust passenger demand, high-value cargo flows and expanding global e-commerce continue to support the industry, while limited aircraft availability keeps utilization and load factors at an elevated level. This environment plays directly to MTU's strength. Our supply chain is built to support customers on both OEM deliveries and the aftermarket, positioning us well to capture ongoing demand. Overall, the market indicators are fully in line with our plan 2030. Our current order book stands at USD 29.5 billion (sic) [ EUR 29.5 billion ] which technically means we are sold out for the next 3 years. To sum this up, MTU is exceptionally well positioned to benefit from market dynamics in 2026 and beyond. Let's have a look at the commercial OEM side of our business. In 2025, demand from new commercial engine remained exceptionally strong. We recorded more than USD 2 billion in new orders, driven by the GTF, GENX and GE9X program. For the GTF alone, customers placed orders and committed for more than 1,500 engines. And 2026 also started on a solid note for the GTF. Vietjet selected the PW1100 to power 44 A320neo family aircraft. Customer confidence in the GTF remains high. With commitments for more than 13,000 GTF engines, the order book is now roughly twice the size of the active V2500 fleet. The strong position of the GTF is visible for the program after just 10 years in service. Since 2016, the GTF family has accumulated over 50 million flight hours on more than 2,600 aircraft, safely carrying more than 1.7 billion passengers. Its fuel efficiency has enabled airlines to save more than 2.8 billion gallon of fuel. And the journey continues with the next major milestone, the entry into service of the GTF Advantage later this year, an engine that provides even better performance metrics and will carry the success even further. On the customer side of the GTF program, the fleet management plan continues to make solid progress in line with our expectations. Turnaround times are improving. Material availability is stabilizing. With RTX reporting significantly higher MRO output and airlines confirming an easing of the AOG cases, we expect the situation to continue to improve throughout 2026. Compensation payments remain on track. We contributed by roughly USD 360 million in 2025 and expect the remainder of the payments to be settled in the current year. Looking ahead, we continue to invest in the future of propulsion. In November, we reaffirmed our commitment with our partners, Pratt & Whitney and JAEC to evolve the technologies for engines for the next generation of commercial aircraft. This partnership, which is now in place for more than 4 decades, will allow us to deliver even higher efficiency, lower emissions and long-term competitiveness in the future. In short, MTU is taking advantage of the strong demand and is ready to deliver on our customer needs and is set for a strong and successful future. Let's have a look at the MRO of -- sorry, at the military OEM business. Over the past 2 years, we have seen strong order momentum for the Eurofighter engine program. The core nations, Spain, Italy and Germany, together with export customer, Turkey, placed engine orders for more than 80 Eurofighter aircraft. This clearly demonstrates the continued relevance of the program for Europe's defense capabilities. In the United States, demand for the heavy-lift helicopter remains high. The U.S. Marine Corps has ordered an additional 99 units. MTU holds an 18% share of the T408 engine program powering this platform, and we continue to benefit from the program's production ramp-up. At the same time, our OEM business for the TP400 is secured until 2029, with additional export opportunities offering meaningful upside as the A400M continues to attract international interest. Looking ahead at the future of military propulsion in Europe, we have joined forces with Safran and Avio Aero to develop a potential next-generation helicopter engine. This partnership positions us well to support future European defense platforms with advanced propulsion technologies. And while recent headlines around the FCAS program have been mixed, we remain confident that the partner nations will find a constructive way forward. It is essential for Europe's long-term defense sovereignty to develop their own military products, and MTU is fully committed to do this. In short, through our programs, partnerships and long-standing expertise, MTU contributes meaningfully to Europe's long-term defense readiness. Now we come to the commercial MRO side on the next page. And here, we are continuing to invest in both capacity and the scope of our product portfolio, strengthening our global footprint and supporting the ramp-up across all major engine programs. In Poland, EME Aero has added a second test cell, enabling the site to execute 500 GTF shop visits per year from 2028 onwards, an important expansion of our European GTF capabilities. In China, we opened our second MRO shop, initially focused purely on GTF engines, and we delivered the first overhaul engines just a month after the inauguration. Together with this, our first shop in MTU maintenance Zhuhai, the site has now capacity for more than 700 shop visits annually, creating a major capacity hub in one of the world's fastest-growing aviation markets. In North America, we enlarged our Fort Worth portfolio to include the LEAP and the GEnx later on and we will invest further to transform the site from an on-site service center into a full disassembly, assembly and testing facility, significantly strengthening our market position in North America. At MTU Maintenance in Berlin, we introduced full MRO capability for the PW800 and are about to increase our industrial gas turbine capacity by around 30%, supported by targeted investments, including the new IGT hall already under construction. In the broader IGT segment, we have deepened our collaboration with GE Aerospace to expand activities in the marine sector, opening even additional market opportunities. Taken together, these initiatives significantly enhance MTU's global MRO network and technical capabilities. As we execute this expansion, our focus remains clear, supporting the ramp-up and enabling sustainable profitable growth. On the technology side, we reached important milestones in developing further propulsion concepts. First of all, we are proud that the GTF Advantage has received both FAA and EASA certification, positioning it for the market entry in 2026. Aircraft certification is expected soon. With higher thrust, improved fuel efficiency and enhanced durability, the engine is particularly well suited for the larger aircraft of the A320neo family. In addition, RTX announced the introduction of a Hot Section plus retrofit package, enabling to benefit from 90% to 95% of the durability improvements on the GTF advantage. As announced earlier, our IAE consortium publicly reaffirmed its commitment to advancing the GTF architecture as a foundation for the next-generation engines. We are incorporating all learnings from the first generation of GTF engines design execution as well as fleet experience. From today's point of view, the design of future engines will definitely be geared. Building on these advancements in our current product portfolio, we are simultaneously accelerating in the development of next-generation propulsion technologies. In June, we signed a memorandum of understanding with Airbus to jointly advance hydrogen fuel cell propulsion. Within our own technology program, the Flying Fuel Cell, we have made significant progress. The design has been finalized, early tests have been successfully passed, and we have commissioned a dedicated Flying Fuel Cell test bed in our Munich site. This marks a major step towards an extensive test campaign for this technology. All of this demonstrates one thing very clearly, we are not only advancing propulsion technology, we are actively shaping what comes next. MTU is preparing the future of aviation step-by-step and with a very clear long-term vision. Over the past year, we have made strong progress in reducing CO2 emissions across our production sites. Here in Munich, for example, our new geothermal plant has been operating since December 2025 and will cover around 80% of our heating needs, entirely CO2-free. The 71-degree Celsius thermal water is sourced from a depth of more than 2,100 meters and will provide clean, reliable heat well into the future. Looking ahead, our ambition is clear: reduce CO2 emissions across all MTU sites by 63% by 2035 compared with 2024. Each location contributes through its own targeted measures. We are driving this ambition through 3 main levers: improving energy efficiency, expanding on-site renewable energy generation and, of course, purchasing renewable energy such as green gas and green electricity. Together, these actions ensure that we are progressing credibly towards sustainable decarbonization. In addition to our operational success and progress, our sustainability performance is also externally recognized. MTU has once again received the silver medal in the EcoVadis sustainability rating. Taken together, these developments demonstrate that we are on a strong and credible path towards significantly decarbonization. With that one, I will hand over to Katja, and she will walk you through the numbers. Katja Garcia Vila: Thank you, Johannes, and welcome from my side as well. Let me begin my part by briefly putting our results into perspective. For 2025, we achieved our several times upgraded guidance in all financial KPIs. These results are new record highs for MTU and marks the next milestone on our ongoing growth path. Revenues of EUR 8.7 billion were in line with our updated guidance, clearly exceeding our initial guidance despite a weaker U.S. dollar, a headwind we were able to offset through strong operational performance. Adjusted EBIT increased 29% to EUR 1.35 billion, showing a strong margin of 15.5%. This represents a significant step-up compared to our expectations. Adjusted net income roughly followed the EBIT growth as expected and grew 27% to EUR 968 million. Free cash flow of EUR 378 million came in significantly better than originally anticipated and in line with the guidance from October 2025. This marks another record level in recent years, even while carrying the burden of the GTF fleet management program and it proves our progress in improving our cash conversion. Let's now take a closer look at some details behind this outstanding performance. Group revenues increased by 16% to EUR 8.7 billion. In U.S. dollar terms, revenues were up 21%. This strong performance was driven by our commercial OEM business, which benefited from a favorable mix in engine deliveries, including a higher share of spare and lease engines as well as the expected growth in spare parts revenues. We also achieved strong sales growth in the MRO segment, supported by continued momentum across our activities there. Adjusted EBIT rose over proportionally by 29% and to EUR 1.3 billion, resulting in a margin of 15.5%. The excellent result was driven by the above mentioned business mix effect. Adjusted net income grew by 27% to EUR 968 million. Growth was influenced by higher interest expenses associated with new financial instruments. The higher earnings translated into a strong free cash flow of EUR 378 million, an all-time high for MTU. This level exceeds the previous peaks of 2019 and 2023, even though the expected impact from the GTF fleet management plan were fully reflected. Airline compensation payments amounted to roughly USD 360 million. Let's now move on to the business segment. Let me begin with the OEM segment. In Q4 2025, total OEM revenues increased by 11% to EUR 817 million. Therein, commercial OEM revenues were up 13%, reaching EUR 621 million. In Q4, organic growth in commercial OE and U.S. dollar sales increased by a low to mid-teens percentage. As anticipated, Q4 OE sales included a higher share of installed engines. Organic spare part sales in Q4 in U.S. dollars grew in the low to mid-teens range. Drivers were both narrow-body and wide-body engine platforms. Military revenues increased by 6% in Q4, marking the strongest quarter of the year. However, delays in the supply of parts and modules required for the plant delivery, limited the level of growth we anticipated, resulting in a stable revenue versus 2025. Adjusted EBIT for the quarter improved by 39% to EUR 234 million, resulting in a margin of 28.6%. The margin development was as expected, reflecting the higher share of installed engines as well as lower-than-expected military revenues. For the full year, total OEM revenues increased by 14% to EUR 2.9 billion. Commercial OEM revenues grew by 18%, reaching EUR 2.3 billion. Organic commercial OE sales in U.S. dollars were up around 10% for the full year 2025, a bit below our mid-teens guidance as the delivery plans within our various partnerships does not materialize as expected. Organic spare parts U.S. dollar sales for full year 2025 increased in the low teens range, drivers for both narrow-body and mature wide-body platforms. Overall, this performance drove adjusted EBIT up by 43% for the full year to EUR 873 million, delivering an excellent margin of 30.4%, clearly exceeding our expectations for the year. Let us now move on to the commercial MRO business. Commercial MRO revenues in the fourth quarter of 2025 increased by 11% to EUR 1.7 billion, making it the strongest quarter of the year. In U.S. dollars, Q4 revenues were up 22%. Key revenue drivers in the fourth quarter were the GTF, the CF6 and the MLS leasing and asset management business. Revenues from CFM56, CF34 and CF6 platforms also increased compared to Q3 2025. The GTF MRO revenue share in the quarter was around 41%. In Q4, adjusted EBIT decreased by 11% to EUR 123 million, resulting in a margin of 7.4%. The margin reflected the higher share of GTF MRO revenues as well as ramp-up costs at MTU Fort Worth. For the full year 2025, commercial revenues rose by 18% to EUR 5.96 billion. In U.S. dollar terms, revenues increased 23%, significantly exceeding our full year guidance of mid- to high-teens growth. Revenue growth in 2025 was broadly spread. The GTF delivered strong performance, while the CF6-80, GE90, V2500 and our IGT business also recorded solid growth. In addition, MLS leasing and asset management delivered the expected operational performance, further supporting overall results. GTF MRO accounted for 40% of total MRO revenues in line with our full year expectations. Revenue recognition accelerated in the second half of the year, driven by broader work scopes, improved material availability and shorter turnaround time. Adjusted MRO EBIT increased by 9% to EUR 478 million, resulting in a margin of 8%. Margin development was mainly influenced by the GTF MRO mix, ramp-up costs for the LEAP MRO at MTU Fort Worth, partly compensated from an equity contribution, particularly from MTU Zhuhai. Overall, the MRO business delivered a strong performance in 2025. Let me now give you an update on our hedge book. As you can see, we have further increased our hedge coverage over the past months since the release of our 9-month results. For 2026, we have now hedged around 80% of our net U.S. dollar exposure at an average hedge rate of 1.13. Looking further ahead, we continue to build our hedge position at higher average hedge rates, reflecting the currently weaker U.S. dollar. Please keep in mind that the purpose of our hedging strategy is to reduce the impact of U.S. dollar exchange rate fluctuations on our EBIT. EUR 0.05 movement in the U.S. dollar exchange rate would translate into an EBIT effect of roughly EUR 20 million. Overall, our hedge book secures a high degree of visibility and stability for 2026, giving us a solid foundation for the year ahead. Before moving to the guidance, let us have a look on our progress on the finance side. Our net debt currently stands at around EUR 1.1 billion, resulting in a net debt-to-EBITDA ratio of below 1. That is a very solid level, fully in line with our midterm guidance of a leverage ratio of 0.5 to 1.5, and gives us the financial headroom we need to execute on our priorities. Our strong balance sheet is also reflected in the credit ratings from Moody's and Fitch, both of which assigned an investment-grade rating to MTU. Moody's upgraded its rating from Baa3 to Baa2 with a stable outlook in August 2025, while Fitch confirmed its BBB rating with a stable outlook in September last year. At the beginning of January, we issued a new convertible bond with a volume of EUR 600 million. We used the proceeds to repurchase our outstanding EUR 500 million convertible bond that would have been due in July 2027. This transaction allowed us to reduce the potential dilution for our shareholders by around 300,000 shares, a clear and tangible benefit. As already stated by Johannes earlier, we intend to propose a dividend of EUR 3.60 per share at our Annual General Meeting in May 2026. This represents an increase of EUR 1.40 or by 64% compared with last year and corresponds to a dividend payout ratio of 20%. This is a clear signal of our gradual return to our targeted long-term dividend payout ratio of 40%, a ratio we temporarily suspended due to the GTF fleet management plan. All in all, these measures strengthen the financial flexibility and solid balance sheet that underpin MTU's long-term growth strategy. So let's now come to the key drivers for our guidance 2026. As Johannes already mentioned, the market environment remains highly favorable for the aviation industry, and MTU is well positioned to benefit from this momentum. Overall, we expect engine deliveries to increase in 2026 with a higher share of installed engines. For the GTF, we will support these deliveries in line with our market share, contributing to the production ramp-up while ensuring sufficient spare engine availability for our airline customers. Following RTX announcement, demand for spare and lease engines remains strong. And on the GTF, we expect this to stay broadly flat in absolute terms compared with 2025. For the GEnx, we expect higher volumes driven by Boeing's plans to increase 787 production from currently 8 aircrafts per month to around 10 in 2026. Deliveries of the first GE9X are targeted for this year, although the official entry into service of the first B777X has been delayed to 2027. Putting this together, we expect organic U.S. dollar OE revenues to grow in the mid- to high teens range in 2026. This reflects the current expectations with respect to mix and pricing. Commercial spare parts are expected to remain a strong revenue contributor. The V2500 should be up, supported by higher utilization of the A320ceo fleet and increased material demand in work scopes and shop visits. We expect continued growth in GTF spare parts, driven by the GTF fleet management plan as well as ongoing durability improvements. Mature engine programs are expected to remain broadly stable or show a slight decline. Overall, this points to low to mid-teens organic spare parts revenues growth in 2026. The military business will benefit from the strong order momentum for the EJ200, leading to higher deliveries. In addition, we expect a continued ramp-up in T408 production, which powers the CH-53K heavy-lift helicopter used by the U.S. Marines. The development contract for the next-generation fighter engine runs until September this year, and we remain optimistic that the government will find a solution for the FCAS program. The phaseout of the German Tornado fleet will result in a gradual decline in RB199 revenue over the coming years. Due to some supply chain disruptions in 2025, we expect certain spillover effects into 2026. Altogether, this should result in an accelerated revenue growth in the mid-teens range. Commercial MRO will continue to benefit from strong air traffic, which drives high demand for mature engine programs in our independent MRO business. We also expect rising GE90 MRO volumes from our freighter customers. Our MLS leasing and asset management business will continue its growth trajectory. In 2026 -- 2025, we generated roughly EUR 600 million in revenues, marking steady progress towards our EUR 1 billion revenue target for 2030. For GTF MRO, we expect a revenue share of 40% to 45% in 2026. Key drivers will be the growing fleet and service, ongoing execution of the GTF fleet management plan and further durability improvements. Together, these factors should translate into low to mid-teens U.S. dollar revenue growth in MRO. Across all business segments, we expect continued growth in 2026, another important step towards achieving our midterm revenue target of EUR 13 million to EUR 14 billion. The business drivers I've just outlined with growth across all our segments translate into expected total group revenues in the range of EUR 9.2 billion to EUR 9.7 billion based on a U.S. dollar exchange rate of 1.20. Adjusted EBIT is expected to come in between EUR 1.35 billion and EUR 1.45 billion above the 2025 level. Positive contributions will come from continued strong spare engine sales, partially offset by a higher share of installed engines. The spare parts business and the military segment will also contribute and support absolute EBIT expansion. The 40% to 45% GTF MRO share will have some impact as will our investments in Fort Worth and the ramp-up of MTU maintenance Zhuhai. At the same time, the ongoing strength of our independent MRO business and further growth in our MLS leasing and asset management activities will drive the margin. Overall, the group margin guidance for 2026 remains well within the corridor of our midterm guidance. For net income adjusted, we expect growth broadly in line with adjusted EBIT. With regards to our cash conversion rate, we expect further improvement to 45% to 55%, mainly driven by lower GTF AOG compensation payments and stronger earnings. As you can see, we are well on track to deliver our 2030 ambition across all key performance indicators. Our 2026 revenue outlook of EUR 9.2 billion to EUR 9.7 billion is broadly in line with the revenue CAGR implied by our 2030 ambition. Our 2026 adjusted EBIT target of EUR 1.35 billion to EUR 1.45 billion also implies the margin within our guided 2030 corridor of 14.5% to 15.5%. Our cash conversion rate is set to improve significantly from 39% in 2025 to 45% to 55% in 2026, representing another step towards our 2030 ambition of reaching a high double-digit level. As you know, our midterm 2030 ambition remains unchanged. Since the future development of the U.S. dollar exchange rate cannot be predicted, we have included our well-known U.S. dollar sensitivity, noting that our 2030 ambition is based on an exchange rate assumption of 1.10. This concludes my presentation. And I would now like to hand over to Johannes for the closing remarks. Johannes Bussmann: Thank you, Katja. Let me close our presentation with some key takeaways for you. MTU has delivered an excellent performance in 2025, despite all the headwinds that we were facing and have been reaching new record highs. The GTF fleet management plan is on track financially and technically, and the financial burden will start to ease. We continue to execute on our technology road map to support our customers worldwide on their ambitions. The market environment remains positive for the entire industry, and MTU is extremely well positioned to benefit from this growth all around the world. We have provided a strong guidance for 2026, fully aligned with our growth plan towards our midterm target for 2030. This will translate also into improved free cash flow, allowing us to even further strengthen shareholder value. MTU continues to represent a highly attractive investment with exposure to long-term profitable growth. So thank you for your attention so far. And now we are happy to take your questions. Operator: [Operator Instructions] Mr. David Perry from JPMorgan, may we have your question. David Perry: Johannes and Katja, can I ask one question on each of you, please? Johannes, I think you've been in the role now maybe 6 to 8 months, I think. So I'm just curious whether you see any real scope for operational improvement? I know MTU is a well-run company already. But in particular, I'm thinking about the FX headwind that the company could face and whether there's anything operationally you could do to offset that? And then Katja, for you, thanks for the comments on the free cash flow bridge to '26, and you talked about lower GTF compensation payments. Just -- can you talk about some of the other moving parts, please? I think some of the feedback I've hoped from investors was they thought it could be a little bit better than your guidance in 2026. So maybe just some of the puts and takes on the cash flow would be helpful. Johannes Bussmann: Yes, improvements of operations are, of course, a topic that we are dealing with every time. And I think the expansions that we talked about, especially in 2025 also showed already that we have a really steep learning curve on the existing facilities and building up new facilities with even better processes, combining what we have learned in other parts. And that our operational performance is in, at least some areas, second to none proves with the GTF, the moment we are best-in-class in the network with short turnaround times. And that's, of course, what we also want to provide as a service level for our customers in the other side. And that is what we are working on. It's a lot of work, of course that is done in the different facilities. But I see progress there and strong willingness of our colleagues to improve that even further. And with the inductions coming in, of course, that also helps because if you have volume, the repetitiveness is increasing. And by that, the learning curve is even posted further. Katja Garcia Vila: Okay, David. And then I would take over here to talk about the cash flow topic. So overall, despite the fact that we do see less impact from the GTF fleet management plan on the AOG side with approximately expected [ USD 250 billion ] still impacting our free cash flow for 2026, we're also facing still an increase in the GTF receivables for the prefinance shop visits. As you remember, we also elaborated on that path during our 9-month call stating that we will see further increase in those prefinance shop visit receivables over the next couple of years before we start to see that turning rather later in the end of this decade. Another topic that is a headwind, so to say, for our free cash flow is the ramp-up of our facility in Fort Worth in Texas, where we expect to see a high double digit impact on our free cash flow building up the inventory to operate the facility. Operator: We will take our next question. Mr. Christophe Menard from Deutsche Bank. Christophe Menard: Yes. I had actually two. The first one is on the OE commercial guidance in 2026. Your guidance, could you detail the -- in terms of volumes, what you intend to -- the growth in GEnx and in GTF because it seems to be a higher number than what Airbus has been guiding us to. And I would have been keen to -- I mean, you mentioned several times, IGT on this call. Could you tell us what is the conclusion both to OE and MRO at this point in time and where you see this going forward in terms of contributing to earnings and sales? Katja Garcia Vila: Yes, Christophe. So first of all, with regards to the OE commercial guidance, there are a couple of moving parts, so to say, in this OE commercial guidance, and it's not just the GTF. So we have the GTF. We have the GEnx that is growing. We do see first deliveries in the GE9X that is moving. So these are figures, but also some other smaller Pratt & Whitney Canada engines will contribute to the growth. And that's why our figure is more a blend and the mix of the different programs that we are in compared to what Pratt has communicated. The IGT part is part of our MRO segment. So this is where you can find that. The expectation is that this is a very profitable business that is continuing to grow. We are investing in the Berlin plant to be able to support the growth and also the customer demand that is out there, which is partially driven by a law in Germany, for example. There, we do see more business coming around the corner, but also internationally due to the peaks in power supply, the increase in the -- how is that called, in the artificial intelligence area, there's more need for short-term peak power supply, and therefore, this is a business expansion that we do expect. Operator: We will take our next question. Mr. Robert Stallard from Vertical Research, may we have your question. Robert Stallard: I just wanted to follow up on the last question on your guidance versus Airbus. And in particular, those comments that Airbus made on the GTF. I was wondering if you could elaborate on this situation? And what is causing this disagreement between you and your customer here or at least Pratt & Whitney's customer? And then secondly, on the V2500, I was wondering if you could give us your latest thoughts on the trajectory for shop visits on this engine and also work scope as you work through 2026. Johannes Bussmann: Okay, thanks. Yes. I mean the discussions on the deliveries between Pratt & Whitney and Airbus are still ongoing. And all of you read that Guillaume commented on it. So obviously, we have not come to a conclusion so far, but the 2 partners are negotiating. And so that's what I think we will have to wait for, and I'm pretty sure that they will find a solution. So the orders, of course, have been placed. And we, in the consortium, have discussed what we can deliver as a total, and now Pratt is discussing with Airbus, how we deal with this in the relationship with Airbus and our other customers. That's from our side, all we can comment on that one. On the V2500, I think the numbers speak for itself. We have around 15%, roughly 15% that have not even seen the first shop visit. We have another 35% in operation that has not seen the second shop visit. So that means half of the installed fleet is well into the lifespan of the engine itself. So from that perspective, we still planned with the induction of the MRO sites for the V2500 to be ongoing for quite a while. And this is something with the growth of the overall aviation market that we discussed earlier on. I think something that is shared by a lot of our colleagues and market participants. And that's why we are also in the MRO shops still preparing for further inductions of the V2500 for the coming years. Did that answer the question? Robert Stallard: Yes. Just on the work scope, sorry. Johannes Bussmann: The work scope, of course, is -- that's with the -- the further you go down the road, the work scopes get heavier, of course. So that means the second work scope is normally heavier than the first one and so on. And that's, of course, something that is helpful for the MRO business, and that will drive our numbers and also the work scopes inside the shops. And that is, I think, the normal behavior that we have seen on engines also for many years. Operator: We will take our next question. Mr. Ian Douglas-Pennant from UBS, may we have your question. Ian Douglas-Pennant: Ian Douglas-Pennant at UBS. So the first is on cash flow, please. So you mentioned prefinance shop visits, which I think is the balance payments line item on your balance sheet. Could you just help us size how you see that effect? I mean, first, just remind us for 2025 impact on cash flow from that? And then also, if you could you just help us think about sizing that in 2026, 2027 as well, please, either qualitatively or quantitatively is useful. My second question is on the aero derivative or the IGT business. Are you worried or thinking about here the possibility of increased competition from aircraft engines being converted to be used as aero derivatives as we've seen one of your peers talking about. And have you looked at doing that yourself, given that you have, I mean, almost unrivaled expertise here? Katja Garcia Vila: One thing that -- I'll take the first part, Ian. So we don't specifically provide numbers on the growth of our aftermarket compensation payments. What I can say is that we expect that to continue to grow year-over-year and therefore, still have an impact on our cash flow development over the next couple of years. We expect that to turn rather later in the -- not in the century, farther late in the decade. And you can see the position itself under other financial assets in our balance sheet. And these are receivables and no compensation payments. So currently, we are still building up those receivables for the prefinance shop visits. But sorry, I cannot share any details on the coming year. Maybe, you take... Johannes Bussmann: Yes, I'll take the second part. I'm pretty sure you relate to the FTAI Power announcement some time back. And of course, the conversion of aviation engines into power generation units could be an attractive adjacent business for MTU. So it's -- for the LM2500, the CF6 and the 6000 and the 6-80. That's a business we are in for already a long time and have deepened our collaboration with GE Aerospace. So that's something that we are, of course, seeing good market opportunities into. That said, the attractiveness of the conversion into power generation ultimately also depends on the scale of the addressable market and availability of feedstock for these engines, of course. And we certainly have the potential that we are observing. And we have -- as we are active on both sides, I think we have also a good visibility of what is more attractive for us. And that part, we will then follow with the customer demand being on the side. Operator: We will take our next question. Ms. Chloe Lemarie from Jefferies, may we have your question. Chloe Lemarie: Yes. Johannes and Katja, if I could start with -- actually a follow-up on your comments on inventories. First, could you comment on the driver for the growth in 2025 and in particular, in Q4, where typically you actually unload a little bit of those inventories? And where should we assume this stabilizes going forward in terms of days of sales, please? The second question is on OE sales. Could you share maybe what was the impact of mix on top of the 10% organic growth that you report? And on your 2026 guide, did I understand well that your current guide for mid to high teen actually also includes the impact of a mix? Or does that come on top? Katja Garcia Vila: Okay. So let me start with the inventory question first. You remember that I said, for example, in the military business, we were not able fulfill all the deliveries that we originally anticipated for the quarter despite the fact that it was the strongest quarter in deliveries. So that also had a stay with more inventories than originally anticipated, let me say it like this. And I'm sorry, I didn't get the second question entirely about the mix in the guidance, Chloe. I'm sorry. Chloe Lemarie: Yes. So in 2025, you talked about 10% organic growth in OE. But obviously, the spares and the -- yes, the spares mix and the overall pricing mix, I guess, is additive to that. So if you could maybe share just what kind of roughly -- if you could scale this and how it impacts 2026 as well? Katja Garcia Vila: So as you know, our organic growth rates does not account for any changes on pricing or on share between spare and installed engines overall. So what we've done now for 2026 is that 2026 reflects the current expectation with regards to mix and pricing, and this is what we've laid out. Chloe Lemarie: Okay. If you can just follow up on the inventory question. So you said that in 2026, you expect a high double-digit headwind from working capital from the Fort Worth rent, I guess. But overall, for inventory, is that the total amount that we should assume? Or is it going to be like a higher headwind year-on-year? Katja Garcia Vila: That was a specific headwind that I would like to point out because we never quantified the amount that specifically before. So that was why I mentioned the MTU Fort Worth inventory step-up. Overall, as you know that with the growth of the business, we will also face some increase on the inventory side despite the fact that we do our very best to manage our inventories as efficiently as we can. Operator: We will take our next question. Mr. Rory Smith from Oxcap Analytics, may we have your question? Rory Smith: It's Rory from Oxcap. I just wanted to come back to that point on spares. I was hoping you'd be able to give a number for spare engines actually shipped in Q4 and what that was in the first 9 months of 2025. And then the second question in terms of the MRO segment and the guide for the GTF share there, 40% to 45% in 2026. Is it possible to get any sort of sensitivity on margins, whether it comes in at 40% versus 45%, what we can kind of get some guide rails around that? And then my third and final question is just on the GE9X, you've obviously called that out, its delayed entry into service is 2027 now. How does that actually impact your financial statements? If you could just frame that for us financially, that would be really helpful. Katja Garcia Vila: Okay. So with regard to the split between spare and installed engines, you know that as those information are also not disclosed by our partners in the network, there is also no way that we will disclose those details. I think what is clear when you look at the fourth quarter of last year, we said that there was a higher share of installed engines and that, that has, for sure, an impact on the margin of the OEM segment. The MRO guide for 2026, so there is no way we break down the 40% to 45%. But what you need to see is that the GTF, just from a pure construction of the contract is rather dilutive to the margin, the higher the share rate. So if we have a higher share on the GTF in our revenues, there is an impact on the margin side. And for the GE9X, I think there are 2 important topics to keep in mind. The GE9X delivery was already postponed a couple of times and we had built up inventory in our facilities to support the original ramp-up, and that still is with us to the largest extent, yes. Operator: We will take our next question. Mr. Samuel Burgess from Goldman Sachs, please, may we have your question? Samuel Burgess: Just a couple of questions for me, please. Just a follow-up on the Fort Worth point. I mean you talked about the impact of working capital from the inventory ramp up. I think the first induction of LEAP at Fort Worth is expected at the end of this year. As we go beyond that to '27, should we expect that to unwind to become a bit of a tailwind to cash rather than a headwind? So just thinking through how Fort Worth starts to contribute would be really helpful. And then just secondly, on R&D, how do you see that evolving next year and beyond, that would be really helpful? Katja Garcia Vila: Okay. So with regards to Fort Worth, first of all, let me correct one assumption for the first induction of an engine is foreseen already for July of this year. And the induction -- like to ramp up the facility itself for the first induction already comes with the headwind, so with the buildup in inventory. As we will continue to ramp up that facility over the next couple of years until 2030, you can expect further impact coming from this ramp-up on the inventory side. So we expect a similar impact year-over-year, more or less. So that's a big topic. And on the R&D side for 2026, that is a bit of a 2-answer question. So there is the R&D -- the capitalized R&D, we rather expect to decrease during the course of the next year compared to the 2025 level. And the self-financed R&D, we expect to maybe increase a little bit compared to prior year's level. But that is more or less what we do see. And I think it's clear as we continue to follow our technology agenda, there are small development works to be done in that area. Overall, I would say -- and if you look at the midterm ambition that we have, it's rather a decrease in R&D expected until 2030 overall. Operator: We will take our next question Mr. Sash Tusa from Agency Partners, may we have your question? Sash Tusa: Yes. You stated in the section on military OEM that a constructive way forward on the FCAS project is expected. I wonder if you could just elaborate a bit on that. What do you see as being a constructive way forward? And presumably, you are thinking about contingencies for -- if the program currently configured does not continue past the end of Q3. What would you do with all these engineers? Johannes Bussmann: Okay. I'll take that one. As you mentioned, the Phase Ib is ongoing until end of September this year. And we are delivering together with our partners, Safran and ITP, there are according to the time plan and according to what the deliverables are. So that means in our Pillar, Pillar 2 in the entire FCAS program, we have a very stable and good working relationship that we are also willing to continue whatever the solution the politicians in Europe might take. So that's something where we have aligned. And the question is now, what do the politicians decide? And that's not in our hands. I think we need guidance from politics, which direction they want to go, how the system should look like. And then we, as an industry, and then in our share with the engine, of course, can join forces. And depending on these decisions, the consortium stays as it is for Pillar 2 or it might need to be adjusted, but that's something for us only now to guess. So that's nothing that we can elaborate on in detail as we don't know these facts. And we are waiting for a decision. What I'm really confident on that the -- at least the German politicians where I'm in contact with, they have understood that the decision has to be taken soon. And there is a strong will to do so. But of course, it's a European program, and that's why several governments need to come together and make a decision, and that's what we are waiting for. Operator: We will take our next question. Benjamin Heelan from Bank of America, please, may we have your question? Benjamin Heelan: Yes. So first question for me. So you've guided for EUR 1.35 billion to EUR 1.45 billion from an EBIT perspective. My interpretation of your comments is that the spare engine ratio, which is somewhat of the swing factor as to why you would be towards the bottom end or the upper end. Is that a fair assessment? Or is there something else going on that could move through the year, if there's any color of kind of what drives you to the top or the bottom of that range? Secondly, obviously, spare engine ratio, I appreciate you're not going to give any numbers, but qualitatively, how should we be thinking about that into 2027 and potentially beyond? Is there any color that you can provide around that because I think in my view, in particular, it is clearly elevated right now. So understanding how long it's going to remain at an elevated level. And then third question, obviously, Airbus are very unhappy based on the comments that they made on their conference call. Is there any -- can you talk a little bit through like what are the bottlenecks, like what has driven this shift over the past couple of months. Are there new bottlenecks in production that we need to be thinking of? Is it a stickier AOG situation? Just can you help frame a little bit what has driven the need to shift the deliveries from Airbus over the last couple of months? Katja Garcia Vila: Maybe I'll start with the financial questions, and then I hand over to Johannes for the Airbus comment. So overall, what we have pointed out on Page 20 of our presentation is that there are a couple of drivers that will influence our margin also on the commercial OE side. So the -- and we will an increase in new engine deliveries overall and the growing spares and installed engines. Just to really remind you once again, it's not only all about the GTF. So there are also a lot of other engines that we supply. And also in there, we do have spare and installed engines that we do supply. The GTF definitely is a driver, but also the B787. So the GEnx engine or also the B777 that will start will happen in 2027. So it's not only the topic of the GTF spare engine ratio or total number that lifts that. When you look at the overall development, I think it's clear that we are currently operating at an elevated level with regards to the spare and lease engines in the GTF program. But also there, I would like to make one comment. In the newer engine programs, we will -- we do expect to see an elevated level for a much longer time moving forward because of the fact that those engines overall are being operated under much harsher conditions than engines have been operated in the past. And that's not only true for the PW11 or for the GTF, but it's also true for other engine programs. So overall, we do not expect to move back to a historic level of maybe 10% of spare and lease engines in the market. We rather expect that to remain elevated. Nevertheless, the current levels will not be sustainable for the longer future. For this year, and this is also a comment that we have made in absolute terms, we expect the delivery of spare and lease engines to be pretty much in line with what we've seen in 2025. But due to the increase in installed, there will be a reduction in the overall ratio. Maybe, Johannes, with that, I hand over to the Airbus part of the question. Johannes Bussmann: Yes. Okay, of course. Yes. Of course, Guillaume, obviously, is not happy with the actual status of the negotiations. As a matter of fact, there is no new [indiscernible], nothing at all. We have, I think, proven that in the -- especially Q4 last year that we have made progress in the -- on the MRO side and the throughput turnaround times. So in order to decrease the situation for the airlines, and then all things come together, there is a mixture of requests from Airbus, what they want to get delivered. As you know, the GTF is for A220, the sole engine. And for the A320, it's a mixture between LEAP and the GTF. And in that overall setup, of course, there needs to be a solution that Pratt is negotiating with Airbus. But we can't further comment on that one. We're also not familiar with all the details that are on the table there, but I'm very confident that they will find a solution, and think that Guillaume is not happy was clear message that he sent and we're aware of that one. Operator: We will take our next question. Mr. Aymeric Poulain from Kepler Cheuvreux, please, may we have your question? Aymeric Poulain: My questions must have been answered, but maybe a few more color, please, on the turnaround, the time you said there was some improvement in 2025 and you're now best in class. So what was what is the turnaround time now? And how much more room for improvement do you see in the years to come? And then your competitor mentioned that given the low retirement rate, the number of shop visits should stay pretty flat up to 2028 before starting the descent. Do you see the same phenomenon for the V2500? Or do you see a higher retirement rate coming now? Johannes Bussmann: So, okay. On the turnaround times, that's always a mixture of different numbers, of course. The work scopes are different depending on how long the engines have been run, in which environment they have been operated. So the average turn time has come down. Material availability, supply chain issues have been reduced or at least came down. And that's, of course, helpful for the turnaround time in the shops. And within the network, so the partners that are performing MRO, we are sharing this information. So that's nothing that we keep for us. Of course, we want to support our customers to the best possible. And MTU Hannover especially has contributed last year, a lot there because turnaround times and developments have developed in a very nice way to reduce that. On the V2500, we still see quite a big portion of engines coming in, 15% are still waiting first shop visit, 35% second, and then, of course, the remaining 50% third or even further. And that's something, of course, that will go on for quite a while. So we have quite heavy workload in our shops with that. And with the increased work scopes/limited parts coming out of the engine, of course, due to the later shop visits, that's something that is positive for the development of our business, an engine that we know very well and where we have great capabilities also on the repair side. And that's why this will remain for the foreseeable time quite good and stable business for us. Operator: We will take our final question. Mr. George Mcwhirter from Berenberg, please, may we have your questions? George Mcwhirter: In the military business, can you just provide a bit more detail around the supply chain issues that you are experiencing? And are you confident that this will be less of an issue this year? And the second question is on your expectations for when the first in-service GTF engines will receive the GTF Hot Section Plus retrofit package? And when do you think you will be able to complete the retrofit of the whole fleet? Johannes Bussmann: Okay. As you know, all military programs run into consortiums. And of course, that also has seen the difficulties that we are facing on the commercial side. Volumes are much smaller. So that means the impact of single disturbances is a bit bigger. And so that's something that is calming down as the overall supply chain is coming down, and we have seen a slight drag that led to the slightly reduced numbers, but we are also confident that we can compensate on that one this year and the years after. So we don't see any real problems that are remaining and are hindering us from increasing the military side now for the time to come. The Hot Section Plus from Pratt & Whitney, of course, interesting for the installment in the already delivered engines on the GTF side. And it covers for around 90%, 95% of the durability issues for the existing fleet. And that is, of course, something that we will install during the course of the normal shop visits. So an assumption on how long that takes, it's a bit difficult, but all customers that opt for this Hot Section Plus thing, we can install it in the normal shop event. And then this comes in. It's not mandatory, so the customer has a choice. And that's why any guess on any time line is difficult, but we are confident that customers will make use of it, to what extent remains to be seen. And maybe when we have a little more time down the road, then we can elaborate on these numbers. Operator: This concludes today's question-and-answer session. I'll now hand the call back to Mr. Thomas Franz for closing remarks. Thomas Franz: Yes. Thank you. This indeed marks the end of today's call. Thank you, Johannes, and thank you, Katja, for your presentation, and thank you all participants for the interest in the questions. As usual, for further information and details, reach out to the IR team. Beyond that, have a great day. And yes, see you soon. Operator: We want to thank Dr. Johannes Bussmann and Mrs. Katja Garcia Vila, and all the participants of this conference. Goodbye.
Operator: Hello, ladies and gentlemen. Welcome to the Day One Biopharmaceuticals, Inc. Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that this conference call is being recorded. I would now like to turn the call over to Joey Perrone, Senior Vice President of Finance and Investor Relations. Please go ahead. Joey Perrone: Thank you. Hello, everyone, and good afternoon. Welcome to Day One Biopharmaceuticals, Inc.'s fourth quarter and full year 2025 financial and operating results conference call. Earlier today, we issued a press release that outlines the topics we plan to discuss today. You can access the press release and the slides to accompany this conference call in the Investors and Media section of our website at www.dayonebio.com. An audio webcast with the corresponding slides is also available on the website. Before we get started, I would like to remind everyone that some of the statements that we make on this call and information presented in the slide deck include forward-looking statements as outlined on Slide 2. Actual events or results could differ materially from those expressed or implied by any forward-looking statements. We encourage you to review the various risks, uncertainties, and other factors included in our most recent filings with the SEC and any other future filings that we may make with the SEC. These forward-looking statements are based on our current estimates and various assumptions and reflect management's intentions, beliefs, and expectations about future events, strategies, competition, products and product candidates, operating plans, and performance. You are cautioned not to place any undue reliance on these forward-looking statements and, except as required by law, Day One Biopharmaceuticals, Inc. disclaims any obligation to update such statements. Today, I am joined by Dr. Jeremy Bender, Chief Executive Officer; Lauren Merendino, Chief Commercial Officer; Charles York, Chief Operating and Financial Officer; and Dr. Michael Vasconcelles, Head of Research and Development. I will now turn the call over to Jeremy. Jeremy Bender: Thank you, Joey. Good afternoon, and thank you for joining us. We are proud to present today our fourth quarter earnings and full year financial results for 2025. 2025 was our first full year as a commercial company. With the launch and uptake of Ojemda in pediatric low-grade glioma, we have now demonstrated we can deliver on our mission to develop new medicines for people of all ages with life-threatening diseases. Importantly, we have also now taken the initial steps needed to repeat this with meaningful pipeline advancements. Together, the Day One Biopharmaceuticals, Inc. team achieved seminal commercial and clinical milestones in 2025 that have positioned us for accelerated growth in 2026. Ojemda continues to be the primary revenue and growth driver for the company. Enthusiasm for Ojemda among the health care professionals, caregivers, and patients in the pLGG community expanded throughout 2025. I am confident we are advancing and improving the pLGG treatment paradigm and moving towards establishing Ojemda as the standard of care therapy in second-line pLGG. For the year, we reported $155.4 million in net product revenue, which is up 172% year over year. We achieved double-digit sequential quarterly growth throughout 2025. That translates to more than 4,600 total prescriptions for the year, which is more than 180% growth compared with 2024. We will dive further into that performance shortly. The momentum we are seeing has given us confidence in the path forward, and as such, we are reiterating our 2026 Ojemda net product revenue guidance of $225 million to $250 million for 2026. We are just beginning to shape the market for pLGG, and we see considerable opportunity ahead for us to continue Ojemda growth. This will be driven in part by the three-year data we presented at the Society for Neuro-Oncology meeting, which Mike will review in a moment. As the community gains experience with and confidence in Ojemda, we are in parallel on track to establishing a strong scientific basis for use in the frontline setting in pLGG through the FIREFLY-2 trial. We expect to complete enrollment in FIREFLY-2 in the first half of this year, with a top-line readout occurring in mid-2027. These data represent an important opportunity to define our path towards standard of care across all lines of pLGG therapy, which would open up not only the opportunity to advance patient care earlier in the treatment paradigm, but also to broadly accelerate our growth. We also anticipate global expansion for Ojemda this year, with our partner Ipsen preparing for ex-U.S. regulatory approvals, including in Europe. Beyond Ojemda, we are advancing numerous potential growth drivers with our expanding pipeline. We closed the acquisition of Mersana in January, and are now integrating the lead program, EMILY, into our pipeline. This is a promising antibody-drug conjugate with early evidence of activity in adenoid cystic carcinoma, or ACC, a challenging and rare cancer with few therapeutic options today. This program represents a very real opportunity to extend our mission into a disease area with significant medical need. We will share a bit more about this in a few moments, and additional clinical data on EMILY will be reported in the middle of this year. We also continue to generate progress with DAY301, a promising antibody-drug conjugate with opportunities for development in multiple pediatric and adult indications. While we are still early in development, we are seeing encouraging signals of an efficacy and safety profile that could address persistent unmet medical needs as well. We are actively advancing the program and look forward to sharing an update on that trial later this year. Finally, we have maintained a strong financial position throughout this dynamic year, ending 2025 with more than $440 million in cash. We have no debt. Our disciplined approach has and will enable us to continue investment in high-value programs that can deliver meaningful impact to additional patient communities. Taken together, we are on a promising trajectory for 2026 and beyond. Let me now turn it to Mike to review the three-year data on Ojemda. Michael Vasconcelles: Thanks, Jeremy. Our mission at Day One Biopharmaceuticals, Inc. is well represented by our ongoing clinical development with Ojemda in pediatric low-grade glioma, or pLGG. Notably, long-term follow-up data from our trial, FIREFLY-1, has provided critical insights to the contribution Ojemda is providing to patients with relapsed or refractory pLGG. Referred to as the FIREFLY-1 three-year data, these updates were presented in November 2025 at the Society for Neuro-Oncology Conference. With a median on-study duration of 40.6 months, these data confirm earlier reported results, strengthening our understanding of the durable clinical impact Ojemda is providing patients. I would like to summarize the highlights of these three-year data, beginning with safety. The three-year data summarized on this slide are notable for no new safety signals identified in comparison to data at the time of our initial approval. Specifically, adverse events leading to treatment discontinuation are low. In addition to rash, other low-grade adverse events include fatigue and gastrointestinal events, such as nausea or vomiting. As noted on this slide, adverse events of higher grade and frequency include decreased growth velocity, anemia, and occasional more severe rash than usually observed, and certain asymptomatic lab abnormalities such as elevated CPK or ALT. This profile remains consistent with the current product label. Let us turn now to the efficacy data. These updated three-year data confirm the meaningful responses in patients with relapsed or refractory BRAF-altered low-grade glioma in second or subsequent line of therapy as initially reported in FIREFLY-1. In fact, the 53% objective response rate is slightly higher than the 51% objective response rate at the time of the Ojemda approval. Response durations were also meaningful, with a median of 19.4 months. The median time to response is 5.4 months. The three-year follow-up data have also revealed insights into clinical decisions taken by investigators when radiographic-only tumor progression was observed on therapy with Ojemda. Consistent with general practice patterns, the FIREFLY-1 study has allowed for continued Ojemda treatment despite tumor progression. All 38 patients experiencing progression while receiving Ojemda continued treatment for a median duration of 9.3 months. Of these patients, 45% demonstrated further tumor reduction after initial documented progression had been observed. These data prompted us to undertake further analyses to better understand the clinical impact of treatment decision-making in patients on FIREFLY-1, and I would like to walk you through those on the next two slides. This slide illustrates important endpoints designed to reflect real-world treatment decisions. In addition to objective response and response duration, progression-free survival, or PFS, was assessed in FIREFLY-1. PFS is a composite endpoint encompassing either tumor progression or death, and in many settings, PFS is a meaningful measure of clinical benefit. However, the data I have just shared with you challenge this assumption in pediatric low-grade glioma, where treatment often remains ongoing despite radiographic evidence of tumor progression. In pLGG, other time-to-event endpoints may better reflect clinical benefit compared to PFS. Two other important time-to-event endpoint assessments are introduced on this slide. Let us focus on time to next treatment, or TTNT, which is shown across the top of the slide. Like PFS, TTNT is a composite endpoint measured from the date of onset of the first dose of Ojemda. However, unlike PFS, TTNT defines the initiation of the first subsequent anticancer therapy as an event versus tumor progression. The next slide shows these endpoints analyzed using the three-year FIREFLY-1 data. There are several on this slide, but I would like to call your attention predominantly to the dark blue, or TTNT, and the gold, or PFS, Kaplan-Meier curves. Physicians, patients, and their families work together to balance treatment of patients' low-grade glioma with meaningful treatment-free observation periods in between their therapy. For some patients, this clinical balancing act may go on for a couple of decades. The three-year FIREFLY-1 data demonstrate this critical aspect of patients' optimal care. Let me walk you through these points. The gold curve illustrates progression-free survival in FIREFLY-1. The median PFS is 16.6 months. The light blue curve, sitting more or less on top of the PFS curve, is an exploratory analysis where we have restricted progression to radiographic progression only. We are calling this rPFS. Clearly, most tumor progression events in FIREFLY-1 are radiographic-only events, which is why these curves are more or less on top of one another. In contrast, let us look at the two Kaplan-Meier curves at the top. Recall from the prior slide that in the time to next treatment endpoint, tumor progression as an event is replaced by the initiation of subsequent anticancer therapy. When we make this substitution, we can easily see the differences in the two curves. The median TTNT is 42.6 months versus the 16.6-month median PFS previously noted. The purple curve, referred to as clinical PFS, simply confirms the TTNT analysis by showing PFS based upon clinical progression events only. In short, these analyses from FIREFLY-1 illustrate standard clinical practice in the care of patients with pLGG. In an effort to optimize treatment over extended periods of time, treatment decisions are made based upon clinical tumor progression, not simply measurable change in tumor size based upon radiographic imaging. These data show that Ojemda meaningfully contributes to physicians' treatment armamentarium by extending patients' time to next treatment, thus improving their ability to craft the optimal treatment decisions for their patients. These time-to-event analyses are being incorporated into the ongoing randomized Phase 3 FIREFLY-2 trial in the frontline treatment of patients with pLGG, allowing the optimal characterization of the clinical benefit of Ojemda for these patients in frontline treatment in comparison to standard chemotherapy regimens, which is the control arm in the trial. As previously noted, we anticipate full enrollment in FIREFLY-2 in mid-2026. These impactful data strengthen our knowledge of the durable clinical impact Ojemda is providing to patients. Let me now turn it to Lauren to address how this is translating to the continued strong market uptake of Ojemda. Lauren Merendino: Thank you, Mike, and good afternoon, everyone. As the clinical data has continued to mature throughout 2025, we have delivered impressive results throughout the year, culminating in an especially strong Q4. This performance reflects the growing confidence in Ojemda within the physician community and its increasing role as a valued treatment option for patients with relapsed or refractory pediatric low-grade glioma. Let me walk you through the key drivers behind this growth. With less than two years on the market, we are proud of the meaningful impact Ojemda has made in improving the care for patients suffering from pediatric low-grade glioma. Our strong growth across 2025 reflects steady growth in physician experience and adoption, and an increasing number of patients persisting on therapy. In the fourth quarter, net product revenue reached $52.8 million, representing 37% sequential growth over Q3. For the full year, net product revenue totaled over $155 million, with double-digit sequential quarterly growth throughout the year and 172% growth over 2024. This performance was driven by clear and compelling increases in demand throughout the year. Fourth quarter prescriptions exceeded 1,300, representing 11% growth quarter over quarter, which is notable given the typical seasonal impact of the holidays. For the full year, we delivered over 4,600 total prescriptions, growth of over 180% versus 2024. Although it is still early, demand is off to a strong start in 2026. We believe the three-year data that Mike just reviewed will continue to strengthen physician confidence in Ojemda and fuel our business growth throughout 2026. We have made meaningful progress in redefining the treatment paradigm, but significantly more opportunity remains for 2026 and beyond. Later this year, we expect to report four-year follow-up data from FIREFLY-1, which we believe will further bolster Ojemda's clinical profile, with additional insights into time to next treatment and a greater number of patients receiving retreatment. Based on our momentum in 2025, and encouraging market indicators, we are reiterating our 2026 Ojemda net product revenue expectation of $225 million to $250 million. To date, we have made a lot of progress in expanding Ojemda's use in the second-line setting. Market research shows increasing preference for and use of Ojemda in the second line, and in 2026, our objective is to solidify it as the second-line standard of care. As our base of continuing patients grows, maximizing persistency to provide optimal patient outcomes has become increasingly important. Through detailed analysis, we have identified clear opportunities to further improve persistence, and this is an active area of focus for our team. Since launch, we have benefited from highly favorable payer dynamics, which continues to be an important driver of our business. Coverage rates are 95%, with more than 90% of patients approved on the first request. With over 95% of pLGG patients receiving paid drug, there is minimal reliance on our free drug programs, enabling patients to initiate therapy quickly and efficiently. The work we do now to establish Ojemda in relapsed/refractory pLGG lays an important foundation of experience and confidence that will be essential as we prepare for the outcomes of FIREFLY-2. These data will be a critical enabler to support the potential approval and use of Ojemda in the frontline and ultimately support its adoption as standard of care across all lines of therapy. Looking ahead to 2026, we are focused on two primary execution levers to drive our growth: driving new patient starts and optimizing persistence. Ojemda is increasingly well positioned to become the standard of care in the second-line setting. Its clinical profile aligns closely with the attributes physicians prioritize when treating pLGG, specifically rapid and sustained tumor response, long duration of benefit with the potential for retreatment, a safety profile that is manageable in pediatric patients, and a convenient once-weekly dosing schedule. Our three-year FIREFLY-1 data reinforced these attributes, demonstrating durable responses both on and off treatment. Physician enthusiasm for Ojemda is reflected in the pace of new patient starts. In the second half of 2025, pLGG new patient starts increased by 25% compared to the first half. This acceleration was driven by growing clinical experience with Ojemda and the growth velocity data presented at ASCO that showed catch-up growth for patients after completing treatment. These data increased physician confidence in the long term for patients. Once patients initiate therapy, our focus remains on optimizing persistence. With just over 20 months on the market, median duration of therapy for commercial pLGG patients is trending to 19 months. The quarter-over-quarter stacking effect of long treatment durations was a significant contributor to our strong performance in the second half of the year. I am proud of what we have accomplished for the pLGG community since launch and particularly throughout 2025, and I am confident that this focused and disciplined execution will continue to drive sustained growth for Ojemda and solidify its position as second-line standard of care. With that, I will turn it back to Mike to discuss our pipeline progress. Michael Vasconcelles: Thanks, Lauren. While we continue to build a strong base of evidence supporting Ojemda, we are also advancing highly promising pipeline programs that may help us further deliver on our mission, and I would like to review those briefly today. But let me take just a moment to reinforce our approach to research and development at Day One Biopharmaceuticals, Inc., as this informs how we prioritize and advance our pipeline. We remain inspired by the urgent need of children with cancer. Our sense of urgency brings focus to innovative solutions in areas of unmet need that others often overlook. Pursuing opportunities that are differentiated, with the potential for high impact, allows us to leverage the internal focus and expertise we have already established with Ojemda to rapidly advance transformative programs through research, development, regulatory approval, and commercialization. This is the lens through which we continuously work to identify, study, and advance novel programs intended to substantively change patients' lives. Let us touch briefly on M-Tog, Let It Out, and/or EMILY, our newest addition to the Day One Biopharmaceuticals, Inc. portfolio following the closing of our merger agreement with Mersana Therapeutics last month. EMILY is a novel antibody-drug conjugate comprised of both a B7-H4 directed antibody targeting a well-characterized immune checkpoint cell surface protein widely expressed on multiple cancers and our proprietary linker-payload designed for targeted delivery of a novel r-statin, FHPA, in Phase 1 clinical development. As reported at the 2025 meeting of the American Society of Clinical Oncology, EMILY demonstrated antitumor activity in adenoid cystic carcinoma, or ACC, a rare cancer affecting adults across the age spectrum that most often arises in the salivary gland. Monotherapy antitumor activity and a well-characterized safety profile may support a rapid development path to registration for this uncommon cancer for which there are no current approved treatments. If ACC is confined to its site of origin at diagnosis, then surgical intervention with or without external beam radiation may be curative. However, some patients present with locally advanced metastatic disease or recur shortly after definitive local therapy. This aggressive form of ACC may be defined by a combination of clinical and histologic features and represents a subset of the approximately 1,300 patients diagnosed with ACC each year in the United States. The Phase 1 data set with EMILY has advanced in both patient number and follow-up. We look forward to sharing an update on the ACC patient cohort and the expanded safety data set since ASCO 2025 at a medical meeting in mid-2026. In parallel, we intend to initiate discussions with the FDA in the United States to discuss our intended approach for accelerated clinical development for this patient population in desperate need of new therapies. Median survival of the expected patient population for registration is estimated at only between two to three years, and no approved therapy exists. As I noted at the outset of my remarks, our focus on life-threatening diseases others may have overlooked is entirely consistent with the unmet need faced by patients and their families with a diagnosis of ACC. Beyond our focus in ACC, if there are opportunities to study EMILY in other cancers where B7-H4 is overexpressed, we will assess those carefully, most notably triple-negative breast cancer. However, our primary focus at the present is to ensure a rapid advancement of clinical development program in ACC. Finally, I would like to provide a brief update on our early pipeline program DAY301. DAY301 targets PTK7, a transmembrane protein in the pseudokinase family of receptor tyrosine kinases. We have harnessed a high-potency topoisomerase I inhibitor with a novel hydrophilic, highly stable linker to deliver a drug-antibody ratio of 8 with this molecule. PTK7 is overexpressed in a wide variety of adult and pediatric cancer, in particular gynecologic cancers and squamous cell cancers of the head and neck. Our Phase 1 program has been progressing through dose escalation and schedule optimization, such that we anticipate sharing data and a program update in 2026. We are encouraged by early signs of antitumor activity even at this relatively early stage of clinical development. With these summaries of our current programs, I trust you share the same degree of enthusiasm as I do about each one. I look extremely forward to sharing updates across the board as the year progresses. In the meantime, I will turn it over to Charles, who will provide our financial update. Charles York: Thank you, Mike, and good afternoon, everyone. Earlier today, we reported our fourth quarter and full year 2025 financial results. I will focus on a few key takeaways to highlight the growing strength of Ojemda's commercial trajectory, our disciplined investment approach, and the durability of our financial position as we enter 2026. In the fourth quarter, U.S. Ojemda net product revenue reached $52.8 million, representing 37% sequential growth over the third quarter. This strong finish capped a very successful year, with full year 2025 net product revenue of $155.4 million, an increase of 172% year over year, and double-digit sequential quarterly growth throughout the year. As Jeremy and Lauren discussed, this performance reflects sustained demand, increasing prescriber confidence, and the cumulative impact of longer treatment duration. Importantly, this growth has been achieved while maintaining channel management. Channel stock increased modestly at year-end, consistent with the typical seasonal ordering patterns, and remains at approximately the midpoint of our targeted two to four weeks of days on hand. For the fourth quarter and full year, gross-to-net remained within our previously communicated 12% to 15% guidance range, reflecting continued stability in payer dynamics. Total cost and operating expenses were $81 million in the fourth quarter of 2025, and $286 million for the full year 2025, as compared to $95 million in the fourth quarter of 2024, and $348 million for full year 2024. The year-over-year decline is primarily driven by the absence of one-time expenses related to the in-licensing of DAY301 in 2024. As we continue to grow the top line, we also remain determined to invest at a pace that supports long-term financial stability for Day One Biopharmaceuticals, Inc. We reached an important milestone in 2025. In just about 20 months since our approval of Ojemda, revenue exceeded the combined cost of sales and SG&A for the full year. This highlights both the growing contribution of the product to the enterprise and the scalability of our operating model as revenue continues to expand. And Ojemda is just getting started. Ojemda is supported by both composition of matter and a broader patent portfolio consisting of issued and pending applications that we believe provides meaningful layered exclusivity extending into the 2040s. We see Ojemda as a foundational program that will deliver cash flow for investment and increasing value for shareholders. We ended 2025 with approximately $441 million in net cash and no debt, providing a strong financial foundation to support our commercial growth and our pipeline advancement. This balance does not include the impact of the Mersana acquisition, which closed in early January 2026, yet we maintain ample capital to fund our current plans without the need for additional financing. Looking ahead, we are guiding to 2026 Ojemda net product revenue of $225 million to $250 million, with a midpoint implying greater than 50% year-over-year growth. Where we land within that range will depend primarily on continued persistence on therapy and the pace of new patient starts. We continue to have a favorable gross-to-net profile for Ojemda, and in 2026, we see gross-to-nets in the range of 16% to 19%. Finally, business development continues to be an important strategic priority. The acquisition of Mersana was anchored on the value we see in the EMILY program, particularly in ACC. The transaction is also a framework that is representative of how we think about continuing to grow Day One Biopharmaceuticals, Inc. We look for opportunities that are rooted in oncology or select rare diseases where unmet medical need and clinical impact are the highest; have the potential to be first in class or clearly differentiated, supported by strong biology and early clinical signals; offer a clear line of sight to near-term revenue or meaningful value creation; and can be developed and commercialized at a scale and cost that is appropriate for a growing company, while maintaining financial discipline and flexibility. The EMILY program embodies all of these traits and has the added benefit of the potential for a favorable accelerated regulatory pathway. We are thrilled to have that platform on board and are excited about the data release planned for mid-2026 and the future announcement of what we anticipate is our path to registration. I will now turn it back to Jeremy to wrap up and share a few closing remarks. Jeremy Bender: Thank you, Charles. As you can see, our momentum at Day One Biopharmaceuticals, Inc. is palpable. We delivered on our goals for 2025, and our success to date has further fueled our ambitions for 2026. We are well positioned for growth both in the near term and in the long term, with well-defined commercial growth plans, upcoming strategic pipeline data sets, and a consistent and disciplined plan for managing our finances. I would like to extend our sincere thanks to the entire Day One Biopharmaceuticals, Inc. team for an outstanding year of execution, and a warm welcome to those new colleagues from Mersana who have recently joined us. We are excited to have them on board as we drive the next phase of growth together. I would also like to thank our partners and shareholders, and most importantly, the investigators and patients who generously participate in our clinical trials. All of the progress we have shared today is in service of our ambition to deliver life-changing new medicines to people of all ages. Together, we are delivering on this mission. I will now hand it back to the operator for Q&A. Operator: Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before the star key. We ask that all participants limit themselves to one question with an opportunity to have a follow-up. We will now open the line up for questions. Our first question comes from Anupam Rama with JPMorgan. Please proceed with your question. Anupam Rama: Hey, guys. Thanks so much for taking the question, and congrats on the quarter. You talked about persistency on Ojemda here in the commercial setting. How do you maintain the persistency that you have seen? And to your comments, Lauren, earlier, do you improve it as duration of therapy increases? Jeremy Bender: Thanks so much. Anupam, thanks for the question. This is Jeremy, and I will ask Lauren to address the persistence topics directly. Lauren Merendino: Thanks, Anupam. First of all, I just want to reiterate that our current persistency is really great. Our median duration of therapy is trending towards 19 months for our commercial patients, so that is really robust persistence already. But we recently did some additional analysis that helped us identify some groups of patients that do better from a persistency perspective, and we think that that creates opportunity for us that can result in increased persistency. Some of those groups—first of all, earlier-line relapsed/refractory patients, which, as you know, we are already driving towards establishing Ojemda as a standard of care in second line, so that is consistent with what we are doing already—but those earlier-line patients do tend to stay on therapy longer. We also found that physicians with more experience with Ojemda had patients that stayed on for longer. That makes sense because they are likely better able to manage any AEs that may pop up, and so that really aligns with the depth that we are driving with our prescriber base. The more patients they have, the more adept they will be at managing the AEs and keeping patients on therapy. Another group that came out of this analysis were dose-adjusted patients. Remember, all of our doses are priced the same, so regardless of what dose they are on, it does not have a revenue impact. However, if they stay on longer, obviously, that will have a positive revenue impact, and so we believe there is room for us to further educate physicians on the importance of dose adjustment in AE management. The final group that we identified were those patients who were enrolled in our patient support program. These are programs where nurses have calls with the patient along the way and help them through their journey, and we found that those patients stayed on for longer. It creates an opportunity for us to increase enrollment in those programs. These are all important areas of focus for my team this year, and we believe that this will help us to drive longer persistency over time. Anupam Rama: Thanks so much for taking my questions. Jeremy Bender: Thanks, Anupam. Operator: Our next question comes from Tara Van Krogh with P.D. Cohen & Co. Please proceed with your question. Nick: Hey, guys. This is Nick on for Tara. Thanks for taking our question. With the updated EMILY data coming midyear, are you looking for that to support moving into a registrational trial? Also, you mentioned potentially looking at other indications. Do you plan to release data from additional indications midyear, potentially TNBC since Mersana looked at this indication initially? Thanks. Jeremy Bender: Thanks, Nick. One quick comment before I hand to Mike, and that is that I want to reemphasize the importance of EMILY to our portfolio and to our strategic plan. It is really critical as an additional growth driver in a relatively short time and, of course, underpinned the deal. There could be opportunities beyond ACC for development, as Mike mentioned. Go ahead, Mike. Michael Vasconcelles: Nick, thanks for the question. This is Mike Vasconcelles. A couple of reminders just for you and the folks listening. In the context of the diligence we undertook for Mersana, we were already able to see a substantial body of data that went beyond what Mersana was able to present last year at ASCO 2025, and that pertains to both the antitumor signal from the Phase 1 experience as well as the safety data set. We have continued to advance the study in the context of closing the Mersana acquisition earlier in January to further generate data that will strengthen that body of evidence that will support registration, as well as provide the data to firm up our confidence in the dose and schedule that will be taken forward in registration. We will aggregate all that information and not only share as much of it as we are able to midyear this year in a scientific conference, but also bring that forward to discussions with the FDA. I think the second part of your question was whether to expect data beyond ACC. We have not, in a disclosure later this year, been specific about that, but I can tell you that certainly the safety data set will be comprehensive and, again, just reiterating what I said in the prepared comments, that our core focus right now is on adenoid cystic carcinoma while we continue to evaluate other opportunities. Nick: Thanks very much. Appreciate it. Michael Vasconcelles: Thanks, Nick. Operator: Alec, are you there? Alec Stranahan: Yeah. Sorry. I cut out there for a second. Can you hear me? Operator: Yeah. We can hear you, Alec. Alec Stranahan: Okay. Great. Yeah. Thanks for the questions. Just two from me. Great to see the strong progress to close '25. I guess, looking to 1Q, just back over the past two years, we have seen some fairly incremental consecutive growth in the first quarter of the year following a strong closure to the year. So any early 2026 trends you could highlight directionally at this point, or maybe anything you think that might be unique to 4Q? And then I have got a follow-up. Jeremy Bender: Sure. Thank you, Alec, for the question. I am going to ask Lauren to comment, but what I would start with is really to focus on 2026 in total as a year, and our reiteration of the guidance that we provided of $225 million to $250 million in net product revenue for the year. We are quite confident in that through the early experience of 2026. Lauren Merendino: And thank you for the question. As you know, we generally do not comment on the details of our current quarter. But I will say that demand continues to be strong in Q1, and as Jeremy mentioned, we are reiterating our guidance, and we are confident that we will be able to continue to grow throughout 2026. Alec Stranahan: Okay. That is really helpful. And then maybe one on the TTNT analysis. I thought this was pretty interesting. Curious if it is possible to break this down further between patients that continue to receive tovo after progression versus ones that, I guess, discontinued post-progression? Just trying to better understand what is happening in that window between progression and subsequent treatment. Thank you. Jeremy Bender: I think, Alec, thank you for the question. I think you are referring to the data that we published at SNO on the three-year follow-up data on FIREFLY-1. Mike, any comments there? Michael Vasconcelles: Alec, if I tracked with your question correctly, I think you are exactly onto the critical point that these analyses are looking to help interpret, which is that if there is a radiographic tumor progression in the context of therapy, that often does not lead to the discontinuation of that therapy, and that statement extends beyond the way in which the FIREFLY-1 investigators have administered tovorafenib, but is generally an approach that is taken certainly with targeted therapies in the disease. So the analysis that I summarized and shared earlier in this call does not differentiate the question that you are asking, which is what is happening to those patients who might have had radiographic progression in the time-to-next-treatment analysis versus those that did not. But as you will see in the upcoming publication of those data, which go into a lot more detail, in fact, you do see that patients who are continuing on tovorafenib that have evidence of radiographic progression often will then have some measurable tumor improvement or certainly tumor stability for an extended period of time. It just, again, reinforces the criticality that clinicians are making with respect to the initiation of new therapy, which is driven by overt clinical signs and symptoms and not simply often relatively small changes in the measurement of tumor on a radiographic assessment. Alec Stranahan: Okay. Very helpful. Thank you. Jeremy Bender: Thanks, Alec. Operator: Our next question comes from Ami Fadia with Needham & Co. Please proceed with your question. Poorna Kannan: Hi, this is Poorna on for Ami. Thank you for taking our question. For DAY301, from the initial data update that is expected in '26, how many dose cohorts can we expect the data from? And have you reached any DLTs or MTDs? How many doses are you seeking to take forward in the Phase 2 expansion? Thank you. Jeremy Bender: Of course. Thank you for the questions. Let me comment kind of broadly on the DAY301 program status and what you can expect with respect to the data later in the year. Michael Vasconcelles: First off, we have not defined the specific parameters that will be included in that data update at this stage. The program is in dose escalation. We have been backfilling at certain doses to evaluate those doses more comprehensively and to enrich for specific patient populations that we think may benefit. As I emphasized, we are seeing both an efficacy and a safety profile consistent with continued development. We are enthusiastic about what that prospective set of studies may look like. Beyond that, we have not said much and will not until we put those data out. You can look forward to seeing those details once there is a more comprehensive data set available. Poorna Kannan: Got it. Thank you. Michael Vasconcelles: Thank you. Operator: Our next question comes from Andres Maldonado with H.C. Wainwright. Please proceed with your question. Andres Maldonado: Hi, everybody. Thanks for taking my question. First one for me is thank you for, again, providing us with incredible amounts of detail, really mapping out the patient journey. So as you guys think about maybe two buckets of patients—one that have a finite treatment course of duration versus maybe ones that are more chronic intermittent—in the chronic intermittent therapy group, help me understand some of the puts and takes that put some of those patients in one bucket or the other. Help me triage this: one weighted more towards depth of initial response versus maybe a better retreatment outcome. Help us understand a little bit of those two patient buckets with the data that you have generated so far. Jeremy Bender: Thanks for the question, Andre. Let me provide some overview of how I think about how this medicine is going to be used over time based on what we do and do not understand today about treatment patterns. My first comment is that, of course, in FIREFLY-1, we have a fairly regimented approach to how Ojemda is administered and the potential for a break in treatment at 24 months. That is one paradigm. In the commercial or the real world setting, what we are observing is so far quite consistent with an approach that is fundamentally, at this stage, treat-to-progression, which is why, as Lauren has emphasized, we are seeing really strong persistence and durations of treatment at the median that are consistent, largely, with our expectations, if not exceeding those. What I think we expect to see going forward, and this is based on the three-year data, is that we will continue to see that persistence and certainly durations of treatment that are consistent with it, if not increasing. But we may also see some treatment breaks for patients that have a highly stable tumor, and for that reason, we may very well see retreatment as well because these tumors are genetically stable. There is evidence—and this comes from the three-year data, but other anecdotal descriptors as well—that patients do not develop resistance in those tumors and can be retreated. If they have had clinical benefit before, they are likely to have that again. How that nets out in terms of the specific populations—which is what I think you are asking about—I think is to be determined. But what I can tell you is that what we are expecting, and again, this is based on data you have already seen, is that you will see relatively frequent retreatment for patients who do take breaks, and a really good pattern of lengthy durations of treatment followed by reasonably significant, for your average patient, tumor stability. Beyond that, it is just too early to say exactly what patterns will be and which patients will fall into which kind of patterns of overall treatment. Andres Maldonado: Great. That is very helpful. And just as a quick follow-up question for EMILY, what is the magnitude and durability of response in ACC that you kind of have set as an internal bar? And what would regulators likely consider sufficient for accelerated approval? Thank you very much. Jeremy Bender: One quick comment, and then I will hand to Mike on what we hope and believe we will see for EMILY in ACC. That is a clinical data package that is really consistent with an approvable package in a setting like ACC where you have very few treatment options, a rare population, and an important potential new medicine with a pretty clear efficacy and safety profile that is consistent with a lot of clinical benefit. Beyond that, let me ask Mike to comment further. Michael Vasconcelles: This is Mike. Just exactly keeping the context that Jeremy nicely summarized in mind, this is a patient population that is really in urgent need of new therapies. There are no approved therapies for aggressive adenoid cystic carcinoma. When we look at what we would consider benchmark data, it is essentially old chemotherapy regimens with very poor responses, and we know from a variety of sources that the survival is poor. When you put all that into context and think about a development program, our expectation would be—and this is what I would expect until we can give you specifics following our conversation with regulators—that we would look to a sufficiently robust single-arm data set that would define the monotherapy objective response rate with sufficient durability, with patient numbers where the confidence intervals would clearly delineate the performance of a new medicine like EMILY in contradistinction to the available therapy, which is very poor, in the range of response rates as low as single digits in some series. Andres Maldonado: Thank you. Operator: Our next question comes from Kelsey Goodwin with Piper Sandler. Please proceed with your question. Britney Stopa: Good afternoon. This is Britney Stopa on for Kelsey Goodwin. Congrats on the quarter. Our question is regarding Ojemda sales. What are you hearing from physicians in your conversations following the presentation of the three-year FIREFLY data? And with the data having been presented mid-fourth quarter, how much of the fourth quarter growth do you attribute to that data, and when do you expect the bulk of the impact to be seen in the sales figures? Thank you. Jeremy Bender: Thank you, and I will pass to Lauren to answer your question. Lauren Merendino: The three-year data for FIREFLY-1 was presented at SNO, and that is a conference that many of our KOLs attend, and so we did have opportunities to speak to them at the conference, and their response was very positive to the data. Many of them were positively surprised with the length of time to next treatment that we are seeing with Ojemda, so a very positive response in every conversation that we had. On the timing of it, that was just prior to Thanksgiving, and I would say the awareness is mainly in the community that attended the conference. As far as the impact on Q4 performance, I would say it is minimal. It is going to be important that we continue to educate a broader group of physicians on this data in 2026 because it is so compelling, and Mike’s team, our medical team, is working on a peer-reviewed publication, and that will be a really important part of sharing this information more broadly. Since it has only been presented at a conference, we are not really able to promote it actively today, and will not be able to promote it actively, so we really need that publication in order to broaden the exposure to this data. We do think that when that time comes, it will be a compelling part of our story for a broader group of physicians to hear. Britney Stopa: Super. Thank you so much. Jeremy Bender: Thanks, Kelsey. Operator: We have reached the end of our question and answer session, which concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, and welcome, everyone, to the Ferguson's Results for the Year Ended December 31, 2025, Earnings and the Market Opportunity and Strategy Update. My name is Becky, and I will be your operator today. [Operator Instructions] I will now hand over to your host, Brian Lantz, to begin. Please go ahead. Brian Lantz: Good morning, everyone, and welcome to Ferguson's Earnings Conference Call and Webcast. Today's call will also cover an update on our market opportunity and strategy. Hopefully, you had a chance to review the earnings announcement we issued this morning. The announcement is available in the Investors section of our corporate website and on our SEC filings web page. A recording of this call will be made available later today. I want to remind everyone that some of our statements today may be forward looking and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, including the various risks and uncertainties discussed in our Form 10-K available on the SEC's website. Also, any forward-looking statements represent the company's expectations only as of today, and we disclaim any obligation to update these statements. In addition, on today's call, we will discuss certain non-GAAP financial measures. Therefore, all references to operating profit, operating margin, diluted earnings per share, effective tax rate and earnings before interest, taxes, depreciation and amortization reflects certain non-GAAP adjustments. Please refer to the appendix of the accompanying presentation for additional information regarding those non-GAAP measures, including reconciliations to the most directly comparable GAAP financial measures. Further, please note that some of the information discussed on this call is derived from third-party sources. We have not independently verified this data and make no representation as to the accuracy of this data nor do we undertake to update such data after the date of this presentation. Please refer to the accompanying presentation for additional information. With me on the call today are Kevin Murphy, our CEO; and Bill Brundage, our CFO. I will now turn the call over to Kevin. Kevin Murphy: Thank you, Brian, and welcome, everyone, to Ferguson's conference call. Before we begin, we'd like to flag something from this morning's release. I'd like to congratulate Brian on his decision to retire in May and thank him for his significant contribution to Ferguson over the past 5 years. He has been instrumental in our transition from the United Kingdom to the United States, in setting up our New York Stock Exchange listing and in establishing a strong investor relations presence here in the U.S. We're also pleased to announce that Pete Kennedy has been promoted to Vice President of Investor Relations, based out of our headquarters in Virginia. He's been with Ferguson for more than 10 years, initially in finance and the past 7 years within Investor Relations. Thank you both. And again, congratulations, Brian. Moving back to today's call. We'll initially cover highlights of our recent performance and our calendar 2026 guidance before moving on to a broader update on how we are uniquely positioned to provide essential water and air solutions for the complex needs of the specialized professional, looking specifically at how our scale and capabilities combined with multiyear market opportunities allow us to continue outperforming the market and deliver shareholder value over the longer term. We'll have time to take your questions at the end. Turning to our full year performance. Our associates delivered another strong year while faced with a challenging market. Revenue of $31.3 billion was 5% ahead of last year. The actions we took to diligently manage gross margins and streamline our business resulted in operating profit of $3 billion, up 11.3% and represents a 9.6% operating margin for the calendar year. Diluted earnings per share came in at $10.58, a 13.4% increase over last year. Cash generation was strong with $2.2 billion of operating cash flow, which allowed us to continue investing in our growth areas and executing our capital allocation priorities. We welcomed associates from 8 acquisitions, continuing our strategy of consolidating our fragmented markets while also returning $1.6 billion to shareholders via dividends and share repurchases during the year. And we continued to deliver a strong overall return on capital of 31% for the year. We're also pleased to declare a quarterly dividend of $0.89, which will be paid in April. Despite the challenging environment, we drove continued outperformance in our markets and delivered strong profit expansion in calendar year '25. Turning to our performance by end markets in the United States. Net sales grew by 5%. Residential end markets representing approximately half of revenue remained challenged. New residential housing starts and permit activity were down on the prior year, and repair, maintenance and improvement work also remained soft. Overall, we continued to outperform weak markets with residential revenue flat for the year. Nonresidential end markets performed better than residential. Our scale, expertise, multi-customer group approach and value-added solutions drove strong share gains with nonresidential revenue up 11%. Large capital project activity remains good, and we've seen solid shipments with growth in open order volumes and bidding activity. Our intentional balanced approach to end markets continues to position us well. Moving next to the full year revenue performance across our customer groups in the U.S. We grew Waterworks revenues by 13% as our highly diversified customer group saw strength across large capital projects, public works, general municipal and metering technology, offsetting weakness in residential. Ferguson Home grew 1% in a challenging new construction and remodel market. Our ability to present a unified experience combining best-in-class showrooms with a digital experience as we cater to higher-end projects drove outperformance against the broader market. Residential Trade Plumbing declined by 3% due to headwinds in both new construction and RMI construction. HVAC declined by 1% against a strong 10% comparable and weaker end markets, impacted by the industry's transition to new efficiency standards and weak new residential construction activity as well as a pressured consumer. We remain pleased with our execution of our counter build-out for the dual trade, our greenfield expansion and M&A opportunities. The Commercial/Mechanical customer group grew 18% on top of a 5% prior year comparable, driven by large capital projects such as data centers and partially offset by weaker activity in traditional nonresidential projects. Our Fire & Fabrication, Facilities Supply and Industrial Customer groups all saw growth during the year as we take share and leverage the benefits of our unique multi-customer group approach. Our customer groups are better together as we share expertise to provide end-to-end solutions that help simplify complex projects and drive construction productivity. Now let me pass the call over to Bill for the financial results in more detail. Bill Brundage: Thank you, Kevin, and good morning, everyone. Calendar year 2025 net sales of $31.3 billion were 5% ahead of last year, driven by organic revenue growth of 4.5% and acquisition growth of 1%, partially offset by 0.4% from 1 fewer sales day and 0.1% from the combined adverse impact of foreign exchange rates and a divestment in Canada. Price inflation was low single digits for the year, with improvement in finished goods pricing, offset by deflation in certain commodity-related product categories. Gross margin of 31% increased 70 basis points over last year, driven by our associates' disciplined execution as well as the timing and extent of supplier price increases. Operating profit of $3 billion was up 11.3%, delivering a 9.6% operating margin with 50 basis points of expansion over the prior year. Diluted earnings per share of $10.58 was 13.4% above last year, driven by operating profit growth and the impact of share repurchases. And our balance sheet remains strong at 1.1x net debt to EBITDA. Now turning to the calendar fourth quarter results. Net sales of $7.5 billion were 3.6% ahead of last year, driven by organic revenue growth of 3% and acquisition growth of 0.9%, partially offset by 0.3% from the combined adverse impact of foreign exchange rates and a divestment in Canada. Price inflation was low to mid-single digits. Gross margin of 30.6% increased 90 basis points over last year. Operating profit of $625 million was up 13.8%, delivering an 8.3% operating margin with 70 basis points of expansion over the prior year. Diluted earnings per share of $2.10 was 11.7% above last year, driven principally by operating profit growth. Moving next to our calendar fourth quarter revenue performance across our customer groups in the U.S. Many of the trends that Kevin highlighted for the full year have remained consistent during the quarter. We've continued to see strong Waterworks growth, up 9% on top of a 10% growth comparable. Commercial/Mechanical also saw a strong performance with 18% growth against a 5% growth comparable. The more residential exposed customer groups have been more pressured due to weaker markets. Ferguson Home was flat. Residential Trade Plumbing was down 4%, and HVAC was down 7% against a very strong 16% comparable. We're pleased with the continued growth of Fire & Fabrication, Facilities Supply and Industrial as we rounded out the year. Across our 2 end markets, our residential revenue was down 2% and nonresidential revenue was up 10% in the quarter. Once again, our multi-customer group approach and balanced end market exposure continue to serve us well. Moving next to our cash flow performance for the year. EBITDA of $3.2 billion was $338 million ahead of prior year. Working capital investments of $294 million were up from $106 million in the prior year as we selectively invested to support growth areas in the business. Interest and tax remained broadly stable year-over-year, resulting in operating cash flow of $2.2 billion, up $110 million on prior year. We continue to invest in organic growth through CapEx, investing $354 million during the year, resulting in free cash flow of $1.9 billion compared to $1.8 billion in the prior year. We also invested $276 million in M&A, returned $656 million to shareholders in dividends and repurchased 4.5 million of our shares for $902 million during the year. Now turning to our calendar 2026 guidance. While our markets remain mixed as we enter 2026, we expect another year of outperformance, strong operational execution and continued investment to expand our market-leading capabilities and scale. We expect markets to be broadly flat for the year, with residential down low to mid-single digits, and nonresidential up low to mid-single digits. Against this backdrop, we expect low to mid-single-digit revenue growth, and we expect an operating margin range of 9.4% to 9.8%. Interest expense is expected to be approximately $200 million. We estimate CapEx of approximately $350 million to $400 million, and we continue to expect an effective tax rate of approximately 26%. We believe we are well positioned as we head into the new calendar year. Now let me pass the call back to Kevin to give an update on our market opportunities and strategy. Kevin Murphy: Thank you, Bill. Moving on to our update on market opportunities and strategy. Our goal today is to provide a clear view of who Ferguson is, our core strengths and the structural trends that we believe will drive continued market growth over the medium and long term. Ferguson is the largest value-added distributor of essential water and air solutions, and we are proud to partner with our customers as they build and maintain the infrastructure that keeps North America running on projects, big and small, in communities across the country. Together, our residential and nonresidential construction markets represent a $340 billion market opportunity. And even with our current size and scale, there's still tremendous growth opportunities ahead. Our intentionally balanced business mix allows us to capitalize on the full spectrum of demand across our markets. Our balance of 50% residential and 50% nonresidential with 2/3 repair, maintenance and improvement and 1/3 new construction help provide durability and resilience regardless of market conditions. Our strategy is built on a foundation of core strengths that allow us to leverage our size and scale to provide exceptional service in our local markets as this is an intentionally local business. Our business strategy is aligned with structural trends that are shaping the North American construction market in the short, medium and long term. We're well positioned to take advantage of these structural tailwinds to deliver a strong and consistent financial performance. Ferguson is operating from a position of strength today and our business model will allow us to continue to compound growth and deliver shareholder value. One of our most powerful differentiators is our ability to integrate across multiple customer groups and provide products and solutions across the full life cycle of water and air applications from water treatment and transmission to storm water management to plumbing and HVAC systems to industrial pipe, valve and fittings, fire suppression and much more. Our associates collaborate as experts on the entirety of the project, partnering with our customers in early stages of the design and engineering process. We aid decision-making while providing products and solutions throughout the life cycle of the project, whether new construction or RMI. Our comprehensive water and air expertise allow us to help simplify complexity for our customers and provide end-to-end solutions that our communities rely on every day. The ability to deliver these solutions is made possible by where we are positioned in the broader supply chain. We connect 37,000 suppliers with over 1 million customers, providing them with choice of over 1 million products, all delivered through our extensive supply chain network. We strive to be the best path to market for our suppliers. Our scale allows us to offer customers more product options with shorter lead times and convenient delivery options. And our relationships in the local market ensure our customers receive the right product at the right time from people they like and trust. Additionally, our markets are highly fragmented with more than 10,000 small and midsized competitors serving individual geographies or specific customer types. This creates opportunity for consolidation and reinforces the relevance of our scale and enabling us to deliver differentiated value to both customers and suppliers. The projects we support demand the expertise of specialized professionals, plumbers, HVAC technicians, waterworks contractors, fire protection installers, commercial/mechanical contractors and the many skilled trades that keep water flowing, buildings functioning and essential infrastructure operating across North America. The tangible value we provide is even more important when you consider the environment our customers are operating in, essentially, a trade-starved world. Skilled labor is increasingly scarce. Demand continues to rise and the pressure on contractors to do more with less has never been greater. As these labor pressures intensify, our ability to unlock productivity becomes even more valuable to the over 1 million customers that we serve. Our job is to make their job easier. We help the industry overcome these challenges and unlock construction productivity through our ability to deliver the right products, the right solutions, guided by our people when and where our customers need them. Our strategic footprint puts 95% of our customers within 60 miles of a Ferguson location and allows us to deliver same day or next day. Our product strategy includes access to over 1 million products with a multi-brand offering in almost every major category. This includes 21 owned brands that make up approximately 10% of our overall revenue and span multiple product categories across our customer groups. The backbone of our business is the 35,000 associates that bring deep industry knowledge, technical expertise and strong long-term customer relationships. Our training program is designed to build a solid pipeline of talent and our culture emphasizes long-term career development and an unrelenting commitment to service. Our multi-customer group strategy allows us to serve customers and have a greater impact on the entire project, whether it's a multimillion-dollar data center or a residential remodel. We currently hold leading positions in the markets that we serve. We believe we are uniquely positioned to take advantage of the growth opportunities created when these groups come together on large, more complex jobs, jobs that are tailor-made for our business, jobs that require scale, product breadth and the ability to coordinate across multiple trades. For our customer, it means fewer handoffs, fewer delays, tighter coordination and a level of integration that drives meaningful construction productivity. In a trade-starved world, our customers don't just need product. They need productivity. And that's exactly what our value-added solutions deliver. We're continually looking for ways to save our customers' time on the job and deepen our partnership with them based on the unique needs of that project. We have intentionally added or expanded services like virtual design and construction, custom fabrication and valve automation to streamline design, bidding, ordering, staging and overall project management. And our digital tools give customers the ability to transact with us 24/7, making it easy to do business with us when and wherever they need. Shifting to a more macro view. We've identified 4 structural trends that are shaping the residential and nonresidential markets. Large capital projects, water infrastructure, climate and comfort and aging and underbuilt housing, each represent fundamental trends that are tailwinds for our business and catalyst for future growth. We are well positioned to capitalize on these trends, providing a foundation for long-term consistent above-market growth. Across the U.S., we're in the middle of a once-in-a-generation build-out of large capital projects, with more than 4,000 projects planned through 2031 and an estimated $6 trillion of projected spend. This represents a potential market opportunity across our customer groups of approximately $90 billion. Data centers, semiconductor facilities, advanced manufacturing, energy, biotech. These are long cycle, high-complexity projects that require the very best in water and air solutions. The demand we're seeing for these types of projects goes beyond incentives. It's demand from onshoring, reshoring, [ GLP-1 ] production, AI infrastructure and power generation, demand that we believe will continue well into the future. We're not securing these jobs by being a distributor moving boxes from point A to point B. It's because of the value Ferguson can uniquely bring to projects of this size and scale, from our multi-customer group expertise and our speed of our supply chain to full project management capabilities and value-added solutions. These projects are tailor-made for Ferguson. As an example, this data center project demanded scale, highly technical precision and coordination across multiple trades. We partnered with the general contractor and the contractor on the virtual model design and led the development of the liquid cooling build strategy in early stages of the project. Our skilled associates are using industry-leading fabrication technology to preassemble the custom design piping system. This project will deliver 5,700 liquid cooling assemblies, 57,000 valves, 12 miles of copper pipe and over 19 miles of water and fire lines. To date, we've generated over $40 million in revenue with over $100 million in open orders. By combining the expertise and capabilities of our 4 specialized customer groups, with our project management capabilities, we will seamlessly support coordination and execution throughout every phase of the project, both on and off-site. As we shift to water infrastructure, the reality is America's water systems are aging, underfunded and in need of modernization. Significant investment is required to upgrade and replace critical water, wastewater and storm water infrastructure. Our Waterworks business engages early in the project with both public and private utilities as well as engineers to offer solutions for the entire life cycle of water from collection and treatment to transmission and distribution. We're also on the forefront of smart technology in the water space, providing the metering, monitoring and intelligent infrastructure tools that help utilities manage usage, detect leaks and improve efficiency. Wherever water flows, we play a vital role and we're well positioned to take advantage of one of the most durable, high priorities and essential needs in the country with scale, capabilities and customer reach to lead it. Warmer summers, higher cooling loads, changing regulations and rising expectations for indoor comfort, it's changing how we heat, cool and ventilate our homes and buildings. We don't see this as a one-season trend, but as a long-term shift in how climate systems are being designed, installed and serviced. Demand is moving more toward efficient equipment, smarter systems and dual trade capabilities that blend HVAC and plumbing. Consolidation in the industry has led to larger multi-trade businesses with broader footprints and the need for a partner that understands this evolution and can scale with them. Ferguson now has over 650 full-service dual trade HVAC and plumbing locations that offer broad access to multiple equipment lines, parts and supplies and includes Ferguson's own brand products as well as national partnerships with the industry's leading manufacturers. We continue to invest in additional counter expansion, greenfield locations and M&A to drive further growth while expanding our digital tools to help our customers be more productive. We view climate and comfort as a durable structural growth driver for Ferguson and our investment in initiatives, along with our strong position in both HVAC and plumbing, provide us with a unique opportunity to capitalize on this industry evolution. While the residential market remains challenged in the short term, we believe the combination of aging housing stock and a housing shortage underpins strong demand over the longer term. The average home in America is now more than 4 decades old, and we're still millions of units short of meeting our current demand. That gap isn't closing quickly. It's a long-term challenge and a long-term opportunity. Older homes need repair. They need replacements. They need upgrades. And when new homes are built, they require everything from water delivery and metering to rough and finished plumbing to HVAC, appliances, lighting and in some cases, residential fire protection. Ferguson is uniquely positioned to serve both new construction and repair, maintenance and improvement through our multi-customer group approach. At Ferguson Home, it's about a nationwide builder sales force, best-in-class showroom experience and a strong connected digital experience to serve builders, remodelers, designers, architects and homeowners. These customers value our personalized consultative approach to design and product selection, and we're known for our strong relationship-driven approach. Once again, with our multi-customer group approach, we're poised to take advantage of a residential recovery. Ferguson combines the reach, resources and capabilities of North America's largest value-added distributor serving the water and air specialized professional with the speed, relationships and decision-making of a local partner. It's how we leverage our scale, earn trust in the local market and drive organic growth while also helping our customers be more productive in today's trade-starved world. And when you look at it, the favorable long-term structural trends in front of us, our strategy, capabilities and value-added solutions position us to take advantage of the demand created by these tailwinds. These are multiyear, multi-decade opportunities where we believe Ferguson is uniquely positioned to lead. The result is a sustainable business model that's designed to deliver strong, consistent financial performance, driven by above-market organic growth. And I'll now hand over to Bill, who will expand on our financial opportunity. Bill Brundage: Thank you, Kevin. You've heard today about who we are, how we win and the significant opportunities ahead of us. At our foundation, we have a long-term proven track record of consistent execution and strong financial performance. Looking back over the past decade, we've generated annual revenue growth of 8% with operating profit growth of 11% and operating margin expansion of 210 basis points to 9.6%. Over this time, our sustainable business model with balanced end market exposure has proven an ability to perform against a wide range of market conditions from a more steady market growth period to a hyperinflationary supply chain constrained period to a deflationary period with a more challenging market in recent years. Through this time, we've reached record sales of $31.3 billion, record operating profit of $3 billion and a new level of operating margin while delivering a 545% total shareholder return, and we've done this while generating strong cash flow and cash conversion. We take a disciplined approach to working capital investment, balancing the growth needs of the business while continuing to optimize our supply chain network. Over the past 5 fiscal years, we've generated approximately $9 billion in operating cash flow with an operating cash flow to net income conversion of 107%. And we allocate that cash across 4 clear capital priorities. First and foremost, we make the investments necessary to drive above-market organic growth. Next, we invest in bolt-on geographic and capability acquisitions. We've moved this up in our allocation framework ahead of the dividend. While we've not had to choose between acquisitions and sustainably growing our dividend, we believe this repositioning more appropriately reflects our growth focus and the returns we can generate for shareholders on quality acquisitions. Next, we look to sustainably grow the dividend over time. And finally, if we're below the low end of our target leverage range of 1x to 2x net debt to EBITDA, we return capital to shareholders via share repurchases. That consistency of capital allocation has enhanced growth and shareholder value. Over the past 5 fiscal years, we've deployed nearly $12 billion of capital and we've done this while driving strong returns on capital and maintaining a strong balance sheet that will provide great resilience, should we encounter a tougher economic cycle, and also optionality to further invest as opportunities arise. Turning now to acquisitions. We have a proven track record of success buying quality businesses in our highly fragmented markets. Over the past 5 fiscal years, we've completed over 50 acquisitions bringing in over $2 billion of revenue and accounting for just under 2% of our annual growth over that period. We acquired these companies at attractive multiples and leverage our scale to drive revenue, gross margin and operating cost synergies to generate strong returns. Our strategy targets 2 types of bolt-on acquisitions. First, geographic, which allow us to expand and fill in our existing footprint, consolidate our markets and bring in local associate expertise and customer relationships. We have a repeatable process that allows us to quickly integrate these acquisitions, leverage our scale and generate synergies. In addition to geographic opportunities, we look for capability acquisitions in which we bring in new products, new value-added solutions, associate expertise and new vendor relationships that we can leverage across our platform. In both cases, while we're acquiring physical assets such as locations, trucks and inventory, the real gain we have is from the people, their expertise and the customer and vendor relationships they bring into our business. We spend significant time evaluating cultural fit and alignment of values to support successful acquisitions. As we look forward, our pipeline remains healthy and acquisitions will continue to be a core component of our growth focus. Now turning to our financial opportunity in the future. We are and will continue to be an organic growth-first company. Historically, our markets have outgrown GDP and we believe a reasonable expectation of market growth over the long term is approximately 2% to 4% a year, and we will continue to take share and outpace these markets. We've demonstrated a track record of above-market organic growth, and we believe our market-leading capabilities and favorable structural trends will drive continued above-market growth in the range of 300 to 400 basis points a year. We'll continue to consolidate our fragmented markets through acquisitions, driving a further 1% to 3% incremental annual growth. Our markets -- our over market growth and our acquisition strategy, collectively result in a total annual growth expectation over the long term in the range of 6% to 11%. In addition to continued growth, we have a wide variety of initiatives focused on driving sustainable margin expansion. We're utilizing analytics and dynamic pricing tools to enhance project bids and quotes while tailoring pricing based on segment, service level and job complexity. We're expanding value-added solutions and ensuring that we charge for that value. We guide our customers to the right product for their project. In doing so, we can drive higher margin products, leveraging our vendor partnerships and, in some cases, own brand to enhance overall gross margins. And we're focused on improving the productivity of our operations, leveraging technology and AI to drive labor and cost productivity. And we're further investing in and optimizing our supply chain network and automation to drive efficiencies to reduce the cost to serve our customers. As we invest in these areas, we expect to incrementally expand our operating margins over time. As we bring all this together, we will continue to execute our growth and improvement strategy. Over the long term, we expect revenue growth rates of 6% to 11%, combined with flow-through in the range of 11% to 14% resulting in operating margin expansion of roughly 10 to 30 basis points a year. As we do this, we will continue to deliver strong cash flow and cash conversion. We'll remain disciplined in the deployment of that cash across our 4 capital priorities, all while maintaining a strong balance sheet. Collectively, this will drive continued strong earnings per share growth, which we estimate would be in the low double-digit to mid-teens range. To give a sense of our growth trajectory, we believe the combination of our large, fragmented and growing markets, our ability to deploy scale locally, our ability to capitalize on structural market trends and our disciplined approach to capital allocation will propel us over the medium term to deliver our next milestone of $40 billion in revenue, with over $4 billion in adjusted operating profit at over a 10% operating margin. We have laid a firm foundation and believe we are strongly positioned to continue generating additional shareholder value. Thank you again for your time. And now let me hand it back to Kevin to wrap up. Kevin Murphy: Thank you, Bill. Ferguson is North America's largest value-added distributor of essential water and air solutions from water treatment and transmission to storm water management to plumbing and HVAC systems to industrial pipe, valves and fittings, fire suppression and more. We operate in large fragmented and growing markets, and we believe our business is well positioned to take advantage of durable, long-term structural trends across large capital projects, water, climate and housing. What differentiates us is a set of core strengths that allow us to win in the marketplace while driving construction productivity for our customers, scale deployed locally, a multi-customer group approach and a strong combination of supply chain capabilities, value-added solutions and expert associates. This has resulted in a long track record of growth and outperformance. And combined with our disciplined capital allocation, positions us to compound growth and drive shareholder returns over the medium and long term. Thank you for your time. Bill and I are happy to take your questions. Operator: [Operator Instructions] Our first question comes from Phil Ng from Jefferies. Philip Ng: Congrats, Pete and Brian, and then Kevin thanks for all the great color in terms of how you guys are positioned longer term. I think what has been standing out in your really strong performance in the past year is certainly the nonres capital project side of things. Give us a little more color on how you're thinking about the outgrowth in that category when we think about 2026. Are you starting to see share gains there accelerate? Give us a little perspective in when you bid for these projects, is that competitive landscape pretty limited just because we figure there's not a lot of competitors have that ability or that's not even how the process works. I mean you foster a relationship where it's pretty sticky. It's really just you in some of these projects. Kevin Murphy: Yes. Thank you, Phil. Thank you for both the comments as well as the question. When we look at large capital construction projects, it really does take a structural trend that is very attractive and put it together with what our business strategy has been over the past 5-plus years as we've looked to develop a multi-customer group approach, bring scale to best local relationships and then engage earlier in the project to help with the design process so that we can deliver the right product at the right time, on budget. And all that's come together well. Is there a competitive dynamic that's different than the general market that we compete in from a nonresidential perspective? Slightly. We still compete with great local competitors in every one of our different customer groups. But we think that we offer something different collectively as we engage with the GC, the owner, and we think we bring something different when you talk about the supply chain, being able to deliver on those local relationships. Additionally, what we've seen, especially in the data center market is the need to complement some of the activities of the contractor base in areas like fabrication, valve and automation and off-site construction to make sure that they can deliver on that project on time. So the competitive landscape, albeit different is very much attractive for the business model that we've built. And people ask us all the time about the large capital construction project tailwind when that goes away, then what does that mean? It really is a new way of operating for us as a company that we think will serve us well for decades to come. Bill Brundage: And Phil, you're seeing that in the growth rates on nonres over the last 3 quarters, 3 quarters in a row of double-digit growth rates and back to the multi-customer group approach, as Kevin outlined, real strength in not only the Commercial/Mechanical business, up 18% in the quarter, up 18% for the calendar year, but also in the Waterworks business, up 9% in the quarter and 13% for the year. So really seeing that strength play across that multi-customer group approach. Philip Ng: Okay. Super. Question for you, Bill. The outlook for 2026 top line looks really good. Margins look quite good, but you're calling for more flattish margins, you typically do see some sort of flow-through with organic growth. Are there any things that you want to call out from an investment standpoint that you're making that mitigate some of these gains from a top line standpoint? Or there's mix dynamics perhaps we're not really appreciating? Bill Brundage: Yes. Maybe to give a little bit of context and color on it. First off, if you take a step back, Phil, we grew the operating margin of the business from 9.1% in calendar '24 to 9.6% in calendar '25. So we had a 50-basis point very strong step up during the year. As we went throughout the year, we did highlight that we had some outsized gross margin quarters driven by the timing and extent of supplier price increases that came through the middle part of the year, and we flagged that, that there was going to be some normalization on that gross margin. And that's what you've seen as we've stepped through the back half of the calendar year. So for the full year, we delivered 31% gross margins. As we exited the year, you saw that gross margin come back into a more normalized range at about 30.6%. So if you just roll that forward into next year, there's going to be a little bit of year-over-year gross margin compression, which we tried to flag as we went through those summer months as that being a bit of an outsized gain. So there'll be a touch of gross margin pressure. We do expect to generate good SG&A leverage to offset that. And then, of course, we've provided a range of operating margin outcomes. So 9.4% to 9.8%. The top end and the bottom end of that range are largely going to be bookended and driven by what kind of market we find ourselves operating in. So if we find ourselves operating in a bit of a stronger market and growth is a bit on the higher end of our expectation, we would expect to expand those operating margins and get a little bit more SG&A leverage. And then if markets are a bit weaker, we'd expect to be towards the bottom end of that range. But regardless, when you take a step back and you look at the progression of the operating margin of this business over time, we continue to improve it over the long term, and that's our expectation as we look forward. Operator: Our next question comes from Sam Reid from Wells Fargo. Richard Reid: Brian, congrats on the forthcoming retirement. Just wanted to stick on the... Bill Brundage: Thank you. Richard Reid: Awesome. Just wanted to stick on the EBIT topic here for a second. So looking at your long-term growth target on top line, I believe it's 6% to 11%. Just want to contextualize that in the context of your long-term EBIT margin expansion outlook. And maybe talk to how EBIT margins look over the long term in a scenario where growth tracks at the low end or below the low end of that top line growth target. Just want to think through how EBIT could look let's just say, if growth doesn't always cooperate. Bill Brundage: Yes. Sure, Sam. Thanks for the question. And to your point, we've provided that long-term growth algorithm of 6% to 11%. And if we're within that range, we expect to expand those operating margins in that roughly 10 to 30 basis points a year range. Look, if growth is a bit lower than that, certainly, there are continued investments that we make in the business. Certainly, there's a bit of wage inflation that we expect to have in the business. And generally, we say, if we're growing in the low single-digit range, we will work very hard and can kind of hold serve on operating margin. When you get to that mid-single-digit growth range, we can generally generate a touch of SG&A leverage. And then when you get obviously into that call it, mid-single to low double-digit range, that's the growth algorithm, that's where we get a bit more flow-through and operating cost leverage. Certainly, we're continuing to add value-added services and solutions and so we do expect each of our businesses, each of our customer groups to incrementally grow those gross margins over time. But clearly, we expect the progression of operating margins, as I said earlier, to be expansionary as we look forward over the medium to long term. Kevin Murphy: And as we've said, we believe that as the specialized professional in the trades for water and air continues to be pressured from a headcount perspective and growth of those trades, productivity inside the construction space is going to become even more paramount. And if we can add those value-added services that Bill referenced, we believe that we can expand our gross margins over time because we're more valuable to the supply chain as a whole. Richard Reid: That helps, guys. And then maybe one, let's call it, a bigger picture question here. It looks like the business is about 1/3 new construction today. I believe you brought that down over the last decade and by comparison also brought your mix of RMI up as well, which is great. What I'd love to hear though would be the split that 1/3 new construction between residential and nonresidential just so we have a rough sense as to how much of your business is being driven by new commercial construction, maybe contrast that with the new build channel on the resi side? Bill Brundage: Yes, Sam, it's broadly similar across residential and nonresidential in terms of that 1/3, 2/3 split. Today, to your point, there's probably a touch more new construction, slightly higher than 1/3 on the nonresidential just given the large capital projects. But a lot of the work that we're doing in the nonres space, particularly when you look at things like Waterworks infrastructure is still repair, replace, remodel. Operator: Our next question is from Ryan Merkel from William Blair. Ryan Merkel: My first question is just on calendar first quarter and if sales is trending in that low single-digit to mid-single-digit range or we've had a bit of weather, and I know the new resi construction is soft. So just a little clarity on what you're seeing would be helpful. Bill Brundage: Yes, Ryan. To date, in the first quarter, revenue has been a touch weaker than Q4 so we're trending in that low single-digit range. To your point, we're continuing to face that new residential weakness along with a bit of HVAC pressure. And look, while we never want to blame the weather, there's certainly been some year-on-year negative impact from the number of severe storms that we've seen in January and February. So a touch softer at the start of the year than Q4, but we expect modest improvement in growth as we move throughout the year, and that's embedded in our low to mid-single-digit guidance for the full calendar year. Ryan Merkel: Got it. All right. That's helpful. And then my second question is on the '26 guide. It looks like volumes are kind of up in that 1% range. So correct me if that's not correct. But -- and then could you just talk about -- you did 5% volume growth in '25. So frame for us why it's a bit slower as you're thinking about '26. I realize the market is muted. But just talk about why the volumes are a bit slower in the outlook. Bill Brundage: Yes. To your point, with a low to mid-single-digit overall revenue guidance, look, there's very little acquisition tail in that. So the vast majority of that is organic. From a planning assumption perspective, and it's -- look, it's really hard to predict, but we are expecting, call it, low single-digit inflation. So that does imply a little bit of volume growth through the calendar year. But it really goes back to why has that stepped down from last year. It goes back to those same headwinds that we're facing, particularly early in the year on new residential along with HVAC and then a touch of weather at the start of the year. So we would still expect volume growth but maybe a bit on the lighter side versus last year, again, driven by that resi pressure as we're still seeing good, strong volume growth on nonres. Kevin Murphy: And clearly, we are seeing across the market, the pressure on movement to repair versus replace on the HVAC side of the world when it comes to equipment sales. And we enter the calendar year with that pressure that we think will start to alleviate as we go through the calendar year. Operator: Our next question is from Keith Hughes from Truist. Keith Hughes: I guess the question on pricing. With the tariffs changing is -- are you anticipating any price pressure assuming tariffs fall away on some of the imported goods as you progress through the year? Kevin Murphy: Yes, Keith, I mean, the short answer is , and thank you for the question. Sitting here today, we don't anticipate deflation. We continue to see normal annual price increase announcements across our finished goods spectrum. And if you recall, when we had deflation back in '23 and '24, that was driven by commodities, not finished goods. And as we've said earlier, PVC pipe still remains in deflationary territory but we have seen a mild step-up in inflation across finished goods. And if you go back to some previous quarters when we were talking about tariff impact, we told you that the vast majority, if not all of the realized price increases that we saw were not attributable to tariffs, but we're part of like a normalized price increase environment after what was really several quarters of flat or deflating pressure. And in fact, as you know, going back to that commodity side, during '23 and '24, we experienced 6 straight quarters of deflation. So we're not sitting here today anticipating deflation. Keith Hughes: Okay. Great. I guess a little bit long-term question. You had the 4 pillars of growth. Waterworks was one of them. If you could talk about what kind of growth you would expect out of the sector and then maybe your growth on top of that over the next several years? What role does it play in the 6% to 11% that you highlighted as your long-term growth goals? Kevin Murphy: Maybe I'll take a step back, Keith and just talk about why we are bullish on that trend and the business generally. If I take our business, we have worked very hard to make sure that we have a diversified Waterworks business coming from a place years ago where we were very much a new residential construction business, to one that is broadly based in residential, commercial, public works, water, wastewater treatment, soil stabilization, storm water management, and that served us very well. And then as we look out, not only is Waterworks a key component to large capital projects, and we are performing well with that multi-customer group approach and how we're driving up funnel. But we're also seeing when you think about data center activity that's out there today, there is a knock-on effect for power generation needs as well as water. And when you look at water and wastewater treatment and what that investment looks like, that is a very good place for again, that diversified Waterworks business. So we think the public works side of our Waterworks business will be a strong tailwind for us as we go forward and set up well for the company. Keith Hughes: And when you say diversified Waterworks, are you talking do you mean both fresh and wastewater or what exactly is entailed in that? Kevin Murphy: I mean transmission mains and the reinvestment in transmission and distribution, water and wastewater treatment plant construction as well as rehabilitation, what we look at in controls, pumps and process equipment inside of those water and wastewater treatment plants. And as we see that moving maybe to even private installations adjacent to data center construction. There are good tailwinds that are out there that play well to the business. Keith Hughes: And final thing on that. You're really talking about a combining of the traditional wastewater with some of your commercial and industrial capabilities. Is that what I'm hearing and what you just listed out? Kevin Murphy: That and in addition, new product categories that expand the addressable market and allow us to be involved in specifying complex projects that would normally not lend themselves well to distribution. Operator: Our next question comes from Matthew Bouley from Barclays. Matthew Bouley: Congrats to Brian and Pete. So on nonresidential really helpful color there. You updated the TAM for large capital projects to $90 billion. I think it was $50 billion a couple of years ago. So my question is maybe just kind of link that with the next 12 months, your nonresidential guidance for low to mid-single digit in 2026. You just grew 10% in Q4. Obviously, everything you're saying today, it sounds like that portion of nonres continues to be strong. Is this just sort of tougher comps, kind of light commercial activity a little bit choppy or is there scope to maybe outperform that low to mid-single digits as you look out kind of giving -- in light of that large capital projects business? Bill Brundage: Yes. Thanks for the question, Matt. When you look at our guidance and on the low to mid-single-digit growth for nonresidential, that is our market guide, clearly. And that does assume that large capital project strength is still there. But to your point, light commercial, traditional nonres is still a bit pressured as we go through the year. Against that backdrop, we do continue to expect to outperform that market. And not to repeat everything that we've said today, but we do believe we're well positioned to continue outperforming that market given our investments in the multi-customer group approach. As you look forward to what does that mean for actual growth rates for us on nonres as we go through calendar '26, certainly, there is some reality to those tougher comps. I just talked about earlier, three quarters in a row of low double digit to mid-double digit or to mid-teens growth rates that we're going to comp against. But regardless of that, we are expecting strong nonres growth out of our business. When you take a step back further, our open orders and our backlogs are continuing to build, particularly in the commercial mechanical space as well as the Waterworks space. So we feel pretty optimistic about another strong year out of our nonres customer groups. Matthew Bouley: Perfect. Okay. That's very helpful color. And yes, so the expectation is to continue to outperform that market guide. Perfect. I wanted to ask a second question on M&A. I think you did basically 1% in 2025. Obviously, you're talking about 1% to 3% going forward. I guess just if you look back kind of what drove you towards the lower end of that in 2025 in terms of target availability, anything along those lines? And then when you look at these, I think you said 100 top targets. Where are you focusing that M&A investment by customer group? Where is it you want to continue to lean into? Bill Brundage: Yes. If you look at the historically on M&A, and we highlighted this throughout the prepared comments, we delivered roughly 50 acquisitions over the last 5 years, roughly 2%. Certainly, over the last 12 to 18 months, that delivery, the number of deals that we've executed has been a bit on the lighter side. But our pipeline still remains extremely healthy. We're still very bullish about our opportunity to consolidate our markets. And quite frankly, with M&A, sometimes you just can't control the timing, what assets are available, when those assets come to market. But as we look forward, we do expect calendar '26 to be a more active year from an M&A perspective than what we had in calendar '25. Kevin Murphy: And it's fair to say that we have a pretty full pipeline right now of opportunities that are out there. And if you look across our customer groups and where our focus areas are, although all of our customer groups are growth engine businesses, as we look at them, we have a fairly good focus on the residential side of our house within the HVAC space as we look to build out our capabilities, build out our equipment brands across the country and build out those local relationships. And then on the nonresidential side of the house, we are focused on those areas of capabilities that we can then leverage across the nation and across our customer groups to add construction productivity, areas like fabrication, valve and automation, process equipment and applied services. So there's a good pipeline that's ahead of us, both on the nonres side as well as on HVAC on the residential side. Operator: Our next question comes from Mike Dahl from RBC Capital Markets. Michael Dahl: Great thanks for taking my questions and the mini Investor Day here. Obviously, some of these long-term dynamics, your growth algorithm, the opportunities, it's all really compelling. I think if I had to maybe critique or question one thing, the opportunity that has grown so dramatically over the past few years and your capabilities have improved so much. Your execution has been great when we think about all these large capital projects, the HVAC and water. And if I compare your set of midterm expectations today versus your virtual Investor Day in '22, all of those assumptions are largely similar. I think growth is actually a touch lower. The margin assumptions are pretty similar. So I think the question would be, why not -- why are they similar? What are some of the puts and takes and things that have kind of held you back on maybe even stronger growth outside of, obviously, the near-term macro or more specifically, margin progression. I would think some of the scale benefits your margins even more so over time given how things have evolved. Maybe just walk us through how you thought about that. Bill Brundage: Yes. Sure, Mike. When you take a step back and you look at the overall growth algorithm, certainly what underpins that is the assumption on what the market growth is going to be. And you look at historically, our markets have outperformed GDP. We do expect that to continue as we look forward. Based on some of the tailwinds that we talked about today, we think our markets are going to be healthy over the longer term. As we think more near term, there's certainly more short-term residential pressure. And so we've maybe been a touch conservative on our expectation of market growth of 2% to 4%. That's where that slight difference came from our Investor Day a few years back. But regardless, I think all of us would have a difficult time predicting what the market is going to be with precision over the long term. So regardless of that, the key for us is continuing to outperform that on an organic basis. And we believe 300 to 400 basis points is still a strong performance, and it still gives us the right -- it's still the right place for us to be as we think about approaching this with a balance of continued investment for the long term as well as we develop those capabilities and outperforming a strong underlying market. So we still believe that somewhere in that mid-single digit to low double-digit growth rate over the long term is a good place for us to be. We believe we can generate strong operating margin leverage there and real high-quality EPS growth as well as returns for shareholders. And if you look at that progression going back a few years, I mean, this was a sub 8% operating margin business. We've built it to a, call it, mid 9%, 9.6% operating margin business and we intend to continue to expand that over time. Michael Dahl: Okay. Yes. That's helpful. I think just then dovetailing to that, again, obviously, it's all been really strong, particularly on the large project work. Maybe on -- still on that margin dynamic. I know there's a different mix of business that goes into that, that might be lower gross margin, but then cost to serve or scale benefits kind of offset that. Can you just update us on kind of directionally what are your typical margins on jobs like that, on data centers or large capital projects? And then if you have any updated figures to give us on kind of what your relative market share or win rates have been in those categories versus maybe the last couple of years or your broader business overall? Bill Brundage: Yes. And it's one of the reasons -- the mix of our business, the type of jobs that we have will clearly vary across our customer groups. It's one of the reasons that we really focus on guiding to operating margins rather than the components of gross margin and SG&A leverage. So when you look at large capital projects, in general, given the size and scale of them, they have slightly lower gross margins, but also a slightly lower cost to serve. And so net operating margins are very strong and returns on capital are very strong for them. So we could see some mix impact on the gross margin line over time within our business. But overall, we, again, intend to and expect to continue to grow those operating margins regardless of the mix across those customer groups. Kevin Murphy: And Mike, we've been very pleased with our outperformance and it being even better than our traditional outperformance in the nonresidential space. If you look at plus 18% on the Commercial/Mechanical side of our business, plus 9% on the Waterworks business, plus 7% on the Industrial business, that plays out to a better share performance inside that large capital construction project space. And so we'll continue to press that advantage as we look at working up funnel, making sure that we've got access to the best product breadth and we're going to continue, as Bill said, on the working capital side of the large capital project space. We're going to make sure that we've got the right product at the right time for that customer in the local market because this is a unique opportunity, and we want to make sure that we take advantage of it. Operator: We will now take our final question from David Manthey from Baird. David Manthey: Congratulations, Brian and Pete. My first question, as we look at the long term, it looks like Slide 22 is pretty well unchanged versus what you said previously. But Slide 24, I think we've talked about a little of this, but the revenue growth is down just a touch. The contribution margin up slightly on the high end. I know these are minor changes, and you talked about these. But I just I'm interested always in these long-term trajectory changes because they matter when you're launching satellites. Can you just talk about the thought process behind those slight changes in that -- in the growth outlook? Bill Brundage: Yes. I think, Dave, we just talked about with Mike, the slight changes in the market growth assumptions, but no changes in the underlying outperformance expectation and the acquisition expectation. To your point, we did take the flow-through or the incremental operating margins up slightly on the higher end as we're continuing to invest in the business. And we talked about some of the margin expansion opportunities we have where we're driving additional productivity within the business. So that has moved up a touch. Now given the fact that our baseline operating margins are now 9.6%, we've got to continue to expand that over time to keep that 10 to 30 basis point year-in, year-out expansion. So no real significant change, but we are trying to drive and do expect to drive a touch more productivity particularly with technology and AI investments in the core of the business. David Manthey: Okay. That's clear. Moving M&A up the capital allocation hierarchy, is that a reflection of a better pipeline or just a change in strategy if you -- Bill, earlier you mentioned that the pipeline was strong, but I'm not sure if you mean it's stronger relative to a year or 2 years ago or if it's just characteristically strong normally today? Bill Brundage: I would judge it as more characteristically strong. I mean it does -- M&A does ebb and flow. And so we're at a point now, as Kevin said, the pipeline is very healthy, and we would expect 2026 to be a more active year. So I would characterize it as that. In terms of the movement from bucket #3 in our capital priorities to bucket #2. I think that just reflects the growth aspirations that we have and the growth focus that we have, but also is probably a more appropriate reflection of the returns we expect we can generate on M&A versus shareholder returns. I think it's important to go back and we said this in the prepared comments, we've never had to choose historically between doing a specific deal or doing acquisitions and growing the dividend sustainably over time. We don't expect to have to make that decision or choice. It's not a binary choice in the future. But we think it more appropriately reflects growth and returns that we can generate. David Manthey: Okay. Small changes around the edges, but a good strategic update. Thank you very much for doing this. Operator: Thank you. I will now hand the call back to Kevin Murphy, CEO, for closing remarks. Kevin Murphy: Thank you, operator. And I'll close with a special thank you to our associates who delivered another strong year while faced with overall what is a challenging market. And I then thank you to our customers and suppliers for their ongoing support of our company as we go through these markets. We're really pleased with the continued growth and improvement inside the business and what it delivered in calendar year '25, but we're more pleased with what the future can hold with large capital projects with water infrastructure, wastewater infrastructure with climate and comfort and with what will be a residential rebound, both in RMI as well as in new construction in time. And so we want to say thank you to all that are on the call for your time. We appreciate it more than you know. Please take care, and we'll talk soon. Thank you. Operator: This concludes today's call. Thank you for joining us. You may now disconnect your lines.
Jeff Borcherding: Good morning, everyone. This is Jeff Borcherding. Thank you very much for joining the call this morning. We are excited to speak with you about the fourth quarter for 2025 and what lies ahead as we continue to build on the success of the PancreaSure launch and prepare for securing reimbursement and continuing to drive the success of this product as we move to achieve our mission of changing the way we detect cancer in pancreatic cancer and making a significant difference in people's lives. For our agenda today, we will do a brief review of 2025. We'll go into more detail about the PancreaSure commercial results in the fourth quarter of the year. We'll then talk about our progress towards reimbursement with a special focus on the clinical studies that lie ahead as well as the steps that we've already accomplished. And then finally, I'll turn it over to my colleague, Adam Backstrom, to discuss the Q4 financial results and our cash position. In 2025, more than 2 years of development and clinical research culminated in the commercial launch of PancreaSure. And as we look back on 2025, there are a number of things that we're proud of as a company, but here are some of the highlights. Certainly, at the top of the list has to be the commercial launch of the PancreaSure test. A couple of years ago, we made the difficult decision to remove our IMMray PanCan-d test from the market and bring to the market a better test that could detect cancers earlier, could do it with a greater level of sensitivity and specificity, particularly for those people who don't secrete CA19-9. We also wanted to make sure that we had a much more robust set of clinical data supporting the PancreaSure test. And I think we clearly saw that in 2025 when you look at the scientific dissemination that happened about the PancreaSure test. We had 5 clinical studies that were published in scientific journals. The CLARITI study was named the best of DDW at the Digestive Disease Week Conference, which is the world's largest gastroenterology conference. At these scientific meetings that we attended last year, our data was selected for prestigious podium presentations at 5 of those meetings. And in order to continue to fund that research in order to fund the launch of the test, we were also pleased to raise over SEK 140 million to support that launch, to support those clinical studies and to take us to the next critical milestones in our launch. We also received strong support in addition to that support from the scientific community, we received strong support from multiple advocacy groups within the pancreatic cancer space. And then as we'll talk about a little bit later, we were able to secure a lucrative reimbursement rate of USD 897 from the Centers for Medicare and Medicaid Services. And we'll talk about why that's so important in just a moment. But first, let's dive deeper into the PancreaSure commercial results. Before we do that, I would just like to remind everyone what is our strategy for launching the test. So here, you see the 4 key pillars of that strategy. Perhaps most important is the idea of starting at the top. We want to build advocacy in use among the key opinion leaders, the experts in this field who practice at the top high-risk surveillance centers in the United States. As we progress through the launch, we want to make sure that we are being disciplined financially and that means that we tie our investment to revenue. We know that meaningful revenue will not come immediately at launch. As a result, we want to execute a very targeted, very cost-effective launch that leverages our current resources and our strengths. And then we can increase that investment in commercialization as the reimbursement grows, as we have revenue to fund that investment. We've talked previously about the fact that finding a commercialization partner is going to be a critical aspect of launching and commercializing the PancreaSure test. Our goal is to demonstrate to a commercial partner that we have enthusiasm in the market. This is a test that physicians want. This is a test that patients are asking for. And as we build that commercial revenue, we want to make sure that we're showing them how it is that we will get reimbursement for the test in order to secure a really strong commercial partner. And then finally, we want to run very efficient and very lean in order to preserve our cash, make sure that we are very operationally efficient and that we automate as much as possible and that we're very scalable so that as our volumes increase, our costs don't increase along with them. Focusing in on the first phase of the launch, I mentioned that our goal here is really about driving targeted advocacy. This phase of the launch started with the launch of the test in September of 2025 and it will continue through the second quarter of 2026. During this targeted advocacy phase, we are really focused on the key opinion leaders in top high-risk surveillance centers in the United States where people are being screened for pancreatic cancer. During the early stages of the launch, we did not have a separate sales team. All of the results that you saw in September as well as the results in Q4 are the result of selling by members of our existing management team. As we move into 2026, I'm excited to share that we have now hired 3 strategic account managers who will be covering the country and bolstering our sales efforts. The last thing that I want to touch on as we think about this first phase of the launch is what are the metrics that we are saying are really critical. And most importantly, it is the number of high-risk surveillance centers that are ordering PancreaSure. Why is that the right metric? Well, for a few reasons. Number one, because it's all about driving expert advocacy at these centers. This is where a lot of high-risk surveillance is taking place. These are the experts that are relied upon by physicians who are doing high-risk surveillance. We want to have a strong presence there, and we want those physicians to be using the test. Second, this focus allows us to be consistent with our goal of being very focused on the most important targets that we have commercially so that we can limit our investment and limit our spending. And then finally, you see that a secondary metric is the number of orders. We want to make sure that these centers are getting enough experience with PancreaSure and generating enough usage of the test that they really get a sense for how the test is used. That volume number becomes important, especially as we get to the second quarter of 2026. So as we're in the early stages of this targeted advocacy phase as we close out 2025, we're really very focused on the number of centers that are agreeing to implement the test and those centers that are ordering. This stage will set the scene for what we do later in 2026, where we'll have more focus on building volume as we begin to ramp up volume in anticipation of the revenue phase and the revenue phase really begins in 2027. It's not to say that we won't generate some revenue before that. We will, and we'll talk about that in just a moment. But our real focus is on setting the stage for making sure that once that revenue stage starts in early 2027, that we are in a position to really maximize the revenue. But between now and then, we're limiting our investments so that we stay disciplined and use the cash that we have very efficiently and very effectively. These are some of the centers that have agreed to use the pancreatic -- PancreaSure test and are now using it within their pancreatic cancer surveillance programs. This quarter, you can see we added 4 new centers. And I'll just talk a little bit about each of those centers and why they wanted to use the PancreaSure test. So first is Beth Israel Deaconess Medical Center. This is a Harvard-affiliated hospital in Boston, Massachusetts, and their desire for the PancreaSure test was really driven by the fact that they very often get patients asking them about a blood test for pancreatic cancer. As you know, today, people who are in surveillance are generally using imaging. So that might be an MRI, it might be a CT scan. It could be an endoscopic ultrasound. These imaging techniques are relatively accurate but they are very inconvenient. They're quite expensive. And so Beth-Israel's patients are very interested in a blood test, and they were excited to implement PancreaSure to address that desire from their patients. With NYU, New York University Langone Health, their goals are a little bit different. NYU covers a very large area in New York and many of their patients have a difficult time getting to NYU facilities and locations. As a result of that, imaging-based surveillance creates gaps. There are people who just simply can't get to a facility. Maybe they don't have transportation, maybe they don't have someone that can drive them there. And so they are eager to implement the PancreaSure test and have started implementing the test in order to address those access issues. And then finally, Prisma Health in the Southeastern part of the United States. Unlike Beth-Israel and NYU, Prisma is a private health system. It's not an academic medical center, but it is one of the leading facilities in the area. And it's important to them that they communicate to their patients that they are on the cutting edge that they are doing everything for their patients that their patients might expect from a top-tier academic medical center. So for them, a new innovation like the PancreaSure test is a really attractive addition to their high-risk surveillance program. On the rest of the slide, you can see those organizations that previously had agreed to use the test. And I'm happy to say that adoption is going well at these centers. I mentioned in our Q4 report, UC Health at the University of Colorado has done significantly more than 100 tests at this point. And we've also got high order numbers from facilities like Northwestern Medicine and Honor Health, where they have gone through that process of figuring out how to implement the PancreaSure test and how to use it within their existing high-risk surveillance program. As we look forward into 2026, I'm very excited about the pipeline of additional centers that we have who are looking at and evaluating the PancreaSure test. If you look at this funnel, this is essentially how we view prospects within the company as we're thinking about moving them through the process from an initial conversation to the point where that center is up and running and they're regularly using the PancreaSure test every week as part of their surveillance program. So as you can see at the bottom, we have 6 centers that are regularly using the test. These centers have figured out how to incorporate it into their existing protocols, and they are using it extensively. We have another 6 sites where they have begun using the test but they're still figuring out exactly what their testing process will look like, how they'll use the test in conjunction with imaging and which patients within their program are the most appropriate as they start to use the test. The stage before that is registration. And essentially, what registration means is that these 8 facilities have said, yes, we are excited about PancreaSure. We plan to implement the test and we are ready to do so. So registration is essentially just the simple process that we go through to make sure that they can access our online ordering portal that they understand the logistics of how to test. We work with them on making sure they are clear on things like how to collect the blood, how to ship it to us. And so that registration process then very quickly leads to trial. We also have 9 late-stage prospects as of the end of the year in 2025. These are groups that have shown strong interest in the test based on initial conversations, and we are about ready to talk with them about how to implement the test and what that looks like. And then in addition, we've got the early-stage prospects. These are people where we've had at least one sales conversation. But oftentimes, what happens is as facilities are moving through this process, as you can imagine, there are a number of different people that we need to speak with. And so in that early stage, often what we're doing is having multiple meetings with different people within the high-risk surveillance center who would be involved in using and implementing the test. This is what the pipeline looked like as of the end of December. I'm very happy to share that these numbers have all grown meaningfully in the several weeks since the end of 2025. And I think that says good things for what our results will be in the first quarter. As we think about the first quarter of 2026 and into the second quarter, we see 3 key drivers of commercial success in the first half of the year. Most important is the sales staffing that we've added. I mentioned earlier that up to now, all of the selling has been done by a couple of members of the management team and I. Going forward, we will be bolstered by 3 full-time strategic account managers. These individuals bring fantastic experience from companies like Exact Sciences, which has the Cologuard test, Quest Diagnostics, Myriad Genetics and other top diagnostics companies. Once these reps are up to speed and on board and they're very quickly ramping up, we're going to have them focused on 4 key things: one is adding new prospects to the pipeline. They'll do that through their existing network and by reaching out to new prospects. The second is moving prospects through the sales pipeline faster. We just talked about the various steps on the prior slide. With the new account managers being on Board, I'm optimistic we can move prospects through that funnel more quickly. The third thing that they will be doing is working with the teams at our client centers to integrate PancreaSure into their existing protocols. And as they do that, that leads to their fourth focus area, which is really engaging the cross-functional team within these surveillance centers. Previously, when we were only selling through the management team of Immunovia, our capacity was limited. And what that meant is that we generally would connect primarily with the overall leader of the surveillance program, that physician expert that is driving the overall strategy and thinking for the program. Bringing the strategic account managers on Board allows us to develop relationships throughout those teams. So relationships with people like the nurses, the genetic counselors who are having conversations with people that have those genetic risk factors. Staff people who can do things like placing orders for the test in the online portal or flagging potential patients who should be given the PancreaSure test. So by building out their reach within the team, we can drive greater volume. So through those 4 activities, I think the sales and strategic account managers are going to make an enormous difference for us. Also driving results in the first half of 2026 will be the California state approval that we received in January as well as the New York State approval, which we hope to receive in the next several weeks. So if you look at California, it is an incredibly rich area for pancreatic cancer surveillance. We already have 8 high-risk surveillance centers that are in our pipeline, and we look forward to sharing news in the coming weeks about those centers adopting the test. In New York, New York is a hub of academic medical centers. We talked about one of them earlier, which is New York University, which is using our test on a pilot basis even before approval. But the approval in New York State will unlock significant potential there as well. We have had the auditor from New York State come and inspect our lab. That inspection went very well. They had only 4 minor findings. We've already addressed those findings and implemented changes to make sure that we comply with all of their requests. And so we are now waiting for the final approval from New York State. So collectively, these 3 things should help drive commercial use in the first half of the year. Transitioning then to reimbursement and the clinical studies to support them. If you think about getting reimbursement, there are key elements to making sure that we can get fully reimbursed for our test. One is getting a code in place that can be used to bill for the test. The second is getting the price of the test approved through the government. And then the third is getting coverage. Coverage essentially means that those payers determine that a test is reasonably and medically necessary for the patients in their programs. You can see by the colored circles here that we have already obtained a code that we can use to build a test. We also have secured a very attractive rate of $897 for the PancreaSure test. What that means is that when Medicare, the U.S. government insurer that pays for all health expenses for people over age 65, once they do make a coverage decision, those tests will be reimbursed at a very attractive rate of almost USD 900. Our final focus now is on coverage, essentially convincing payers that the test is medically necessary. And to do that, we have a variety of clinical studies that we've already completed and some that are coming. There are essentially 3 categories of clinical data that these payers look at. The first is analytical validation. Can you accurately measure the biomarkers in the test? We have very, very strong published data to support this. The second element of the clinical package is clinical validation, essentially, how accurate is the test in detecting cancer and avoiding false positives when cancer is not there. As we've shared previously, we have 3 clinical validation studies completed, and we have 2 of those published, the AFFIRM study, we hope to publish soon and we're pursuing additional publications in this area. The final area is clinical utility. Essentially, what this means is that the test is useful for guiding clinician decisions and for improving patient outcomes. We have 2 clinical utility studies that are underway, and we are conducting additional studies this year, and some of those studies will extend beyond 2026 and into the future. If you look at our reimbursement plans in 2026, this just gives you a quick view of what it is that we want to accomplish this year. So we are conducting several quick survey studies that will give us the preliminary evidence of clinical utility that we need to start applying and submitting for coverage. We're going to be initiating a registry study. And what that means is that this is a study where we will gather data on the people who are using the test commercially, as they are using the test, we'll use that to understand things like how it's impacting the decisions of those physicians and what the reaction of the patients using the test is to the PancreaSure test. One thing that we started doing after the end of quarter 4 was billing insurance companies for PancreaSure tests. Prior to that, we had only been collecting cash from the patients who get the test themselves. But this month, we started billing insurance companies. Without coverage decisions in place, we know that the reimbursement will be limited, but we will generate some limited cash. Importantly, we also will use this as a way to show those insurance companies that there's demand for the PancreaSure test. I mentioned earlier that a key part of our reimbursement plan in 2026 is to launch additional studies to prove clinical utility. And then finally, and probably most importantly, we plan to submit for Medicare coverage in mid-2026. So we are actively putting together now the package of clinical data and the summary of that data so that we're ready to submit that to the group that makes those decisions about coverage. With that, I'd like to hand it over to my colleague, Adam?Backstrom, our CFO, to talk through our Q4 financial results and the company's cash position. Unknown Executive: Thank you, Jeff. So a short update about our financial figures for the fourth quarter. Jeff, will you [indiscernible] the slide once. Thank you very much. So when we look into our financial figures for the fourth quarter this year, we had revenue of SEK 354,000, which is mainly coming from royalty revenue. Last year, same period, we had royalty revenue of SEK 455,000. Based on the planned ramp-up and the time it takes to convert test orders into revenue, revenues from PancreaSure are expected to become more significantly meaningful after 2026, as Jeff has been describing before. During this quarter, our operating losses was SEK 16.4 million, which is significantly lower comparing to the same period last year, where the operating losses was SEK 30.1 million. The main reason for the stronger result this quarter compared to the same period last year is the lower cost, which is mainly attributed to the R&D cost reduction this quarter. While in the same time, last year, in the fourth quarter '24, we had relatively higher R&D expenses that we normally have. In addition to that, during 2025, we have worked hardly to reduce our cost base and carefully allocate our cash to the most business-driven prioritized, and we can now see that the result of this in the fourth quarter 2025. Our cash burn in the fourth quarter was SEK 6.6 million per month, which is lower than our guidance for this quarter, mainly due to lower spend on the clinical studies. Our cash position at the end of this quarter was -- in the end of this quarter as well at the end of December was SEK 77.5 million, which had been stressed due to our rights issue in the fourth quarter that we will shortly talk more about. Well, one thing to point out is the end of this year, the parent company, which is the Swedish legal entity, converted its internal loan, which has to the U.S. legal entity into capital contribution. On a group level, everything will be eliminated in the books. But the background to this action is to reduce the exchange fluctuation in the comprehensive income that you can see from the previous interim reports. We can move over to the next slide. Thanks. During the fourth quarter, we successfully completed the rights issue of SEK 100 million before fees and issue costs. The rights issue was granted to 100% and existing shareholders subscribed by 88% in this rights issue. We are very happy to have so many existing shareholders that was participating in this share issue. After all the fees issued costs and also repayment of the bridge loan, the total cash injection from this rights issue was SEK 69.8 million, which we are super happy about. This gives us a cash position to last through the third quarter 2026, so we can launch the PancreaSure as planned and run the clinical studies needed to support reimbursement. So thank you, everyone. And over to you, Jeff. Jeff Borcherding: Thanks, Adam. As we transition to questions, I just want to summarize a few key points from the fourth quarter. The first is that we are pleased with the commercial adoption of the PancreaSure test. We continue to make progress on moving towards reimbursement and that will be driven by our clinical studies as we continue to move from the focus on driving adoption among the high-risk surveillance centers. Again, that will be our focus in the early part of 2026 and then transitioning to a greater focus on building volume later in the year and then on building revenue as we move into 2027. So we're eager to answer questions and have the chat feature available for that as well as questions that can be answered through the phone call. Operator: [Operator Instructions] The first question comes from the line of Niklas Elmhammer from Carlsquare. Niklas Elmhammer: I have a question about Medicare, Medicare coverage. Encouraging to hear that about the time line for the submission. But if I understand it correctly, the basis for the submission is sort of real-world data on clinical utility. So I mean, is that what you're collecting right now? How much data do you need? How many patients that sort of. Jeff Borcherding: Sure. So if you look at the initial application to Medicare and the clinical utility data that will be included in that, it will primarily be survey studies. So we are conducting those now, and those are very quick to complete. So what we will do is we will use that data to submit to Medicare and essentially get their review started. Then we will submit to Medicare as we get additional data for example, as you noted, from the registry study. So that data will come in throughout 2026. So in the second half of the year, we will submit data from that registry. We are targeting having about 400 patients in the registry study this year. We've also got another clinical study that we're conducting right now that will look at how early we can detect pancreatic cancer before it's detected by imaging, which is another measure of clinical utility. So it's sort of a collection of data that we'll use to submit to Medicare. But one of the important things is that we will submit data with that initial submission. We will then build on that as we get additional data. We'll submit that data as it comes in. Niklas Elmhammer: Okay. Great. And I think a couple of quarters ago, you said that you targeted Medicare reimbursement by the end of '26. I mean, I understand that maybe that is a sort of outdated comment and you're explaining right now, will be sort of rolling submission. Is it a reasonable target to see reimbursement by year-end? Or is it into '27? Jeff Borcherding: Yes. So I think what we'll see is that we will see some reimbursement for particularly Medicare Advantage patients in 2026. I mentioned that we'll begin billing them or we have begun billing them this month. And so we do expect to start seeing the reimbursement this year. But in terms of the full coverage that would lead to reimbursement of every test at that full rate of $897 that will be something that we expect to come once Medicare has reviewed our submission. And so the timing for that really depends on Medicare. They're in a position where they can review submissions as they come in, but they also prioritize those that they see as important. So we're certainly hoping to get one of those priority spots. Niklas Elmhammer: Okay. Great. And you mentioned the importance of regulatory state approval, for example, California. Could you please elaborate a little bit on the sort of regulatory environment for the states? I mean, which states do you have approval and where would you sort of seek approval? Do you need approval in every state? Jeff Borcherding: Yes. So ultimately, we will need approval in every state. We now have approval in 48 states. So we are -- and really the one that is outstanding that will really drive the business is New York. So we would expect that by -- certainly by the end of the second quarter and most likely in the next month or 2, we should have approval in all 50 states. In many states, approval is pretty straightforward. California's application process is more extensive. And then New York approval is really the most extensive by far. New York does a very thorough review of not only our lab, but the test itself and does an on-site inspection and essentially does a review that's, in many ways, pretty comparable to what the FDA does. And so we're excited to have that approval here shortly. Niklas Elmhammer: Okay. And as you mentioned in the report, cash flow was better than guidance. Are you willing to provide any guidance for 2026? Jeff Borcherding: I think that we would expect that our cash flow would return to the levels that we've previously guided to. So more like that SEK 8 million to SEK 10 million per month target that we've set previously. Niklas Elmhammer: Okay. And also maybe a little bit detailed questions, but regarding sales, is it possible to comment on the realized pricing per test, which, of course, is currently lower than what you would expect long term? Jeff Borcherding: Yes. It's a great question, Niklas. At this point, we don't really have enough data to speak about the realized average selling price per test just because of the delay in getting reimbursement, whether that is payments from the patients themselves or from payers. As I mentioned, we're just starting that process. So it will take us a while before we're able to give you an estimate of what that average selling price will look like before we get full coverage and reimbursement. Niklas Elmhammer: All right. And that's fair. And regarding orders, you mentioned that 12 centers ordered test through year-end, I believe. Jeff Borcherding: Yes. Niklas Elmhammer: But I guess you have not billed all of those orders yet? Jeff Borcherding: That's right. Yes, that's right. Niklas Elmhammer: So it's... Yes. Okay. So those, for example, 180 orders from Colorado and UC Health, I mean, are those been billed in Q4 or I guess not? Jeff Borcherding: It would be a mix. So generally, we would probably have sent bills for most of those, but it will take time to get payment on those bills. Niklas Elmhammer: Okay. Yes, I think that was all from me for the moment. Operator: [Operator Instructions] Jeff Borcherding: I'm sorry, please go ahead. Operator: Ladies and gentlemen, there are no more questions over the phone at this time. I would now like to turn the conference over to Jeff Borcherding for any written questions. Jeff Borcherding: Thank you. We have some questions through the chat feature. So I'll review those. How will the utility data generated after 2026 be used if the application to Medicare has already been sent in mid-2026. And I think this question came in before Niklas' question. But just to clarify, once we make the initial submission to Medicare, we are able to augment that submission with additional data that comes in later. In addition, those clinical utility studies will be really critical for the commercial payers outside of Medicare. Oftentimes, there are commercial payers who have different requirements and stricter requirements for the type of clinical utility data that they require. And so that's part of where those studies will really add value. The next question was, can we expect meaningful revenue in the second quarter of 2026. I think what we would say is that the meaningful revenue does not come in the first half of this year. We see the first half of this year as really being the time where it's about bringing centers into the franchise and getting them to start using the PancreaSure test. As we move into the latter part of 2026, we will start to be more focused on volume. It's really in 2027 that we see significant revenues being possible. But as I mentioned, we are going to be billing insurance companies this year with the goal of generating some revenue even though we don't have those formal coverage decisions in place that will ultimately generate the much more significant revenue in the future. Another question, where do things stand with a potential commercialization partner? It's been a busy couple of months. I've met with about a dozen potential commercialization partners since the beginning of the year. Those discussions are ongoing and positive. A couple of things that we hear from potential partners is they're very impressed with our clinical data, and they've been impressed by the level of interest that we've seen from these high-risk surveillance centers. They know that it's not easy to sell a new test to these academic medical centers because they have high demands for data quality. They have high demands for product performance. And so they've been pleased with the results that we've shown so far. I think the other thing that we've heard, in fact, I heard it from at least 3 different partners was how impressed they are with the rapid progress that we've made. One of them said, essentially, we meet about every 6 months. And every time we meet, you come in with a list of milestones that the company has achieved and the milestones that are coming for the next 6 months. And then when we meet 6 months later, you just have routinely delivered against those. So he was very complementary of the Immunovia team. So those discussions are ongoing. I will say these agreements are complex. They do take time. And so we're focused on making sure that we have a large number of prospects that are in our target group. We want to make sure that in the meantime, we're really showing them the commercial demand for PancreaSure, and we're outlining that road map to payer coverage. And then we want to make sure that we secure a structure that's attractive to our shareholders. Certainly, we want a deal, but we want to make sure that it's the right deal. One of the questions was, you have the billing code and the 897 rate. What necessary triggers do you identify before Medicare starts paying for the test? And when do you expect to file? Again, I think this might have come in before we discussed this. But 2 of the 3 steps are complete. We have that billing code. We have the reimbursement rate. The coverage determination will be based on the clinical data we submit. And so we are going to submit for coverage in mid-2026 with that clinical utility data that I mentioned, and we'll continue to do that through the review process itself. Having said that cash runway is through Q3 2026, what is the plan to survive spendings until 2027? So as we think about our cash position and what we want to do, we know that additional capital will be needed. So how do we manage through that? So I think most importantly, from an operations standpoint, that means continuing to focus on being really efficient in the way that we use capital and focusing on achieving the milestones that are going to create value. If you ask, how are we going to fund the company, where is that capital going to come from? We are looking at a wide range of options to secure the capital that we need. And we're trying to do that in a way that would minimize dilution. So we are pursuing grants and other support from nonprofit organizations, government groups who would provide capital that's non-dilutive. I mentioned the conversations that we're having with strategic partners, and we're also talking with them about different types of cash infusions that they might make into Immunovia. That could be equity investments or it could be things like milestone payments or payments to collaborate with them on projects. Knowing that an equity raise is likely needed, certainly, we strongly prefer a directed issue in order to reduce the fees and really reduce the dilution that we know comes with rights issues. And so we're actively working to achieve this and trying to develop relationships with investors who would directly invest in the company. Just waiting for any other questions. It looks like what might be the last question here. You mentioned hiring the 3 salespeople. What does that change? I think we'll have the strategic account managers focused in 4 areas, and those are where you'll see the biggest changes. The first thing is adding more prospects to the pipeline through outreach and their existing relationships. The second is moving prospects through the pipeline faster. The third will be, again, sort of working to integrate PancreaSure into the protocols. And then I mentioned earlier this idea that they're going to help us get deeper into the surveillance center teams so they can develop relationships with a lot of those different individuals beyond just the overall leader of the program. And I think that might be it for questions unless there are others. Okay. Thank you very much for joining us today. We appreciate your time. We appreciate your interest in Immunovia and look forward to continuing to share additional information as we bring the PancreaSure test to more and more high-risk surveillance centers across the U.S. as we bring PancreaSure to more people who are at high risk and as we continue to pursue reimbursement through our clinical program and our market access activities. Thanks again. Take care. Bye.
Operator: Hello, and welcome to the Coca-Cola FEMSA Fourth Quarter 2025 Conference Call. My name is Sophia, and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Jorge Collazo, Investor Relations Director at Coca-Cola FEMSA. Jorge, please go ahead. Jorge Alejandro Pereda: Thank you, Sofia. Good morning, and welcome to this conference call to review our fourth quarter and full year 2025 results. Before we begin, let me remind all participants that today's conference call may include forward-looking statements and should be considered as good faith estimates made by the company. These forward-looking statements reflect management's expectations and are based upon currently available data. Actual results are subject to future events and uncertainties that can materially impact the company's performance. For more details, please refer to the full disclaimer in the earnings release that was published earlier today. Joining me this morning are Ian Craig, our Chief Executive Officer; Gerardo Cruz, our Chief Financial Officer; and the rest of the Investor Relations team. After prepared remarks, we will open the call for Q&A. [Operator Instructions] With that, let me turn the call over to Ian, our CEO, to begin our presentation. Ian, please go ahead. Ian M. Craig García: Thank you, Jorge. Good morning, everyone. We appreciate you joining us for today's call. 2025 tested our business in multiple ways, which provided the opportunity to learn and adjust to changing conditions. It also underscored the resilience of our core business and reinforced our conviction in our strategy of following a sustainable long-term growth model. Throughout the year, we implemented decisive measures to react to the short term while ensuring we continue progressing towards our long-term objectives. Among other actions, in Mexico, we adjusted our promotional grid and strengthened our affordability initiatives to address a weaker-than-expected consumer and the effects of temporary unfavorable brand sentiment early in the year. We focused on recovering our competitive position and protecting profitability with swift and decisive actions that became a best practice within the global Coca-Cola system. On the other hand, our markets in South America enjoyed more favorable consumer dynamics that coupled with market execution, investments behind capacity and the full reopening of our plant in Porto Alegre resulted in volume growth across most of our territories and an improved competitive position. Notably, gradual sequential improvements during the last quarter of the year led to consolidated volume growth year-on-year. Indeed, volume performance in December marked the strongest month in our company's history. Despite the many headwinds faced, our full year 2025 results demonstrate top and bottom line growth with resilient operating and adjusted EBITDA margins. We were also successful in reinforcing our relative scale across our markets, supported by progress in installed capacity and the rollout of our digital initiatives. As we look to 2026, we are confident that we will deliver both opportunities and challenges, including the impact on our consumers and customers of the excise tax increase in Mexico. This makes it more important than ever that we adhere to our sustainable growth model to best navigate these challenges and emerge with a stronger relative competitive position. We expect to follow the same strategic playbook, leveraging Coca-Cola FEMSA's differentiated strength of an unmatched portfolio of brands, the largest distribution footprint, consistency in investment above the line and below the line, relentless execution and leading -edge digital enablers. For the year, our key priorities remain unchanged. First, to continue growing our core business by leveraging our big bets, accelerating Coke Zero, improving our competitive position in flavors and developing profitable noncarbonated beverages. Second, to capitalize on Juntos+ AI capabilities and continue to roll out and leverage Juntos+ Advisor across our 4 largest markets. And third, to continue fostering a customer-centric and psychologically safe culture for Coca-Cola FEMSA. With that, let's review in detail our consolidated results for the fourth quarter. Our consolidated volume increased 1.3% in the quarter to reach 1.09 billion unit cases. Gradual sequential improvements in Mexico, coupled with solid volume growth in the rest of our territories supported this positive performance. Total revenues for the quarter grew 2.9% to MXN 77.7 billion, led by revenue management initiatives that were partially offset by unfavorable mix effects and headwinds related to currency translation from most of our operating currencies into Mexican pesos. On a currency-neutral basis, our total revenues increased 6%. Gross profit increased 1.8% to MXN 36.3 billion, leading to a margin contraction of 60 basis points to 46.7%. This margin performance was driven mainly by an unfavorable mix and hedging positions, coupled with fixed costs such as labor and depreciation. On the other hand, these effects were partially offset by better sweetener and PET costs. Our operating income increased 13.3% to reach MXN 13.7 billion, with operating margin expanding 160 basis points to 17.6%. This increase is positively impacted by the recognition of insurance claims recovered in Brazil and Mexico, net of expenses for MXN 1.1 billion. By excluding insurance recovery and related expenses in both the fourth quarter of 2024 and 2025, our operating income would have declined by 2.1%, resulting in an operating income margin contraction of 90 basis points to reach 16.1% -- this normalized operating margin contraction is explained by higher depreciation and labor expenses that were partially offset by expense controls such as maintenance and freight, coupled with an operating foreign exchange gain. Adjusted EBITDA for the quarter, including insurance recoveries, increased 12.8% to MXN 18.2 billion, and EBITDA margin expanded 210 basis points to 23.4%. Excluding insurance effects and related expenses at the EBITDA level, normalized adjusted EBITDA grew 4.4% with a margin expansion of 30 basis points to 21.9%. Finally, our majority net income increased 3% to reach MXN 7.5 billion. This increase was driven by operating income growth that was partially offset by an increase in comprehensive financial results and in the effective tax rate. Now let me expand on the main operational and strategic highlights across key markets. In Mexico, despite facing what is still a soft consumer environment, our volumes improved sequentially, resulting in a 0.9% contraction year-on-year, aided by adjustments to our price pack architecture, coupled with revamped affordability initiatives in multi-serve refillable packs. Regarding categories, Coke Zero maintained its solid growth pace with 14% volume growth year-on-year. Our initiatives to recover share allowed us to fully recover our competitive position and enter 2026 with positive share momentum in both the colas and sparkling flavor segments. Notably, our stills portfolio grew 7.4% year-on-year, driven mainly by the solid performance achieved in Monster, FUZE Tea and Santa Clara, which grew 41%, 33% and 28%, respectively. We also positioned our Mexico operation for significant market execution improvements in 2026 with more than 100,000 new cooler doors installed by year-end 2026. Regarding digital, as I mentioned last October, we began the rollout of our state-of-the-art sales force tool, Juntos+ Advisor in Mexico. We are encouraged to share that with a strong focus on usability. We have completed its rollout and today, its overall performance is improving geo efficiency or visitation, as is also known, by 5.5 percentage points from 91% to 96.5% and offering value-added functionalities to our sales force that are helping them strengthen customer relationships and increase sales. I also want to underscore the swift and decisive nature of our Mexico team's reaction to a difficult first half of the year by implementing top line productivity and cost control measures that reversed a negative trend in volume and profitability. As we enter 2026, we are well positioned to navigate the challenges related to the excise tax increase and continued soft economic growth. We have bolstered our portfolio with key affordability initiatives and are in the process of increasing our returnable pack offerings to capture key price points and defend household penetration. We have also developed an ambitious plan together with the Coca-Cola Company to capitalize on being a host country for the FIFA World Cup. Additionally, we continue with a keen focus on productivity and cost control initiatives, together with a prudent CapEx investment level to navigate the short term while we gain visibility on how the year develops. Moving on to Guatemala, where our volumes increased 3.5% to reach 48.9 million unit cases. During the quarter, we continue seeing a macro environment that decelerated versus the previous years, driven by shifts in consumer behaviors as consumers increased their savings from remittances from 11% up to 40% on average, coupled with reductions in mobility because of rising in security in the country, which is now the #1 public concern in Guatemala. Amid this backdrop, we were able to continue growing volumes and share, although at a lower-than-anticipated pace. In addition, during the second half of the year, we implemented productivity initiatives to put in place a leaner operating model. As we enter a new year, we aim to accelerate top line growth with initiatives to continue our colas momentum while capturing share opportunities in flavors. In colas, we continue to have opportunities to gain share through entry price points, leveraging the FIFA World Cup and increasing availability, while we double down on efforts to boost [ Pride. ] We continue to have ample space to develop profitable stills categories with Powerade and Monster as well as continuing to bolster our Juntos+ platform by unlocking new clients and improving executions. With the ambitious investments that we have completed in Guatemala, capacity constraints are no longer a concern. Our priority now is to continue optimizing our cost structure through disciplined expense management and operational excellence. Now moving on to our South America division. In Brazil, our quarterly volumes increased 2.6%, driven mainly by a historic month of December, outstanding market execution on the back of our digital enablers, coupled with higher average temperatures and significantly lower precipitation drove this growth. Notably, this is the highest fourth quarter volume on record for our second largest operation. As has been the case throughout the year, we continued gaining share in all relevant categories within the nonalcoholic ready-to-drink industry. Importantly, we have recovered the vast majority of the share that was lost in Rio Grande do Sul due to the temporary closure of our plant, which fully reopened last May. Aligned with our strategic intent to accelerate growth in non-caloric and single-serve beverages, we delivered strong growth with Coca-Cola Zero, which grew 44% during 2025 and Sprite Zero, which achieved accelerated growth of 93% year-on-year in 2025. Notably, our Sprite Zero playbook is following a similar script as Coke Zero. As a result, Sprite Zero now represents more than 20% of our total Sprite volume. Regarding steels, we have leveraged our portfolio and commercial capabilities to achieve growth across all categories. For instance, energy drinks continue seeing double-digit growth from Monster, driven by portfolio innovation, execution and availability. In line with these positive performances, juices grew 9% and Powerade grew mid-single digits. Finally, within the alcoholic ready-to-drink category, we achieved more than 50% growth year-on-year, driven by Jack & Coke and Absolut Sprite. Our digital enablers, Juntos Plus monthly active user base continues expanding, surpassing our goal of 303,000 monthly active users, while continuing to increase average ticket size. Importantly, our Juntos+ premier loyalty customer base increased 73% year-on-year. Juntos+ Advisor, which is a game changer for our sales force and is supporting Brazil's positive share performance, increased its efficiency by more than 9.2 percentage points to reach 95.6%. Finally, on the supply chain front, we increased our manufacturing capacity by 8.2% year-on-year, supported by 5 new production lines. In addition, our warehouse capacity increased by more than 25,000 pallet positions, representing a 6% increase year-on-year. This was achieved through state-of-the-art projects such as a vertical automated warehouse located next to our Itabirito plant in the state of Minas Gerais. As we look to 2026, we are encouraged by the growth rate at which we closed the year. We anticipate that election-related spending, social programs and the FIFA World Cup will represent important tailwinds for our operation in Brazil. In this environment, we expect to continue executing against our strategic priorities, striving to outperform the industry, leveraging our digital initiatives and our customer-centric culture. Now moving on to Colombia. Our volumes grew 4.5% as the macroeconomic environment gradually recovers and we cycle the effects of the excise tax increase in the country. As was the case in Mexico, we implemented portfolio initiatives to adjust our price pack architecture in brand Coca-Cola, providing attractive price points aimed at growing transactions. In addition, we're managing price gaps in multi-serve presentations to provide affordability and an attractive value proposition. At the same time, Coke Zero, which achieved double-digit growth during the quarter, remains a growth engine with ample headroom. As I mentioned during our last earnings call, Quatro, our grapefruit flavor, is now the #1 flavored sparkling beverage in the country, and we aim to continue expanding our competitive position in flavors with increased innovation and availability. On the digital front, Colombia closed the year with more than 320,000 monthly active buyers. Importantly, average ticket grew more than 4% and digital orders increased more than 15% year-on-year. We anticipate that our Premier loyalty plan will continue driving adoption and frequency as its use expands during 2026. Finally, I want to recognize our team in Colombia for their cost control measures and the cost to serve reductions they have achieved, aided by our capacity investments in the country, which have enabled us to reduce primary freight costs and third-party warehouse expenses. As we look to 2026, we expect to add another distribution center in Medellin, which will alleviate warehouse saturation and bring additional efficiencies. In Argentina, our volumes increased 3%. Our agile response to a volatile environment ensured our sustained positive performance throughout the year despite a heterogeneous recovery across different sectors of the economy. We have remained consistent with our strategy, enhancing our affordability plans and accelerating our single-serve mix, all while maintaining a lean and flexible cost structure. This strategy resulted in an improved competitive position and single-serve mix that reached 26.3%, a 2.3 percentage point increase year-on-year. Regarding our digital initiatives, we continue driving digital client adoption with the rollout of the latest version of Juntos+, resulting in a 71% increase in digital orders year-on-year. As we look to 2026 for Argentina, we expect to continue executing against the strategy that has been successful thus far, sustain an affordable value proposition in brand Coca-Cola and flavors, boost single-serve and Powerade by leveraging the FIFA World Cup and unlock Juntos+ and Premier Juntos+ full potential while keeping a lean and flexible cost and expense structure. Let me close by emphasizing that we are encouraged to be a part of a vibrant beverage industry within a region with positive growth prospects. The support of our long-term sustainable growth model from our strategic shareholders, FEMSA and the Coca-Cola Company is one of our fundamental strengths. With that in mind, I would like to take a moment to recognize and thank Jose Antonio Fernandez Carbajal and James Quincey for their exceptional vision, leadership and partnership as CEOs of FEMSA and the Coca-Cola Company, respectively. Their vision to grow the Coca-Cola system, combining the unique strengths of both the Coca-Cola Company and the bottlers has been fundamental to our company's success. Additionally, both Jose Antonio and James have personally taken a stake in the system's talent development, leaving a legacy of a deep management bench. We're grateful for the transformational impact they have had over the years and wish them both continued success in the roles as Chairman. We are equally excited to welcome Jose Antonio Garza-Laguera to the role of CEO at FEMSA and Henrique Braun to the role of CEO at the Coca-Cola Company. Their leadership marks the beginning of a new growth chapter in our strategic partnership, and we look forward to continuing to transform the beverage industry and create long-term value together. With that, I will hand the call over to Jerry. Gerardo Celaya: Thank you, Ian, and good morning, everyone. I appreciate you joining us today. I will begin by summarizing our division's results for the quarter. In Mexico and Central America, our volumes were even as a slight volume decline in Mexico was offset by growth in Guatemala, Nicaragua, Panama and Costa Rica. Revenues increased 1.6% to MXN 42.2 billion, driven mainly by revenue growth management initiatives that were partially offset by unfavorable mix and currency translation effects into Mexican pesos. On a currency-neutral basis, revenues increased 3.3%. Gross profit increased 2.6% to reach MXN 20.8 billion, resulting in a gross margin of 49.2%, a 40 basis point expansion year-on-year. This margin increase was driven mainly by lower raw material costs such as sugar and PET, coupled with the appreciation of the Mexican peso as applied to our U.S. dollar-denominated raw material costs. These effects were partially offset by unfavorable mix effects and fixed costs. Operating income in the division declined 1.1% to MXN 6.9 billion, and our operating margin contracted 40 basis points to 16.3%. As described in our earnings release, our operating income includes the recognition of insurance recoveries in Mexico, net of expenses for MXN 116 million. By excluding this effect and related expenses in the same period of the previous year, normalized operating income would have declined 8.1%, resulting in an operating margin contraction of 170 basis points. This contraction was driven mainly by an increase in marketing, depreciation and labor, coupled with a lower operative foreign exchange gain as compared to the previous year. These effects were partially offset by operating expense efficiencies such as maintenance and distribution. Finally, our adjusted EBITDA in the division increased 1.3% with a flat margin as compared to the previous year to reach 22.9%. Importantly, by normalizing insurance claims and related expenses at the EBITDA level, normalized adjusted EBITDA increased 0.5% year-on-year and EBITDA margin contraction of 20 basis points. Moving on to South America. Volumes increased 3% to 504.1 million unit cases. This increase was driven by volume growth across all territories in the division. Revenues in South America increased 4.6% to MXN 35.4 billion, driven mainly by our revenue management initiatives, offsetting unfavorable currency translation effects into Mexican pesos from most operating currencies in the division. On a currency-neutral basis, total revenues in South America increased 9.5%. Gross profit in the division increased 0.6% and gross margin contracted by 170 basis points to 43.7%, driven mainly by an unfavorable mix and higher fixed costs such as labor and depreciation. On a currency-neutral basis, gross profit increased 5%. Operating income in South America rose 32.8% to MXN 6.8 billion, with operating margin up 410 basis points to 19.2%. As Ian previously mentioned, this margin expansion was positively impacted by insurance recovery in Brazil for approximately MXN 1 billion. By normalizing insurance effects and related expenses in 2024 and 2025, our operating income increased 6%, resulting in an operating margin expansion of 20 basis points to reach 16.3%. This improvement was driven by expense efficiencies such as freight, marketing and maintenance. Finally, adjusted EBITDA in the division increased 29.5% to MXN 8.5 billion for a margin expansion of 460 basis points to 23.9%. Excluding the effects of insurance recoveries and related expenses in 2024 and 2025, at the EBITDA level, normalized adjusted EBITDA increased 9.6% year-on-year and EBITDA margin expansion of 90 basis points. Now let me expand on our comprehensive financing results, which recorded an expense of MXN 1.4 billion as compared to an expense of MXN 980 million during the same period of the previous year. This increase was driven mainly by a reduction in interest income, resulting from a lower cash position in key markets and lower interest rates in Mexico, coupled with higher interest expenses driven by the issuance of a U.S. dollar-denominated bond through 2035 and its related derivative instruments. These effects were partially offset by: first, a gain in financial instruments of MXN 162 million as compared to a loss of MXN 33 million in the fourth quarter of '24. Second, a higher foreign exchange gain; and third, a higher gain in monetary positions from inflationary subsidiaries. I would like to briefly comment on our recent financing activity that further reinforces our balance sheet with attractive funding conditions. On February 12, we successfully priced the bond issuance in the Mexican market for a total amount of MXN 10 billion. The transaction was executed through a dual tranche structure, allowing us to balance duration and interest rate exposure. The first tranche consisted of MXN 7 billion with a 10-year maturity priced at a fixed rate of 9.12%, equivalent to a [indiscernible] plus 43 basis points. The second tranche amounted to MXN 3 billion with a 3-year term priced at a floating rate of funding TA plus 38 basis points. This structure reflects both strong investor demand and our disciplined approach to liability management. Importantly, the transaction received the highest national credit ratings from S&P and Moody's, reaffirming our solid credit profile and the confidence that the local capital markets continue to place in Coca-Cola FEMSA. Overall, this issuance strengthens our financial position, extends our debt maturity profile and provides us with continued financial flexibility. Finally, I'd like to take a moment to comment on sustainability, which remains a core element of our long-term value creation strategy. Our disciplined and consistent execution translated into tangible improvements across the main sustainability benchmarks used to assess our performance. Most notably, our S&P Global Corporate Sustainability Assessment score increased by 11 points year-over-year, reaching an all-time high of 81. As a result, we were included in the 2026 Sustainability Yearbook as the highest scoring company in our sector in the Americas, an achievement that underscores the strength of our sustainability strategy and governance practices. In addition, we achieved a record score of 4.1 out of 5 in the FTSE4Good assessment, while also posting improvements across our key evaluations, including MSCI, ISS ESG, Bloomberg ESG and CDP. These results reflect particularly strong performance across climate action, water stewardship and supplier management. Taken together, these recognitions reinforce our conviction that the disciplined integration of environmental and social factors, along with robust risk management across our operations and value chain is a critical enabler of sustainable long-term growth. With that, operator, we're ready to open the floor for questions. Operator: [Operator Instructions] Our first question comes from Ben Theurer with Barclays. Benjamin Theurer: I wanted to get some incremental color, if you can, as to the performance, particularly in Mexico over the course of the fourth quarter and then heading into the first quarter. What have you seen in regards to the volume behavior, October through December and particularly now with taxes being in place early on, what are like the early signs of sensitivities that you've been seeing amongst key customers? And how have you been reacted on that as it relates to the tax and then ultimately, your pricing strategy throughout the year? That would be my question. Ian M. Craig García: What you saw during last year, if you remember, I think in Mexico in the first quarter was around a 5% decline. Then the second quarter, when we really had the impact of the consumer sentiment around the 15% decline -- no, sorry, around 10%, if I remember more or less. And then third quarter, 3.7%. And finally, by the fourth quarter, it was almost flat, declining 0.9%. So you saw a sequential improvement. And I mentioned in the prepared remarks that December was the strongest December on record for Mexico in terms of volume growth. So you can see how the underlying trend was improving to the point of having a December that was the highest on record in terms of volume. That being said, we continue with the same guidance for 2026, which is a low to mid-single-digit decline in Mexico simply because we had to transfer the impacts of the IEPS excise tax, and that was a large price increase that we had to transfer through for the IEPS tax. So we're not changing our guidance there, and we are seeing the impacts of that tax increase in the first quarter. Benjamin Theurer: As expected, like the volume declines or very much... Ian M. Craig García: As expected. Operator: Our next question comes from Ricardo Alves with Morgan Stanley. Ricardo Alves: Ian, I remember the cycle of investments in 2024, the focus on growth and then you have 2025 with all the challenges and one-offs, IEPS came through. And I think that to credit Coke FEMSA, the company was very fast in adjusting the cost structure as needed, the price hikes. So when you think about -- the question is your strategic views into 2026. When you think about everything that you have in place, right, I think that since 2024, all the investments or the major investments at least were made, even rebuilding plans. The costs were adjusted in Mexico, a big discussion that we had in the first half of last year. You priced through the tax issues or IEPS issues into 2026. So with -- assuming that all of that is kind of behind you, what would be for this year and the next 2 years, your main strategic ambitions for 2026, not necessarily Mexico only, but across the board. What is keeping you awake as big opportunities ahead? And then just one other question for Jerry. Just a quick update on the shareholder remuneration would be much appreciated given the below 1x EBITDA leverage. So I think that an update on shareholder distribution would be appreciated. Ian M. Craig García: Thank you, Ricardo. Well, just to be clear, as you mentioned, we're very proud of the adjustment that our Mexico team or the reaction, let's say, the rapid reaction that our Mexico team had when we were facing the change in consumer sentiment and the sluggish demand, coupled together with weather, by the way. So it was a quick and swift reaction, and that's behind us. Going into 2026, we are already with a lean structure, and we adjusted our CapEx primarily in Mexico because the rest of the territories are growing as expected. So we adjusted our CapEx there. And our key priorities remain the same. I mean, -- we want to continue growing our core business. It's amazing what's happening with Coke Zero even within this environment in Mexico, even with the tax, we're continuing to accelerate Coke Zero. There are opportunities to improve our position in flavors. What I'm seeing with Sprite Zero in Brazil is nothing short of amazing. What we have done with Quatro in Colombia is very positive. And that's something that we want -- what we're doing with the heritage brands in Mexico. So that's something that we want to continue to leverage this year and also on profitable NCVs, which continued to gain mix and grow at very attractive rates. So that would be my first priority. The second one is we will have Juntos+ Advisor in our 4 largest markets this year. We already have it in Mexico and Brazil, where it's maturing, where it's giving us improved visitation, improved combined coverages. I mean those things are growing 3 to 2 percentage points, and those translate directly to increases in share. You see that in Brazil, more compliance on the guided missions. So I think we expect to continue to scale that and leverage those enablers. And finally, we continue working on the culture piece. It's very important for us that we continue improving on our customer centricity journey, improving our customer-centric measures. We believe that's key to the fundamental long-term health of the business. And that's what we're driving, Ricardo. We've talked about this in our conversations. This is a scale business. It's important that we continue growing relative scale. It's a year that we need to be prudent because of the tax increase in Mexico. It's not a minor tax. It's a very large tax increase. So we need to be prudent. But that only reaffirms our commitment to our sustainable long-term growth model. We need to come out of this stronger and continue accelerating what all of our territories outside of South America. Jerry? Gerardo Celaya: Yes. Thank you, Ricardo. And to briefly complement Ian, I would like to just connect a few of the points that Ian mentioned regarding first, our grow the core strategic initiative as well as our digital enablers as our second most important growth strategic priority. because it came -- or it's coming at the right precise moment that we can leverage those digital capabilities and the AI-enabled capabilities that our platforms have to take the best advantage of our revenue growth management initiatives at a moment where specifically in Mexico, we're facing important challenges with the IEPS tax coming online. Going to capital allocation, Ricardo, I think we are very -- or following very closely our capital structure situation. We understand that we are pending to give information to the market regarding what we're doing. with our dividend strategy. Given that we're facing this challenge in Mexico with IEPS, we're holding on a little bit to see how cash flow behaves during the year. We'll certainly try to do our best to have the less disruption possible from this effect in our cash flow generation. But we're being a bit cautious, just waiting out and see how the first half of the year develops with the World Cup coming on and see how our projection for cash flow for the remainder of the year progresses. So we'll give you a bit more information as the year moves on. Operator: Our next question comes from Thiago Bortoluci with Goldman Sachs. We are going to move on to the next question that comes from Rodrigo Alcantara with UBS. Rodrigo Alcantara: Can you hear me? Ian M. Craig García: Hello Rodrigo. Rodrigo Alcantara: Nice to hear from you. One question for Ian to elaborate on the very encouraging momentum observed in Brazil, right? I mean we discussed here in terms of the 0 concepts momentum, but also judging on competitors' performance, looking -- your performance is quite strong as well. So I'm not sure if we're -- if it's a matter also of price relativity, allowing you guys to give better performance, digital tools. Just wanted to understand the drivers behind not only the strong category growth momentum, but also the relative performance versus competitors in Brazil. That would be for nonalcoholic beverage. And the other question for Jerry, and this is a topic that to tell you truth, I mean, we were asked as writing the review today, what happened to cash flow? I mean, there was a meaningful outflow in working capital, Jerry, that actually burn all the gains that we saw at the EBITDA level. So I just wanted to -- I mean, investors wanted to understand precisely this and what happened to working capital. And if I recall correctly, I mean, -- it's something to do with payables and stuff like that, but it's a topic that we have previously discussed in the past. So I thought that we have turned the pitch on that. So just curious on this and when can we expect some sort of normalization on working capital? Those would be my 2 questions. Ian M. Craig García: Rodrigo, so just in terms of the market performance, Brazil is the perfect example of having decided to adopt a long-term sustainable growth model where we are leveraging a top-notch portfolio of brands, consistent investment year-over-year over-year above the line and below the line. with the widest distribution in network, focusing on expanding our customers, improving our customer service metrics and also rolling out digital enablers. So it's a combination of that consistency year-over-year. And you end up improving your relative competitive position that fits into more scale. It fits into a more orderly market. You can end up continuing to leverage again your scale. And you see it where we have decided to focus. I mean, the Coke Zero playbook worldwide for the system is called the Brazil playbook for a reason. So it was developed there. It's working for Coke Zero. It continues to work, and now we rolled it out across other geographies, and it's working as well. Sprite Zero, nothing short of amazing what we're doing there. The growth that we saw in Sprite Zero last year and has continued again into this year, which is also, by the way, great news when we think of the impact that is going to, at some point, start to flow through on the GLP-1s. It's great for us to improve our non-caloric mixes. So in Brazil, I would say it's a story of consistency behind our strengths that I mentioned in the prepared remarks. And it's just feeding through. And we're very fortunate to now be at a stage where we have very advanced AI enablers, all rolled out and scaled in Brazil, and we just continue to fine-tune them. and that continues to show through. I mean when you look at the share that we are winning and exclude the effects of Rio Grande do Sul, so if you look at mature territories of Sao Paulo and Minos, I mean, these are very large share gains, and they come from that consistency. Gerardo Celaya: Rodrigo, thank you for your questions and for your time. Regarding working capital, it's exactly accounts payable, the effect that you're seeing, and it's an effect in the base. Just to remind everyone in the call, we are in the process of rolling out and deploying the implementation of our new ERP, SAP/4HANA. Due to delays last year, we had a significant increase in accounts payable that were a big effect in fourth quarter of '24. So when you compare to a normalized fourth quarter of '25, you see that large reduction in accounts payable, which basically is the hold effect that you're seeing in working capital. We have normalized that for the year and don't expect to see any further disruptions coming from accounts payables or receivables for 2026. Rodrigo Alcantara: Awesome. And so just to confirm, starting 1Q '26, we should go back to normal on those outflows or inflows on working capital. Gerardo Celaya: That's correct. Even since fourth quarter '25, I would say, is the normal, that the disruption comes from the base fourth quarter '24 when we had unusual increase in accounts payable back then. Rodrigo Alcantara: Okay. No, that's encouraging. I mean excluding -- I mean, that said, I mean, it was a great quarter, guys. Congrats. Operator: Our next question comes from Thiago Bortoluci with Goldman Sachs. Thiago Bortoluci: Can you hear me now? Ian M. Craig García: Yes Thiago. Thiago Bortoluci: I would just like to move the conversation back into Mexico with 2 follow-ups. The first one, I know you mentioned January moving in line with expectations, and it's still too early to call for a more aggressive capital allocation. But I remember having prior conversations on pricing. Obviously, the industry as a whole has been pretty clear in passing the IEPS, but we had some diverging views on whether to go for a second round of increase to cover the underlying raw materials inflation, right? So the first question is, with the elasticities that you're seeing so far in Mexico, how comfortable you are or not in implementing another round of price adjustments this time to cover your underlying cost inflation? This is the number one. And then the number two is with the level of hedges that you have so far, particularly on the FX line, what's the visibility that you have in the direction of your gross margins and cost inflation for the next 12 months? That's the question. Ian M. Craig García: I'll take the first half, Thierry. It's still too early to tell. We need to let the first half -- the first quarter flow through. If you remember, January of last year was very strong. Then we have February where we started seeing changes in sentiment. And in March, we started seeing both the change in sentiment as well as weather. So it's too early to tell. We need to be a little more cautious. From what I see today, I can tell you this, the elasticity is behaving as we have imagined. The consumer is still sluggish in Mexico. So it wouldn't be prudent to venture into an additional increase today. At least I need to see how we end up closing the quarter and things are reacting. And that gives us plenty of time in any case, before we could do any sort of adjustment, additional adjustment. Gerardo Celaya: And Thiago, connecting my answer to Ian's, I would say, gross margins for Mexico, we are seeing a bit of pressure. We're certainly going to follow up on any pricing decisions that we have to make. We're being very cautious, but we are very concerned with maintaining sustainable growth for the long term and following up on that promise to the market. But we are seeing a bit of pressure in gross margins, even though we see a benign raw material environment with the exception of aluminum, we see flattish to favorable prices in sweeteners, in plastic, but we do see a bit of pressure in aluminum that should result in some pressure in gross margins that we're aiming to try to compensate in fixed cost and expenses to try to deliver as close to flat EBIT margins as possible. It's still a work in progress, but that's what we're expecting for the year... Ian M. Craig García: For the full year. Gerardo Celaya: Exactly. Operator: Our next question comes from Renata Cabral with Citi. Renata Fonseca Cabral Sturani: My questions are about the Brazilian operations, some follow-ups. So the first one is regarding the supply chain improvements. We have discussed in the previous quarter, the improvement because of the normalization of the operation in Rio Grande do Sul. My question is how much of incremental savings potential remains in the distribution cost to serve for 2026? Or if it -- in this specific line, we are getting to a peak? And my second question is a follow-up regarding CapEx investments in Brazil. Is Brazil still receiving incremental capacity investment? Or does the current footprint support the growth in the upcoming years without incremental fixed cost improvement or investments this year? Ian M. Craig García: Renata, I would say we still have a couple of months where we're cycling still the Porto Alegre plant closure. So most of the improvements you're going to see really in freight come from that extra freight that was occurring there up until May. In terms of capacity, I think we put in over 4 -- over 5 lines in Brazil. So we've done a lot for the short term in Brazil in terms of lines, and that should not be an issue. Given the growth that we're seeing, if this continues as strong, and we have to see, remember, 2027, a new tax is going to come into effect. So it's a little early to say whether we'll need -- when we'll need the new plant in Brazil. So our projections today is that we will need one to start around 2030. And so investments for that will be in 2029. So I would say from here to 2028, things are at a lower level of investments because we have already invested quite a bit. So from having invested around 8% of revenues we should go down to around 6.5% over the following years, and then it steps up again in 2029 with the start of a new plant. That's the base scenario. But we have to see what sort of impact we see in 2027 from the tax, okay? Operator: Our next question comes from Alvaro Garcia with BTG. Alvaro Garcia: I have 2 questions. I have a bigger picture question on affordability in Mexico. In the context of -- you've stated your long-term sustainable growth model. If you zoom out, is it fair to assume that we could be entering just sort of a longer period of affordability? And we obviously had a phase, let's say, in the 2015, '16, '17, where you probably passed a little too much price, and we've discussed that in the past. given your price gaps today, so maybe some commentary on that would be helpful relative to your competition. And just given the tax and given what the consumer is feeling, is it fair to assume that we could be entering just a multiyear cycle where you're maybe favoring volumes in the context of your long-term sustainable growth model. So any thoughts there would be greatly appreciated. And then just one quick one, Jerry, on CapEx levels for 2026. I think last quarter, you mentioned potentially lower CapEx levels. I'm not sure if you've mentioned it on this call yet or not. I know you cleared up sort of capital allocation, but any comments on specific CapEx levels for '26 would be helpful as well. Ian M. Craig García: Hello Alvaro. I think your general read is some point. We believe this model is the one that delivers the best results, not only in terms of share of volume or even share of value, but also in terms of sustainable bottom line growth. So we saw this, like you mentioned, we lost too much share in the 8 to 10 years prior to 2022. We adjusted the strategy then. It reacted very quickly in 2023, so much so that then we had an availability issues in 2024. I'm talking about Mexico. Then last year, I would say, was a bit of an outlier with everything that happened with the consumer. The reaction again recovered the impact that we have, but that was, I would say, an event-driven strategy to quickly recover the changes in consumer sentiment. when we look at what's going to happen and what is transpiring in 2026 in Mexico, we're very convinced that it's the right strategy because when you're passing through the IEPS price tax increase, it's sort of a similar effect to what we saw in Argentina from there from the economic crisis or in Panama after having to adjust our portfolio, the consumer, we don't want to lose household penetration. It's very important that we maintain that penetration. And it's really a 12-month thing. We don't see it as longer term than that. So we need to come out and we're planning to come out of this yes, impact stronger with a stronger relative position. I think we're very the price gaps are manageable where they are. So the strategy should pay off. It's worked in the other markets. It worked in Mexico as well. We're missing one price point where we're going to be launching a new returnable presentation, but we're keeping that under wraps until that's in the market. But outside of that, we're where we need to be positioned where we need to be, and it's starting to show. So I think it's a 12-month thing, Alvaro, where we reposition this. And then we will grow in terms of RGM initiatives and pricing as much as the market gives us while maintaining increases in competitive position. It's really dictated by that. Gerardo Celaya: Alvaro, I would like to highlight very quickly 2 aspects that I think are very relevant for the implementation of the strategy that Ian was elaborating on, which is our digital capabilities, the ability that we have now to capture and process information from the market and act on that information quickly through our revenue growth management initiatives, I think, is -- puts us in a very strong position to address both the situation that we're facing in Mexico this year and the situation that we will be facing next year in Brazil with the start of the excise tax there as well. The other component, I think, that is worth mentioning is -- we have the learnings from the experience we had in 2014 with -- when the YES was originally enacted. So that will allow us to -- or is allowing us to take more informed decisions with respect to the market to address our growth opportunities in the best way selectively throughout the market. Regarding your question on CapEx, as we were talking about the last couple of years, last year, we invested 8.2% of revenues for the whole year with a big increase coming from deploying capacity, both in manufacturing and distribution. For this year, we're expecting, given the phasing out that Ian already mentioned in our Southeast plant in Mexico as well as our plant in Brazil. We're able to generate a little bit of savings in our investments for this year, dropping our CapEx to revenues from a range of 7% to 7.5%, probably ending in the lower end of that range for the year with the expectations that we have in our business plan. Operator: Our next question comes from Froylan Mendes with JPMorgan. Fernando Froylan Mendez Solther: Can you hear me? Ian M. Craig García: Yes, Froylan. Fernando Froylan Mendez Solther: You mentioned December was the highest monthly volume in Mexico. Was there any overstocking, probably a reaction from the different channels with the upcoming hike on the taxes. Also, you mentioned that price gaps are manageable. Does that mean that the price gap was reduced? And is that a sense that you have been gaining share so far with the IEPS implementation in the industry? That would be great if you could give us some color on how competitors have reacted. Gerardo Celaya: So I don't -- we don't believe there's a stock effect in those -- in that December figure, firstly, because we never used all channels at the same time. And in this case, we adjusted the traditional trade mid-month. So any event of overstocking was, let's say, flow through within the month. So that was done around the mid-December. And the modern trade, as you know, has a huge incentive to improve their working capital in year-end. So they did not really stock in any major form entering into January, and that price flowed through in January. So I don't see that major effect in the Mexico December volumes. It was the highest December on record for our 4 largest operation. and it was the highest fourth quarter on record for Guatemala, Colombia and Brazil. So those are like underlying green shoots that tell you about the strength of the NARTD market that we serve. And in terms of the price gap, it varies a lot by competitor, region and channel. So what I can tell you is the overall mix, it's either the same or very slightly improved than what we have before. But it's very different by competitor and channel geography. It's not a homogeneous thing. Fernando Froylan Mendez Solther: You mentioned a bit about -- no competitor doing anything crazy, right? Ian M. Craig García: No, no deterioration in the price gap. You could say there are some competitors that are being aggressive in certain channels and geographies. What I'm giving you is the blended overall picture. Gerardo Celaya: I mentioned, Froy, a bit about share performance. I think we're very proud of the job, as Ian mentioned in prepared remarks, of the job that the Mexico team did recovering from the backlash effect that we had in the second quarter of last year. And we're very excited of the base from where we're starting this year having recovered that share. So this should be a good position, a good platform to start this year that we're facing the challenge of IEPS with the pricing strategy and RGM initiatives that we elaborated on. Operator: Our next question comes from Antonio Hernandez with Actinver. Antonio Hernandez: Just a quick one regarding -- I mean, you mentioned the different tailwinds for Brazil, especially for this year and next year might be a little bit more complicated. But more specifically, how are you seeing in terms of any volume guidance or sales guidance in Brazil for the year? Ian M. Craig García: Sales guidance, Antonio, what I can say is the year started off this first by [indiscernible] continuing on the back of the strong trend. We've seen no changes there. We had good weather in January. We have social programs. We have election-related spending. So everything moving on strong in Brazil anything that you want to share on that? Jorge Alejandro Pereda: Yes. Maybe to complement on that part, Ian, I would say that with all the tailwinds that we're seeing and so far, Brazil has been to a good start of the year, both January and February have been good months. Some of these tailwinds are already materializing from the social spending, even weather has been positive. So with all things considered, I would say that we expect to grow volumes in Brazil this year, which, as you know, when you zoom out and you see Brazil over the past couple of years, all years have been quite strong. And we have been able to outperform even to initial expectations that was -- or has been what has been happening in Brazil. So all things considered, I would say that if we were to put a number, and please consider this as an early take for the year, I wouldn't call it guidance. But I think we can work with positive volumes probably on the low to mid-single digits range. But we will progressively update you on that as the year progresses. But I think that's a fair assumption for you guys to model. Gerardo Celaya: If I may add, Antonio, I think we're cautiously optimistic and a bit excited of what we've been seeing in terms of share gains in Brazil. I want to highlight this because it's a particular situation. Ian mentioned in one of the earlier questions. But one of the big boost that we're getting from the launching of our adviser tool in Brazil that is also online in Mexico and are excited for what we may see in Mexico as well. But a good result that we've seen has resulted in share improvement through improvement in combined coverage, both in CSDs and stills. This tool allows us to better execute at the point of sale, reducing out of stocks as much as possible, and this has resulted in good share trends in all of the categories, which is especially exciting when we see the breakdown. So we're optimistic of what this tool will bring for the rest of our business, especially with the late last year launch in Mexico and the expectation of launching in Colombia and Guatemala this year. Operator: Next question from Gabriela Martinez with [indiscernible]. Unknown Analyst: Do you already have an estimate of the impact of the World Cup? And could you share more details on your strategies to capitalize the opportunities it will bring? Jorge Alejandro Pereda: Gabriela, yes, it's Jorge here. I think as Ian and Jerry have mentioned in previous earnings calls, we are very excited about the opportunity that the World Cup brings, not only because of the local aspect of being a host country, but perhaps most especially for the power that it has for our brands. creates a lot of opportunities for us to engage with the consumers, with the customers, with activation and not only for brand Coca-Cola, Coke Zero, but also in other categories as Power it, for example. So we're, as I said, very excited about that. It's hard to put a number like to put a number on the model, let's say, for the World Cup. But I would say the most important upside that we see for the World Cup is regarding to brand engagement, the opportunities on frequency. That is a great opportunity for us to capitalize. And I would say not only in Mexico, in other markets as well. It's a great opportunity to gather. It brings more consumption occasions, and that's a great, great opportunity that we have. We have, for example, not only during the tournament, -- but even before and even after the tournament, we have a lot of activations happening. We have the trophy tour ongoing. It's coming to Mexico as well. So those are the kind of opportunities that I would highlight for the World Cup. Gerardo Celaya: If I may add, Gabriela, as well, regarding the World Cup and the expectations for the year, we are particularly proud of the strength and depth of our portfolio of products because we can offer a product for all of the different consumption occasions that our consumers will have around this event, be it at home, be it on the road or be it on the venues occurring during the event itself. So we offer a consumption occasion and a brand and an SKU that allows us to capture all of these opportunities, be it hydration, be it energy, be it indulgence. All of this is -- has a lot of synonyms with the World Cup, and we're proud to be able to serve the Coca-Cola portfolio of products around this event, which is a good engagement -- brand engagement event for us. Operator: Our next question comes from Fernando Ferreira with Bank of America. Fernando Ferreira: Just a quick follow-up regarding volumes. You have mentioned or you share some outlook on Mexico and Brazil. But maybe if you can give us some color about what you're expecting on a consolidated basis, mainly given the strong recovery that we have seen in Argentina, Colombia and the very good performance of Guatemala, that would be great. Jorge Alejandro Pereda: Yes. Thanks for the question. Look, when we put it all together, as I mentioned, we already mentioned low to mid-single-digit decline in Mexico. low to mid-single-digit growth in Brazil and the rest with the -- putting it all together with the rest of the markets, I would say consolidated volume for 2026 will be more of a flattish year, of course, flattish to slightly positive, I would say, if we were to give a range. That's what the team is working on. Of course, we will, as I mentioned before, progress you along the year as the year progresses. Ian and Jerry highlighted the effect of the excise tax that is ongoing, and we still need to get a feel on that. So consider this like an early take on the outlook. But there are several moving pieces, but this is what we have for now, what we've been working on. And of course, the team is very focused on achieving growth this year. Gerardo Celaya: So Ian mentioned, Fair, our sustainable growth model, and we've been talking about this for the past few years. I highlighted performance in share that we are seeing positive performance in share across our territories. So our teams are striving to get -- to return to this path of growth in all of our operations. And I think this year, we certainly will be aiming to deliver slight volume growth across our territories. Operator: This concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Jorge for any closing remarks. Jorge Alejandro Pereda: Well, just to thank everyone for your interest in Coca-Cola FEMSA and for joining us on today's call. As always, we are available to answer any remaining questions, and we look forward to meeting with you, hopefully, in person throughout the year. Thank you very much. Operator: Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.
Joe Lister: Great. Good morning, everybody. Thank you all for coming along, and those of us joining today, I see you fighting over the snacks on the chairs. So please enjoy that. And for those joining us online, sadly, we won't be posting them to you today, but hopefully, you can come next time and enjoy them. So, this morning, I'm going to just run through what we're seeing in the market and progress with our strategic priorities. Karan will then take you through the '26, '27 sales position before Mike talks through the financials and property. And then I'll wrap up and open up for Q&A as usual. So, 2025 was a year of considerable change for us in our sector. And whilst our performance was strong across the majority of the portfolio, we have seen that pace of change accelerate, which has impacted our occupancy. More students are opting to live at home and international postgraduates have declined again since their peak in 2022, which meant that occupancy was weak in three of our cities, which impacted the overall performance. And whilst it's still early, we are currently tracking 3 percentage points behind last year, which is all in the nomination space, which Karan will come on to talk about. We have seen the demand shifts like this before, and we know that we can respond positively. So we set out a plan in November to reposition the business, and I'm proud of the start that we've made across the three areas. First, we've been accelerating the repositioning of the portfolio. We've got a high-quality, well-located portfolio at the right price points, and we've already started selling assets as seen by the USAF disposal announced today, and we've launched a portfolio of GBP 300 million just last week as well. Secondly, we will play to our strengths. We have unparalleled relationships with universities, and we have NPS scores at record levels. And we have an opportunity to deepen these relationships at a time when universities themselves are facing into challenges, and we're excited about further joint venture opportunities. And thirdly, we will leverage our platform. Our integrated platform gives us that ability to react, to take share from our competitors, including HMO and Empiric gives us the opportunity to do this. And we've already taken costs out and reduced CapEx spend at pace. And encouragingly, young people still see the value in a university experience, particularly at high-tariff universities and supply constraints are having a real and having a real and lasting impact. The fundamentals of the HE sector remain strong and where there are near-term headwinds, we are addressing them and facing into them. Demand remains robust. We've seen a record number of applications from U.K. 18-year-olds and international graduates are also increasing, particularly from China, and growth is focused at high-tariff universities. We have seen a fall in postgraduates over the last three years, as I mentioned, but the U.S. and Canada still have restrictive visa policies and the U.K.'s international education strategy provides greater policy certainty and the prospect of growth in student numbers at top universities. And we are positioning our portfolio where this demand-supply imbalance is most favorable. And universities are still targeting growth and the growth ambitions remain core to their strategies. When I'm speaking to the vice chancellors at the likes of UCL, King's, Leeds, Liverpool and the rest, growing U.K. and international undergraduates is a priority for them, and we're seeing that come through in their numbers. They're committing to long-term campus investment. And you can see that at universities like Bristol and Glasgow and also through their investment into joint ventures with our partners at Newcastle and Manchester Met. Universities recognize that they, like all industries, do need to adapt to AI, but educating young minds will be more important than ever. And over the next 20 years, it is estimated that there will be a 10% increase in jobs needing a degree. And so we do see that there will still be more opportunities to grow nominations in joint ventures with high-tariff universities. And we are positioning the business to face into the near-term challenges as young people are being more rational in their choices, and they're prioritizing on value for money and the investment they're making, particularly given the cost of living pressures and the graduate outcomes, meaning that more students are opting to live at home and students are again booking later to try and secure the best deal. And this is driving the continued focus on to high-tariff universities where student sees the value of a residential degree. And this continues to see us concentrate into more cities and the opportunities to capture share from HMO and grow our overall addressable market. On the supply side, the viability challenge is real across PBSA, build-to-rent and new housing and new starts have largely ground to a halt. The Renters' Rights bill becomes effective in May '26, and we've already seen around a 10% reduction in HMO over the last few years, and we'd expect the renters rights to continue to play into this. And so what does this all mean for us? High tariff is growing at the expense of low tariff, so we are growing our exposure there. Universities will commit to high-quality PBSA, either through nominations or joint ventures, and we are well placed to play into this. And whilst we outperformed the market in '25, '26, it's clear that, again, we will need to take share from both HMO and PBSA. And where we need to reposition the portfolio, we will be proactive and pragmatic. And we believe that this will drive a return to growth over the medium term. In November, we set out our revised strategy to respond to these shifts in the market. And as I say, we are making good progress three months into this plan. We are 68% sold for the next academic year, as I mentioned, 3 points behind last year. Universities are being more cautious on renewing nominations, especially at low tariff universities. And whilst the applications data is stronger than we anticipated, and we're having good conversations with universities since that data was released at the end of January, as we saw last year, this does not always flow through to bookings. So we've been more cautious on our outlook and guiding to the lower end of our occupancy and rental growth range. Taking action on costs, our overhead rationalization completed in December, delivering a 20% reduction in our central staff costs, and we're close to completing our technology platform, which will unlock GBP 7 million of savings by the end of the year. And the integration of the Empiric acquisition is well underway. It is really exciting to the opportunity for us to take share from HMO across both Unite and the Empiric portfolios. And we're also increasing our synergy target today to GBP 17 million. We're also increasing -- making progress increasing our alignment to high tariff and the best teaching universities, already reaching 67%, and we will achieve our 80% target through the pipeline, joint ventures and disposals. We are on site with both of our joint ventures and the financial constraints on universities are increasing partnership opportunities at sensible returns and we're making good progress with our capital allocation, the USAF disposal showing our proactivity, and we've been decisive in our approach to developments and using the proceeds from those developments to launch our GBP 100 million share buyback program earlier this year. And we do recognize it will take some time to reposition the portfolio, but delivering these priorities will underpin our return to growth. As we've got into the Empiric business, we really are excited by the extent of the opportunity, giving us a brand and a platform to compete with HMO, which is home to over 1 million students, and this will increase the size of our addressable market. I've been out visiting the properties. I've been to Cardiff, Birmingham and Bristol, and I've been impressed with the quality of the portfolio and the fit with the Unite portfolio as well as the quality of the people in those cities. There are loads of opportunities for us to use our sales platform to drive performance. And yes, the sales position is disappointing, and that reflects some distraction from the acquisition as well as the market challenge and the fact they didn't pivot away from their core market of Chinese post graduates. So the '25-'26 income will impact our '26 earnings by 1p to 1.5p, which Mike will cover. And there is more work to do on our '26-'27 sales, and we are on it. We will partially offset some of the shortfall by the increased synergies and driving our sales performance through both '26 and '27 to deliver earnings accretion from Empiric. In summary, this slide highlights our 2025 performance. We've delivered EPS of 47.5p underpinned by the good performance in the majority of our cities. but at the lower end of our guidance due to the 95% occupancy overall. And the TAR of 2.1% is below our usual standards, driven primarily by yield expansion and also a slowdown in development activity. So I'll now hand you over to Karan, who will take you through the '26 sales in some more detail. Karan Khanna: Thanks, Joe. As Joe highlighted earlier, on occupancy, we are currently at 68% versus 71% same time last year. Nominations are back 4% year-on-year, and I'll share a bit more detail on nominations on the next slide. On direct let, bookings are actually slightly ahead of last year, having adjusted prices and tenancy length to attract more undergraduates to compensate for the softness in the international postgraduate market. We're also making good progress in stabilizing our recently opened and refurbished properties, where bookings are up 25% year-on-year. This has been achieved on the back of strong student feedback, improved marketing, demand for nominations as well as adjustments to tenancy length. Rental growth, which is on a RevPAR basis, is currently at the lower end of our 2% to 3% guidance at 2.4%. Our inflation-linked multiyear nominations continue to underpin this rental growth with some of it being offset by adjustments made to secure single year nominations as well as more undergraduate direct-led customers. Like last year, we are seeing a later demand cycle as students wait to get the best scale possible. So we are preparing for a big push in the latter half of the cycle again. A bit more on nominations. As you know, with nearly 60% of our beds on nominations, of which 85% are on multiyear linked inflation-linked contracts with an average tenure of six years, they're a big part of what makes Unite successful. For the current sales cycle, which is still quite early, we are behind what we achieved last year. To add a bit of color on that, when we started discussions with our university partners towards the end of last year, we found that they were a bit more cautious in resigning to the same volumes that they took from us previously. Quite simply, to manage their financial risk, they needed clarity on their own student numbers before they could make firm commitments to us. The majority of these handbacks, as you can see, were from lower and medium tariff universities, which have been losing share to the higher tariff. Encouragingly, though, since the release of the UCAS application data, we have seen an uptick in the request from universities to take more rooms now that they know their application rates. The headline UCAS data shows continued positive trend in student number growth. Overall applications from 18-year-olds were -- was up nearly 5% as application rates held steady at 41%. Like last year, higher tariff universities continue to win share, growing applications at 6%. They now account for nearly 50% of all student applications. Additionally, higher tariffs have seen an increase in applications from students who intend to live away from home, so effectively seeking accommodation. This highlights that students and parents continue to see value in the full residential experience at these universities, and it validates our portfolio strategy to align ourselves to these institutions. So our focus right now is very much to leverage our relationships to convert as many of these discussions into firm bed commitments and secure an additional 1 to 2 points of occupancy on our current position. That said, the low visibility we have on nominations at this stage and the continued late nature of the direct let cycle is leading us to guide to the lower end of our 93% to 96% occupancy target. Stepping back, we are seeing three major themes come through our discussions with universities. Firstly, there is still strong demand from all universities, whether you are high tariff or low tariff for well-located, high-quality accommodation at the right price points. The cost of living pressure on parents and students and the growing number of stay-at-home students means that universities are very keen to secure more affordable options. And this plays to our portfolio, which is 90% cluster flats. And in most cities, we already have the price points and the tenancy lengths that these universities are looking for compared to so much of what's been built recently, which is at much higher price points and full year occupancies. Secondly, it is essential for universities that the partners that they work with share the same values they do on student experience with a strong welfare component that complements their own. Here again, the investments that we made in our 24/7 operating model in resident ambassadors who build great local communities in our student support framework, all of that has meant that we are at the front of the queue when the universities are looking for accommodation partners, not just another supplier of beds. Finally, there is strong belief within the more selective universities that they will continue to be the net winners. And for them, to continue to grow students, student numbers sustainably, they need a pipeline of high-quality accommodation for the long term. So we are actively working on renewing several of our longer-term deals with universities. The alignment of our strategy with these trends is what gives us the confidence that we will remain the partner of choice for the best universities in the U.K. So, what happens next? I thought it might be worth revisiting the structure of a typical sales cycle. Firstly, we're just four months into the current cycle. So there's a fair bit of runway ahead of us. So far, our focus has been very much on securing rebookers and undergrad returners. We will start our new customer acquisition campaign from end March going into April and May. This is really when undergrads start to act on their offer letter from universities. On nominations, universities tend to firm up their commitments with us in June once the acceptances come back from students. Our goal is, therefore, to have 87% to 90% of our inventory sold by the time we get to clearing in August. Now clearing is always massive for the undergraduate segment, between 65,000 to 70,000 students use clearing, either to find a new course or to switch their universities or both. Last year, we did nearly 6% of our sales during clearing. We expect this trend of a larger clearing to continue as we know, students are first waiting to secure the university place and then book their accommodation on the best possible offer out there. So far, we are seeing the market stay disciplined on incentives. They tend to be usually between 2% and 4% of the value of the annual contract, but this could increase towards the end. So we are keeping a close eye on it, and we will react accordingly. The post-graduate cycle actually does work a little bit differently. Currently, students are in the research phase, and they tend to book later in the cycle with peaks really coming through July onwards, especially for international postgraduates who also need to secure their visas. While the Unite Students portfolio was historically mostly undergraduate, now with Hello Student, we do have a new offer to take to postgraduates, and they will be a big part of our focus later in the cycle. Talking about Hello Student, I wanted to share a little bit more on how we are integrating Hello into the Unite operating platform. As Joe said, Hello Student provides students with a very different proposition to what we do at Unite. They have a high-quality portfolio aligned to high tariff universities where they deliver an excellent experience. And we will be keeping them as a separate brand to address the returners need for a more independent living experience. That said, their sales performance was below our expectations, but we are confident that as part of our platform, we can drive significant commercial improvements. One of the big areas where we will add value is through the scale of our international sales network. We work with 3x as many agents as they do across multiple markets. We have a dedicated sales team, many of whom are native Chinese speakers and also have a dedicated local office in China, all tools that the Hello team didn't have access to before. Additionally, we are already using our data and insights capabilities to help them make the right revenue management decisions, so where to adjust prices and tenancy lens and where to price recent refurbs so they can rebuild the base. We're also putting in place a cross-selling program, both to retain existing returning students across both portfolios, but also try and secure some norms for some of our Hello Student properties. Some of these will have a near-term impact, but the full benefit really comes from the next sales cycle when we will also have fellow students on our technology stack. And talking about our best-in-class operating platform, a final bit for me. I know a lot of focus right now is on our sales performance, but we can only deliver that if we deliver a great experience to our students and HE partners. And here, we've had another stellar year. Our student NPS is at a record high, and we are now rated gold by GSLI. Our higher engagement NPS is also at a record high, a reflection of how aligned we are with our university partners. And we're in the final stages of our technology upgrade program. We've already upgraded our finance, service and people platforms and the last piece of the jigsaw, which is our new booking engine and our new property management system is due to go live in the second half of this year. Once the transformation is complete, we will deliver nearly GBP 7 million of operating cost savings per annum. This, together with how students and universities feel about us, gives me the confidence that we will remain the best operating platform in the sector. And on that note, I'm going to hand over to Mike. Michael Burt: Thanks, Karan. I'll now take us through a review of financial performance in 2025 as well as the outlook for income and earnings in the year ahead. We delivered like-for-like income growth of 4.9% in 2025, thanks to strong rate growth, which more than offset the reduction in occupancy. Operating costs increased by 9% on a like-for-like basis, primarily driven by higher staffing costs at property level, resulting from increases in the rural living wage and higher employers' national insurance. We also saw cost increases linked to higher council tax liabilities from vacant rooms as well as building insurance. Property activity over the past two years added a net GBP 15 million net operating income as the impact of development completions and acquisitions more than offset income loss through disposals. The EBIT margin reduced to 65.9% as a result of lower occupancy and inflationary cost increases. Adjusted earnings increased by 9% in the year, reflecting like-for-like growth in net operating income and investment activity. Overheads net of recurring management fees were broadly flat in the year. Adjusted earnings also included a nonrecurring fee of 0.9p on formation of our Newcastle University joint venture. Finance costs increased as a result of higher borrowings and a 30 basis point increase in the average cost of debt to 3.9%. Capitalized interest was also higher, consistent with the pickup in development activity over the period. On a per share basis, adjusted EPS increased by 2% to 47.5p, reflecting the increase in share count from the equity issue in mid-2024. Net tangible assets per share reduced by 2% in the year to 955p. This reflected a 0.5% like-for-like revaluation deficit in the rental portfolio, where rental growth substantially offset the impact of an 11 basis point increase in the portfolio yield, which now sits at 5.2%. Our development portfolio also recorded a revaluation deficit linked to our decision to defer or exit projects. This included our TP Paddington scheme, for which we incurred a 2p write-down, having taken the decision to not proceed with the scheme on viability grounds. Fire safety CapEx, net of recoveries through our claims, saw a 3p reduction in NTA. This was in line with our expectations, and we expect a similar impact in 2026. Total accounting returns were 2.1% for the year, reflecting the change in NTA and dividends paid in the period. We now move on to discuss the outlook for income, costs and earnings for 2026. As Karan discussed, we've seen a slower start to this year's sales cycle. This has been most impactful for nomination agreements where we expect a reduction of around 1,000 to 2,000 beds. We continue to target additional nomination agreements and have various conversations underway with university partners. Where required, we will pivot these beds to our direct let sales channel. Rental growth for our bookings in the year-to-date is 2.4%. As expected, growth has been stronger for nomination agreements and lower for direct let beds, particularly in those markets where we've reduced price to drive increased occupancy and income. Based on current trends, we expect performance for the next academic year to be at the lower end of the guidance ranges provided at our investor event in November for occupancy of 93% to 96% and rental growth of 2% to 3%. Together, this translates to 0% to 2% expected growth in like-for-like income for the academic year, which is at the lower end of our initial guidance for 0% to 4% growth. There remains six to seven months to go in the sales cycle and significant time to influence performance. While undergraduate student numbers look encouraging, we've learned the lessons of last year and are calling the risks as we see them today. We will review guidance over the remainder of the sales cycle as we firm up university demand for nomination agreements and make progress with our direct let sales, which are more heavily weighted to the end of the sales cycle. Cost discipline is one of our strategic priorities, and we're taking steps to rightsize our cost base to reflect a more competitive operating environment. We've identified GBP 30 million of annual cost efficiencies across the Unite and Empiric businesses, which will be executed by the end of 2026. Before the year-end, we reduced our central team costs by approximately 20%, responding to lower income and making savings where we'd invested in anticipation of stronger future growth. In addition, we're starting to realize the benefit of our investment in new technology platforms with GBP 2 million of our GBP 7 million of annual savings expected to be realized in 2026. Together, these changes will help to offset the impact of inflation, meaning we expect to hold the Unite cost base flat in 2026. For Empiric, we're now one month into our ownership and have spent the time reviewing the synergy assumptions made at the time of our offer. Our original target assumed GBP 13.7 million of annual cost savings on a risk-adjusted basis through removal of duplicate activity and roles and the benefits of our economies of scale. We've now confirmed those cost savings, giving us the confidence to increase our annual synergy target to GBP 17 million. We expect to recognize GBP 9 million of those savings in 2026 and achieve the full run rate in 2027. We have a strong balance sheet, and we will ensure we maintain leverage appropriate for the operational and capital intensity of our business. Net debt EBITDA is within our target range of 6x to 7x following completion of the Empiric acquisition, and we will continue to manage leverage through our disposal program so that we remain within our targets. This translates to a loan-to-value ratio of around 30% to 35% on a built-out basis. We expect a further gradual increase in our cost of debt as we refinance at higher marginal borrowing costs. We are forecasting a 40 basis point increase in the cost of debt to 4.3% in 2026 and then further increases of around 20 basis points per annum thereafter. Liquidity remains strong for new debt, and we've seen the cost of new borrowing reduced by around 25 basis points over the past year through lower rates and tighter spreads. Joint venture capital is a key part of our capital structure and an attractive source of funding for the group. Just under half of our operational beds are held through funds, which generate recurring management fees equivalent to around 2/3 of our overheads. We will look for opportunities to leverage new third-party capital and are pleased to have agreed the disposal of St. Pancras Way to USAF. The GBP 186 million disposal will be funded through GBP 115 million of existing cash in USAF and an equity issue in USAF underwritten by Unite. The transaction helps increase USAF's exposure to London, the U.K.'s largest and most liquid PBSA market through acquisition of a prime Central London asset. For Unite, the sale allows us to remain invested in a high-quality property and earn additional management fees. It also recycles capital to fund the cost of delivering our university partnerships and committed developments. The transaction will see our stake in USAF increase to a maximum of 32%, which we then expect to reduce over time. Our earnings guidance for 2026 reflects the outlook for income, costs and funding described on the previous pages. In November, we highlighted a 7% to 10% year-on-year reduction in EPS for Unite from a combination of factors. This included lower occupancy for existing properties and new openings, the loss of nonrecurring JV fees linked to our university partnerships, the initial earnings drag from disposals and the impact of higher funding costs. Since we issued that guidance, we've committed to an initial GBP 100 million share buyback, which will deliver modest earnings upside in 2026. However, we've also seen the outlook weakened for '26, '27 academic year income, meaning we expect earnings for the Unite business to be at the lower end of our previous guidance. Our 41.5p to 43p adjusted EPS guidance also includes Empiric for 11 months of the financial year. As we said previously, Empiric's income was below our expectations for '25/'26 academic year, which will particularly impact earnings in the first half of '26. This impact is partly offset by increased cost synergies. However, we still expect a 1p to 1.5p reduction in EPS in the year. Thereafter, we're continuing to target earnings accretion from Empiric through an improvement in income performance and the full benefit of cost synergies from 2027. We intend to hold our dividend flat in 2026, which would mean an increase in our dividend payout ratio just under 90%. We expect this to normalize back to our existing payout ratio of 80% over time. I'll now take you through a review of our investment activity in the property portfolio. In November, we set out our revised capital allocation framework based around 4 key priorities. And I'm pleased to say we've made good progress against each in the past three months. We formed our first two university partnerships in Newcastle and Manchester and started construction of new on-campus beds. For our off-campus developments, we reflected a more challenging leasing environment, which has seen us exit or defer future schemes. We're also committed to accelerating disposals and have today announced the sale of St. Pancras Way to USAF. This capital allocation supported our decision to launch a GBP 100 million share buyback in January. As Joe set out earlier, we see a clear trend towards the strongest universities outperforming and growing student numbers. These are also the institutions where students see most value in the residential experience, and we see the most enduring demand for our product. Our target is to increase our alignment to high-tariff universities to 80% of our portfolio over the medium term. Our investment activity in the past year has supported this goal by exiting lower-growth markets, developing in our most supply-constrained cities and acquiring Empiric's high-quality portfolio, all of which have increased our high tariff alignment to 67%. Our future investment activity will see us focus our portfolio on fewer cities and the strongest university partners. This will be achieved through the delivery of our university partnerships and developments and by accelerating our exit from lower-growth assets and markets. We've been delighted with our progress with university partnerships over the past year. We're now on site in Newcastle and Manchester for the delivery of 4,300 new beds. Universities recognize the value we bring through our design, planning and development expertise, which has helped to unlock these substantial projects in a difficult environment for new development. There has been significant appetite to lend to our university partnerships with Rothesay and PIMCO providing debt at borrowing costs below our initial underwriting. As Karan mentioned, the strongest universities want more high-quality affordable accommodation on their campuses. As a trusted partner with a growing track record of on-campus deals, we have a significant opportunity to add future joint ventures. We have half a dozen live opportunities with high tariff universities, and our target is to secure one of these deals per year. We're targeting low to mid-teens unlevered IRRs for future projects with demand underpinned by university partners who have an aligned financial interest in the schemes. I'll now turn to our off-campus developments. We delivered two new developments in 2025 in Bristol and Edinburgh totaling 1,000 beds, and we have a further two schemes under construction in London and Glasgow for delivery in the next two years. The cost to complete our committed schemes are around GBP 100 million. Our 2025 deliveries were 65% less in the year of opening. And as Karan said, these properties are leasing up well for the '26, '27 sales cycle. Our focus is on stabilizing the 2025 openings and leasing upcoming deliveries. Together, this would add GBP 27 million to net operating income from the end of 2027. At Hawthorne House in Stratford in London, we will complete construction in June for the delivery of 719 new beds in an academy school let to the Department for Education. The project is our first development delivery subject to approvals by the building safety regulator. We recently secured the second of three gateway approvals and are fully engaged with the BSR to derisk opening in time to welcome students for the start of the '26-'27 academic year. Our uncommitted pipeline also includes sites for an additional 2,400 beds where we own the land, for which the bulk of the value is in consented schemes in London. We will be highly disciplined over new development starts and recently took the decision to exit our TP Paddington project due to it no longer being viable. We've also deferred the development of our Freestone Island site in Bristol. We're currently exploring all options to realize value from these uncommitted projects, including outright sale as well as joint ventures where a partner would fund future CapEx. In the wider market, we see other developers facing the same challenges around development viability. New supply of purpose-built student housing increased in 2025, but remains around half of pre-pandemic levels. Net of beds leaving the market due to obsolescence, new supply remained modest at around 1.5% of stock. High build costs and longer development programs due to the Building Safety Act gateways mean weekly rents now need to be at least GBP 230 for projects to be viable. This is above the rents in 80% of our markets and runs contrary to what Karan said about universities focusing on more affordable product. Where new supply is coming forward, it tends to be focused on more premium studio product and the small number of prime regional cities, which can support rents at these levels. We expect new supply in 2026 at similar levels to 2025 with markets such as Birmingham, Leeds and Glasgow set to absorb the highest levels of deliveries. Looking beyond 2026, we expect to see a material reduction in new supply as indicated by fewer new planning submissions for PBSA schemes over the past year. We also see the same viability challenges impacting development of build-to-rent, which has become a source of competition at the premium end of the student market. We saw good levels of investment activity in the student housing market during 2025 with just over GBP 4 billion of assets traded. Interestingly, we've seen a change in the makeup of transactions, which have shifted from funding of new development towards purchases of standing stock. This reflects the viability challenge for new development in the current market. Institutional investors remain active with the likes of AustralianSuper, QuadReal, L&G and KKR, all deploying capital in 2025. After a year of softer occupancy, leasing performance for the '26, '27 academic year will be key to pricing for upcoming transactions. We're targeting GBP 300 million to GBP 400 million of disposals in 2026 from a combination of lower growth or mature assets that have made a good start through the sale of St. Pancras Way. We will be bringing further assets to market in the coming months and have identified around GBP 100 million of future disposals from the empiric portfolio. Positively, we're seeing good interest from value-add investors for portfolios at affordable rents valued significantly below replacement cost. We expect further disposals to follow the conclusion of the '26-'27 sales cycle in the autumn. This reflects the importance of current leasing performance as well as the time required to complete technical due diligence linked to fire safety. We are fully focused on deploying capital where it delivers the strongest risk-adjusted returns. This was demonstrated in January through the launch of a GBP 100 million share buyback program to return surplus capital to shareholders. This was funded through reduced off-campus development. Looking ahead, we expect to generate around GBP 100 million to GBP 200 million per annum of surplus capital as we execute on our disposal plan and development CapEx reduces over time. Share buybacks and university partnerships remain the best uses of our capital, and we will decide how and where we invest based on the opportunities we have available to us. New investment must demonstrate clear accretion to both earnings and net tangible assets, and we will not compromise on maintaining a robust balance sheet. This means future investment will need to be funded out of disposal proceeds. And with that, I'll hand you back to Joe. Joe Lister: Thanks, Mike. So, we set out a clear plan in November, and we've made a good start. We know that we've got a lot to do, and it will take some time, but we are really clear on our near-term priorities. We will be relentless in our focus on sales from both nominations and direct let across both Unite and Hello Student. We will deliver further cost efficiencies from the delivery of our tech platform, complete the integration of Empiric by the end of the year, securing additional synergies and drive earnings accretion from our sales platform. We've announced the sale of an asset to USAF and launched a portfolio that supports the portfolio repositioning, and we will be pragmatic and agile in the delivery of that. And we will be disciplined in our approach to allocating capital to new development, prioritizing nominations and joint ventures, and we will consider further share buybacks as we make progress with disposals. We remain positive on the sector and believe that the fundamentals remain strong. U.K. higher education is an amazing asset to this country. It is globally recognized. There is a more stable policy environment and the strongest universities are growing and targeting further growth. We're confident in our platform and our ability to integrate and drive value from the Empiric acquisition and our university relationships, and we are underway with our portfolio repositioning and seeing new supply slowing. We are pleased with the progress that we're making, and we believe that we are well positioned for the future and building momentum in our performance. On that, I'm going to open up for some Q&A. So I suggest we start in the room, and then we can go online. I got a couple of mics at the back. Callum Marley: Callum Marley from Kolytics. Two questions. First one on Empiric. So, Empiric occupancy came in weaker than expected. And Joe, I think you mentioned that they failed to pivot away from their core postgraduate market. Was this priced into your original offer? And I guess, was this a foreseeable miss? Joe Lister: So we did reduce our price because we saw that there was weakness in their sales, but they still came in below that. So that was a disappointment in terms of where they've ended up. And I think that was in part, as I say, because of that lack of failure to effectively reposition and also just from some of the market changes that we saw across our own portfolio. Callum Marley: Okay. Then the second one, why should investors have confidence that today's guidance represents a floor rather than another step down? Joe Lister: Look, I think that we set out in November that the -- effectively the fundamentals of our business that we believe that we should be focused in on those high-tariff universities that we have seen changes in the marketplace coming from the move to more students staying at home and the growth or the fall in international postgraduates and that repositioning the portfolio will take some time. We've also been encouraged by the applications data that has come in for the next academic year, both from U.K. undergraduates and from international undergraduates. And that gives us confidence that we will continue to see that high tariff -- that growth of high tariff universities, but it will take us some time to reposition the portfolio. Paul May: It's Paul May from Barclays. Just following on from that last one. I think you mentioned a few times in the presentation about making good progress since November, but yet you announced another profit warning, which is your third in four months. What confidence can you give us that you have full control and understanding of the market? You highlight demand should be stronger year-on-year and yet you're guiding to the bottom end of operational expectations. There was stronger demand last year and yet the market suffered from operational challenges. How do we know that this is not the start of a multiyear rebasing in occupancy and rate growth given the supply-demand dynamic appears to have broken. Joe Lister: Yes. Universities are taking a more cautious approach, and we've seen that. And the current occupancy position is driven primarily by that shortfall in nominations agreements. I think we are encouraged by the quality and number of conversations we've had since the release of that applications data. But that's why we are reducing our occupancy guidance to the lower end of our range. We set out in November 93% to 96%, and we are saying that given that current position that we are saying that we will be towards that lower end of the range. The reduction in the earnings guidance is primarily because of the Empiric acquisition, the 1p to 1.5p, and that's because of their sales performance before the business was in our control. We fundamentally, and hopefully, we set out our belief of why we see the longer-term performance of the sector and aligning to the high-tariff universities where we have seen strong growth in numbers. We've seen a return in growth or growing numbers of undergraduate students as well. But fundamentally, that's why we believe that we will be able to return to that core occupancy back to where we've historically been. Paul May: So I think in November, you also mentioned an expectation to bounce back to 97% plus occupancy and inflation plus rental growth from academic year '27, '28. I assume this is no longer expected. Joe Lister: Yes. I think the delivery of that to 97% was when we repositioned the portfolio. I'm not sure that we sort of believe that will all be done by '27, '28. I think that we do need to go through that portfolio repositioning. And we've highlighted GBP 300 million to GBP 400 million of sales this year. We've launched the portfolio. As I say, we will be pragmatic in the delivery of that, and we will have to go again into '27 as well. So I think the delivery of that is around the alignment point and that we will need to effectively get back to that focus or greater focus on high tariff to enable us to get to that levels of occupancy. Paul May: A very quick one. then share count you're using for EPS guidance just given the issuances and other things. Michael Burt: Yes. What I can say, Paul, is there's a few moving parts in the share count, clearly. So, the Empiric acquisition completed at the end of January. So, essentially, you have 11 months of own shares. The other variable is clearly the share buyback. We've talked about deploying GBP 100 million over the course of essentially the first half of the year. So you should probably assume around nine months of those shares being out of the share count. So clearly I can't give you a precise number, but hopefully, that gives you the key moving parts. Paul May: Sorry, last one on Pancras Way. Obviously, sold to a related party, one could argue. Why did you decide to sell to USAF? Was this a competitive process? If so, what was the price of the underbidder? And how much was the asset written down in '25 versus the portfolio? Michael Burt: Yes. So it's probably fair to say for context. So USAF is a fund in which we established it over 20 years ago. We remain a big investor. We've got a 30% stake in the fund. And clearly, these are investors who want to -- they see value in the student accommodation sector and they want to be invested there. We've been talking to USAF over the course of the last two years because they've made a number of disposals, which have freed up capital. So the fund has had capital. We've historically sold into the fund and generally, that's helped us recycle capital to fund things like our development pipeline. We knew USAF had a requirement to grow in London. It's about 15% of their portfolio, and they'd like to upweight. And we discussed the number of assets with them. That was on a bilateral basis, but it's arm's length. So the way decision-making works in USAF is for them to approve a transaction, there's a vote which is outside of -- Unite is excluded from that vote essentially. In terms of the valuation of that asset, we saw the yields move out by about 15 basis points over the course of last year, which net of the rental growth meant it was modestly up in value terms, but that's pretty consistent with what we saw in the broad market. But it's fair to say this was an arm's length negotiated transaction. We're pleased to sell it to USAF, and I think USA are pleased to have acquired it from us. Rebecca Parker: Just wondering if you can talk to the markets that you had to execute pricing adjustments in and whether you expect any other markets, I guess, with oncoming supply to be impacted there. Karan Khanna: I can take that. So I think as we've set out in the Capital Markets Day, there were three cities where we had the most challenged performance, Nottingham, Leicester and Sheffield. So in those three cities, we did make pricing adjustments. And we've done a combination of adjusting the headline price, but also adjusting tenancy length to marry to the needs of the universities. So where we may have historically have had 51 weeks, we've gone to some of those 44 weeks as well. In a lot of the other cities, we've done tactical price changes. I don't think we've done strategic citywide price changes. So individual properties. A good example of that is the 2 new properties that we launched last year, Avon Point in Bristol and Burnet in Edinburgh. We've adjusted some of the pricing and tenancy lens there as well to rebuild the base and secure the rebookers as well. Apart from that, it's different in different cities, but those are the key ones where we've made adjustments so far. For the rest of the cycle, obviously, we will see how the performance varies and then depending on where we see demand coming or softening, we will make more adjustments. Rebecca Parker: Also, just with the direct let, I guess, underperforming nomination agreements, how, I guess, under-rented are those nomination agreements? And does that come up in your discussions with universities that nominations are achieving a higher rental growth than the market? Michael Burt: Yes. Rebecca, it varies by agreement clearly. But sort of broadly speaking, they tend to be sort of around 10% under-rented on an annual contract basis versus direct let. However, what we get with those agreements is clearly visibility and security of income. So there are some benefits. One of the other things we think about the nomination agreements beyond the income security are the savings we make in cost of acquisition as well. So they can be something in the order of 3% to 5% of booking for a direct let sale. So we tend to think about these things in the round. Yes, we hope to capture reversion, but we're also looking to grow that nominations space, as Joe discussed. Rebecca Parker: Yes. And then just on Empiric's letting performance, you expect it to be in line with the direct portfolio. Just wondering if you can give some, I guess, some numbers around that. And then also just given the current slower leasing cycle, just wondering if you can talk to, I guess, because they have that higher weighting towards tariff universities, what's really going on here? Yes. Michael Burt: Yes. So if you look at the Unite guidance for this year, we've talked about being at the lower end of the 93% to 96% and nomination agreements being probably around the mid-50s as the share of beds. What you can imply from that is our direct let occupancy would be in the mid- to high 80s, and we think Empiric's portfolio will be in a similar place. And I think your second question, Rebecca was on high tariff and how that's performing for them. Fundamentally, those institutions have performed well and their properties are located in strong micro locations. I think the impact on performance has been around that post-graduate intake. So we often talk about high tariff in regards to the undergraduate data, which is trending very positively. However, what we have seen is softness in post-graduate demand and particularly a reduction in bookings from China for Empiric. Thomas Musson: It's Tom Musson at Berenberg. Just a question on the portfolio valuation. Am I right in thinking that in this period, the valuers will have made a specific deduction to the value in some places due to lower occupancy? Or is the portfolio still valued based on assumption of full occupancy? Michael Burt: Yes. So, yes, Tom, you're right. When we have buildings that are under-occupied versus, say, a standard 97% occupancy assumption and valuation, what the valuers will do is make a pound per pound reduction for the shortfall in that income for the next 12 months. However, what they will also reflect and they have reflected in the Q4 valuations, in some cases, are reductions in expected rents because of the lower occupancy performance. So what you will have seen in the Q4 valuations is they've taken account of the sales outlook that we've reflected in our guidance for the '26, '27 academic year. Thomas Musson: In pound million terms, are you able to sort of say how much that is? Michael Burt: The pound per pound reduction in the income, Tom. It would essentially be that gap. So if we're saying we were 95.2% occupied for the academic year, it would essentially be the 1.8% occupancy reduction relative to the value. Thomas Musson: All right. And then just quickly on software implementation costs. You mentioned the upgrade program will complete next year. How much more cost should we assume for '26? Anything else beyond that? Michael Burt: We have about GBP 10 million to go, Tom. Ana Taborga: Ana Escalante from Morgan Stanley. One question on the nomination agreements because in January, you reported 56%, if I'm not mistaken, of reservations coming from nominations, and that has gone down to 55% now. So I was wondering why -- or what's the reason behind that reduction? And if that 55% that you are reporting today is totally secured for academic year '26, '27? Karan Khanna: Yes, I can take that question. So the reason for why it's sort of gone down since the January update is we were still in the middle of the conversation with universities on what volume they were going to take. And what we have seen is that we've lost very few accounts in full. What we have seen is where universities may have taken 1,500 beds, they've sort of said we're going to take 1,300, and we're going to guarantee you 1,300, but we need to see where the applications are going to be before we can commit to the next 200. So they've sort of taken the top off a little bit, and that's kind of what has led to the number going down from 56 to 55. So it's a lot of small little adjustments rather than one or two big accounts that we have sort of lost as well. Sorry, I missed the second part of your question. Ana Taborga: Yes. Of that 55% that you've currently reported, how much do you think is 100% secured. Karan Khanna: Yes. So we're pretty confident on the 55% that's in there right now. So they represent either contracts that we have already signed. Most of them are multiyear agreements. So they are pretty secure. We also have a pipeline of further conversations, which are what we are hoping will get us the 1 to 2 points of additional occupancy on that 55% right now. Ana Taborga: And then the discussions that you're having with universities are mostly around what they're saying, right, that they don't want to commit on certain number of beds? Or are they, to some extent, some price sensitive and therefore, they are demanding for some price adjustments? Karan Khanna: It is very much the former, which is do we have confidence that we will have the student numbers securing -- seeking accommodation. I think overall, they are actually very happy with our relative price points. They are happy with the rate of rental growth that we've got in there. And historically, we've been quite prudent with what we've sort of pushed through as rental growth as well. I think they've been quite appreciative of the fact that we've adjusted tenancy lengths to reflect where they might need a 41-week or a 44-week rather than last year, we might have sold that as a 51 week. So we have a lot of positive commentary from them around our flexibility and not really a lot of issues around the headline price right now. I think ultimately, what they want to just get confidence on is the application that they're seeing, which is more positive than initially may have thought is actually that turning into acceptances, which really does happen through May and June. Maxwell Nimmo: It's Max Nimmo from Deutsche Numis. Just on the integration with Empiric, I think you were talking about kind of technologically bringing that together for the next sales cycle. Just how confident are you on that in order to get that kind of sales rate back up? Is it sort of a plug and play? And kind of related to that, you mentioned also about the build-to-rent risk as well in the market, particularly in some markets where there's quite a lot of new supply, and we're hearing of build-to-rent assets with 40% to 50% of students in them. Just how you see that risk versus the kind of the rent reform bill and things like that. Karan Khanna: Yes. So, Max, on the first point, I wish it was plug and play, but I think from -- I think anybody -- any of us who ever been in a technology upgrade knows that it takes the complications and the surprise as you get through your deployment. I think the advantage for the Empiric team coming over to the Unite platforms is that we are actually going through that process within the Unite properties first. So we've already transitioned to our new service platform. We've implemented Fusion in finance. So a lot of the core platforms that they'll be coming on to, we have already tested, embedded within the Unite system. So we know how to move them across platforms. The big unknown for us right now is our property management and booking engine because we're in the final stages of its design and testing and the testing really starts in earnest in April. So that's probably the unknown where if that goes well for the United systems, United Properties, then actually the process to bring an Empiric on would be just another group of properties. But again, I think it -- I need probably the next three to six months to see how the testing goes before I can give you the confidence whether it will be a plug and play. But the intent is very much to have it ready in time for the sales cycle for the next year. I think on your second question with build-to-rent risk, we have seen build-to-rent emerge as a competitor, especially for international students and especially for returners who are looking for that more independent living experience. That's part of the reason why we were quite excited by the Empiric portfolio, which offers a very different proposition. There will be more risk within build-to-rent because they will be -- they will not have the benefits of the assured tenancies that we will still have within the student portfolio. So we think there is more volume that we can shift from the HMO market where if you're a landlord, it's yet another challenge that you have to deal with. So we're hoping the supply side does become a little bit better for that second and third year in the returning market, which will benefit Empiric as well. Joe Lister: Not sure we'll allow a second go, Paul. Paul May: Apologies. Just had one which came up, I think, at the Capital Markets Day, which you mentioned about a reduction in utilization of space through the year. Just wondered if you're seeing that in the continuation in the direct let in terms of shorter lease cycle. Michael Burt: We are seeing a slight shortening in lease duration, Paul, and that's reflected in the price guidance we give. So when we said being at the lower end of 2% to 3%, that's annual contract value. So that's the combination of weekly rate and the length of tenancy. We saw that length of tenancy tick up for a number of years, and we saw it slightly reduced last year, and we're seeing a similar sort of attrition in that this year. So it's reflected in the guidance, but it's fair to say that probably that affordability trend means that we're seeing those contracts get slightly shorter. Joe Lister: And part of that is driven by the shift of international postgrad towards undergraduates and generally, the undergraduates want a shorter tenancy length than the postgrads. Paul May: I think you mentioned some leasing per term. Have you seen an increase in that as well? Michael Burt: Not really. Karan Khanna: Not massively, Paul. But we are actually quite good at backfilling our rooms where we do have either vacancies or somebody needs to leave early because of any issues. We've done fairly well. We have seen some jam starts come through as well as universities have started to add courses in that particular period as well. It's something that we're actually fairly good at. It's never been a huge part of our business, that in summer income. But as we have shorter tenancies, we've actually bulked up that business development muscle. Michael Burt: And it's fair to say, Paul, when you end up selling a first semester, let's say, it's generally because you might have vacancy. So we haven't really started doing that yet. It's focused on annual contract values. As you get towards the end of the cycle, you may pivot towards selling some of those shorter tenancies as well. Paul May: And very last one. I mean, we've obviously seen quite a share price decline over the last basically a year or six months, another decline today. Just wondering, should we expect to see direct purchases of shares going up seeing your confidence in the future has increased or deferring a part of your salary into share options given that confidence? Joe Lister: Yes. I think we've already increased our shares that we've been buying, and there is also a bonus deferral element to our remuneration. So yes, it's something that we actually consider. I think that along with the share buyback program that we've announced is sort of hopefully demonstrating the commitment and confidence that we've got in the value of the business going forward. Mike, I think we've got a few coming online. Do you want to pick up any that we haven't sort of covered? Michael Burt: Yes. So I'll start with a couple from Marc Mozzi at Bank of America. First one, are university partnerships included in your earnings guidance? Yes, they are. It's fair to say though that we're in the development stage. So it's just a case of the CapEx coming through and those beds will become operational in future years. Marc then had a separate one on what is the initial yield we should expect for your disposals? It will be a blend of different types of disposals. We've clearly made the disposal to USAF we've announced today. We do think that the yield on disposals will probably be in the order of 5.5% to 6%, albeit some will be high yielding, some will be low yielding. I'll then turn to Denese Newton at Stifel. What is the likely impact of your price matching offer where early bookers will still get the best price? Karan Khanna: Yes, I can take that. So any time that we are considering a price reduction from what we have already launched, we do look at what's the actual net impact of that from -- in terms of incremental revenue it can drive net of what we have to give back to students, be it on the incentive or the headline price as well. In most cases, it's not massively significant. So if you're offering a GBP 250 incentive and there's 100 existing students, that's GBP 25,000 that we'll be doing. So, so far, it's not material, but it is an active consideration when we look at price reductions because we want to make sure that we are making net-net more cash rather than just trying to drive pure occupancy in itself. Michael Burt: Got one from Andres Toome at Green Street. How do you perceive the risk of missing income for 2026 new openings? Are you able to fully let new schemes open in 2025? v Karan Khanna: I can take that. So we've got one scheme coming up in London, which is Hawthorn House. 51% of that building is already nominated with the London university, which is a great sort of base to come from. We've also had interest in that asset from another high tariff university in London, which if we're able to secure, which we'll know in the next few weeks, I think that will then put that property on the track of full occupancy. It's a great asset in Stratford, really well-priced rents as well. So -- and sort of taken the lessons from last year around what we need to do to drive initial occupancy, initial pricing incentives, et cetera. So right now, we are confident that we can -- on the back of the nominations that we should be in a good position. Michael Burt: We've then got a couple of questions that I'll combine on build-to-rent. How is your build-to-rent strategy progressing? Have you thought about repurposing PBSA into BTR where you may be facing lower occupancy? Joe Lister: Yes. So we've got the one asset build-to-rent in Stratford. I think just given the current capital position of the business, we won't be looking to grow and add to that portfolio. Indeed, we'll probably add that one to our overall disposal program either in '26 or '27. I think in terms of repurposing student accommodation to build-to-rent, that does come with some real complexities around affordable housing and change of use. So I think where we have more flexible consents, we may look to open up lettings and actually, the Empiric portfolio plays into that, but it's not something that just given the overall demand and the outlook that we're spending too much time on at this moment. Michael Burt: I think got one from Roy Kulter at ABN AMRO. Historically, you've guided to a total accounting return target of 8% to 10%, excluding you movements. given the current environment, do you still expect to hit that figure? So I think we've laid out the sort of the key elements really that sort of go in to give you the total accounting return. Generally, in any given year, about half of that 8% to 10% comes from recurring earnings. You can clearly see the guidance for this year, which is for a slight reduction in earnings, but you would still expect about 4.5% of return on the NAV from that recurring earnings growth. Thereafter, the valuation impact will be a function of the rental growth we achieve. We've given you a sense of how we're trending and clearly, the property yield movements that may or may not happen, but we don't guide on those. I think that's it. Joe Lister: Great. I don't know if we've got any calls on the -- questions on the calls. Great. Well, thank you all for coming and joining us this morning. Thank you for all your questions, and look forward to seeing you all.
Operator: Ladies and gentlemen, welcome to the Temenos Q4 2025 Results Conference Call and Live Webcast. I am Moradi, Chorus Call operator. [Operator Instructions] The conference has been recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Adam Snyder, Director of Corporate Affairs. Please go ahead, sir. Adam Snyder: Thank you very much. Thanks for joining us for our Q4 and full year '25 results call. Before I hand over to Takis, I'd just like to flag that we're hosting our Capital Markets Day tomorrow in London and virtually. You can still register on our website to attend if you've not done so already. I will be taking questions as usual at the end of this call related to the fourth quarter and fiscal year 2025 as well as our outlook for 2026. I'd ask if you could please kindly keep your questions related to strategy for the CMD tomorrow, where we'll also be talking much more extensively about our approach to AI. With that, I'll hand over to Takis. Panagiotis Spiliopoulos: Thank you, Adam. Good afternoon, good evening. I will talk you through our key performance and operational highlights for the quarter before updating you on our operational and financial performance. As Adam mentioned, we will go into more depth on our strategic execution and road map tomorrow at our Capital Markets Day, also covering AI, where we feel very well positioned with a strong moat for Temenos giving us a structural competitive advantage. Starting on Slide 6. We achieved all our 2025 guidance metrics and delivered product revenue, constant currency growth of 11% in the first year of our strategic plan, which is above the market growth of 7%. The sales environment remained stable throughout the quarter and we saw strong demand across regions and client tiers, including several wins with Tier 1 banks globally. We also continue to see strong signings for premium maintenance and this drove very strong maintenance growth in the quarter and full year. We invested across the business in both sales and product, in line with our strategic road map, in particular, growing our sales quarter carrier headcount by 60% to over 140 by year-end. And we executed well on our AI strategy across product, process and people that we will be talking more about tomorrow. We announced our 2026 guidance, which is based on the stable sales environment, our strong pipeline and are confident in maintaining business momentum through our focus on execution. And given the strong first year of execution on our strategic road map, we have raised our 2028 targets, reflecting the confidence in our strategic positioning and our good levels of visibility. Moving to Slide 7. We signed a number of deals with Tier 1 clients in the quarter. This is a client segment we are particularly focused on, given their size and scale, the diversity of business lines and their global reach. We have invested in dedicated global strategic sales, focus on Tier 1 and 2 banks, and it was encouraging to see us expanding our footprint in the fourth quarter. I would highlight 2 deals in particular. We signed a Tier 1 U.S. bank for composable core banking across multiple international markets and the Japanese Tier 1 bank expanding their Temenos platform for core banking and payments to 3 new countries. These successes demonstrate the strength and scalability of our platform and the value and trust our clients place in Temenos and our deep domain expertise. Turning to Slide 8. It is important for us to demonstrate the value we bring to our customers. A highlight this quarter is VPBank in Vietnam, serving over 30 million customers. They completed one of the largest and most complex core banking upgrades in the region moving to a hybrid architecture with Temenos Core and AWS for scalability. VPBank has been a Temenos core customer since 2006. Our platform scalability, functionality and local knowledge are key differentiators. The core banking platform now handles double the daily volume with 0 incidents, business processing speeds are 30% faster and payment transaction volumes are up 40%. This shows the value of our platform and trust our customers place in us and our extensive domain expertise. On Slide 9, our product and technology road map continues to be validated as market-leading by industry analysts. We were particularly pleased to be named a leader by IDC MarketScape for North American retail digital banking solutions. Given our focus on delivering our U.S. road map, which is a key part of our U.S. growth ambition. We also won best core banking system of the 2025 Banking Tech Awards, and we were recognized for customer experience in Asset and Wealth management. Moving to Slide 10. We executed well against our strategic road map, which translated into tangible results across the business and a strong financial performance in 2025. We reorganized our product and tech function into agile teams and hire senior talent, which strengthened our ability to deliver our road map. We launched multiple new products on our platform in the year, including a number of AI solutions. Our sales organization grew significantly with individual quota carrier headcount increasing around 60% to over 140 individuals across all regions. We invested in sales operations and enablement, which resulted in strong pipeline growth and strong signings, especially with new logos. Looking at the U.S. specifically, we also made good progress on our U.S. expansion strategy, increasing sales headcount to over 20 individuals and opening our U.S. innovation hub hiring 70 developers to roll out our U.S. product road map. Our U.S. pipeline has grown nicely, and we expect to close more deals in 2026. Turning to the next slide. We will be talking about our approach to AI, our competitive positioning and our AI strategy extensively tomorrow at our CMD. To summarize, we have a clearly defined AI strategy across product, process and people. This is focused on lowering total cost of ownership for our customers, speeding up delivery and empowering our people to leverage AI and enable greater productivity. As an example, we are also rolling out Anthropic tools across our entire software development life cycle. The adoption threshold for AI in the banking sector is very high due to high product complexity and significant risk aversion. This, combined with our deep customer trust and domain knowledge, creates a strong competitive moat for Temenos and gives us the right to win in the AI era. I will now run through our Q4 and 2025 financial highlights. Focusing on constant currency and non-IFRS financials, which are pro forma, excluding any contribution from Multifonds. On Slide 13, we delivered strong ARR growth of 12% with ARR now representing over 90% of product revenue. The growth in ARR was driven by growth in all our recurring revenue lines, both subscription and SaaS as well as maintenance. Our ARR growth gives excellent visibility on recurring revenue and future cash flows, supporting our long-term growth targets. Our product revenue, which is subscription and SaaS and maintenance grew 11%, well above the market growth rate of 7% in the first year of our strategic plan. On the next slide, we exceeded our 2025 subscription and SaaS revenue growth target with 9% growth year-on-year. We also delivered strong total revenue growth of 9% in the quarter and 10% for the full year. Growth was broad-based, reflecting robust demand across geographies and client tiers for our platform and products. On the next slide, non-IFRS EBIT grew 21% for the year and non-IFRS EPS grew 25%. While we made significant investments in our business product, [ GTM ] and operations, this was largely self-funded through our cost efficiency program. We have good operational leverage in our business. And saw the strong revenue growth, in particular, premium maintenance drove our profitability. Let me highlight a few items on Slide 16. We delivered strong ARR growth of 12% year-on-year in Q4 '25 with ARR now at $860 million. Cloud ARR was 39% of total ARR, excluding any contribution from Multifonds or the BNPL client, which terminated a contract in 2025. We expect cloud ARR to increase in the mix going forward as more clients move workloads to cloud environments. Maintenance revenue grew 15% in Q4 '25 and 12% for the full year, driven by premium maintenance signings. On profitability, EBIT margin improved by 3 percentage points to 34.7% for the year, reflecting strong operating leverage and savings from cost efficiency. These results demonstrate the strength of our business model and our ability to simultaneously drive growth while investing in the future. Turning to nonoperating items on Slide 17. Net profit was up 9% in Q4 '25 and 21% for the year. EPS grew 14% in Q4 and 25% for the full year, benefiting from both profit growth and the lower share count. We had an increase across net finance charges, tax and FX losses in Q4, offset by our strong operating performance. The tax rate for the year was 17%, in line with our guidance. On Slide 18, free cash flow grew 15% year-on-year, ahead of our guidance, reaching $256 million. This was supported by strong ARR growth, disciplined capital allocation and our continued focus on operating efficiency. On Slide 19, we have our changes in group liquidity in the quarter. We generated $179 million of operating cash in the quarter and bought back $30 million worth of shares in the buyback launched in December. We also repaid a bond which matured in November 2025. We ended the year with leverage at 1.3x comfortably within our target range of 1.0 to 1.5x. Turning to Slide 20, a few comments on our debt leverage and capital allocation. We launched our second share buyback program in 2025 for a total of CHF 100 million in December 2025. This will run until December 2026 at the latest. Reported net debt stood at $605 million at year-end. Finally, the Board is proposing a dividend of CHF 1.40 for 2025, which will be voted on at the AGM in May. Our approach remains disciplined and balanced, returning capital to shareholders while maintaining flexibility for future investment. Next, we have our 2026 guidance, which is non-IFRS and in constant currencies, except EPS and free cash flow, which are reported. For 2026, we are guiding to circa 12% ARR growth, about 9% growth in subscription and SaaS, about 9% EBIT growth, about 7% EPS growth and about 16% free cash flow growth. This guidance reflects the strong foundation we built in 2025, our execution focus and confidence in our competitive positioning and also our pipeline visibility. The guidance includes the headwind from the termination of a BNPL client in 2025 which we have given on the slide. There will be no further headwind from this beyond the current year 2026. And lastly, we have raised our 2028 targets based on our strong first year of execution, confidence in our strategic positioning and good visibility. The new targets are for ARR above $1.23 billion, EBIT of about $480 million and free cash flow around $410 million. I am very pleased with our first year's execution, and I'm very confident about our strategic positioning and momentum. I look forward to sharing more at our Capital Markets Day tomorrow. Operator, please can be open for questions. Operator: [Operator Instructions] The first question comes from the line of Boulan Fred from Bank of America. Frederic Boulan: If I can ask a question around the whole kind of demand/competitive environment. Are you seeing any kind of new behavior from some customers trying to leverage, some of the new tools you actually described yourself to meet their needs around core banking software? Or it's still very much kind of business as usual in terms of competition with incumbents and some of the new vendors? Panagiotis Spiliopoulos: Fred, let me take this one. So on the demand environment first, as we said, it was pretty stable throughout the year and also in Q4. And also if I look at the first 2 months in Q1, there has been no change so far. And this is pretty consistent across all regions and across the Tiers. So really, so far, no change. In terms of -- I'll take the external competition first, still see the same trends as last year, less of, I would say, the so-called new vendors given some of the problems they're facing in terms of funding so still pretty much the same competitors both in the U.S. and outside the U.S. If there is -- the one thing we could call out is emerging markets, clearly showing a consistent positive trend with a slight improvement every quarter. Now when talking to our bank customers. Clearly, we haven't seen any trends in that direction you're mentioning. If at anything, the discussions are how you Temenos can help us with basically two things. One is with AI to have faster installation, faster deployment and easier upgrades. Because if we can help clients do that, they would substantially save on implementation time frames. But in terms of anything regarding the core banking space, we don't see any trends in that direction. Always keep in mind, there is two elements or two dimensions, which we need to be aware of. The customer risk erosion, which is very high with banks is a mission-critical systems. There is zero tolerance for hallucinations. You need to have as a bank always deterministic decision making and not probabilistic, which if you get it wrong, there is a very high cost to errors. And on the other side, we are seeing as a trusted domain expert. We're facing very highly complex workflows, which are very difficult to replicate. So from that perspective, we're going to talk more about tomorrow. So far, not seen an impact. Operator: The next question comes from the line of Charlie Brennan from Jefferies. Charles Brennan: Two, if I could. Firstly, on the guidance, I'm pleasantly surprised by how confident you are for 2026. If I add back the BNPL contract, it looks like you're targeting an acceleration in ARR growth in '26. We're not seeing many software companies more broadly taking these market conditions as an opportunity to point to accelerating growth. Can you just give us some visibility into pipeline coverage maybe versus last year or level of confidence from the known renewal of 10-year licensing deals from prior years versus new logo requirements that just shape your confidence in 2026. And then separately, just on the maintenance, obviously, very, very strong growth. Can you just remind us what customers actually get for the premium maintenance option? And is this a onetime uplift to your maintenance revenues? Or is it more of a sustainable source of growth going forward. Panagiotis Spiliopoulos: Charlie, on guidance, so first, if you look at the performance in 2025, where we absorbed already some of the headwind from this BNPL client downsell. We have mentioned throughout the year, on one hand, the stable sales environment. But on the other hand, we've also been investing a lot in additional quota carriers, which we have hired throughout the year. And clearly, that has helped the pipeline evolution. That's one thing, and you would also expect this not to be yet visible in signings in '25, but this should happen in 2026, given the usual 12 to 18 months lead time. That's one thing. So clearly, we feel pretty good about the pipeline given the investments we have done, specifically also in the U.S., clearly, we started with a relatively low number of salespeople, and we're now at 20-plus and they have substantially built a good pipeline, which we are now about to execute to sign deals throughout 2026. The next one to highlight our confidence is we've done a lot of investments also in how we qualify the pipeline, how we track it. And as part of that, you've also seen now a number of quarters delivered as planned or as predicted. So we have not only better visibility and also the quality of the pipeline is much better understood. And the third element I would put, and we always made it clear that there is also a number of large deals included in our guidance, our approach, taking a weighted approach in terms of the risk proved the correct one. And clearly also for 2026, we have quite a number of larger deals included in the pipeline. So overall, it's a mix of, let's say, internal process improvement and a good market environment, which is giving us that confidence. And yes, you're right, we would expect, excluding this impact to have 15% on ARR growth. Now the renewal pool -- let's put it like this. We have talked about the special situation of what we see and what we have in terms of situation on 2027, where we get basically the 2 things coming together, the 10-year renewals from 2017 and the first time renewals from 2022. And clearly, that's helping in terms of our confidence. However, and I think this is an important element. We do not, today, I think there is a specific revenue benefit included in 2026 guidance. The majority of the revenue we would still expect to happen in 2027 from the respective pool. Clearly provides some sort of safety net. And what we can say is the combined renewal pool for 2027 is definitely something attractive. But this is the same case also for '28 and the years beyond, yes. And this is quite sizable, but let's leave it there. Finally, on the maintenance part, what do clients get? I mean the premium maintenance, these are basically -- this is referring to two main areas. The one is you get enhanced support offerings designed for banks using Transact or other Temenos platforms who want a higher service level than the standard maintenance packages, faster response times and so on. So that's one thing. And the other one is extended support which is basically for customers who are staying on older versions for a bit longer and are not yet ready to upgrade, but we want to continue maintenance for this. Now clearly, we put a lot of effort into selling this to our existing customers. We have seen some good -- very good traction in the last 2 years. We would expect eventually this to slow down, given we have not an unlimited pool. So let's say, 7%, 8% is probably the appropriate growth for 2026. And then we expect this over the next 2 years to tail down to maybe 6%. I think this is a fair assumption, putting the potential of this pool together. Operator: The next question comes from the line of Sven Merkt from Barclays. Sven Merkt: It would be great if you could comment a bit further on the U.S. progress. In the release, it reads a lot like coming from improved sales capacity and better execution. And is there anything else you would call out, especially maybe from a competitive perspective? And how much of this progress is already reflected in the guidance? Panagiotis Spiliopoulos: Sven, yes, let me comment on the U.S. situation. Clearly, we have seen a nice buildup in our pipeline in the U.S. And clearly, as we mentioned, the majority of signed deals, we expect to see the impact in 2026. So this is unchanged. And hopefully, we'll have good news to report. Now there is an element of U.S. growth, obviously embedded in 2026 guidance and in our entire midterm plan to 2028. So this is -- we've taken clearly a prudent approach to how much we reflect. In terms of competition, we are clearly getting now into more RFPs and our win rate is improving. And I think we have -- we're really tackling a huge market with a real need and a long runway for banks to modernize. And I think we also have a much better value proposition in terms of our strategic road map versus where we were a year ago, both on the product side. We have the Orlando innovation Hub. So we're developing U.S. product for U.S. customers that can come in, co-innovate. So this is really helping also from a perception point of view. I think we're very well on track for the U.S. market in terms of specific products. So that's -- we've already been launching some and more will happen throughout the year. But clearly, we have been able already to start selling this. We can also see -- and maybe there is some anecdotal evidence. We can also see competitors becoming more aware of Temenos, maybe as a difference to 1 or 2 years ago. You'll hear more on this from Will and Barb tomorrow at our CMD. They're going to share updates on multiple fronts of our U.S. strategy, product pipeline, go-to-market initiatives. Operator: The next question comes from the line of Toby Ogg from JPMorgan. Toby Ogg: A couple from me. Just on -- just firstly, on the BNPL headwind, which you've mentioned in 2026 is 5 points of headwind on the subscription and SaaS, and 4 points on the EBIT and EPS. Is there any reason to think that revenue growth and EBIT growth wouldn't mechanically accelerate in 2027, given there is no further headwind from the BNPL headwind after FY '26? And then just secondly, just on the FY '28 upgrades, it looks like low single-digit upgrade on ARR, 7% on EBIT and low single digit on free cash flow. What was the main driver of the EBIT upgrade? And also, why is the upgrade a bit bigger than the free cash flow upgrade? Panagiotis Spiliopoulos: Yes. Toby, on BNPL, I think let's get through 2026 where we are confident about before we already talk on 2027. Clearly, yes, there should be no more headwind. Now we're still taking a prudent approach to both 2026 and also our midterm targets. And we're 1 year down into our journey, and we feel confident. And I think you can do the math what this means for '27 and '28. On the upgrade for 2028, we have delivered a good 2025 with a good exit in Q4. And clearly, the upside on -- given also the accounting, the upside was higher on EBIT than it was on ARR and free cash flow. Now the maintenance or the premium maintenance growth, clearly, that will slowly tail down. But we thought this is something we feel confident that we can still deliver. We're not going to lose this. So this is why the EBIT upgrade. The ARR upgrade, I think, is a function of the visibility we see on our pipeline. And ultimately, we wanted and we said we would maintain EBIT to free cash flow conversion, as we said 1.5 years ago around 85% plus. So this is to maintain this year basically the free cash flow of $410 million, yes. So we've always been talking about ARR growth with drive free cash flow growth. So the upgrade on ARR is about 2% and on free cash flow also 2%, but it's really the EBIT to free cash flow conversion, where we say 85% is the right number unchanged from what we said last time. Operator: Next question comes from the line of Justin Forsythe from UBS. Justin Forsythe: Just a couple of questions here for me as well. So on Regions Bank, that was one of your big podium wins or a key reference client, if you will, in the U.S.? It was, I think, your second large Tier 1, 2 bank in the U.S. that you signed in 2023. It seems like they're talking about publicly a pilot in the latter part of 2026 and beginning customer conversion in 2027, which is, by my math, about what, a 4- or 5-year full rollout. So I wanted to ask if that was what your expectation was going into the project or if there have been any delays or anything that went faster? And if that would also mean a direct uplift to revenues as a result? And I just wanted to get a little bit more detail on the BNPL impact that you're mentioning. And maybe just correct me if I've got this wrong, but I think it was first mentioned back in 1Q of '24, and then we talked about maybe accelerated impact in '25. So just curious if maybe you could talk a little bit about the phasing of that. And why we're continuing to see the impact here in FY '26? Panagiotis Spiliopoulos: Justin, clearly, we can't really comment on behalf of clients, also at Regions Bank. We're clearly feel quite happy with the progress the project is taking. If the bank is talking positively in that respect, we appreciate this, but this is as much as we can say. But all large projects have a long evolution in stages, and we feel very happy with our relationship with Regions Bank. On the BNPL customer, this is correct. We initially talked about in April on the Q1 '24 results. There was the first phase of, if you want, downsell. Last year, we mentioned this that there is an impact this year, which was reflected in our original guidance, which was prudent. We ultimately overdeliver despite this headwind. And so clearly, we see that as a good success. And the reason why we bring this up now is really because ultimately, it's about transparency and because it's impacting '26. We thought it's important to understand the underlying growth. I think, it's the last year that was important, we say, okay, we want to show the impact and also show the underlying growth. There is nothing more to that. Justin Forsythe: Got it. And maybe just because the first question was one that you wouldn't answer. Just a broader question on the core versus the other services business. I think I recall in the past that you're saying revenues roughly with the old TSL line were roughly 2/3 core versus maybe 1/5-ish Infinity, which is now the, I think, what you call it digital banking and then other solutions, wealth payments, et cetera. Maybe you could just talk a little bit about if that mix has stayed similar and/or how you expect it to evolve over time, i.e., is there a certain composition of the backlog that's skewed to say, core versus digital banking or otherwise? Panagiotis Spiliopoulos: Okay. So I think what you're referring and we're going to show this tomorrow. So if we look at product revenue, which includes SaaS and subscription and maintenance, and there's almost no term license left. If you look at this, then it's more than 80% is our core banking product. Digital is about 10% and the remaining 10% is spread across basically payments and wealth. And we would expect, given the growth trajectory and we're going to launch some very exciting tools this year on the digital side with AI. But you would expect this to maybe stay stable. But given the strong traction we see on core around the world and especially also in the U.S. maybe core would probably increase even to, let's say, 85% or something. Operator: The next question comes from the line of Christian Bader from Zürcher Kantonalbank. Christian Bader: In Autumn 2024, you laid out your road map including, let's say, over investments of between $110 million and $150 million. I was wondering if that number is still or let's say, this range is still valid. And how much of the investments did you spend in 2025? And how much is embedded in terms of investments in your guidance for 2026? Panagiotis Spiliopoulos: Christian, so as you're going to see tomorrow, and I don't want to spoil the party. Our investment algorithm, and we're going to give more detail for '26 to '28 is still going to be somewhere in the same ballpark. It was a broader range, but we have invested quite a bit in 2025. So if you -- you're going to see it's the same $110 million to, let's say, $130 million, $140 million number we plan for the next 3 years. What have we invested in 2025? We ended up -- as you can see from our cost base, pretty much where we had said we would end up. So around $30 million to $35 million we have invested. Clearly, there was a lot of self-funding or basically offset by efficiencies. For 2026, we have earmarked basically a very similar investment pool somewhere between, let's say, $28 million and $35 million and again offset by some efficiency gains, but that's about it. There is a bit of a mix shift. We were earlier with the go-to-market investment in 2025 and product came only in the second half. Clearly, the focus for 2026, it's mainly going into product because we see a lot of opportunity to invest when competitors are struggling. And when we have the market demand and really want to extend out competitive advantage. The investment is to be done now, including AI, but we saw this as an opportunity to accelerate some of the investments. But the overall pool remains broadly unchanged for the next 3 years. Operator: [Operator Instructions] The next question comes from the line of Laurent Daure from Kepler Cheuvreux. Laurent Daure: I just have two questions. The first is, if you go back to your digital and wealth operation, which are close to 20% of the sales. Referring the first comment you made, you told us that clients' decision-making was not really changing. I was wondering in this particular business as Wealth and Digital, given maybe the risk of AI disruption in the long run, do you see some clients delaying process, delaying contracts? Or is it the same pattern for your three businesses? And my second question is at the end of '25 on the maintenance, would it be possible to have a rough split between the customers that have taken a premium version and the ones that are still on the old version? Panagiotis Spiliopoulos: Okay. The first one on specifically Digital and Wealth. As you have seen from our numbers, we have so far not seen any delayed decision-making regarding any topics in the banks. And this is also what we see reflected in our pipeline. The discussions so far with the banks are not about, okay, we're going to write our own code to replace your wealth system or your digital system. Clearly, there is the potential for banks also experimenting at the edges around the core. But they clearly want to do this, and we do a lot. Barb is going to talk to more about this, about core innovation. A lot of the also AI-specific use cases with co-developing with banks. I think it's -- banks wanting to develop everything in-house and then maintain everything in-house and constantly upgrade and carry the burden of all the regulatory and compliance pressure. I think this is not something we see today, whether it will come in 10 years or so. But clearly, we don't have indications for that. In terms of the mix question for premium maintenance, whether we can't give that kind of disclosure, there has been, let's say, a good take-up over the last 2 years. We would expect this eventually, you'll get to a very good percentage of clients who want to take that and have taken that. So this is why we would expect the growth to trend a bit down. As always, at the start of the year, we are prudent in terms of our financial guidance and this applies to our revenue lines. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to the company for any closing remarks. Adam Snyder: Thanks very much. Thanks, everyone, for joining the call and webcast, and we look forward to seeing many of you at the Capital Markets Day tomorrow and continuing the dialogue. Thank you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good morning. We welcome you to The Navigator Company Full Year 2025 Results Presentation. [Operator Instructions]. I'll now hand the conference over to Ana Canha. Please go ahead. Ana Canha: Ladies and gentlemen, welcome to The Navigator Company conference call and webcast for the fourth quarter and full year results. We are joined today by the following directors: Antonio Redondo, Fernando de Araujo, Nuno Santos, Joao Le, Dorival Almeida and Antonio Quirino Soares. As usual, we will start with a short presentation followed by a Q&A session. You can access the presentation through the links on our website, and you can also send your questions via the webcast platform. Antonio will begin by presenting the main highlights for the quarter. I will now hand over to Antonio. Antonio Redondo: Thank you for joining us today. I am very pleased to be here once again and to share with you our fourth quarter and full year results. In the toughest market environment in decades, Navigator was able to maintain a strong market position, supported by its international footprint and the increasingly diversified business model, enabling volume growth and market share gains. Portfolio transformation remains a key driver of resilience. Vertical integration, operational flexibility, innovation and sustainability focus continue to underpin our competitive advantage as you'll see in today's presentation. I will begin with Slide 5 with an overview of the key highlights. 2025 was defined by persistent geopolitical tensions and rapidly shifting global landscape marked by high volatility, commercial defense barriers such as tariffs, weaker consumer confidence and very limited market visibility. In this environment, the pulp and paper sector faced particularly challenging conditions. From April onwards, pulp prices in China declined sharply with knock on effects in Europe. At the same time, uncoated woodfree consumption fell, growth in tissue and packaging slowed and in many products, operating rates reached unsustainably low levels across several regions. The industry also faced increased energy and chemical costs this year, further pressuring margins. Navigator's strategic diversification played a key role in protecting results, with tissue and packaging accounting for 29% of the turnover, but 32% of group's EBITDA. In tissue, we continue to successfully scale up operations and capture synergies. Turnover increased by 6% year-on-year, supported by the integration of Navigator Tissue UK in May 2024. Around 80% of sales are now international with U.K., Spain and France as our core markets. Packaging also delivered strong performance with turnover up 8% year-on-year, volumes in tons up 11% and paper area in square meters at 17% reflecting the growth of the Flexible Packaging segment with a shift to lower grammage products. The rebuild of PM3 in Setubal to further focus on low basis weight flexible packaging is progressing as planned. In printing and writing, we reinforced our competitive position with uncoated woodfree volumes up 6% year-on-year in a shrinking market and market share of European deliveries increasing to 26%. Looking ahead, we start 2026 with a positive final investment decision for the new tissue capacity in Aveiro, further strengthening our growth and resilience profile. Turning to Slide 6, we can clearly see the resilience of Navigator business model. The key strength of Navigator is its ability to generate strong cash flows, underpinned by our vertically integrated model, and leading cost positions in pulp, uncoated woodfree paper, tissue and Flexible Packaging in Europe. Over recent years, these cash flows have been strategically reinvested to strengthen our core business and diversify our portfolio, supporting long-term value creation. Since 2019, we have invested EUR 1.31 billion, including EUR 241 million in M&A and distributed a further EUR 1.32 billion in dividends. Our diversification strategy is clearly paying off. Recent international expansion and portfolio diversification have strengthened Navigator's results in tissue and packaging, providing more balanced and resilient earnings profile. This robust position enables Navigator to consistently outperform its peers as demonstrated once again this year, even in very challenging market conditions, underscoring its resilience and competitive edge. Strategic CapEx boosted by next-generation new funding and started in 2023 is phasing out in 2025 and will be fully completed by 2026. Last year, CapEx totaled EUR 210 million, with 60% classified as value-added sustainability investments, making a strong contribution to reducing future costs. While maintaining a strong financial position with net debt-to-EBITDA ratio at 1.87x. I will now hand it over to my colleagues, who will walk you through the results in more detail and share some insights on our different business areas we have been doing. Fernando will start by commenting on financial highlights. Fernando, please go ahead. Jose de Araujo: Thank you, Antonio. Turning to Slide 7. We can look at our debt maturity profile. Over the past 2 years, we increased the average debt maturity to 5 years, maintaining a well-staggered repayment profile and strengthening the indexation of debt to sustainability indicators to 90% versus 65% in December 2024. Also, Navigator continues to enjoy ample liquidity, EUR 390 million as of 31 of December. At the end of 2025, 70% of the total debt issue was remunerated at a fixed rate, either directly or through interest rate hedging instruments. It should be noted that despite the general rise in market rates compared to the last financing cycle, the average cost of finance at the end of December remains low at around 2.7%, an increase of 0.3% -- 0.3 percentage point, sorry. Turning to Slide 8. We can take a closer look at the main impacts on EBITDA in a year-on-year comparison. EBITDA stood at EUR 375 million, down 30% year-on-year, with an EBITDA margin of 19%. It should also be noted that given its size, integration of U.K. tissue business converting only brings down the group's EBITDA margin by 1.2 percentage points, which without this additional operation would have been 20.3%. The downward trending in uncoated woodfree and pulp sales price was pressured by falling benchmark index. Changing our product and geographical mix also influenced our average sales price as Antonio will explain further. On a positive note, the paper packaging and tissue segments saw a significant increase in sales volume. In 2025, cash costs were impacted by a combination of simultaneously and longer than normal planning and unplanned maintenance stoppage in our pulp mills, Figueira da Foz, Aveiro and Setubal. This includes a temporary shutdown following a small fire in the bleaching area at Setubal in July. There were no injuries and operations were fully restored within 2 or 3 weeks. This maintenance stoppage reduced energy generation from biomass during the period and led to higher natural gas consumption. Cash costs were also affected by the U.S. customs tariffs and the resulting increase in antidumping duties. Despite these headwinds, cash costs ended the year below the level at the start of the year. Finally, the volatility of the EBITDA was mitigated by our financial risk management strategy, including the hedging for energy price and foreign exchange which offset negative impact of negative evolution of the U.S. dollar and the British pound. However, the energy hedging strategy implemented in 2025 delivered [indiscernible] effectiveness, particularly in the first quarter when its impact was most critical. Joao will speak about the key projects focused on operational efficiency and portfolio diversification. Mr. Joao, please go ahead. João Cabete Gonçalves Lé: Thank you, Fernando. Turning to Slide 9, please. Navigator strategy is built on a responsible business model grounded in the belief that sustainability without performance has no impact and performance without sustainability has no future. This balance underpins responsibility, long-term growth and value creation. Drawing on decades of experiencing sustainable forest management, supported by science and technology, we have developed sector leading industrial assets and advanced R&D capabilities. Our R&D efforts span the full value chain from genetic improvement, pest and disease control, soil and climate characterization to support forestry management, industrial operations consumption efficiency and product development. At the same time, we continue to explore new long-term opportunities for product and business diversification, focused on adding value to Portuguese eucalyptus forests through new bioproducts, biomaterials and biochemicals. Despite challenging market conditions, we continue to invest in diversification and sustainable transformation. In 2025, we completed several key investments across all segments to strengthen business resilience. This includes the new chemical recovery boiler at Setubal, which will significantly enhance the mills operational and environmental performance. It will reduce malodorous emissions and marks a key milestone in our industrial decarbonization journey, cutting emissions by around 136,000 tons of CO2 per year, while enabling the capture in the incineration of noncondensable gases. And also, the oxygen delignification line in Setubal due to start up in April 2026, which will enable the plant to reduce consumption of chemicals at the pulp bleaching stage as well as improving the quality of the effluent from this industrial site. AI-driven control systems reduced process variability by around 20% and lowered bleaching chemical consumption by 55%. The reduction in variability reflects, for instance, an internally developed advanced process control applied to PCC incorporation and chemical savings resulting from APC projects implemented in pulp bleaching. We also scaled up Navigator hub, which generated EUR 300 million in online sales in 2025 and is now serving all business units, strengthening both our commercial reach and digital resilience. As already mentioned by Antonio, the evolution of our portfolio is a key pillar of our resilient business model. The tissue segment illustrates this shift growing from 5% to around 25% of revenues over the past decade through acquisitions and organic growth, supported by in-house R&D Alongside this development, sustainable packaging solutions designed and scaled up entirely on the basis of internal expertise, R&D and technology already account for 4% of sales, an important milestone in the fast-growing segment, achieved purely by repurposing existing uncoated woodfree assets without any significant investment. And of course, this enhances the operational flexibility of our assets, preserving the ability to produce uncoated woodfree grades while also enabling the production of a broad range of packaging grades. In 2025, we approved the rebuild of PM3 at Setubal to produce low grammage flexible packaging, equipping the machine with state-of-the-art technology to enhance flexibility, energy efficiency and product quality and to meet growing international demand. Our diversification has reduced our dependence on uncoated woodfree paper, which declined from 75% of revenues in 2017 to around 57% in 2025. Not due to lower turnover, but to growth in new segments, while uncoated woodfree revenues remained stable at EUR 1.2 billion. Uncoated woodfree remains a resilient core business, supported by highly competitive assets, world-class quality and strong new brands. This evolution reflects a disciplined integrated strategy focused on long-term value creation, innovation and responsible resource management. I will now hand over to my colleagues for a brief commentary on each of the business segments, starting with Quirino will comment on pulp and paper prices. Quirino, please? António Soares: Thank you, Joao. Good afternoon. Moving to Slide 11, we have the evolution of pulp and paper prices. Between April and August, the pulp price index for pulp in China, BHKP sharply decreased, largely driven by overcapacity in the pulp and paper sector. This overcapacity resulted from a sudden and expressive increase in integrated pulp capacity in China, alongside the local wood available at competitive prices, lower than imported wood. This occurred amid the current situation of severe tensions in international freight and the reduction in demand in several paper segments across the different world regions. Although this downward cycle has been shorter than previous ones. It started from a significantly lower peak, reflecting a structurally weaker base than in previous cycles. Recovery gained momentum in the first quarter with a clear improvement in pricing in China. Even so 2025 was the weakest year for pulp pricing in nominal terms since 2016, excluding 2020. Average prices in China fell to around $540 per ton on average, which is down 16% year-on-year. In real terms and from the perspective of both Iberian and Brazilian producers, prices were even weaker than 2016 and 2020 once inflation and exchange rate effects are taken into account. Transforming 2025 real prices as the worst prices in decades. In Europe, prices followed the volatile path after falling to $1,000 per ton at the start of the year, benchmarks recovered in the spring. Weakened again through the summer and then rallied in the fourth quarter. The hardwood pulp benchmark ended the year at $1,100 per ton reflecting this late year recovery, although average prices remained 12% below 2024 levels. In 2025, the European benchmark for office paper, PIX A4-Copy B, averaged EUR 1,003 per ton, which is down 9% year-on-year. This decline was more moderate than in hardwood pulp, where European benchmarks fell by 15%. Importantly, despite these adjustments, uncoated woodfree price levels remained structurally strong, still around EUR 149 per ton or 17% above 2016 to 2019 average. As Fernando mentioned, Navigator's average sales prices in Europe broadly follow benchmark trends, supported by 2 complementary strategies. On the one hand, we increased penetration in both economic and standard segments to quickly capture additional volumes, which weighs on the average prices, given our traditional premium rich product mix. Simultaneously, we reinforced pricing discipline on higher value-added products, particularly under our flagship brands, which achieved an 80 percentage point increase in price premium during the year of 2025. In international markets, paper prices were affected by both the weaker dollar and more significantly by the sharp decline on the China pulp market index. This dual approach on pricing has helped us remain competitive and responsive to market dynamics, balancing volume growth with value retention. Moving please to Slide 12. We have summarized the main developments on the uncoated woodfree markets. Apparent global demand for printing and writing papers was down by 2.4% year-on-year. Uncoated woodfree remained the most resilient grade declining by just 1.5% compared with a drop of 4.8% on uncoated woodfree and 3.2% decline in mechanical papers. This resilience reflects the versatility of uncoated woodfree end users, which has constantly outperformed other grades over time. In Europe, however, apparent uncoated woodfree demand declined by 5% year-on-year, driven by weaker deliveries from European mills and a sharp reduction in imports. In fact, intra-European deliveries fell by 5%, while imports dropped by 10% year-on-year, confirming a significant slowdown in the effective demand across the region. Despite a significant increase in uncoated woodfree capacity in Asia of 4.3 million tons between '24 and 2025, which more than offset the capacity reduction of 1.5 million tons in Europe and the U.S. In the U.S., the decline was not as significant with consumption down by 3.8% year-on-year. At the same time, the closure of a major domestic mill increased the structural need for imports, which rose by 16%, partly also driven by anticipation of new tariffs last year. This tighter supply environment, combined with tariff impacts has supported higher price levels in the U.S. market, which are expected to remain elevated. Navigator's operating rate measured as deliveries over capacity stood at 87%, up by 8 percentage points year-on-year, whilst the rate for European industry recovered slightly from 79% to 81%, up by 2 percentage points. In 2025, Navigator increased its order intake by 13% year-on-year in volume, marking our strongest performance since 2021, and surpassing even the peak levels achieved in 2022, a particularly strong year for uncoated woodfree. Nuno will now give some more market context on the pulp business. Nuno de Araújo Dos Santos: Thank you, Quirino. Turning to Slide 13. As Quirino just mentioned, in 2025, the pulp market came under severe pressure, most visibly through the sharp decline in pulp prices in China from April onwards with a clear spillover effects into Europe. This weak pricing environment was driven by several structural factors. First, global overcapacity increased significantly with major hardwood pulp expansions in both Latin America in '24 and China over the last 5 years as Chinese producers pursued upstream integrations. Second, China saw a rapid rise in the use of domestic wood by smaller and midsized mills, supported by very low cost CapEx, temporary availability of local wood diverted from the construction sector and strong state backing in areas such as financing, employment and energy. Third, overcapacity in paper production and weak domestic demand in China compressed paper prices and in turn pulp prices, with operating rates across many segments falling to and sustainably lower levels. At the same time, demand softened in Western markets, particularly in printing papers, contributing to a decline in European hardwood pulp consumption alongside slower growth in tissue and packaging. Finally, trade tensions, tariffs and geopolitical uncertainty increased volatility, shuffled trade volumes and accelerated the downward pressure on prices. Nevertheless, at the global level, demand for market hardwood pulp grew by 6% year-on-year. China remained the main growth engine with demand up 8% while the rest of the world grew by 7%. This contrasted with Europe where demand declined by 1% in line with weaker printing paper consumption. In United States, demand fell by 3% following heavy restocking in '24. The strongest mobile growth came from eucalyptus pulp, up 8% in '25 driven by a 10% increase in China, while Europe remained broadly stable. This trend continues to strengthen eucalyptus pulp share with the hardwood bleached chemical pulp market. Looking at tissue performance on Slide 14. European tissue demand grew by 1.2% following strong growth of 6.3% in '24. Navigator's tissue sale increased by 5% year-on-year, with turnover increasing by 6%. Our tissue business operates through 2 complementary models, an integrated Iberian operation, covering paper production and converting and the U.K. operation focused exclusively on converting while margins in the U.K. are structurally lower, this model enhances scale and market research. To strengthen our position as a leading paper tissue producer and enhance operational resilience, Navigator launched a strategic plan in '25 to consolidate its U.K. tissue rolls operations with completion planned for '26. Rolls and possibly wipe separations are being streamlined from 5 to 2 strategic hubs, the existing Leyland and the new site in Leicester, optimizing coverage of Northern and Southern England, improving proximity to key consumer markets and strengthening logistics efficiency. Operations at the new sites are expected to start in the first half of this year, and the main workforce transition has been successfully completed with an investment of approximately GBP 18 million, this project is expected to deliver cost efficiencies through the optimization of personnel expenses and operating costs, driven by the integration, centralization and increased scale of operations. These benefits are expected to be realized from '27 onwards, following the completion of the restructuring with an estimated improvement of 2 to 3 percentage points in converted EBITDA margins, positioning them above the industry average. Overall, acquisitions in Spain and the U.K. have improved our geographic balance and resilience with finished products accounting for 98% of tissue sales and a strong focus on the consumer segment, which now represents around 83% of volumes. Dorival will now comment on the main developments in packaging. Dorival de Almeida: Thank you, Nuno. Now turning to Slide 15. In 2025, the European market for machine glazed and machine finished kraft paper grew by 2.6%. Navigator's packaging business outperformed the market with sales of 8%, supported by 11% growth in tonnage and 17% increase in paper area sold, reflecting deeper penetration in light weight low grammage segments. The strongest performance came from flexible packaging, particularly low grammage, food and nonfood applications alongside release liners for family and hygiene and personal care. These priority segments benefit from the technical and cost advantages of eucalyptus fiber where Eucalyptus Globulus is a clear differentiator. This growth is fully driven by our own brand, kraft structured across 3 segments: bag, flex and box, where innovation based on eucalyptus fiber has been key to strong market acceptance and recognition. The packaging segment delivered a consistent performance over the year, supported by a gradual increase in sales. Today, 71% of our sales are in Europe, with the remaining 29% in overseas markets, mainly in the Americas and the MENA region. As part of this industrial transformation, we approved in 2025, the rebuild of #3 paper machine at the Setubal complex to produce low grammage flexible packaging. This EUR 30 million investment running from 2025 to 2027 equips the machine with state-of-the-art technology, enhancing flexibility, energy efficiency and product quality. The converted PM3 will produce around 90,000 to 100,000 tons per year, and it is expected to start up at the end of the third quarter of 2026 at a fraction of the cost, 5 to 7x lower than a greenfield project of approximately the same capacity. While we're still preserving our indusial flexibility to produce both uncoated woodfree and flexible packaging on the same machine. This conversion transforms PM3 from a mid-tier uncoated woodfree asset into a well-positioned first quartile competitive flexible packaging machine, leveraging our vertical integration and the cost advantages of eucalyptus fiber. As a result, Navigator will become the fourth largest producer of low grammage flexible packaging in Europe, strengthening our position in a market growing at 2.5% to 3% per year through 2035. Now I hand over to Antonio for a wrap-up of the full year results. Antonio Redondo: Thank you, Dorival. Let's please turn to Slide 16. As we said today, 2025 was the toughest year in decades for our industry. Yet, Navigator has emerged better positioned for growth. Our international footprint and diversified business model enables to capture opportunities, deliver higher volumes and continue expanding market share even in a highly challenging environment. At the same time, we have repositioned the group for future growth. Key initiatives include the consolidation of our U.K. tissue operations, the investment decision for the PM3 rebuilding packaging and the investment decision for the new tissue machine in Aveiro, each reinforcing efficiency, scale and resilience. Our diversification strategy is clearly delivering results and help to capture the impact of sharply falling price in pulp and uncoated woodfree paper. In packaging, sales benefited from the increase of our flexible packaging portfolio initiated in 2023. In tissue, we continue to scale operations and capture long-term synergies. And an execution plan is underway to consolidate U.K. operations and enhance efficiency. Alongside this, we remain further focused on our core operations, business transformation and innovation, delivering a meaningful reduction in future cost intensity. These investments in efficiency and environmental improvement aim to ensure the longevity and continued exceptional margin generation of our world-scale high-tech mills. This transition reflects a commitment to leveraging our core expertise while expanding into adjacent markets with high growth potential. All of this has been achieved while maintaining disciplined and conservative financial policies with net debt to EBITDA at a solid 1.87x. A brief note on capital allocation, specifically regarding dividends. Considering Navigator's performance in 2025, the Board of Directors will propose to the General Meeting of Shareholders the distribution of dividends totaling EUR 80 million. I will now hand over to Nuno and Dorival, who will comment on the investment decision for a new tissue machine. I will now hand over to Nuno and Dorival, who will comment on the investment decision for a new tissue machine? Nuno de Araújo Dos Santos: Thank you, Antonio. Let's move on to Slide 17. As part of our growth strategy in the tissue segment, we took an important step in '25 by launching a feasibility study for a new tissue paper machine. This project would add around 70,000 tons of annual capacity, specifically to support our U.K. operation acquired in '24. The U.K. business has strong converting capacity of around 130,000 tons per year, but currently relies entirely on external reels, making this investment a key enabler of integration, efficiency and resilience. The idea behind it is simple to create a more balanced vertically integrated operation. By producing our own reels, we reduced dependence on external suppliers, strengthening the sustainability of the process and improve overall efficiency. It also allows us to develop products that are even better aligned with the needs of our U.K. customers while leveraging the sustainability forestry base we have in Portugal. Dorival will now provide some color on the CapEx and investment details. Dorival de Almeida: Following this feasibility study, last week we moved ahead with the final investment decision. The new machine will be installed at our Aveiro industrial complex, which was designed from the beginning to accommodate a second tissue machine. This location brings several advantages, shared infrastructure, integrated pulp supply, lower drying and transportation costs and operational efficiency from being next to the first tissue machine, the TM1. To further strengthen efficiency and resilience, we are implementing a tailor-made logistics model at the port of [ Aveiro ] dedicated to shipping reels in mega containers, instead of breakbulk. This new model delivers significant logistics savings per ton driven by lower handling costs, fewer movements and reduced variable costs. Today, reels supply to our U.K. operations are shipped as breakbulk. Moving to this containerized solution will also bring qualitative benefits, including more efficient handling, lower loss rates and reduced environmental footprint through more efficient shipping. The investment totals around EUR 115 million spread across 2026, '27 and '28 with start-up planned for April 2028. The project will also benefit from support under the Portugal 2030 program. Antonio will now comment on the outlook. Antonio Redondo: Thank you, Dorival. Let me share our view on the current market environment and within the very limited visibility, our outlook for the coming months. Globally, risks persist, particularly around geopolitical instability in different regions across the world, protectionism, economic fragmentation and financial vulnerabilities in major economies remain a concern. While the recession does not appear imminent, growth is still relatively subdued and ongoing uncertainty continues to weigh on investment and international trends. Even with limited visibility, we remain cautiously optimistic about near-term market development. Looking ahead, pulp prices are expected to strengthen in the first half of 2026, supported by improving momentum both in China and Europe. In the second half, our downside scenario points to price stability rather than any significant deterioration. Demand in 2026 is expected to be broadly in line with 2025 with growth in China offset by flat outlook in Europe. On the supply side, new capacity additions will be limited. In contrast with 2025, no significant new capacity is expected to come online this year, considering that most of the 2.7 million tons of capacity in projects announced for 2026, including 1.3 million in China and 1.4 in Indonesia is due to start up only in the final part of the year, and this impact will essentially be felt in 2027. The project in Indonesia involves 2 lines, each with a capacity of about 1.4 million tons, of which around half is intended for the market. But only the first of these lines is expected to start at the end of the year, joined by the second some months later with an impact essentially in 2028. Finally, recent natural disasters in Indonesia have been linked by local authorities to continuous deforestation, leading to the revocation of forestry license. The Indonesian government have linked the scale of the disaster to the high level of deforestation in the past 2 decades, laying the blame on local industry and canceling the forestry licenses of some 22 companies, which supply wood to Indonesian's major exporters of cellulose pulp and coated woodfree paper and tissue, covering an area of more than 1 million hectares. The tragedy in Sumatra highlights the structural challenges faced by the Chinese, Indonesian producers operating in the country, including their inability to certify forests and under internationally recognized systems. It should also reinforce concerns among European authorities regarding Indonesia's risk profile for wood and wood products under the EUDR framework. This has tightened wood supply and supported prices while reinforcing the strategic importance of certification and compliance with EUDR requirements. In the paper segment, the first quarter of this year began with renewed optimism. Navigator led the market by announcing paper price increases, which were subsequently followed by other key players. In December last year, we announced a price increase in Europe of 5% to 8% and in overseas markets of 5% to 11%. The increase in overseas was already followed by a second increase of $30 per ton in February this year. We also announced price increases of 5% to 8% in the United States, effective from next March onwards. The impact of these global price increases in printing and writing paper will be felt mainly in the second half of this quarter. And as a result, we expect average prices in the first quarter to be above fourth quarter last year, with further increases anticipated in second quarter, subject, of course, to the evolution of pulp price. Despite this positive price momentum, the global environment remains challenging. The sector continues to face a structural decline in consumption and economic stagnation across key regions, partially offset by recent capacity closures in Europe and North America. In the states, following the reduction of 350,000 tons of annual capacity by an Asian producer, another uncoated woodfree closure was announced early this year, removing a further 320,000 tons of capacity. Combined with impact of import tariffs and U.S. markets heavy reliance on imports, we estimate the structural supply shortfall of approximately 1.2 million tons per year or about 25% of consumption. These import requirements will need to be met by the limited number of countries able to supply products that meet U.S. market specs, notably a small group of producers in Europe and Latin America. U.S. producers at the same time are likely to focus more on their domestic market, creating opportunities in their traditional export destinations. Looking ahead, the expected increases in pulp prices during 2026, should provide underlying support to paper prices. European import levels remain steady with no additional upward pressure on the market. While the sector continues to face a structural decline in consumption and a sharp economic slowdown across the regions, this has been partially offset by significant capacity closures, 430,000 tons in Europe last year and the combined close to 670,000 tons in North America across last year and this year. Within this context, the uncoated woodfree segment is showing renewed opportunities across different geographies, supported by supply discipline and Navigator's competitive position. In the tissue segment, demand continues at [ investment ] levels. The integration of Navigator's tissue chain is progressing well with stronger collaboration between local and Iberian teams driving cross-selling and a higher-margin portfolio. At the same time, we have launched an execution plan to consolidate U.K. operations in 2 core sites, Leyland and Leicester, integrated production and storage to boost efficiency, scalability and cost competitiveness, building on an already strong operational model. We have taken a final investment decision for a new tissue machine at Aveiro, a transformational project that will enhance efficiency and further strengthen the long-term resilience and competitors of our tissue segment. It's worth pointing out that we are now a quite different company from what we were. We boosted Europe's pulp and uncoated wood free business, which is a distinctive grade in printing and writing, in Europe at least. We globally can sell our pulp at low discounts with solid margins. Our tissue business outperforms, and we are building a diversified, innovative and growing packaging business. Packaging continues to perform strongly with growth in both volumes and price. At the same time, our PM3 conversion project is progressing as planned. Once completed, this investment will position Navigator as the fourth largest producer of low grammage flexible packaging in Europe, consolidating our presence in the segment with robust and growing demand. From late January this year, a set of raging storms, notably storm Kristin brought severe weather with strong winds and flash flooding to Portugal, particularly affecting the center of the country. Navigator responded proactively, working closely with impacted forestry producers and regions to support the sector's operational and economic recovery. The storm caused disruptions at Figueira da Foz and Vila Velha de Rodao Mills, due to external power and water outages and some impact on our forestry assets still under assessment. There was no material damage to essential mills equipment and production resumed normally within a few days once utilities were restored. All other industrial units kept operating as usual. However, adverse weather conditions associated with storms have disrupted forestry operations and hindered the transportation of wood to our mills. The relatively low stock levels at the start of the year, combined with the impact of the storms may require a temporary adjustment to sales volumes in the first quarter, which is still under assessment. Navigator's integrated business model, strong financial position and the ability to respond proactively across the value chain from forestry to a set of different finished products are enabling us to navigate current challenges with confidence. Ongoing diversification and continuous innovation in our core business will further strengthen Navigator's resilience and long-term value creation. Thank you. Ana Canha: Thank you, Antonio. This ends our presentation. We are now open for the Q&A session. Operator: [Operator Instructions]. The first question comes from Bruno Bessa from Caixa Bank. Bruno Bessa: I would focus on the new plant that you announced in Aveiro. Could you share any numbers on this new plant, mainly in terms of your expectations for EBITDA margin or even EBITDA contribution once it starts up, will be appreciated. And also regarding the investment that you announced, the EUR 115 million investment. One question about this. Would it be reasonable to assume that 20% of this investment could be in the form of nonreimbursable subsidies. So this will be the second question. The third question, just a bit of a more technical one. If you could just explain the changes in the fair value of biological assets because I saw that in Q4, you had relevant movement of around EUR 5 million contribution in the EBITDA, positive contribution. If you could just explain what are the dynamics behind this? And what should we expect from this for 2026? Antonio Redondo: Thank you, Bruno, for your questions. I'm going to try to repeat them. The second I was completely unable to understand. I'm going to repeat first and third, and I will ask you to be so kind to repeat second. So first, we would like to try to understand better the EBITDA margin impact of Aveiro new tissue machine once it starts up, correct? Bruno Bessa: Yes, that's correct. Antonio Redondo: The third one is about fair value of biological assets. You would like to understand a bit more how we see things in 2025 and going forward. Bruno Bessa: Yes. That's correct. Antonio Redondo: And the second one, are you so kind to repeat it, please? Bruno Bessa: Sure. The second one is about the EUR 115 million investment that you announced in Aveiro. You mentioned that this should have some subsidies from the government. My question here is, if it would be reasonable to assume that 20% of this investment could be then in the form of nonreimbursable subsidies? Antonio Redondo: Okay. I will give some introductory comments on the questions. I will pass to Nuno, the first one and to Fernando the second and the third. So the impact of the tissue machine is going to bring the Tissue UK operation closer to what is the EBITDA margin of our Iberian operations. As we have heard, we believe that with the reshuffling of the converting operations we are doing in U.K., this will add to the existing conversion 2 to 3 points in margin improvement. It will be more or less the same range, the integration of tissue -- new tissue machine. Regarding the second question, obviously, we do not share any specifics on our discussions with the Portuguese government. But I would expect the levels not to differ from similar projects that we deal with the government, of course, outside the [ NextGen EU, Innovation ] funds in previous investments. So it's not going to be materially different from that percentage-wise. Nuno, can you add something more on the first question, please? Nuno de Araújo Dos Santos: I can only comment and stress what you just said. I think overall, I think people attending the conference also have the benchmarks for what can be a tissue machine of this size. For us, we would expect on a long-term basis [indiscernible] that this should increase the EBITDA margin of tissue by 3%, something like that. And in fact, the EBITDA margin of Navigator by 1% because, as you know, tissue is already 1/3 of the EBITDA margin of the group. Antonio Redondo: Fernando? Jose de Araujo: Some mention related with the PM2 of tissue in Aveiro, the margin of support is around 20%. And we are talking about investment of EUR 115 million. In what concerns the biologic assets, it's -- we have an increase this year. It's mainly related with Mozambique. The way that we calculate the discount cash flow, it was on the basis that we will get and transport to Portugal. And fortunately, we found better ways to monetize these biologic assets in Mozambique. This means that we have less costs and we can have increase of return. For the near future, we are not expected to have huge amounts of variation on biologic assets, like we always do, we try to manage in a way that we do not foresee a big increase for the future. This particular year, it's because of this good news that we found ways to sell directly to local. Bruno Bessa: And just a follow-up. Could you please elaborate a little bit more on those alternatives that you have now for the wood produced in Mozambique. Are you exporting to Asia, what are those alternatives? Antonio Redondo: I will ask Joao to answer the question. Joao, please? João Cabete Gonçalves Lé: Yes, it's a good question. We -- in the last 2 years, we found out that we could sell wood locally mostly for furniture purposes. And -- but we sell it locally for Chinese operators, mainly but also from India. And we expect that with that these local sales we can monetize almost all the stocks, the wood stock that we have in the near future. Operator: The next question comes from Antonio Seladas from AS Independent Research. There are no further questions at this time at the conference call. Now we will go through the webcast. From the webcast, we have the first question. Thanks for the detailed presentation. Can you please provide us with some guidance on the possible margin uplift that the new tissue machine will bring now that you will become fully integrated in Tissue? Antonio Redondo: I think that question was also already answered in a very complete way. Operator: The next question comes from [ Michael Saido, ] a shareholder. What are the dividend relevant dates ex dividend and payment date as well as how much dividend will you propose to the AGM? Ana Canha: The general meeting will be held on May 22. And regarding dividends, we already gave the answer, EUR 80 million is the proposal from. Jose de Araujo: And normally, it's paid 8 days after the general assembly meeting. Ana Canha: Okay. Thank you. This concludes our session. Thank you for your time. Should you require any further clarification, please feel free to reach out through our usual channels, wishing you all a pleasant evening.
Jeff Borcherding: Good morning, everyone. This is Jeff Borcherding. Thank you very much for joining the call this morning. We are excited to speak with you about the fourth quarter for 2025 and what lies ahead as we continue to build on the success of the PancreaSure launch and prepare for securing reimbursement and continuing to drive the success of this product as we move to achieve our mission of changing the way we detect cancer in pancreatic cancer and making a significant difference in people's lives. For our agenda today, we will do a brief review of 2025. We'll go into more detail about the PancreaSure commercial results in the fourth quarter of the year. We'll then talk about our progress towards reimbursement with a special focus on the clinical studies that lie ahead as well as the steps that we've already accomplished. And then finally, I'll turn it over to my colleague, Adam Backstrom, to discuss the Q4 financial results and our cash position. In 2025, more than 2 years of development and clinical research culminated in the commercial launch of PancreaSure. And as we look back on 2025, there are a number of things that we're proud of as a company, but here are some of the highlights. Certainly, at the top of the list has to be the commercial launch of the PancreaSure test. A couple of years ago, we made the difficult decision to remove our IMMray PanCan-d test from the market and bring to the market a better test that could detect cancers earlier, could do it with a greater level of sensitivity and specificity, particularly for those people who don't secrete CA19-9. We also wanted to make sure that we had a much more robust set of clinical data supporting the PancreaSure test. And I think we clearly saw that in 2025 when you look at the scientific dissemination that happened about the PancreaSure test. We had 5 clinical studies that were published in scientific journals. The CLARITI study was named the best of DDW at the Digestive Disease Week Conference, which is the world's largest gastroenterology conference. At these scientific meetings that we attended last year, our data was selected for prestigious podium presentations at 5 of those meetings. And in order to continue to fund that research in order to fund the launch of the test, we were also pleased to raise over SEK 140 million to support that launch, to support those clinical studies and to take us to the next critical milestones in our launch. We also received strong support in addition to that support from the scientific community, we received strong support from multiple advocacy groups within the pancreatic cancer space. And then as we'll talk about a little bit later, we were able to secure a lucrative reimbursement rate of USD 897 from the Centers for Medicare and Medicaid Services. And we'll talk about why that's so important in just a moment. But first, let's dive deeper into the PancreaSure commercial results. Before we do that, I would just like to remind everyone what is our strategy for launching the test. So here, you see the 4 key pillars of that strategy. Perhaps most important is the idea of starting at the top. We want to build advocacy in use among the key opinion leaders, the experts in this field who practice at the top high-risk surveillance centers in the United States. As we progress through the launch, we want to make sure that we are being disciplined financially and that means that we tie our investment to revenue. We know that meaningful revenue will not come immediately at launch. As a result, we want to execute a very targeted, very cost-effective launch that leverages our current resources and our strengths. And then we can increase that investment in commercialization as the reimbursement grows, as we have revenue to fund that investment. We've talked previously about the fact that finding a commercialization partner is going to be a critical aspect of launching and commercializing the PancreaSure test. Our goal is to demonstrate to a commercial partner that we have enthusiasm in the market. This is a test that physicians want. This is a test that patients are asking for. And as we build that commercial revenue, we want to make sure that we're showing them how it is that we will get reimbursement for the test in order to secure a really strong commercial partner. And then finally, we want to run very efficient and very lean in order to preserve our cash, make sure that we are very operationally efficient and that we automate as much as possible and that we're very scalable so that as our volumes increase, our costs don't increase along with them. Focusing in on the first phase of the launch, I mentioned that our goal here is really about driving targeted advocacy. This phase of the launch started with the launch of the test in September of 2025 and it will continue through the second quarter of 2026. During this targeted advocacy phase, we are really focused on the key opinion leaders in top high-risk surveillance centers in the United States where people are being screened for pancreatic cancer. During the early stages of the launch, we did not have a separate sales team. All of the results that you saw in September as well as the results in Q4 are the result of selling by members of our existing management team. As we move into 2026, I'm excited to share that we have now hired 3 strategic account managers who will be covering the country and bolstering our sales efforts. The last thing that I want to touch on as we think about this first phase of the launch is what are the metrics that we are saying are really critical. And most importantly, it is the number of high-risk surveillance centers that are ordering PancreaSure. Why is that the right metric? Well, for a few reasons. Number one, because it's all about driving expert advocacy at these centers. This is where a lot of high-risk surveillance is taking place. These are the experts that are relied upon by physicians who are doing high-risk surveillance. We want to have a strong presence there, and we want those physicians to be using the test. Second, this focus allows us to be consistent with our goal of being very focused on the most important targets that we have commercially so that we can limit our investment and limit our spending. And then finally, you see that a secondary metric is the number of orders. We want to make sure that these centers are getting enough experience with PancreaSure and generating enough usage of the test that they really get a sense for how the test is used. That volume number becomes important, especially as we get to the second quarter of 2026. So as we're in the early stages of this targeted advocacy phase as we close out 2025, we're really very focused on the number of centers that are agreeing to implement the test and those centers that are ordering. This stage will set the scene for what we do later in 2026, where we'll have more focus on building volume as we begin to ramp up volume in anticipation of the revenue phase and the revenue phase really begins in 2027. It's not to say that we won't generate some revenue before that. We will, and we'll talk about that in just a moment. But our real focus is on setting the stage for making sure that once that revenue stage starts in early 2027, that we are in a position to really maximize the revenue. But between now and then, we're limiting our investments so that we stay disciplined and use the cash that we have very efficiently and very effectively. These are some of the centers that have agreed to use the pancreatic -- PancreaSure test and are now using it within their pancreatic cancer surveillance programs. This quarter, you can see we added 4 new centers. And I'll just talk a little bit about each of those centers and why they wanted to use the PancreaSure test. So first is Beth Israel Deaconess Medical Center. This is a Harvard-affiliated hospital in Boston, Massachusetts, and their desire for the PancreaSure test was really driven by the fact that they very often get patients asking them about a blood test for pancreatic cancer. As you know, today, people who are in surveillance are generally using imaging. So that might be an MRI, it might be a CT scan. It could be an endoscopic ultrasound. These imaging techniques are relatively accurate but they are very inconvenient. They're quite expensive. And so Beth-Israel's patients are very interested in a blood test, and they were excited to implement PancreaSure to address that desire from their patients. With NYU, New York University Langone Health, their goals are a little bit different. NYU covers a very large area in New York and many of their patients have a difficult time getting to NYU facilities and locations. As a result of that, imaging-based surveillance creates gaps. There are people who just simply can't get to a facility. Maybe they don't have transportation, maybe they don't have someone that can drive them there. And so they are eager to implement the PancreaSure test and have started implementing the test in order to address those access issues. And then finally, Prisma Health in the Southeastern part of the United States. Unlike Beth-Israel and NYU, Prisma is a private health system. It's not an academic medical center, but it is one of the leading facilities in the area. And it's important to them that they communicate to their patients that they are on the cutting edge that they are doing everything for their patients that their patients might expect from a top-tier academic medical center. So for them, a new innovation like the PancreaSure test is a really attractive addition to their high-risk surveillance program. On the rest of the slide, you can see those organizations that previously had agreed to use the test. And I'm happy to say that adoption is going well at these centers. I mentioned in our Q4 report, UC Health at the University of Colorado has done significantly more than 100 tests at this point. And we've also got high order numbers from facilities like Northwestern Medicine and Honor Health, where they have gone through that process of figuring out how to implement the PancreaSure test and how to use it within their existing high-risk surveillance program. As we look forward into 2026, I'm very excited about the pipeline of additional centers that we have who are looking at and evaluating the PancreaSure test. If you look at this funnel, this is essentially how we view prospects within the company as we're thinking about moving them through the process from an initial conversation to the point where that center is up and running and they're regularly using the PancreaSure test every week as part of their surveillance program. So as you can see at the bottom, we have 6 centers that are regularly using the test. These centers have figured out how to incorporate it into their existing protocols, and they are using it extensively. We have another 6 sites where they have begun using the test but they're still figuring out exactly what their testing process will look like, how they'll use the test in conjunction with imaging and which patients within their program are the most appropriate as they start to use the test. The stage before that is registration. And essentially, what registration means is that these 8 facilities have said, yes, we are excited about PancreaSure. We plan to implement the test and we are ready to do so. So registration is essentially just the simple process that we go through to make sure that they can access our online ordering portal that they understand the logistics of how to test. We work with them on making sure they are clear on things like how to collect the blood, how to ship it to us. And so that registration process then very quickly leads to trial. We also have 9 late-stage prospects as of the end of the year in 2025. These are groups that have shown strong interest in the test based on initial conversations, and we are about ready to talk with them about how to implement the test and what that looks like. And then in addition, we've got the early-stage prospects. These are people where we've had at least one sales conversation. But oftentimes, what happens is as facilities are moving through this process, as you can imagine, there are a number of different people that we need to speak with. And so in that early stage, often what we're doing is having multiple meetings with different people within the high-risk surveillance center who would be involved in using and implementing the test. This is what the pipeline looked like as of the end of December. I'm very happy to share that these numbers have all grown meaningfully in the several weeks since the end of 2025. And I think that says good things for what our results will be in the first quarter. As we think about the first quarter of 2026 and into the second quarter, we see 3 key drivers of commercial success in the first half of the year. Most important is the sales staffing that we've added. I mentioned earlier that up to now, all of the selling has been done by a couple of members of the management team and I. Going forward, we will be bolstered by 3 full-time strategic account managers. These individuals bring fantastic experience from companies like Exact Sciences, which has the Cologuard test, Quest Diagnostics, Myriad Genetics and other top diagnostics companies. Once these reps are up to speed and on board and they're very quickly ramping up, we're going to have them focused on 4 key things: one is adding new prospects to the pipeline. They'll do that through their existing network and by reaching out to new prospects. The second is moving prospects through the sales pipeline faster. We just talked about the various steps on the prior slide. With the new account managers being on Board, I'm optimistic we can move prospects through that funnel more quickly. The third thing that they will be doing is working with the teams at our client centers to integrate PancreaSure into their existing protocols. And as they do that, that leads to their fourth focus area, which is really engaging the cross-functional team within these surveillance centers. Previously, when we were only selling through the management team of Immunovia, our capacity was limited. And what that meant is that we generally would connect primarily with the overall leader of the surveillance program, that physician expert that is driving the overall strategy and thinking for the program. Bringing the strategic account managers on Board allows us to develop relationships throughout those teams. So relationships with people like the nurses, the genetic counselors who are having conversations with people that have those genetic risk factors. Staff people who can do things like placing orders for the test in the online portal or flagging potential patients who should be given the PancreaSure test. So by building out their reach within the team, we can drive greater volume. So through those 4 activities, I think the sales and strategic account managers are going to make an enormous difference for us. Also driving results in the first half of 2026 will be the California state approval that we received in January as well as the New York State approval, which we hope to receive in the next several weeks. So if you look at California, it is an incredibly rich area for pancreatic cancer surveillance. We already have 8 high-risk surveillance centers that are in our pipeline, and we look forward to sharing news in the coming weeks about those centers adopting the test. In New York, New York is a hub of academic medical centers. We talked about one of them earlier, which is New York University, which is using our test on a pilot basis even before approval. But the approval in New York State will unlock significant potential there as well. We have had the auditor from New York State come and inspect our lab. That inspection went very well. They had only 4 minor findings. We've already addressed those findings and implemented changes to make sure that we comply with all of their requests. And so we are now waiting for the final approval from New York State. So collectively, these 3 things should help drive commercial use in the first half of the year. Transitioning then to reimbursement and the clinical studies to support them. If you think about getting reimbursement, there are key elements to making sure that we can get fully reimbursed for our test. One is getting a code in place that can be used to bill for the test. The second is getting the price of the test approved through the government. And then the third is getting coverage. Coverage essentially means that those payers determine that a test is reasonably and medically necessary for the patients in their programs. You can see by the colored circles here that we have already obtained a code that we can use to build a test. We also have secured a very attractive rate of $897 for the PancreaSure test. What that means is that when Medicare, the U.S. government insurer that pays for all health expenses for people over age 65, once they do make a coverage decision, those tests will be reimbursed at a very attractive rate of almost USD 900. Our final focus now is on coverage, essentially convincing payers that the test is medically necessary. And to do that, we have a variety of clinical studies that we've already completed and some that are coming. There are essentially 3 categories of clinical data that these payers look at. The first is analytical validation. Can you accurately measure the biomarkers in the test? We have very, very strong published data to support this. The second element of the clinical package is clinical validation, essentially, how accurate is the test in detecting cancer and avoiding false positives when cancer is not there. As we've shared previously, we have 3 clinical validation studies completed, and we have 2 of those published, the AFFIRM study, we hope to publish soon and we're pursuing additional publications in this area. The final area is clinical utility. Essentially, what this means is that the test is useful for guiding clinician decisions and for improving patient outcomes. We have 2 clinical utility studies that are underway, and we are conducting additional studies this year, and some of those studies will extend beyond 2026 and into the future. If you look at our reimbursement plans in 2026, this just gives you a quick view of what it is that we want to accomplish this year. So we are conducting several quick survey studies that will give us the preliminary evidence of clinical utility that we need to start applying and submitting for coverage. We're going to be initiating a registry study. And what that means is that this is a study where we will gather data on the people who are using the test commercially, as they are using the test, we'll use that to understand things like how it's impacting the decisions of those physicians and what the reaction of the patients using the test is to the PancreaSure test. One thing that we started doing after the end of quarter 4 was billing insurance companies for PancreaSure tests. Prior to that, we had only been collecting cash from the patients who get the test themselves. But this month, we started billing insurance companies. Without coverage decisions in place, we know that the reimbursement will be limited, but we will generate some limited cash. Importantly, we also will use this as a way to show those insurance companies that there's demand for the PancreaSure test. I mentioned earlier that a key part of our reimbursement plan in 2026 is to launch additional studies to prove clinical utility. And then finally, and probably most importantly, we plan to submit for Medicare coverage in mid-2026. So we are actively putting together now the package of clinical data and the summary of that data so that we're ready to submit that to the group that makes those decisions about coverage. With that, I'd like to hand it over to my colleague, Adam?Backstrom, our CFO, to talk through our Q4 financial results and the company's cash position. Unknown Executive: Thank you, Jeff. So a short update about our financial figures for the fourth quarter. Jeff, will you [indiscernible] the slide once. Thank you very much. So when we look into our financial figures for the fourth quarter this year, we had revenue of SEK 354,000, which is mainly coming from royalty revenue. Last year, same period, we had royalty revenue of SEK 455,000. Based on the planned ramp-up and the time it takes to convert test orders into revenue, revenues from PancreaSure are expected to become more significantly meaningful after 2026, as Jeff has been describing before. During this quarter, our operating losses was SEK 16.4 million, which is significantly lower comparing to the same period last year, where the operating losses was SEK 30.1 million. The main reason for the stronger result this quarter compared to the same period last year is the lower cost, which is mainly attributed to the R&D cost reduction this quarter. While in the same time, last year, in the fourth quarter '24, we had relatively higher R&D expenses that we normally have. In addition to that, during 2025, we have worked hardly to reduce our cost base and carefully allocate our cash to the most business-driven prioritized, and we can now see that the result of this in the fourth quarter 2025. Our cash burn in the fourth quarter was SEK 6.6 million per month, which is lower than our guidance for this quarter, mainly due to lower spend on the clinical studies. Our cash position at the end of this quarter was -- in the end of this quarter as well at the end of December was SEK 77.5 million, which had been stressed due to our rights issue in the fourth quarter that we will shortly talk more about. Well, one thing to point out is the end of this year, the parent company, which is the Swedish legal entity, converted its internal loan, which has to the U.S. legal entity into capital contribution. On a group level, everything will be eliminated in the books. But the background to this action is to reduce the exchange fluctuation in the comprehensive income that you can see from the previous interim reports. We can move over to the next slide. Thanks. During the fourth quarter, we successfully completed the rights issue of SEK 100 million before fees and issue costs. The rights issue was granted to 100% and existing shareholders subscribed by 88% in this rights issue. We are very happy to have so many existing shareholders that was participating in this share issue. After all the fees issued costs and also repayment of the bridge loan, the total cash injection from this rights issue was SEK 69.8 million, which we are super happy about. This gives us a cash position to last through the third quarter 2026, so we can launch the PancreaSure as planned and run the clinical studies needed to support reimbursement. So thank you, everyone. And over to you, Jeff. Jeff Borcherding: Thanks, Adam. As we transition to questions, I just want to summarize a few key points from the fourth quarter. The first is that we are pleased with the commercial adoption of the PancreaSure test. We continue to make progress on moving towards reimbursement and that will be driven by our clinical studies as we continue to move from the focus on driving adoption among the high-risk surveillance centers. Again, that will be our focus in the early part of 2026 and then transitioning to a greater focus on building volume later in the year and then on building revenue as we move into 2027. So we're eager to answer questions and have the chat feature available for that as well as questions that can be answered through the phone call. Operator: [Operator Instructions] The first question comes from the line of Niklas Elmhammer from Carlsquare. Niklas Elmhammer: I have a question about Medicare, Medicare coverage. Encouraging to hear that about the time line for the submission. But if I understand it correctly, the basis for the submission is sort of real-world data on clinical utility. So I mean, is that what you're collecting right now? How much data do you need? How many patients that sort of. Jeff Borcherding: Sure. So if you look at the initial application to Medicare and the clinical utility data that will be included in that, it will primarily be survey studies. So we are conducting those now, and those are very quick to complete. So what we will do is we will use that data to submit to Medicare and essentially get their review started. Then we will submit to Medicare as we get additional data for example, as you noted, from the registry study. So that data will come in throughout 2026. So in the second half of the year, we will submit data from that registry. We are targeting having about 400 patients in the registry study this year. We've also got another clinical study that we're conducting right now that will look at how early we can detect pancreatic cancer before it's detected by imaging, which is another measure of clinical utility. So it's sort of a collection of data that we'll use to submit to Medicare. But one of the important things is that we will submit data with that initial submission. We will then build on that as we get additional data. We'll submit that data as it comes in. Niklas Elmhammer: Okay. Great. And I think a couple of quarters ago, you said that you targeted Medicare reimbursement by the end of '26. I mean, I understand that maybe that is a sort of outdated comment and you're explaining right now, will be sort of rolling submission. Is it a reasonable target to see reimbursement by year-end? Or is it into '27? Jeff Borcherding: Yes. So I think what we'll see is that we will see some reimbursement for particularly Medicare Advantage patients in 2026. I mentioned that we'll begin billing them or we have begun billing them this month. And so we do expect to start seeing the reimbursement this year. But in terms of the full coverage that would lead to reimbursement of every test at that full rate of $897 that will be something that we expect to come once Medicare has reviewed our submission. And so the timing for that really depends on Medicare. They're in a position where they can review submissions as they come in, but they also prioritize those that they see as important. So we're certainly hoping to get one of those priority spots. Niklas Elmhammer: Okay. Great. And you mentioned the importance of regulatory state approval, for example, California. Could you please elaborate a little bit on the sort of regulatory environment for the states? I mean, which states do you have approval and where would you sort of seek approval? Do you need approval in every state? Jeff Borcherding: Yes. So ultimately, we will need approval in every state. We now have approval in 48 states. So we are -- and really the one that is outstanding that will really drive the business is New York. So we would expect that by -- certainly by the end of the second quarter and most likely in the next month or 2, we should have approval in all 50 states. In many states, approval is pretty straightforward. California's application process is more extensive. And then New York approval is really the most extensive by far. New York does a very thorough review of not only our lab, but the test itself and does an on-site inspection and essentially does a review that's, in many ways, pretty comparable to what the FDA does. And so we're excited to have that approval here shortly. Niklas Elmhammer: Okay. And as you mentioned in the report, cash flow was better than guidance. Are you willing to provide any guidance for 2026? Jeff Borcherding: I think that we would expect that our cash flow would return to the levels that we've previously guided to. So more like that SEK 8 million to SEK 10 million per month target that we've set previously. Niklas Elmhammer: Okay. And also maybe a little bit detailed questions, but regarding sales, is it possible to comment on the realized pricing per test, which, of course, is currently lower than what you would expect long term? Jeff Borcherding: Yes. It's a great question, Niklas. At this point, we don't really have enough data to speak about the realized average selling price per test just because of the delay in getting reimbursement, whether that is payments from the patients themselves or from payers. As I mentioned, we're just starting that process. So it will take us a while before we're able to give you an estimate of what that average selling price will look like before we get full coverage and reimbursement. Niklas Elmhammer: All right. And that's fair. And regarding orders, you mentioned that 12 centers ordered test through year-end, I believe. Jeff Borcherding: Yes. Niklas Elmhammer: But I guess you have not billed all of those orders yet? Jeff Borcherding: That's right. Yes, that's right. Niklas Elmhammer: So it's... Yes. Okay. So those, for example, 180 orders from Colorado and UC Health, I mean, are those been billed in Q4 or I guess not? Jeff Borcherding: It would be a mix. So generally, we would probably have sent bills for most of those, but it will take time to get payment on those bills. Niklas Elmhammer: Okay. Yes, I think that was all from me for the moment. Operator: [Operator Instructions] Jeff Borcherding: I'm sorry, please go ahead. Operator: Ladies and gentlemen, there are no more questions over the phone at this time. I would now like to turn the conference over to Jeff Borcherding for any written questions. Jeff Borcherding: Thank you. We have some questions through the chat feature. So I'll review those. How will the utility data generated after 2026 be used if the application to Medicare has already been sent in mid-2026. And I think this question came in before Niklas' question. But just to clarify, once we make the initial submission to Medicare, we are able to augment that submission with additional data that comes in later. In addition, those clinical utility studies will be really critical for the commercial payers outside of Medicare. Oftentimes, there are commercial payers who have different requirements and stricter requirements for the type of clinical utility data that they require. And so that's part of where those studies will really add value. The next question was, can we expect meaningful revenue in the second quarter of 2026. I think what we would say is that the meaningful revenue does not come in the first half of this year. We see the first half of this year as really being the time where it's about bringing centers into the franchise and getting them to start using the PancreaSure test. As we move into the latter part of 2026, we will start to be more focused on volume. It's really in 2027 that we see significant revenues being possible. But as I mentioned, we are going to be billing insurance companies this year with the goal of generating some revenue even though we don't have those formal coverage decisions in place that will ultimately generate the much more significant revenue in the future. Another question, where do things stand with a potential commercialization partner? It's been a busy couple of months. I've met with about a dozen potential commercialization partners since the beginning of the year. Those discussions are ongoing and positive. A couple of things that we hear from potential partners is they're very impressed with our clinical data, and they've been impressed by the level of interest that we've seen from these high-risk surveillance centers. They know that it's not easy to sell a new test to these academic medical centers because they have high demands for data quality. They have high demands for product performance. And so they've been pleased with the results that we've shown so far. I think the other thing that we've heard, in fact, I heard it from at least 3 different partners was how impressed they are with the rapid progress that we've made. One of them said, essentially, we meet about every 6 months. And every time we meet, you come in with a list of milestones that the company has achieved and the milestones that are coming for the next 6 months. And then when we meet 6 months later, you just have routinely delivered against those. So he was very complementary of the Immunovia team. So those discussions are ongoing. I will say these agreements are complex. They do take time. And so we're focused on making sure that we have a large number of prospects that are in our target group. We want to make sure that in the meantime, we're really showing them the commercial demand for PancreaSure, and we're outlining that road map to payer coverage. And then we want to make sure that we secure a structure that's attractive to our shareholders. Certainly, we want a deal, but we want to make sure that it's the right deal. One of the questions was, you have the billing code and the 897 rate. What necessary triggers do you identify before Medicare starts paying for the test? And when do you expect to file? Again, I think this might have come in before we discussed this. But 2 of the 3 steps are complete. We have that billing code. We have the reimbursement rate. The coverage determination will be based on the clinical data we submit. And so we are going to submit for coverage in mid-2026 with that clinical utility data that I mentioned, and we'll continue to do that through the review process itself. Having said that cash runway is through Q3 2026, what is the plan to survive spendings until 2027? So as we think about our cash position and what we want to do, we know that additional capital will be needed. So how do we manage through that? So I think most importantly, from an operations standpoint, that means continuing to focus on being really efficient in the way that we use capital and focusing on achieving the milestones that are going to create value. If you ask, how are we going to fund the company, where is that capital going to come from? We are looking at a wide range of options to secure the capital that we need. And we're trying to do that in a way that would minimize dilution. So we are pursuing grants and other support from nonprofit organizations, government groups who would provide capital that's non-dilutive. I mentioned the conversations that we're having with strategic partners, and we're also talking with them about different types of cash infusions that they might make into Immunovia. That could be equity investments or it could be things like milestone payments or payments to collaborate with them on projects. Knowing that an equity raise is likely needed, certainly, we strongly prefer a directed issue in order to reduce the fees and really reduce the dilution that we know comes with rights issues. And so we're actively working to achieve this and trying to develop relationships with investors who would directly invest in the company. Just waiting for any other questions. It looks like what might be the last question here. You mentioned hiring the 3 salespeople. What does that change? I think we'll have the strategic account managers focused in 4 areas, and those are where you'll see the biggest changes. The first thing is adding more prospects to the pipeline through outreach and their existing relationships. The second is moving prospects through the pipeline faster. The third will be, again, sort of working to integrate PancreaSure into the protocols. And then I mentioned earlier this idea that they're going to help us get deeper into the surveillance center teams so they can develop relationships with a lot of those different individuals beyond just the overall leader of the program. And I think that might be it for questions unless there are others. Okay. Thank you very much for joining us today. We appreciate your time. We appreciate your interest in Immunovia and look forward to continuing to share additional information as we bring the PancreaSure test to more and more high-risk surveillance centers across the U.S. as we bring PancreaSure to more people who are at high risk and as we continue to pursue reimbursement through our clinical program and our market access activities. Thanks again. Take care. Bye.
Ariana Pereira: Good morning and welcome to Gerdau's Fourth Quarter 2025 results presentation. I am [ Ariana Pereira ], specialist with Investor Relations, and it's a pleasure for me to be joined by CEO, Gustavo Werneck; and CFO, Rafael Japur. Please note that this call is being simultaneously translated in english and you can choose your preferred language by clicking on the globe icon at the bottom of the screen. [Operator Instructions] It is worth noting that the forward-looking statements contained herein are based on the company's beliefs and assumptions based on information currently available. Forward-looking statements are not guarantee of future performance and are subject to risks and uncertainties that may or may not occur. I will now turn the floor over to Gustavo to begin the presentation. Gustavo Werneck: Hello. Good afternoon, everyone. I hope you're all well, and thank you for joining us again for another earnings release presentation. We will briefly comment on the highlights of the last quarter and also the year 2025 as well as the outlook for our operations, and then we will move on to the Q&A session. The year of '25 was marked by distinct scenarios in the main regions where we operate, North America and Brazil. In light of this, I would like to emphasize that Gerdau has greatly benefited from its business model based on geographic diversification and productivity -- and production flexibility. Moreover, I would like to highlight the resilience of the North American market, which has seen strong steel consumption and the reduction in import levels as well as the robust operating performance of our operations in the region. Even in the fourth quarter, when there is a typical year-end seasonality, we achieved solid results. In December 2025, we even posted record shipments in North America. Meanwhile, in Brazil, the market reached a new record for steel imports in 2025 with a 7.5% increase in shipments year-on-year, despite important advances in trade defense measures such as the recent inclusion of new NCMs in the list of products covered by the 25% import tariff and the implementation of antidumping tariffs on cold-rolled steel. This unfair import scenario has impacted the profitability of our operations in the Brazilian market. On the other hand, I would like to highlight the progress of our new sustainable mining platform in Miguel Burnier in the city of Ouro Preto. In Minas Gerais, the project is about to go into operation and will contribute to a significant reduction in production costs at our Ouro Branco unit. I will now turn the floor to Japur, who will elaborate on the financial highlights and the impacts of this current scenario on our results. Rafael Japur: Thank you, Gustavo. Hello, and good morning, everyone. It's also a great pleasure to be here with you in the presentation of the fourth quarter of 2025. We ended 2025 with EBITDA of BRL 10.1 billion, down 7% when compared to 2024 results, mainly reflecting a still challenging environment in Brazil marked by increased competition. On the other hand, our operations in North America continued to gain relevance, supported by resilient demand and excellent operating performance, significantly contributing to the group's consolidated results and the overall results of Gerdau. Having said that, I would like to highlight four points related to this quarter's results. First, in the fourth quarter, our net income was impacted by nonrecurring items related to impairment losses in Brazil units in the amount of BRL 2 billion. It's also important to note that these write-offs have no cash effect. Excluding these effects, Gerdau's adjusted net income in 2025, in our view, that accurately reflects the operating performance for the period; stood at BRL 3.4 billion, down 21% when compared to the previous year. Secondly, regarding Gerdau's investments, we carried out CapEx in 2025 of BRL 6.1 billion. Now for 2026, as already disclosed, our guidance is BRL 4.7 billion, representing an important reduction of BRL 1.4 billion. And we understand that this will bring more flexibility to our free cash flow generation in 2026. I mean this is the third topic, by the way, that I would like to highlight. Even with a very strong pace of investments in Miguel Burnier with our expansion mining project, even then, in this fourth quarter, we achieved a very strong free cash flow generation of BRL 1.4 billion. And as a result, the annual cash flow generation for the last 12 months, which was negative until then, is now positive and stood at BRL 394 million in 2025. Part of this cash generation was earmarked for reducing our debt. And as a result, we ended the year with leverage of 0.76x net debt over EBITDA, a level that we consider to be extremely sound. Our resilient business model continue to be very, very resilient, combined with caution in capital allocation. And all of that allowed us to grow significantly without sacrificing shareholders' return. As evidence of this, throughout 2025, we paid out BRL 2.4 billion in dividends and share buybacks. And finally, in addition to completing our buyback program initiated in December 2025, which we already announced last December, yesterday, we announced the launch of a new program for Gerdau S.A. It will be for approximately 2.9% of outstanding shares of the company. And if we think about today's numbers of the last exchange floor, this will be the equivalent to BRL 1.2 billion. So I'll end here, and I'll join Gustavo for the Q&A session. Gustavo Werneck: Thank you, Japur. And still speaking about Brazil, we expect moderate growth in demand in 2026, even despite the excessive influx of imported steel in the local market. I would like to point out that we are more optimistic about the progress of the trade defense measures recently announced by the federal government to combat unfair competition from imported materials and as well as the transparent and ongoing dialogue that the steel industry has maintained with pertinent agencies. Meanwhile, in North America, we continue to see stable steel consumption at high levels with order backlogs above historical averages. The outlook for steel demand from sectors such as solar energy, data centers and infrastructure remains positive. I'll now hand over to Ariana. And Japur and I will be available to answer your questions. Ariana Pereira: Our first question comes from Daniel Sasson with Itau BBA. Daniel Sasson: My first question has to do with the outlook of the Brazil business margins. You spoke about some stability expected for Q1 of 2026. I'd like to have your view about the trajectory over the years, starting with a somewhat weaker base. But with Miguel Burnier ramping up in the second half of the year, could we expect a different trend? Normally, we have a worse seasonality in the end of the year. And do you think you can end 2026 with an EBITDA margin being double digit? Although perhaps double digit for Brazil would be too optimistic. It depends on more aggressive measures regarding price, et cetera. My second question is about impairment. For more than 5 years, you didn't have a very relevant or substantial write-offs. So could you give us more detail on the more conservative assumptions you used to project the cash flow of some assets? What made the difference here, level of usage, price level, perhaps lower growth expectations for the coming years? And in Brazil, some of your competitors may ramp up their own capacity. Will Gerdau consider closing down more capacity in addition to what you have done in the last few years when you adjusted your footprint? Rafael Japur: Excellent to start the call. Addressing the elephant in the room, which is the outlook for the first quarter, we realized, we got some comments in the market that people were kind of surprised with the expectation we see now of maintaining margins in the first half. There are some points here. First, we have a year with fewer business days compared to other years because there are many holidays, there's the FIFA World Cup and so on and so forth. And that has an impact on our economic activity; plus rainfall, which was stronger in the Southeast, particularly in Minas Gerais, stronger rainfall, heavier rainfall compared to prior years. Also, considering consumption sectors as the automotive industry, we have ANFAVEA data, for example. In January, they started with a level 12% lower for vehicle manufacturing compared to January of 2025. And that matches the high level of inventory that there is in Brazil of imported vehicles. And that matches of the data published last night of consumption of long steel and flat steel sales in the domestic market that were lower in January 2026 compared to January 2025. So a stronger resumption of volume is something that we are not seeing in terms of volume. And as regards to our costs and margin, although we see prices that on average are better than we had in Q4 '25, there are still some cost pressures that we see in the long -- in the short term that may get a chunk of the margin that we would have with the more competitive prices. And here, we have coal, the coal theme. We are not so exposed to coal as other companies listed in Brazil. Most of them are integrated, but half of our operation in Brazil rounding up is the Ouro Branco unit. And when we get our modeling, about 20% of our Brazilian costs have a relationship with the cost of coal, and we see that coal costs from Q4 to Q1 increased substantially. It is true that we have a long lead time between 90 and 180 days between the price of coal increasing and this being passed through to our results. But we see that this will cause some level of pressure on our variable cost. Now you put it all together. We understand that we will have an environment of better prices but perhaps costs under a little bit of pressure and at the same time, volumes that are not increasing significantly to improve the operating leverage. I don't know whether Gustavo would like to add anything about the Brazilian outlook. Go ahead, if you have anything. Gustavo Werneck: If I have anything to add, I'll do it in the end. Rafael Japur: As regards to impairment, it has something to do with the Brazil conditions. When we run our annual tests in our accounting policy and recovery of PP&E, et cetera, we run a number of tests considering the future cash flow for our business operations, taking into account foreign exchange assumptions, profitability of the businesses and utilization of our capacity. When we compare the set of the assets in the Brazilian business, it justifies some of the assets that we have in our balance sheet. Some plants were hibernating. They were depreciating slowly because we didn't have a definition of not returning these units. Some other units that were not operating at full capacity, they were far -- you can see that our utilization capacity is below 60% in terms of the melt shop operating lower than 75%. So clearly, we see a high level of idle capacity. Except if we have a significant increase in demand and the level of profitability, we don't see any reason why we would maintain part of these assets. It's a small amount of the total PP&E that Gerdau has in terms of premium prices, well, we had something around BRL 350 million, BRL 400 million. But we understand that with a more challenging foreign exchange, with a more challenging market, with a more challenging macro scenario; it's a moment for us to reflect these results in our accounting. That's why we had the impairments. Gustavo Werneck: Rafa, perfect. Still on the margins, on the first question, is it reasonable to imagine that everything constant in the second half, we should see an improvement in the margins, at least in the part of costs with Miguel Burnier? Absolutely, absolutely. And to answer the second part of your question, again, we are talking about stability of a margin of around 7%. We don't think it's unreasonable to have a second half, perhaps a year-to-date -- a full year with a 2-digit margin. It's not unthinkable. It depends on our ability to deliver the Miguel Burnier project. And if we have the trade defense mechanisms and market dynamics not deteriorating, things can happen. I'd like to remind you that this is a presidential election. It's an election year. There might be some volatility in some of our target markets, but it's something that we're going to be monitoring over the year. And Daniel, you also mentioned a possible closing down of further capacity. When Japur was talking about a lower usage, we were -- it was possible to think about closing down more operations. But the thing is we have such a variety of products manufactured at these mills that if we remove capacity now, we will not be supplying the market in some of those segments. So our 2026 plan does not include closing down any more capacity. What we had to do, we did last year. Of course, over the next few years, depending on how things progress in Brazil, there's always space. And technically, it is possible to change these assets, we can make investments, particularly in the rolling mills to make them more flexible. But looking at the short term, in 2026, we are not thinking and we're not considering closing down any more capacity. So our expectation of cost reduction and optimizing our Brazilian operations that will not come by closing down mills, okay? Ariana Pereira: Next question from Rafael Barcellos with Bradesco. Rafael Barcellos: My first question, we have seen the United States posting very strong results, kind of contrasting with Brazil, but this has been discussed here. And in this quarter, South America was a negative surprise. You talked a lot about Brazil. You gave us a guidance. And I would like to know more about South America and how you're seeing the expectation for the year, for the quarter. What can you tell us to help us understand the future results? And my second question is about the United States, which is indeed what is impressing all the investors. We're seeing very, very strong results. We are following metal spreads, and it seems that we are going to see even greater margins in Q1. But in talking with some local players, they tend to be less optimistic, which is only natural because margins and prices increased. But also there's parity of some products, which is kind of stretched in the region. So if you could speak about the United States, what you're seeing about the sustainability of the U.S. profitability and comment on the main drivers? And since this is a segment that is really standing out, some investors consider a possible listing of the operation. If you can comment on that, we would appreciate it. Rafael Japur: Rafael, starting with South America. In this specific quarter, we had a specific team in Argentina to maintain the level of utilization of our unit. We had a greater volume of exports, which ended up increasing our cost because we have a greater logistics cost that goes into our cost line item, and that impacted profitability. We don't expect that we will maintain the same level of exports from Argentina this year. So we're expecting a normal conversion, a recovery of our margins in our South America operations already in the first half of this year and continuing in the second half of the year. Something in the mid-teens would make more sense to the South America operation, as was the case of what happened in the year of 2024, on average, what happened in 2025. Now moving to the North America operation. We have a number of different situations that are worth highlighting. The situation in Canada is different than the situation in the United States. And in the United States, special steels, longs and rebar have different dynamics. It is true that we had an expansion of spreads because of our beams that had some price adjustment at the end of the year. And that didn't have the same level of recovery in decrease of prices of scrap, but that does not account for our whole portfolio. We have other lines of manufacturing such as special steel in the automotive industry of the United States. They are not recovering at the same level of production and sales that we would like to see to drive our SBQ operation in the region. So I guess that, overall, we don't see anything making us think that there will be a substantial reduction in the profitability of our North America segment in the short term. We continue with our order book being very strong, remaining at very high levels. I think that we're actually now a little above the level of the end of the quarter. We are close to 90 days rather than 80 days. So that gives us good confidence that this is not the effect of just 1 or 2 months of results, but rather, it's something more recurrent. Would you like to add anything, Gustavo? Gustavo Werneck: Yes. Rafael, when we speak about North America, when we look at this in more detail, when we look at Gerdau results divided by business operations since 1990, plotting the results and looking at them with attention, there were many moments when the results in Brazil were much better than those in North America. Other times, North America overperforming. Rarely, both were doing poorly and very rarely, both were very good. And when we look at this in more detail, after we published the results, I get bothered with a number of things about Gerdau. One thing that does not bother me that much is that we see this discrepancy between the United States and Brazil. I would say that this worries me less than you do. I was more concerned in 2017, '18 when our Brazil results were very, very strong. And our results in a solid economy like the U.S. economy were kind of poor. And why? Why do I feel that way? Because I don't see any signaling of deterioration of our margins in North America in the coming quarters for a number of reasons. When we compare the soundness of our operation of our assets in 2017 to now, we have been operating quite well. 8 years ago, the comparison of our operating performance vis-a-vis our competitors, we had a number of $30 per tonne, and that was my judgment, my analysis regarding our performance gap vis-a-vis the competitors. But in the last 8 years, we worked hard in the U.S. Not only did we close this gap, but the public indicators and indicators we have access to clearly show that we have an operation from scrap to industrial with very good results and a more robust operation than our main competitors. So we're doing very well in terms of the operation, in terms of raw materials. We learned to use only obsolescence scrap, so scrap that we have access to, that has easier access to. And from the commercial standpoint, our decision to leave those products where we see greater penetration of imported steel was a good one. When we look at the main category of products, the main structural beams, that's a product that is very difficult to import, given the size, the weight, the different gauges. So I would say that we're very well positioned. In a way, we are very well protected in our business when we look forward. The health of our backlog in terms of infrastructure, in terms of solar power, data centers; that gives me some peace of mind that we will continue to have solid and sound results in North America in the coming quarters. As we solve -- and we will solve the competitive issues that we have in Brazil. So I don't really worry about these points. Well, I read some of the comments made in general by the market, and this don't really worry me. And as regards to Brazil, this has happened previously. Of course, if we have an antidumping of HRC, as we're expecting, there will be some improvement. And there's a lot happening in the coming quarters. Ouro Branco mill operating in a very solid way. Testimonial of that is the quality of our coke plant, the quality of our blast furnaces. And we have been delaying and postponing the stoppage. I would say that our Ouro Branco mill is very differentiated. We have the new sustainable mining platform of Miguel Boni that will increase our competitiveness. So I am fully convinced that we have adequate timing or sufficient time to improve margins in Brazil. And we are far from a deterioration of margins in North America. I just wanted to stress this point. Most of the times, I agree with the comments that are made by the investors and the analysts. But right now, I kind of disagree with some of the analysis that kind of penalize our results because there's a significant difference in margin when we compare the U.S. operation, the Brazilian operation, okay? So I have a slightly different opinion on that regard. Rafael Barcellos: Just as a follow-up question. Given everything you said in the relevance that the U.S. operation acquired in the Gerdau business and the difference in between the regions, that's always questioned by investors. Are you evolving with the listing possibility? How do you see this? Are you maturing in this discussion at the company? Can you comment on that? Rafael Japur: Of course. Overall, themes regarding company restructuring, tax impacts and ways to unlock value. Well, these are always things that we are looking at internally. But we haven't got any tangible study or action plan being executed or about to be executed regarding the listing of the company. We are monitoring some cases. We are monitoring some companies that did follow that path. They are reaping some fruit, but with some difficulty as we are monitoring them. And we will continue to look into that if the management of the company concludes that this is going to unlock value for the shareholders, it's something that we might explore. Ariana Pereira: Our next question comes from Caio Greiner with UBS. Caio Greiner: I have two questions. I would also like to revisit something you briefly mentioned during your last answer, and that refers to antidumping and how this is impacting the company's view. And this has been a very frequent discussion point. And if I recall, I think this is one of the points that you mentioned in the past, this lack of protectionism or even this unfair competition coming from imported steel that is being dumped into the country. And this is what led you to think about the putting some brakes on the CapEx investment. But now we are seeing some approvals, not only in regards to the antidumping issue, but the 25% tariff. So I think somehow we see some movements on the part of the government in that direction. Certainly, the impact in terms of your products, I mean, it's there, but it's minimal. It's very small. But your products should be still impacted in the next coming decisions. Just like what you said before, you already envisioned some preliminary approval. But the question is, how do you see protectionism expanding in the steel milling industry in Brazil? And how does that change this relationship with your Brazil unit. Are you more comfortable today to resume investing in the region or even maybe going in the opposite direction? Maybe you could start thinking about, I mean, reopening some of your units. And I would also like to revisit one of your comments. Maybe you could start thinking about investing in some rolling mills going forward. So I would just like to hear your views about how this is impacting the company vis-a-vis the Brazilian market after the approval of the protection measures. And my second question is about asset divestments. This has been an ongoing topic among your peers. Maybe you should start looking at some noncore assets, and I think there -- you still -- you already have a lot of things in the company. I would just like to understand where this is something that you are discussing today in the company. And if the answer is yes, whether you could give me more details if you're looking at some assets that you think about selling, what the assets are? And what do you see going forward? Gustavo Werneck: Okay. Thank you. Thank you, Caio. I will start and then Rafa will follow through. Well, one of the main reasons that led me to be more optimistic about the trade defense measures is the fact that it's no longer a political thing, but it's becoming more technical. There are countries that right after the election, they -- some countries made a political decision to introduce these defense mechanisms. I'm very careful when I use the word protection because I never use this word when I am in Brazilia. I would rather use the word defense because we don't need to be protected by anyone. I think the industry has to be defended against some fair competition. Therefore, for political reasons, in the last few years, we didn't see any expedited decisions in the steel industry as we did see in the U.S. market. I mean, Section 232 is very important because it promotes reindustrialization and it also promotes the growth of steel milling industries. I mean when we are there, we see that reindustrialization is now taking place. So I believe that in the future, we will see better and clearer indicators. The issue is, and I will say that in a way, I'm a bit frustrated because technical trade defense could happen faster. I understand the difficulties that we have today, especially in the federal government because there, we don't see a large number of experts like we had in the past. Some functional structures are being revisited. But I still believe that it could have been faster than what we saw. But now when we look at HRC and a temporary measure being put in place, this shows a transition from a political measure to a technical measure. I think it's very difficult for any government to make a decision that is not aligned to clear proof of damage to the domestic industry. Therefore, I'm very confident that this HRC antidumping should become a definite measure come June and July. And this could be really a significant landmark in our trade defense measure. This will not change our internal decision to allocate capital or our CapEx decision. I didn't talk about it extensively, but I am of the opinion that we should continue to allocate capital in Brazil to improve our competitiveness. There are relevant alternatives in the future that indicate that we should bring our cost level to a level that would allow us to compete on equal footing with any other company, even with those that practice some fair competition. We are not going to change our CapEx for this year of BRL 4.8 billion. And my future belief is that we will continue to invest in Brazil. Probably, we might continue to translate allocated capacities for exports in the domestic market. There is still some game, maybe some rolling mill or some production capacity that we believe will make sense for the future if it is to replace any additional capacity that we have in terms of exports. But our main CapEx focus for Brazil will be aligned with what we are about to ramp up in Miguel Burnier, which is to bring our cost equation and competitiveness to a new level. And I think I covered all your questions, but if you have any additional questions, let me know. But now I will turn the floor to Japur because he's the one leading the subject of noncore assets. So he has more details on that subject than me. And so over to you, Japur. Rafael Japur: I don't want to make anyone nervous, that guidance is 4.7, not BRL 4.8 million. Okay. I don't want anyone to be nervous with the number. Now going back to your question in terms of noncore assets, I think here, we have two main sources. I think we are speaking to investors as they approach us with the subject. The first front regards our forest assets and farms that we have in Brazil. And we have those assets because of our coal production to produce iron ore -- to produce the iron we need. And today, we have excess capacity, both in terms of land and forest. So certainly, this has some value, and this has to be justified in our P&L. I mean it's nice to have assets, but they have also to generate value. So we understand that then if we have more clarity, and we are now working to validate that. So in fact, it's important that we have an important amount of forests and farms that can be monetized throughout time. Another front of noncore assets has to do with real estate. Gerdau, both in Brazil and abroad, we grew a lot through acquisitions. And these acquisitions, sometimes, they come with some property, with some real estate attached; and sometimes due to operating aspects and the way we operate and the way we are organized. I mean, at the end, we end up keeping these properties, and we use them sometimes in full, sometimes not in full. But now we are beginning to revisit some of our units and take a look at Comercial Gerdau in Brazil. We say, okay, this property was very well located, but this is not the case nowadays anymore. And this -- I mean this asset, I mean, changed in terms of its location and the surroundings. So it's not so important to us anymore. Therefore, this asset portfolio, which is very fragmented, we are talking not about 1 or 2, but hundreds of properties; we understand that some of them have still a lot of value. We are trying to understand now how much it is worth and what will be the best way to extract value in the timeline. Having said that, it's important to make a distinction. In time, I mean, along many years, Gerdau made an important effort to deleverage its balance sheet. And we are keeping a very robust and sound balance sheet so that we can continue to invest in our growth, paying off our shareholders without taking up unnecessary risks in such a cyclical industry like steel and commodities. Therefore, any divestment of noncore assets will certainly be subordinate to value generation for the company. We don't feel the need to make any sale. And of course, I'm not against those who are doing it. What we want, I mean, at the end of the day is to create value and not simply just carry it out an operation just to take it out of our balance sheet because what we want is to indeed evaluate our asset portfolio and determine what will be the best location for every asset. And when we realize that we are no longer the natural owners of the assets, be it a farm or any particular property, we will try to create value through that. I think this is the main idea behind it. We don't have any guidance, we don't have any concrete plan. But as we move forward, we will certainly inform the market. So I'll go back to you, Ariana. Ariana Pereira: The next question is from Carlos De Alba with Morgan Stanley. Carlos de Alba: Just maybe following up a little bit to recent discussions, how is the company and maybe the Board of Directors to the extent that you can share their views thinking about the return to shareholders of any excess cash that the company generates? We definitely acknowledge and took a very positive notice of the yet another share buyback after concluding the one successfully that you had implemented in the past. But despite the very strong cash flow generation in the fourth quarter, dividends came a little bit below expectations from the sell side. So I wanted to understand how are you waiting or the Board is thinking about shareholder returns to -- in terms of cash, excess cash between these two alternatives. And maybe just complementing this one before I go to my second question is if you do execute the company does execute these noncore asset sales, would the company return the proceeds from those to shareholders? Or would it keep it as part of the cash balance of the company? And then just my second question has to do a little bit with the CapEx, the view on the -- maybe not guidance, but just broadly speaking, how does the company see CapEx beyond 2026. Do you think that it will be closer to BRL 4.5 billion or maybe moving back closer to BRL 6 billion that we saw in the past? Gustavo Werneck: Thank you, Carlos, very much for your three questions. I will try to answer each one at a time, starting with shareholders' return and noncore assets. And then I will talk a little bit more about CapEx, right? Carlos, it's good to see you again. As we already said in the past, we've been maintaining the dividend payout slightly above our policy. And this has been so in a very consistent way. And the average has been 45% to 50% payout, which has been the case in the past. And taking into account the value of our shares today, we still believe that it is below the intrinsic value of how much they should be worth it, taking into account the cash generation level, I mean, in North America, our profitability in that geography and the moment where we find ourselves in the CapEx cycle as we start to decreasing our investments in CapEx and then we start generating more free cash flow to our shareholders. In time, we understand that in the long run, we want to return more value to our shareholders. So not only the amount that we are paying now above the mandatory level, we want to add some more with the buyback program. In terms of capital allocation, taking into account the current status of our shares, but we must also look at taxes because this may impact our foreign shareholders because now they will be subject to withhold taxes over dividends. And the buyback is not subject to that tax. And that's why when we take into account the shareholders' base of Gerdau S.A. and considering that more than half of that base consists of foreign shareholders, it is important that we bear that in mind. I mean, the effective return of how much money we place in the hands of shareholders, not necessarily how much cash leaves the company. Now about the question on proceeds from noncore assets, I don't see any reason why other liquidity of things that we may have through our assets, of course, this should be returned to our shareholders. Throughout last year, if we look at the history of all the quarters, we basically saw an increase in net debt of BRL 2.4 billion, and we paid out BRL 2.4 million to our shareholders. Therefore, we experienced higher leverage throughout the year. So quarter after quarter, we continue to remunerate our shareholders. This last quarter, when there was a significant release of cash, we thought that this would be the adequate moment to reduce our net debt, and therefore, we would have more breadth space and flexibility going forward in this current environment. So I think this can throw some light. I mean, I look at your report, you expected BRL 0.13. And I think you have now a better explanation of what led today. About CapEx, Carlos, I don't have any guidance or any detailed information about guidance for 2027 onwards. And as Japur put it well, CapEx disbursement for this year is BRL 4.7 billion, not BRL 8 billion, right, BRL 4.7 billion. What I can tell you, Carlos, is that we will be really diligent and we will not disburse CapEx that is not aligned with our capacity to generate cash. Therefore, in the future, we don't want to commit the financial health of our balance sheet or the levels of debt just to increase CapEx. I mean we have strong beliefs. Therefore, we will not discuss any changes regarding these limits in the next coming years. But as any other companies, we have a wish list, which is full of projects. What we noticed today is that the wish list, in terms of investments in the future, this list is more populated by reinvestments to seek for further competitiveness, cost reductions rather than investments that will allow us to grow in capacity. Certainly, in the future, we may make investments just to replace some capacity or exports of semi-finished goods or high added value just to serve the domestic market or maybe some marginal increase in capacity in one of our plants that may be directly related to the development of a new product or any product that may add up to our product mix of products. But going forward, I believe we will invest in things that will allow us to promote cost reductions or to increase competitiveness. But I also want you to bear in mind that at some point in the next 10 years, we will have to invest in our Ouro Branco Mill. That mill has been operating at a very intense pace in terms of our blast furnaces and the coke production unit and shutdowns for maintenance. But at some time, we will have to deal with the lifespan of the equipment. Therefore, this may require some more relevant investment in Ouro Branco. But obviously, if the need arises, this will be compensated by a CapEx reduction in other areas of Gerdau in order to maintain a disciplined balance sheet, which has been the case in the past. Ariana Pereira: Next question from Caio Ribeiro with Bank of America. Caio Ribeiro: My first question is regarding avenues for growth in the U.S. segment. The company has the Midlothian operation that aims to be more competitive and increase its footprint in the U.S. market. But I would like to explore two related things. Firstly, how do you see the option of growing through micro mills, considering the products where you operate the most in the United States? And on that same topic, other than organic growth options, would you consider M&A inorganic growth mainly via smaller players in the U.S. market? My second question is about the project that you were looking into in Mexico. Could you give us more color on how a possible renegotiation of the USMCA could lead to an increase in tariffs of the United States? Could this impact your decision to go through with this investment or not? Gustavo Werneck: Sorry, my mic was muted. Well, looking forward, we don't have any great wish or great ambition to significantly grow our production capacity. Growing for the sake of growing for many years now has not been part of our life. So I would say that overall, what we expect for the coming years is organic growth, where we can add some capacity for higher added value products and products that may bring value, not just for Gerdau, but for our customers. So when we look at these micro mills, in our view, they make more sense or they will make more sense to reduce our production costs rather than adding capacity. We see that this is a very modern and smart solution in terms of joining hot rolling with a melt shop. So we won't need to reheat the billets. So it's interesting. But in our view, if this is included in Gerdau's plans, the goal would be to replace some existing production capacity, which is more inefficient from the cost standpoint. And as regards to mergers and acquisitions or any such growth, of course, we are always attentive as we have always been. I take the opportunity to congratulate our team because if in the future, we can find an opportunity for M&A. This is the result of our discipline in the past few years of having a company with a very sound balance sheet. We see in the market some companies that are facing difficulties, a lot of difficulties. We have seen them in difficulty for quite a while now. And we were very disciplined in our actions to have the company's balance sheet at a certain level that will allow us to think about M&A in the future. But we are very down to earth. It doesn't make sense to make an acquisition that will not add value for the company in the long run. Of course, there are always things that can complement our business. We can always seek some synergies when we analyze a possible acquisition. We're always keeping our ears and eyes open for an acquisition that will help us get to the Gerdau that we want, a smaller Gerdau, but one which is more profitable, more well prepared to face the coming years. And the Mexico investment has to do with that. We have a business case that is ready. But Mexico, regardless of USMCA, is going through a very substantial change. I see in Brazil, a growing debate on reducing the working hour A few weeks ago, they approved a reduction in their working hours. So Mexico as a country has been losing competitiveness at the industry level. So these are always relevant elements that we have to take into account in our business case. In the USMCA, the new USMCA that will be debated as of June of this year will be a very relevant point for us to review our business case and make a decision whether it's worthwhile -- whether it's worth investing in this new mill of special steel. It is an opportunity. We understand that the U.S. market, whether it's ups and downs with heavy and light vehicle market, remains an opportunity for us, but we will be very diligent in allocating significant CapEx for greenfield mill in Mexico, considering the debates involving Canada, U.S. and Mexico. Okay? Rafael Japur: Let me just add a couple of points to your question about growth. We have been doing some important things to improve our profitability in North America. In recent years, we opened 2 downstream segments in Midlothian thermal treatment and solar piles. And when we look at our quarterly report in the year-to-date, the different lines of products we see that the downstream line item in the North America segment increased 39% compared to 2024. into 2025. These are high added value products that are less susceptible to competitive imports and the ones in which we have greater differential or competitive edges. And I think that this matches what Gustavo said, we are very cautious and very prudent in allocating capital for growth in North America. In addition, we're growing with smaller acquisitions and upstream investments, which is the case of scrap producers that happened last year that increased our scrap potential and our ability to process scrap in a cheap way. So that's more the kind of growth that we're thinking of rather than a major acquisition as we have seen in some cases in North America. Ariana Pereira: Next question from Igor Guedes from [ Genial ]. Igor Guedes: Looking at the level of exports, 370,000 tonnes growing quarter-on-quarter and year-on-year, we saw a level of BRL 140 million in the consolidated EBITDA compared to BRL 80 million in Q3 and only BRL 24 million in Q4 '24. So given that you export a large amount of semi-finished steel coming from you in Brazil, even to other regions in South America, you mean cut, bend, hot rolling; this higher level of eliminations, would it be related with intercompany transactions? Or was it due to other reasons? And second question, you mentioned that part of the CapEx in Q4 that was BRL 1.5 billion was allocated to restructuring and improvement in the [ Seara ] unit, [ Maracanau ], about BRL 100 million. However, in one, this was one of the 2 mills that you hibernated together with Barao de Cocais. So I'd like to explore that. Could you share with us what kind of changes have you made to these mills? And how does this fit now in the footprint of the company? Will you reactivate the mill with more efficiency than before? If you could comment on that, it would be interesting. Rafael Japur: Okay. It's always good to see you. You made some interesting questions. Let me start with the eliminations regarding imports, exports and eliminations. In eliminations, in all -- we have eliminations of all possible businesses between the reportable segments. Since we have little exports from North America to South America. What we have is more business between the Brazil segment and the South America segment. I think in the previous question, we mentioned we had a large volume of exports of billets from Argentina to some of our Gerdau units in Brazil and in South America, Peru. And that kind of increased the amount of eliminations that we had. It was a lot because of that, because of this greater volume of exports from Argentina, which typically is not a country that exports a lot and all the time. So that increased the atypical volume that we had in the line item of eliminations. To your second question about [ Maracanau ], that's a very good question. Back in 2024, when we had the hibernations, we also [ hibernated ] the [ Maracanau ] mill in [ Sierra ]. And we said that it was going to go through a modernization project and the program. What was the goal of that modernization program? Today, the [ Maracanau ] unit operates integrated with our rolling mill that we also have in [ Sierra ] that we acquired from [indiscernible] when we acquired it in 2019. That's a rolling mill, state-of-the-art rolling mill that we have, very modern. And the melt shop -- I'll be a little technical here. The melt shop made smaller billets, relatively small billets, about 6 meters long. When we rolled it and put it in the rolling furnace and started rolling it in a more robust rolling mill, a more modern rolling mill, the rolling mill of Silat, we didn't have a level of optimal cost and yield because oftentimes, I had to be feeding that furnace with smaller billets. So the project we had was to adapt the size of the billets manufactured at the [ Maracanau ] melt shop to 12 meters. They are closer to the ideal size to be consumed in the Silat rolling mill. With that, we can increase our competitiveness in the Northeast operation. And again, as Gustavo has highlighted before, a good part of our portfolio of projects at Gerdau has been focusing on increasing our level of competitiveness, our ability to be cost efficient to compete with any competitor anywhere in the world. And this is an example of this goal. We are not making a new mill. We are modernizing an existing mill and thinking about how to better integrate these two assets that we have in the state of [ Serra ]. So that's basically the rationale behind this project to modernize the [ Maracanau ] mill. Igor Guedes: Just a follow-up question, Japur. In terms of integrating the mill to the footprint one more time, would that entail any cost increase, perhaps a one-off cost increase that we should be paying attention to? Or would it be like a smooth transition? Just to have an idea? Rafael Japur: No, no. It's basically the melt shop that will start operating again, supplying billets for the Silat rolling mill. There will be no one-off cost increase, no additional cost. It's basically allocating billets, also imported billets that we get to Silat and that now we will be supplying to a neighboring mill in the state of [ Seara ]. Ariana Pereira: Our next question from Ricardo from Safra. Ricardo Monegaglia Neto: I have just two very quick questions, but they were very important in the discussions we had yesterday. First, looking at your cash flow, I would just like to understand what is your outlook? You have 2 lines, mainly working capital. There was a significant release of working capital. How much of that is structural and how much of that can be reverted in the short run? And the second line is the cash financial expenses. There was a significant drop of almost BRL 4 billion. But I just want to understand, how much more reduction you anticipate in this line or whether we could review like more expensive debt being paid out and the balance paid at a lower interest rate? And my second question is that I would like some help to build a double-digit margin for Brazil in 2026 because Japur, I think you said that if there were not for the deterioration of market conditions, we could probably reach double digits throughout the year or even year-to-date, including Miguel Burnier. I just want to understand if in your number, are we starting with a weaker margin and this will improve in the second quarter and maybe getting even better in the second half? Or probably there is some room for getting a better margin quarter-on-quarter. And with that, you will create a bigger buffer. Therefore, throughout the second half, you will be able to deliver a double-digit margin. Rafael Japur: Ricardo, so working capital, your first question. Yes, we believe that there will be a use of working capital even because of the strong results that we posted in our North America operation, we saw increase in volumes, increased shipments. And also, there was an increase in the average of our product mix, and this will require some additional working capital in addition to the resumption of our operations, especially considering our operations in Brazil because of seasonality. So there should be a certain level of working capital use, but we will not go back to everything that we were able to build because especially when you look at the inventory line, we posted important gains of efficiencies, not really thinking about working capital, but cash conversion cycle, days of working capital. This quarter, since we had the settlement of our make-whole call, we had to pay interest that had been accrued until the make-whole date. So there was an increase of what was expected in terms of cash interest because not only I had to pay for what we already anticipated in terms of payments in the due date, but also there was a make-whole of the bonus that was settled in full. So that interest account was a bit bigger. But if you break down our P&L, you look at the fact that we break down the debt per currency and type of debt. And this is very clear in our P&L. So you could have WCD in U.S. dollars and reals. And then looking forward, you can have an estimate of that interest account. But in terms of cash flow, all you have to do is pay more attention to the maturity date of the bonds because they follow dates that are more concentrated between -- in April and then October. These are the 2 months that concentrate the bulk of the interest. Now finally, about the Brazil operation. I'll start with the end of your question. Significant improvement in Brazil in terms of margins, I think this is a bit far-fetched looking at the current situation. But again, if we hadn't seen this very strong move of over 20% in coal increase that we saw from the fourth quarter onwards, probably we could have seen a more consistent improvement in the first quarter of the Brazil operation despite the fact that the market is not growing so much. So maybe the data could have been worse in January. So I don't think it's so far fetched yet to think about a 2-digit margin, considering that in the second half of the year, we will already post concrete benefits related to our Miguel Burnier ramp-up, the mining project. So a bit of this construction, I would say, is like a first quarter, very close to the margin we have today, which is high single digits and maybe other coming quarters with a gradual improvement. If you look at the combined numbers, if everything else remains constant, so we may say that by year-end, if you look at the combined numbers of the year, the EBITDA margin, everything combined would be around 2 digits. Ricardo Monegaglia Neto: Perfect. Just to confirm, so Miguel Burnier's EBITDA will be around BRL 400 million a year? Rafael Japur: It will certainly depend on our capacity to deliver the Miguel Burnier project in due time and at the stability level that we want to imprint in the project. It's important to mention that this is not an existing mill because something that is new and starts ramping up every month from the end of the year that I eliminate, I have to do the math accordingly. And this affects the calculation. We don't have any number in terms of what will be the ramp-up result of the Miguel Burnier operation. But as soon as we have more information available and the project is in its integrated test phase, so as soon as we have additional information, we will soon share that information with you. So this is very important to achieve the competitive level that we expect to have. Ariana Pereira: Our last question from Emerson Vieira with Goldman Sachs. Emerson Vieira: I would like to review the U.S. profitability level. It's very clear what you said that you will maintain the levels in the short run. But my question, especially if I look at cost and the scrap prices, the pricing have not recovered in a way that it would make sense, given the rebar price level because this is growing in the U.S. But so -- looking towards the second half, do you think that there will be a more relevant scrap prices or the current scenario -- I mean, or this scenario is very unlikely. And it will be more likely for us to see the same scenario that we have today. And the second question is about what is your view regarding the potential impact of the antidumping measures related to steel exports coming from Vietnam and Algeria and whether this should lead to some marginal share gain or this is not really impacting the company in the U.S. Gustavo Werneck: Well, let me share the answer with Japur because I don't want him to answer everything by himself. I mean it's very difficult for us to project scrap prices in the U.S., I mean, looking at prices 2, 3 quarters ahead. But we believe that with this level of semi-finished produced in the world, produced based on coal and iron ore coming from China, this will probably take some share of scrap coming from the U.S. Therefore, the trend going forward will be for scrap prices to be more stable. And reinstating what I said before, this lead us to believe that the metal spread will be very similar to the levels we are seeing now. And this is another reason in addition to all the reasons that I mentioned before, this is one of the reasons that lead us to be more certain about the stability of our results coming from the North America when you look at the entire year of 2026. Now I will turn to Japur to talk about antidumping. Rafael Japur: The point is that when we look at the product portfolio, rebar is a product that is a feeder of our line. Like I have the full rolling mirror with the products that I want to produce, then I dilute my fixed cost by producing rebars. It's not something that it's a very significant portion of our business. I mean it accounts for about 10% to 15% today because beans and others have a strong price. So rebars account for about 10% of our price. But what happens, Anderson, is that at times when there are producers that make merchant bars and rebars. When profitability increases, on the rebar side, and they have modern assets or micro mills that are location for the production of rebars, so their appetite increase to use -- I mean, in terms of using scrap for merchant bars because not necessarily this has to do with the antidumping measures when you look at our own rebar producers. But this would be a secondary effect to improve merchant bar prices and producers have to look at a trade-off because they can at times produce rebars and at times produce merchant bars. Ariana Pereira: Very well, our Q&A session is now closed. I would like to take this opportunity to invite you to our next earnings conference call. It will take place on April 28. Werneck, you have the floor for your final comments. Gustavo Werneck: Well, before we disconnect, I would like to send my very best to Mari. She's not here with us today. She's living a very special moment. She had a baby called Pedro Antonio. So I would like to send her all the best and wish all the best for baby and mother. And I would like to thank Ariana that you called Ari during this call. I'd like to congratulate her on how well she conducted this call today. This only reinforces Gerdau's commitment and culture to have excellent teams onboard. On my own behalf, on Japur's behalf, I'd like to close this call, wishing you all the very best. And I am sure that I will see you in April when we discuss our Q1 earnings results. Thank you very much. I will see you then.
Operator: Good morning, and welcome to Beam Therapeutics Conference Call. [Operator Instructions] Please be advised that this call is being recorded at Beam's request. I would now like to turn the call over to Holly Manning, Vice President of Investor Relations and External Communications. Please go ahead. Holly Manning: Thank you, operator. Good morning, everyone, and welcome to Beam's Conference Call to review updates announced this morning in conjunction with our fourth quarter and year-end 2025 financial results. You can access slides for today's call by going to the Investors section of our website, beamtx.com. With me on the call today, with prepared remarks are John Evans, our Chief Executive Officer; Dr. Amy Simon, our Chief Medical Officer; Dr. Gopi Shanker, our Chief Scientific Officer; Sravan Emany, our Chief Financial Officer; and Dr. Kiran Musunuru from the University of Pennsylvania. Our President, Dr. Guiseppe Pino Ciaramella, will join for Q&A. Before we get started, I would like to remind everyone that some of the statements we make on this call will include forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual events and results could differ materially from those expressed or implied by any forward-looking statements as a result of various risks, uncertainties and other factors, including those set forth in the Risk Factors section of our most recent annual report on Form 10-K and any other filings that we may make with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Except as required by law, Beam specifically disclaims any obligation to update or revise any forward-looking statements even if our views change. With that, I'll turn the call over to John. John Evans: Thanks, Holly, and good morning, everyone. At Beam, our vision is straightforward, but ambitious: to provide lifelong cures for patients suffering from serious diseases. We believe base editing has the potential to deliver on that vision through onetime durable genetic medicines with predictable and reproducible outcomes. Today, we're excited to share several important updates that bring us closer to accomplishing this mission. First, leveraging our platform to bring forward a new and innovative development program to address a serious genetic disease, phenylketonuria, or PKU, and second, further solidifying our balance sheet to support the anticipated commercialization of a potentially transformative onetime base editing therapy for sickle cell disease. Beam was founded on a simple concept: aimed at rewriting broken genes back to normal. Base editing is a next-generation form of CRISPR that allows us to make precise single base changes, resulting in predictable edits without the need to make double-stranded breaks in DNA. With consistent gene sequence outcomes conferring potentially lifelong benefit, base editing enables predictable, reproducible outcomes for patients. This scientific foundation underpins everything we do. Predictability is a theme you'll hear throughout today's discussion. We believe it is a powerful driver of progress, not just for patients, but across the broader health care ecosystem. Predictable outcomes can streamline R&D, reduce development risk, accelerate regulatory pathways and ultimately improve confidence and deliver value for physicians, patients and payers alike. Base editing is a highly modular and scalable technology. This means that the core elements of our therapies can be reused again and again. And once they are proven to work the first time, we expect to have a higher probability of technical success as we expand to other genes and other diseases over time. So the power of predictability is built into our business from the start. This is not a one-asset story. It is a repeatable, reproducible model. And as you'll see today, we are now applying that model across a growing pipeline. One of the clearest examples of this platform in action is our liver-targeted portfolio. We have built leading lipid nanoparticle or LNP capabilities to enable efficient in vivo delivery to the liver that can be leveraged for multiple programs, allowing us to move faster with each successive candidate. We're excited to share today that we're expanding this franchise with an innovative new development program for PKU called BEAM-304. BEAM-304 exemplifies how we can leverage base editing to directly correct not just one but multiple disease-causing mutations over time. PKU represents an important strategic expansion of our portfolio and an ideal application of our platform. To start, we have the technology and expertise that positions us well to address this condition. PKU is often caused by a single-point mutation in the phenylalanine hydroxylase, or PAH gene, exactly the type of error base editing is designed to correct. PAH is primarily expressed in hepatocytes, making it highly addressable through LNP delivery, which is an area where we have an industry-leading expertise. There also remains significant unmet need despite available therapies in a large population of approximately 20,000 individuals in the U.S. and many more around the world. As Gopi will describe in a moment, our initial focus will be on targeting the 2 most common mutations found in almost half of patients with PKU. In addition, taking advantage of novel and emerging regulatory pathways, we believe our innovative development approach gives us the potential to address mutations found in a majority of PKU patients over time. Blood phenylalanine or Phe reduction has been accepted as an endpoint for full approval in both the U.S. and Europe, providing an attractive opportunity for both early clinical proof-of-concept and an expedited path to market. Taken together, PKU is a compelling opportunity to demonstrate the scalability of our platform and to deliver potentially transformative therapeutic options to patients. With that overview, I'll now turn the call over to Amy to provide additional context on the clinical manifestations of PKU and current standard of care. Amy Simon: Thank you, John. PKU is an inherited autosomal recessive metabolic disorder caused by mutations in the PAH gene, which results in the loss of PAH activity, failure to metabolize or break down phenylalanine, referred to as Phe, leading to elevated Phe levels in the blood, which can cause neurotoxicity. In the United States, PKU is typically identified at birth through the federally mandated newborn screening program, and genotyping of these patients is increasingly common as it can guide therapy. As shown in the large arrow, the severity of PKU depends on the amount of residual PAH enzyme function an individual has, which determines their pretreatment Phe levels that can range from 360 to 1,200 micromolar, with classifications ranging from hyperphenylalaninemia to mild, moderate or classic or severe PKU. Guidelines in the United States recommend patients maintain Phe levels below 360 micromolar across their lifetime. But as I'll show on the next slide, many patients struggle with uncontrolled disease, particularly as they age. People living with PKU can face a significant impact on their health and quality of life as very elevated Phe can have serious neurologic and cognitive consequences. In children, very elevated Phe can result in impaired brain development, intellectual disability and seizures, with some of these manifestations being irreversible. In adolescents and adulthood, where adherence decreases dramatically and many patients are lost to follow-up, increased Phe can also have detrimental health consequences, such as cognitive impairment, headaches, anxiety and depression. As you can see in the chart on the right, the majority of pediatric patients are within the recommended blood Phe levels of less than 360 micromolar up until about the age of 12. But this percentage steadily decreases with age and as adult, only about 25% of patients remain under control. For pregnant women, strict control prior to conception and during pregnancy is required to prevent maternal PKU syndrome, which can result in severe irreversible fetal harm such as microcephaly and congenital heart defects. There remains a significant unmet need for new treatment options to address PKU that offer better control of Phe levels and that are less burdensome to patients and their families. Phe exists in most foods, including meat, dairy, grains, vegetables and fruits. Thus, people living with PKU must follow a severely restricted diet limiting protein intake from foods to only 5 to 10 grams per day, which, as you can see from the chart on the right, would mean 1 egg and a slice of bread. Instead, they require medical food without Phe, shown in the lower right-hand panel, to get their needed protein. Medical food is often poorly tolerated and very expensive. Patients with more mild disease and some residual PAH enzyme activity are able to take BH4, a cofactor used to stimulate the PAH enzyme to reduce their elevated Phe levels. However, people living with more moderate to severe disease would require enzyme replacement therapy to decrease their Phe to reach target. This type of therapy must be administered as a daily subcutaneous injection, and it often takes at least 1 to 2 years for patients to achieve target levels. Overall, this occurs in only about 60% of the patients. In addition, it requires frequent labs to adjust treatment based on diet and Phe levels and the discontinuation rate is high due to immune reactions and hypersensitivity. While these treatments help manage the disease, they are not curative and impose significant burden on the patients, leading to diminished quality of life and compliance. To guide our development strategy in PKU, we have anchored our target product profile to establish regulatory precedents, the literature, including the updated ACMG clinical guidelines for PKU diagnosis and management and direct feedback from clinicians treating this disease. Importantly, the regulatory precedent in PKU is well established. Blood Phe reduction has been accepted as a surrogate endpoint for full approval in both the U.S. and EU. Within this context, a successful gene therapy would be expected to achieve significant and sustained Phe reduction below 360 micromolar, be well tolerated, enable normalization of diet, enabling people to get off of medical foods, which really has the potential to meaningfully improve quality of life. Ideally, this therapy would be delivered as a onetime treatment. These elements define the target product profile we are pursuing with BEAM-304. I will now hand the call over to Gopi to discuss our base editing approach and early preclinical data demonstrating what's possible with BEAM-304. Gopi Shanker: Thank you, Amy. As John said earlier, PKU is an ideal expansion of Beam's genetic medicines pipeline and application of our platform technology. I'm excited to share the incredible rapid progress that has led us to the cusp of clinical development today. In the United States, there are approximately 20,000 people living with PKU. To date, we have already identified 2 development candidates within our BEAM-304 program, targeting the 2 most prevalent PKU mutations, including R408W, which is the most prevalent. Together, these candidates have the potential to treat nearly half of PKU patients, and we have active research efforts to address additional pathogenic PKU mutations over time, covering a majority of all PKU patients. We plan to utilize an innovative development approach in which multiple mutation-specific base editors are developed within a single clinical program. With this approach, we believe that Beam has the potential to create a scalable path to get transformative therapies to the majority of patients with PKU as efficiently as possible. BEAM-304 leverages our proprietary and clinically validated base editing technology together with our internally discovered and optimized LNP delivery system to precisely target hepatocytes in the liver and directly correct the disease-causing mutations. This technology is adaptable, utilizing a unique guide RNA for each mutation, while the rest of the components of the therapy can stay largely consistent. The advantages of LNPs as a delivery mechanism for liver genetic diseases are multiple. They can be dosed in an outpatient setting by an intravenous infusion. They are titratable and redoseable if necessary, and benefit from a synthetic and highly scalable manufacturing process. Once optimized, LNPs provide a predictable and reproducible platform for both tolerability and dose projection. LNPs also offer a more manageable cost of goods. At Beam, we have built significant expertise in LNP optimization of both internally developed and externally sourced lipids and have internal GMP capabilities to manufacture at scale in our North Carolina facility. The BEAM-304 program builds on foundational work conducted in collaboration with Dr. Kiran Musunuru's lab at the University of Pennsylvania, which first established preclinical proof-of-concept for base editing in PKU. After adding our in-house capabilities in base editing and delivery, we have now advanced BEAM-304 to IND-enabling activities in less than just 2 years. We are pleased to have Dr. Musunuru here with us today to discuss this work as well as his pioneering work on the development of customized genetic medicines for rare diseases. This slide highlights the preclinical data supporting BEAM-304, which demonstrate the potential of base editing to correct underlying PKU mutations and rapidly normalize plasma Phe levels. On the left, you see results from a mouse model carrying the R408W mutation. And on the right, data from a second prevalent mutation, which we refer to here as mutation B. Following a single dose of BEAM-304 at 0.3 milligrams per kilogram, we observed a rapid reduction in plasma Phe levels by day 7. In both models, plasma Phe levels were reduced below the therapeutic threshold, effectively normalizing levels in animals consuming an unrestricted standard protein-containing diet. These reductions were accompanied by robust on-target editing in the liver, consistent with correction of the underlying PAH mutation. Here, we show the dose response relationship between on-target editing and plasma Phe reduction. As dose increases, editing in the liver rose in a predictable manner with even relatively low levels of editing sufficient to drive Phe below the therapeutic threshold. We are eager to advance BEAM-304 into the clinic and have already completed productive pre-IND interactions with the FDA. Structured similarly to our BEAM-302 and BEAM-301 clinical programs, the planned Phase I/II study will be an open-label, single ascending dose trial initially in PKU patients with the R408W mutation. The study is designed to achieve early clinical proof-of-concept of plasma Phe reduction, establishing a potential path to market and laying the foundation for expansion of the program to additional mutations. Key endpoints will include safety, tolerability and reduction of blood Phe concentration. We expect to file the IND for BEAM-304 in 2026 following completion of pre-IND activities. As we've laid out here today, our goal is to develop a onetime treatment for as many PKU patients as possible. Our underlying technology, manufacturing process, clinical learnings, regulatory path and commercial infrastructure for R408W will directly inform and support an efficient path forward for additional mutation-specific editors. In addition, our work in PKU builds upon our growing expertise in metabolic disease, along with our experience in GSDIa and has the potential to enable continued expansion into other metabolic disorders. With that, I'd like to formally introduce Dr. Kiran Musunuru. Dr. Musunuru is a Professor of Cardiovascular Medicine, Genetics and Pediatrics at the Perelman School of Medicine and the University of Pennsylvania, and was recently appointed as the Co-Director of the Penn Orphan Disease Center. A practicing cardiologist and geneticist, his research focuses on genetics and genomics of cardiovascular and metabolic diseases with a particular emphasis on developing gene editing therapies. Dr. Musunuru is widely recognized as a leader in applying CRISPR and other genome editing technologies to prevent and treat heart disease. He also played a central role in the development of world's first personalized base editing therapy to treat an infant known as baby KJ, marking a landmark advance in precision medicine for ultra-rare genetic diseases. Over to you, Kiran. Kiran Musunuru: It's a real pleasure to have the chance to speak to you today. I've been working with my friend and colleague, Dr. Rebecca Ahrens-Nicklas at the Children's Hospital of Philadelphia, or CHOP, for several years now to develop personalized gene editing treatments for a variety of inborn errors of metabolism, including PKU. I should start by emphasizing the poor metabolic control achieved in patients with PKU under the current standard of care, even at an academic medical center where patients are receiving specialized care from a team of metabolic physicians. We looked at data from patients with PKU treated at CHOP, specifically all individuals with at least one copy of the PAH R408W variant, which is the most frequent variant causing classic PKU, that is severe PKU. We found that the majority of patients had at least a single Phe measurement above the recommended safety zone indicated here by the dotted line, 360 micromoles per liter. About 30% of patients had lifetime average Phe levels above the recommended maximum Phe level. There's clearly enormous unmet medical need here. There are more than 1,000 PAH variants cataloged in patients with PKU worldwide, and many are potentially amenable to adenine-based editing, meaning that like the R408W variant, they could in principle be corrected by A to G edits, either on the sense strand or the antisense strand. Rather than focus on the top few most frequent PKU variants, Dr. Ahrens-Nicklas and I chose to initially focus on a lower frequency variant, the PAH P281L variant. Early on in our work using a humanized mouse model with PKU caused by the P281L variant, we found that treatment with an LNP test article with an mRNA encoding an adenine base editor and a guide RNA specific to the variant caused the elevated Phe levels in these mice to be entirely normalized by 48 hours after treatment. This got us excited about the prospect of addressing not only the P281L variants, but a broad range of disease-causing variants in the PKU population. Since then, Dr. Ahrens-Nicklas and I have found promising adenine-based editing solutions for other variants, which together comprise a majority of PKU patients. It's not hard to envision using the same LNP formulation, slightly different versions of mRNAs to cover a family of closely related adenine-based editors and individualized guide RNAs, effectively, variations on the same drug product to treat all these patients. That said, Dr. Ahrens-Nicklas and I are very committed to the idea that no patient should be left behind. Our goal is to be able to rapidly develop and validate a corrective editing therapeutic for any PAH variant in any patient with PKU. Solving a small number of variants isn't enough. What about the 1,000-plus other variants that have been cataloged? And that actually understates the problem. Here's a figure from the most comprehensive study of PKU variants worldwide published in 2020, plenty of data from some parts of the world like Europe, and then whole stretches of the globe from which there are little data, for example, the entire African continent and large parts of Asia. This highlights that you can't make gene editing therapies for patients if you have no idea what genes and variants are causing their diseases. As gene sequencing becomes more broadly accessible, we can be sure that many more PAH variants will be identified. It won't be feasible to design gene editing therapies for these patients beforehand for many of these patients will need to be able to make these therapies in real time. The problem is even more acute in another set of diseases on which Dr. Ahrens-Nicklas and I have been working, the urea cycle disorders. Variants in the genes encoding any of the 6 liver enzymes and the transporter shown here, which together comprise the biochemical pathway that converts the toxic ammonia that results from the breakdown of dietary protein into nontoxic urea, can cause very high blood ammonia levels shortly after birth, which in turn cause irreversible injury to the brain, coma and death. In principle, all 7 of these urea cycle disorders could be addressed by doing corrective editing in the liver, just like PKU. But these are ultra-rare diseases, and most of the patient's variants are N-of-1 and N-of-few. And so the treatments would need to be highly personalized, and in most cases, made rapidly in real time once a patient has been diagnosed. It goes without saying that the current regulatory framework was never intended to handle this type of personalized therapy and that regulatory innovation is needed. Dr. Ahrens-Nicklas and I have been extensively engaging with the FDA over the past couple of years, having interact in pre-IND meetings about gene editing therapies for patients with PKU or any of the 7 urea cycle disorders as well as a single patient expanded access IND for an infant with a urea cycle disorder, through which we were able to make a personalized adenine-based editing therapy for the patients in just 6 months. I'm not going to get into the details shown here, but instead give you the highlights over the next few slides. I should note that we've published some of our FDA interactions, the briefing books and written feedback, in the paper cited here in the American Journal of Human Genetics a few months ago so that everyone has access to them. We first asked the FDA whether we could include multiple PAH variants in the same IND application, a single application using the same LNP formulation, slightly different adenine-base editors and individualized guide RNAs. They were agreeable to this, opening the door to a so-called umbrella clinical trial. We then asked the FDA whether we could add new PAH variants to the umbrella clinical trial in real time, submitting rapid IND amendments that include only in vitro cellular on-target and off-target data with no animal data at all. And they were agreeable to this concept, and it lays the foundation for an eventual approval of a full therapeutic editing platform for PKU. Finally, we asked the FDA if we could bundle all 7 urea cycle disorders into a single clinical trial under a master protocol. There's a primary IND with the master protocol and then gene-specific secondary INDs that heavily cross-reference the primary IND and to which new variants in any of the 7 genes can be added in real time. We think of this as an umbrella-of-umbrellas clinical trial. And our hope is that the FDA will be open to an accelerated approval with a relatively small number of subjects, either through the newly announced plausible mechanism pathway or another pathway. In all, we think this is a very positive development for the ultra-rare disease space and are excited to move forward with this kind of clinical trial for the urea cycle disorders with funding support from the NIH's Somatic Cell Genome Editing program. John Evans: Thank you, Dr. Musunuru. It's a pleasure having you here with us today. I'll now turn the call over to Sravan to discuss today's financial updates. Sravan Emany: Thanks, John. In addition to PKU, today, we shared another important update that further strengthens our balance sheet and reaffirms our belief in the commercial potential of risto-cel, our investigational autologous cell therapy with potential for best-in-class profile for the treatment of sickle cell disease. This morning, we announced a strategic financing agreement with Sixth Street that provides up to $500 million in long-term non-dilutive capital to support the anticipated launch of risto-cel. The facility includes $100 million funded at close, up to $300 million available upon the achievement of certain regulatory, clinical and commercial milestones for risto-cel and an additional $100 million subject to mutual agreement during the 7-year term. Repayment of the principal is due in early 2033. This structure strengthens our balance sheet while preserving flexibility and enhancing our ability to both commercialize risto-cel as well as fund future growth and innovation across our pipeline. With this latest announcement, we have established a foundation of financial strength for sustainable growth. We ended 2025 with $1.25 billion in cash, cash equivalents and marketable securities. With the anticipated minimum draw of $200 million from the Sixth Street facility, we now expect our runway to extend into mid-2029. This supports Beam's pipeline execution through key anticipated milestones, including the launch of risto-cel, the BEAM-302 pivotal plan and clinical proof of concept for BEAM-304. We remain focused on being efficient with our investments, including building focused commercial capabilities ahead of the anticipated risto-cel launch and positioning BEAM-302 for a potentially accelerated path to market. Finally, our pipeline is wholly-owned and addresses significant markets. Combined with our platform-enabled approach, we believe this provides a clear path to long-term value creation and sustainable growth. I'll turn the call back to John for closing remarks. John Evans: Thank you, Sravan. We believe our PKU program clearly illustrates the power of Beam's genetic medicines platform. By correcting the genetic cause of the disease, base editing is a potentially ideal onetime solution for patients with this severe disease. Further, we believe we'll be able to take advantage of the modularity of our platform to ultimately address additional mutations supported by emerging regulatory precedents. Like our other programs, BEAM-304 is a precision medicine with potential for early proof-of-concept in the clinic and a predictable pathway to a large initial market poised for significant growth. As we look ahead to 2026, we believe BEAM is well positioned to realize the power of predictability across our growing portfolio. For our lead programs, we are accelerating the path to approval and look forward to providing updated Phase I/II data and next steps for BEAM-302 pivotal development in alpha-1 antitrypsin deficiency this quarter, followed by the anticipated submission of the risto-cel BLA as early as year-end. In addition, we continue to advance and expand the pipeline. We expect to file the IND for BEAM-304 for PKU, report initial BEAM-301 data in GSDIa, complete the BEAM-103 healthy volunteer study and continue advancing our in vivo HSC editing efforts this year. As Sravan outlined, we are doing this from a position of increasing financial strength with a strong cash balance and new long-term non-dilutive capital from Sixth Street to support risto-cel. At Beam, everything we do is driven by our commitment to patients. The promise of base editing is not just scientific innovation, it is the potential to deliver onetime life-changing therapies to patients in need. We are grateful to all of our partners, employees, investors, physicians and above all, the patients who are participating in our clinical trials for making this work possible. Together, we are building a future where serious genetic diseases can be treated precisely at their source in a personalized and predictable manner to bring new options and new hope to patients with serious genetic diseases. Operator, please open the line for Q&A. Operator: [Operator Instructions] Our first question comes from Samantha Semenkow with Citi. Samantha Semenkow: Congratulations on all the progress. I just wanted to talk a little bit about the regulatory path forward and addressing multiple mutations. From a Beam-specific perspective, how should we think about the opportunity and the time line to moving beyond the R408W mutation into other mutations? And then just with the strategic financing for risto-cel, does this allow you to reallocate more of your existing capital to additional liver-targeted indications? And how should we think about the rollout of those additional programs? John Evans: Yes. Thanks, Samantha, and great questions. So maybe to start, I'll ask Gopi and then Amy to talk a little bit about how we see additional mutations rolling over time, first in research and then in the clinic. And then we'll come back and have Sravan talk a little bit about what this allows us to do financially. Gopi? Gopi Shanker: Thanks, John. Thanks, Samantha, for the question. On the additional mutations, our research efforts are already underway for other mutations beyond the first 2 mutations that I described. And we expect the time lines could be fast given that we are primarily changing the guide RNA. We believe this platform approach can act as a flywheel where we get faster and more efficient for each subsequent mutation. And based on our initial interactions with the FDA, we expect to be able to bring multiple mutations forward within one program. Amy Simon: Also just to add to what Gopi has said, I think as a first step, it's been very gratifying to work with the FDA, very collaborative in order to kind of get their feedback on this whole process. And I think our intention is to get proof-of-concept in PKU with the R408W mutation. And then we'll continue to work on adaptive trial design to accelerate development in some of the other mutations that also impact patients with PKU. Sravan Emany: This is Sravan. I'll tackle the finance question. So I think we're really confident this financing gives us a lot of flexibility with the long-term non-dilutive capital to support the commercial launch and subsequent revenue generation for risto-cel. And I think you kind of hit the point, which is, it also enhances our ability to redirect our capital to the growth of our pipeline. For a novel platform and technology like ours, it takes a lot of fixed investment to get to at this point. But we really feel like the subsequent programs that are on top of our platform are exciting, and we look forward at some point in the future when they're ready to be shared to show. Operator: Our next question comes from the line of Maury Raycroft with Jefferies. I'm going to move to the next question. It comes from the line of Eric Schmidt with Cantor. Eric Schmidt: A couple of questions on 304 as well. First, it sounded like Dr. Musunuru's lab may have been first at kind of reducing the practice of base editing for some of these mutations. Is there some IP associated with either R408W or others that the company has access to? And then second, in terms of the predictability of the platform, that seems to be the theme today. Does 304 use the same ionizable lipid or even same or similar lipid nanoparticle? What can you say about the delivery there relative to, say, 302 or 301? John Evans: Yes, great questions. I can handle those 2. So yes, so I think we will have access to all of the IP that we need here. Certainly, there is a lot of pioneering work from Kiran's lab to point the way in this indication. Obviously, a lot of work has happened at Beam in the last few years, as Gopi said, to then make these industrial and leverage all of the platform capabilities that we have as well. In terms of the LNP, so yes, so it's broadly the same kinds of LNP approaches that we use with 302, 301. We do have our own a ionizable lipids at this point as a company, which we expect to use. But the way we make them, the formulation, the approach as well as the internal manufacturing, we'll all be leveraging the work that we've done for 302 and 301 as well. Operator: One moment for our next question, it comes from Yohan Zhu with Wells Fargo. Yanan Zhu: A couple of questions. I wanted to take advantage of the presence of not only the company, but also Dr. Musunuru On the line. Yesterday, FDA provided a draft guidance for individualized therapy. One thing that's not quite clear is how rare [ does ] the disease has to be to qualify for this new framework? I am wondering within the PKU range of mutations, are there any that are some or a lot of the mutations would have fall under this new framework? And if I may, 2 quick technical questions. For the 304 product name, are there going to be 2 different guide RNAs targeting the 2 different mutations or the same guide RNA? And if you can also talk about in your preclinical work, the presence of bystander editing, that would be great. John Evans: Great. Thank you, Yanan. Yes. So I think you're touching on some of the more innovative aspects of what we're doing here, which is quite exciting. So maybe I'll ask Dr. Musunuru First to say a bit about yesterday and the plausible mechanism pathway. And then Gopi, maybe you can cover the multiple guides in the bystander [indiscernible]. Kiran Musunuru: Yes. Thanks, John. So my perspective on the plausible mechanism that was announced yesterday is that it's primarily talking about potential approvals of platforms. And so you have to make a distinction there that it's about ultra-rare diseases, at least that's what is explicitly stated in the guidance, for which it is not feasible to do standard randomized clinical trials. And there are a bunch of conditions that are set there as to what particular types of diseases might qualify under the plausible mechanism framework. But it's ultimately geared towards either accelerated or potentially full approvals, in this case, because we're talking about gene editing therapies, we're talking about biological license applications. It's not necessarily prescriptive about clinical trial designs per se. And so what I should say with respect to PKU is that there's some ambiguity there. So if you're talking about urea cycle disorders, which I mentioned during the presentation, those are very clearly ultra-rare diseases. You're talking about perhaps a few dozen patients at most who are born in any given year who might be amenable to this type of gene editing approach. What's less clear is with a disease like PKU, where there's a wide spectrum of mutations, there are relatively frequent mutations where potentially you could contemplate doing a standard randomized controlled trial. But then if you go to the other end of the spectrum, there are N-of-1, N-of-few type scenarios that would be individually considered ultra-rare. And so I don't think it's clear. I'm not sure the FDA necessarily has thought about this so much. Dr. Hoeg, the acting CDER Director yesterday during the press conference when asked about this very issue, demurred to some extent and said that the agency doesn't want to be prescriptive, at least at this point as to what distinguishes ultra-rare from rare. She expressed openness to the idea that it doesn't necessarily need to be an ultra-rare context in order for the plausible mechanism framework to apply, but he didn't give much specificity. And I would point out again that this is a draft guidance, not the actual final guidance. And so there will be 60 days in which members of the biomedical community can give feedback. And I expect this will be one of the issues where they will receive a lot of feedback. And so we'll have to see what the final guidance says. The other last point I would make is that, as I mentioned during my presentation, my academic group has been having interactions with the FDA about clinical trial designs. I outlined some of them. Those predate the announcement of the plausible mechanism framework, both what happened yesterday as well as the original New England Journal of Medicine article published by Dr. Makary and Prasad back in November. And so those clinical trial designs where one can include multiple variants in the same IND under a single umbrella clinical trial, those are relevant regardless of whether the disease itself would qualify for the plausible mechanism framework or not. The clinical trial designs will stand on their own. It's very clear that the FDA is open to those types of designs, whether there are going to be accelerated approvals under the framework that was announced yesterday, less clear. I think that would entail discussions with the agency on a case-by-case basis. Operator: Our next question is from... Amy Simon: I just wanted to add one... John Evans: One moment. I think we have -- we wanted Gopi to answer the second half of Yanan's question. Gopi, over to you. Gopi Shanker: Yes. Thanks for the question. So the 2 mutations that I described today, the guide RNAs are unique. And in general, for this program, we expect to be developing mutation-specific guide RNAs and editors. So the guide RNA will be unique for each mutation, but they'll all be part of a single clinical program. That's how we intend to carry this forward. And on the bystander profile, even though we didn't disclose details today, we feel confident about the on-target editing and the benefit risk profile. John Evans: And Amy, did you want to add something to Kiran's discussion? Amy Simon: I would just indicate that we've had also very good meetings with the FDA, and they're supportive of this platform approach where multiple variants could be treated under one single program or one type of IND. So I think that it is something that, although it's not necessarily the same as a plausible mechanism, they're clearly showing interest in adaptive designs to enable basically acceleration to patients. Operator: Our next question comes from Cory Kasimov with Evercore ISI. Adhirath Sikand: This is Adhi on for Cory. I wanted to ask a question on sickle cell given the new financing. The recent increase in uptake of approved ex vivo therapies, can you help frame your current view of peak penetration or sales for ex vivo modality? And specifically, what market share assumptions do you currently expect for risto-cel, assuming its differentiated profile continues to hold? John Evans: Yes. Thank you. So maybe I'll have Pino talk a little bit here about our view for risto-cel. Of course, we wouldn't be giving market share or other specifics like that at this stage. But I think we do have -- we have been watching, obviously, the market evolve and have a lot of perspective on that. So maybe, Pino, you want to talk a little bit about how the market is coming along and what we think [ about ] risto-cel? Giuseppe Ciaramella: Yes. Thank you, John. Yes, I guess what we have seen about the market is consistent with some of our sort of intelligence gathering that we've been doing over the last year or so. And that is that clearly, there is a significant demand for a program such as the risto-cel that we're developing. And that's -- as you can see, there are basically patients waiting in order to do that. Also, other aspects of the market are very positive, like, for instance, to our knowledge, nobody has been refused the payment despite the fact that these treatments are north of $2 million. What has been a situation so far has been the somewhat limited ability to support the demand that exists on the basis of the manufacturing process that the current programs seem to have. And in particular, what we have seen is that many patients have had to go through several rounds of mobilization before they're actually being dosed. And so that causes also limitation on the overall capacity of the system as well as not making the money essentially on behalf of this company. We have really from the get-go, optimized our manufacturing process very strongly so that you can see our median mobilization cycle is only one. And that's also likely helped by the fact that we don't make double stranded break. So we do believe that we have a very competitive product and that it will hopefully help to satisfy the significant demand that exists for these products. Operator: One moment for our next question, it comes from the line of Whitney Ijem with Canaccord Genuity. Angela Qian: This is Angela on for Whitney. Maybe jumping over to the AATD. Can you just help us set expectations into the upcoming readout? How should we all be thinking about what is good in terms of AAT levels from the 75 and the 60 milligrams double dose? And then for the pivotal, I guess, how confident are you that we'll have what we need with the next data update to pick a dose and move forward into the pivotal? John Evans: Yes. Great. So I'll handle that one. So we're obviously on track to give that update. I think we've shared prior, there will be a pretty comprehensive set of data there. So as a reminder, for that trial in alpha-1, so with 302, we're dosing additional 60-milligram patients, just given the strength of the data we showed last year and then continue to explore dosing schedule, looking at a 75-milligram dose and a 2x 60. So we'll put all of that together. And as a reminder, what we're looking to see there is, is there any evidence of increases in alpha-1 sort of versus how close are we to saturation in the liver already. So that will be sort of part 1. We'll also be looking at patients with -- this is all sort of Part A with lung. We're looking at patients in Part B who have the sicker livers. We're trying to see if there is similar efficacy and safety as in Part A. And then depending on what we see there, there's certain things we can think about. We'll also be, of course, showing durability. So we'll have a significant amount of time now with patients who are in the update from last year out 12-plus months and then a range of follow-ups from there. So I think in terms of your second question, I think we said before, we do expect to have sufficient insight over the course of the beginning part of this year to finalize dosing schedule and anything else that need to go into the protocol. I expect that the data set will be hopefully helpful there, and we have it or we'll be able to have it soon. But it's [ not we're ] limiting at this point. We're already operationalizing the accelerated approval cohort and that can just take in the input from the rest of the part of the Phase I/II. So that is very much on track for getting started. Operator: Our next question comes from the line of Brian Cheng with JPMorgan. Lut Ming Cheng: First, just on responses in PKU. Do you have a sense of how well these R408W carriers behave and respond to current options like Kuvan, Sephience or Palynziq in the real world? And any thoughts on their uniformity in terms of response to a base editing approach? And then second, just on the Phase I/II design, can you talk about the age range you're thinking of recruiting here? And how quickly can you get to the newborn at the time of their diagnosis? John Evans: Yes, great question. So as a reminder, the mutations we're going after are really in the classic kind of severe PKU part of the market. So maybe, Amy, if you could speak a little bit to for those patients, responsiveness to current therapies, and then a little bit of how we think about getting to different age ranges over the course of the clinical trial. Amy Simon: Sure. Thanks, John. So it turns out that the first mutation, the R408W is called classic or more severe because the amount of PAH enzyme activity is really almost 0. And so from that perspective, these patients would not respond to things like BH4 or co-factors that you mentioned because that requires some residual enzyme activity in order to have any types of utility. And so typically, that would be for more mild or moderate cases and not necessarily for this R408W. There is, as we mentioned, the enzyme replacement therapies, but these are quite cumbersome. And even then only about 60% of patients after a couple of years of therapy can even get to the target below 360 micromolar. So even in those patients with this cumbersome therapy, we're still not addressing and getting people to have full diet liberalization with the therapies that are available. As far as the pediatric population and getting into those patient populations, I think the FDA has shown signs of being very collaborative. And typically, when we do go into these patient populations, we will stage [ gauged ] a little bit and typically start either at 18 and above or, for example, sometimes you can get an indication directly to go to 12 and above. And then once you get some data, then working with the regulators to then be able to open up cohorts that are younger and younger. And some of this also can be done with some, obviously, PK/PD modeling and other kind of things to kind of figure out dosing, et cetera. But we are very confident that we will be able to get to the patient population that, frankly, would benefit tremendously from this because those are the patients who are having brain growth in development, and it's critically important that they have their target levels less than 360, even though we have increasing evidence that adults and others should be treated for a lifetime with the goal of being under 360 given impact on cognitive and executive function. Operator: Our next question comes from Luca Issi with RBC Capital Markets. Jiayi Yuan: Congrats on the progress. This is Cassie on for Luca. A quick one on A1AT. I appreciate that you are DNA editing and some of your competitors is RNA. But what is your read on GSK returning the rights on A1AT? And also maybe a longer question for A1AT's pivotal, has the FDA discussed with you their minimum requirements for representative U.S. enrollment? If -- correct me if this is not right, please, we see on fda.gov that the Phase I/II are ex U.S. Would this mean that your pivotal of [ NL50 ] will have to be mostly from the U.S. if the agency does require a majority of patients in the approval package to be U.S. patients? Any color there is much appreciated. John Evans: Yes. Thanks. I can handle some of those. So the first question on RNA editing, I mean, I wouldn't want to comment on another company's situation. I think you just have to ask them. I think our belief remains that, all things equal, that having a one and done for alpha-1 is going to be a preferable target product profile if you can achieve it, which we believe we can. And then obviously, just doing head-to-head on the different data sets that have currently been disclosed, we continue to believe that BEAM-302 has shown the best-in-class data in terms of alpha-1 levels as well as the composition of that -- of those levels as well between MD production. So in terms of U.S. ratio, I think it's probably premature to talk about that. I think we are -- we obviously have an open IND. We will be active in the U.S. That will be a big part of the entire trial going forward, along with the ex U.S. regions that we're in. So we'll certainly be keeping an eye on that and make sure that anything we need for U.S. approval will be satisfied, which I'm sure. Operator: Our next question comes from the line of Sami Corwin with William Blair. Samantha Corwin: Congrats on the progress. I was curious for the clinical development in PKU, if it will be required that patients have 2 copies of the same mutation. And if not, how that could impact the range of benefit observed? John Evans: Yes. Great question. Maybe, Gopi, do you want to talk a little bit about the preclinical work we've done on that subject? And then Amy, if you want to expand on that [indiscernible]? Gopi Shanker: Yes. Thanks for that question. As you saw in the dose response data I showed, the level of correction that is required in order to reduce Phe levels below the therapeutic threshold is relatively modest, and that is one copy of PAH gene corrected is sufficient. A large number of patients do -- are compound heterozygous, so they will have 2 different mutations on each of their alleles, and it's sufficient to correct one of them. And to model such patients, who've actually used compound heterozygous mice, meaning mice that have 2 different mutations, but we were only correcting one of the mutations and then demonstrated that, that was sufficient in order to reduce the Phe levels to below the therapeutic threshold. Operator: One moment for the next question, we have Maury Raycroft from Jefferies. Maurice Raycroft: Congrats on this update. Maybe just a quick one. For the in vitro data that you have for the different variants, can you just provide more specifics on how much of that you already have? And I don't know if there's any more practicalities you can comment on for how new variants are going to be added into this Phase I/II study and how the Phase I/II is going to work from like a dosing standpoint to adding these new variants? John Evans: Yes. I think -- I mean, maybe I'll just give the high-level answer, which is, we are quite far at this point through all the preclinical preparations. We've already had interactions with the FDA, which have been supportive of this approach, which has been very encouraging. And I think as you've seen, we've guided to IND filing this year. So clearly, we're in the final steps here. And then I think the other piece about bringing more mutations in over time, I think we obviously are going to start with 2, but there is an understanding that we can then append additional mutations into the same IND over time. That's basically the framework that has been put forward here. And so as the research team brings them along, we can then adaptively put that forward. Some of the nuances of exactly how we manage the trial over time and mix these different populations together on our approval pathway is obviously some of the work that Amy and her team will do in consultation with the FDA, and that's where we're going to continue to sort of pioneer this. But we feel quite confident, especially with the well-precedented endpoints in this disease that we will be able to do that. Maurice Raycroft: Got it. And for dosing, is there anything from the AATD study that just kind of informs where you can start out with dosing here? John Evans: Yes. Either Gopi or Amy, you want to talk about sort of initial dose selection and escalation? Amy Simon: Yes. I mean I think, again, it depends a lot on what we see in our nonclinical, and we do PK/PD modeling. And obviously, it's unique for each kind of LNP and drug product that you make. And so I think we're just going to base it on kind of those analyses like we have in the past for 302 and 301. John Evans: I think you can expect it to be standard would be what I would say. Gopi Shanker: And maybe I can just add that as you saw in the preclinical work, we were able to bring Phe levels down to below the therapeutic threshold at relatively low doses of LNP. So we expect to be able to do the dose finding relatively efficiently. Operator: Our next question comes from William Pickering with Bernstein. William Pickering: First is, could you explain why a lower editing rate seems to be needed here compared to, say, sickle or AATD and any risk that translating to humans? And then on OpEx, could you just ballpark how much incremental OpEx you'll be taking on over the next couple of years to advance the PKU program? And how does that scale with the number of unique mutations you take into the clinic? John Evans: Yes, good question. Maybe Gopi, why don't you start with the first question just about the low threshold for [indiscernible] here? And then, Sravan, do you want to talk about how PKU appears in our cash planning and runway guidance? Gopi Shanker: Sure. So PKU is caused by what's called recessive loss of function mutations, which means both copies of PAH need to be nonfunctional in order to have PKU. And it's often not required in diseases such as this caused by recessive loss of function mutations to have full restoration of the enzyme activity in order to reduce the phenylalanine levels. And as you saw from the mouse data, it's sufficient to only get modest levels of the enzyme activity restored in the liver for the enzyme to then reduce the phenylalanine levels and to be active. And you see this in other diseases in addition to PKU as well. Sravan Emany: And then on the question about runway in operating expenses, I would say that first, and I guess the most important thing, PKU is already baked into the operating runway guidance we provided at the start of the year and updated today. And that we're just at this point in time, probably not going to disclose the level of detail around cost by program as it's kind of balanced across the entire portfolio. And I think I mentioned already as a platform company, we've got a lot of fixed investment. But as we evolve as an organization, start to see some of the benefit of taking advantage of that platform as subsequent programs come online. John Evans: Yes. And if I could even just underline that last point. I think it's generically as the platform gets built that an entirely new program is easier and faster and more efficient and more likely to succeed when we do it at the second time or the third time or the first time. And I think we're already experiencing that to a degree with PKU BEAM-304 coming after 302 and 301. The adding additional mutations within the same program is even more efficient, right? I mean the flywheel now is simply an additional guide RNA, some minimal testing and then you're off the races. So we do think these are continuing to drive down the kind of incremental cost of the additional editor as we continue to mature the platform. Operator: One moment for our next question, that comes from the line of Alec Stranahan with Bank of America. Alec Stranahan: Just a couple from me. Maybe just a follow-up on the plausible mechanism pathway. I know ultra-rare was mentioned. Curious if you have any thoughts on the FDA comments on plausible mechanisms, specifically related to AATD. This seems consistent with the biomarker-driven [ patient ] path you're pursuing, but any additional thoughts relating to the applicability to AATD would be great? And then just given the increased attention on vector safety in the liver, could you maybe talk a bit more about your LNP for the PKU program? Any structural modifications you're making here, specifically thinking for optimizing safety and specificity? John Evans: Sure. So maybe on the first point, so I think, as Kiran already mentioned, I think the plausible mechanism pathway is sort of one way that the FDA anticipates getting these sorts of programs to approval, but it's not, of course, the only way once you're in this sort of platform world. I think with alpha-1, we can say that we think we're taking a, frankly, more traditional path, which is an accelerated approval pathway [indiscernible] root cause of disease, followed presumably by some kind of confirmatory experiment. So we don't need an innovative new pathway for that. That's pretty traditional. That said, obviously, it shows that what we're doing in alpha-1 is broadly aligned, I think, with the kinds of programs working on the kind of root cause of disease that the FDA is clearly leaning in on. And then lipid nanoparticle, I mean I think broadly, I think we think that LNPs are the best available option for the liver in terms of getting there. We think we've got a lot of expertise in that area. And I think as I mentioned before, we're building on that clearly with the 304 IND and look forward to updating you over time. Operator: Our next question comes from the line of Michael Yee with UBS. Unknown Analyst: This is Matt on for Mike Yee. Maybe one on the next-gen sickle cell program. It seems like in vivo has maybe leapfrogged ESCAPE in terms of priority. Could you just speak to what goes into choosing the right next-gen program for sickle cell? And what gives you confidence in the in vivo program and the HSC targeting that you might use there? Just any you can say there would be great. John Evans: Sure. Pino, do you want to maybe just talk a bit about our prioritization of in vivo and prospects there? Giuseppe Ciaramella: Yes. Definitely, the consideration here is the fact that with LNP, of course, we can deliver a product much more easily than an ex vivo approach, and therefore, it would provide support for a larger number of patients if the efficacy, obviously, were proven to be equal or certainly manageable from a disease point of view. I think the important aspects of -- and because we're making progress, frankly, and preclinical studies would suggest that, that can also move relatively quickly in clinical studies. And therefore, that's what is guiding us to making that choice. We also have opportunities, obviously, to further enhance the engraftment rate, if you will, of an LNP with the use of our ESCAPE-like technology as well. So I think that gives us the confidence at this stage to move that program as quickly as possible. And obviously, we're doing everything we can to move it at speed. Operator: One moment for our next question, it's from the line of Patrick Trucchio with H.C. Wainwright. Luis Santos: Luis here. A question on -- for the go and no-go decision for 103 in healthy volunteers, how are you thinking about that? And comparing to the in vivo editing in HSCs, how are the efficiency -- the editing efficiencies compared? John Evans: Sure. Pino, do you want to talk a little bit -- I think you just sort of talking about this about the role of ESCAPE, obviously, broadly, but also in the in vivo context. Giuseppe Ciaramella: Yes. Also, the initial question was not clear, but I heard the healthy volunteers. So... John Evans: Yes, 103, yes. Giuseppe Ciaramella: Yes, 103. So what we're doing with the healthy volunteers is basically, we are dosing just the antibody component of the ESCAPE technology. This is the anti-CD117 antibody. And what we are doing there is in addition to obviously confirm the safety of that antibody, we're also developing a PK/PD model that would guide us the dosing in the context of the sickle cell patients that we plan to test in subsequent studies. We do not have any editing in that particular healthy volunteer study. And the other thing to confirm is that by having the additional edit that essentially protects the edited cells from the binding of their antibody, it gives us the opportunity for edited cells to basically survive over the unedited cells even in the context of an in vivo delivered technology. Luis Santos: And the efficiencies compared to the in vivo program? Giuseppe Ciaramella: The efficiency, do you mean, of editing in combination... Luis Santos: Editing the 2. Holly Manning: Yes, it's very high. So it's comparable. Operator: Thank you, ladies and gentlemen. This will conclude our Q&A session for today. I will pass it back to John Evans for final comments. John Evans: Thank you all. It's obviously a lot of exciting updates. We continue to be really pleased with our momentum here across the board and very excited about what's ahead. I also want to thank Dr. Musunuru for joining us and for all of his pioneering work along with his colleagues and Dr. Ahrens-Nicklas for really opening the door to some of these new approaches. I look forward to continuing the partnership. So thank you all for your time. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Joe Lister: Great. Good morning, everybody. Thank you all for coming along, and those of us joining today, I see you fighting over the snacks on the chairs. So please enjoy that. And for those joining us online, sadly, we won't be posting them to you today, but hopefully, you can come next time and enjoy them. So, this morning, I'm going to just run through what we're seeing in the market and progress with our strategic priorities. Karan will then take you through the '26, '27 sales position before Mike talks through the financials and property. And then I'll wrap up and open up for Q&A as usual. So, 2025 was a year of considerable change for us in our sector. And whilst our performance was strong across the majority of the portfolio, we have seen that pace of change accelerate, which has impacted our occupancy. More students are opting to live at home and international postgraduates have declined again since their peak in 2022, which meant that occupancy was weak in three of our cities, which impacted the overall performance. And whilst it's still early, we are currently tracking 3 percentage points behind last year, which is all in the nomination space, which Karan will come on to talk about. We have seen the demand shifts like this before, and we know that we can respond positively. So we set out a plan in November to reposition the business, and I'm proud of the start that we've made across the three areas. First, we've been accelerating the repositioning of the portfolio. We've got a high-quality, well-located portfolio at the right price points, and we've already started selling assets as seen by the USAF disposal announced today, and we've launched a portfolio of GBP 300 million just last week as well. Secondly, we will play to our strengths. We have unparalleled relationships with universities, and we have NPS scores at record levels. And we have an opportunity to deepen these relationships at a time when universities themselves are facing into challenges, and we're excited about further joint venture opportunities. And thirdly, we will leverage our platform. Our integrated platform gives us that ability to react, to take share from our competitors, including HMO and Empiric gives us the opportunity to do this. And we've already taken costs out and reduced CapEx spend at pace. And encouragingly, young people still see the value in a university experience, particularly at high-tariff universities and supply constraints are having a real and having a real and lasting impact. The fundamentals of the HE sector remain strong and where there are near-term headwinds, we are addressing them and facing into them. Demand remains robust. We've seen a record number of applications from U.K. 18-year-olds and international graduates are also increasing, particularly from China, and growth is focused at high-tariff universities. We have seen a fall in postgraduates over the last three years, as I mentioned, but the U.S. and Canada still have restrictive visa policies and the U.K.'s international education strategy provides greater policy certainty and the prospect of growth in student numbers at top universities. And we are positioning our portfolio where this demand-supply imbalance is most favorable. And universities are still targeting growth and the growth ambitions remain core to their strategies. When I'm speaking to the vice chancellors at the likes of UCL, King's, Leeds, Liverpool and the rest, growing U.K. and international undergraduates is a priority for them, and we're seeing that come through in their numbers. They're committing to long-term campus investment. And you can see that at universities like Bristol and Glasgow and also through their investment into joint ventures with our partners at Newcastle and Manchester Met. Universities recognize that they, like all industries, do need to adapt to AI, but educating young minds will be more important than ever. And over the next 20 years, it is estimated that there will be a 10% increase in jobs needing a degree. And so we do see that there will still be more opportunities to grow nominations in joint ventures with high-tariff universities. And we are positioning the business to face into the near-term challenges as young people are being more rational in their choices, and they're prioritizing on value for money and the investment they're making, particularly given the cost of living pressures and the graduate outcomes, meaning that more students are opting to live at home and students are again booking later to try and secure the best deal. And this is driving the continued focus on to high-tariff universities where student sees the value of a residential degree. And this continues to see us concentrate into more cities and the opportunities to capture share from HMO and grow our overall addressable market. On the supply side, the viability challenge is real across PBSA, build-to-rent and new housing and new starts have largely ground to a halt. The Renters' Rights bill becomes effective in May '26, and we've already seen around a 10% reduction in HMO over the last few years, and we'd expect the renters rights to continue to play into this. And so what does this all mean for us? High tariff is growing at the expense of low tariff, so we are growing our exposure there. Universities will commit to high-quality PBSA, either through nominations or joint ventures, and we are well placed to play into this. And whilst we outperformed the market in '25, '26, it's clear that, again, we will need to take share from both HMO and PBSA. And where we need to reposition the portfolio, we will be proactive and pragmatic. And we believe that this will drive a return to growth over the medium term. In November, we set out our revised strategy to respond to these shifts in the market. And as I say, we are making good progress three months into this plan. We are 68% sold for the next academic year, as I mentioned, 3 points behind last year. Universities are being more cautious on renewing nominations, especially at low tariff universities. And whilst the applications data is stronger than we anticipated, and we're having good conversations with universities since that data was released at the end of January, as we saw last year, this does not always flow through to bookings. So we've been more cautious on our outlook and guiding to the lower end of our occupancy and rental growth range. Taking action on costs, our overhead rationalization completed in December, delivering a 20% reduction in our central staff costs, and we're close to completing our technology platform, which will unlock GBP 7 million of savings by the end of the year. And the integration of the Empiric acquisition is well underway. It is really exciting to the opportunity for us to take share from HMO across both Unite and the Empiric portfolios. And we're also increasing our synergy target today to GBP 17 million. We're also increasing -- making progress increasing our alignment to high tariff and the best teaching universities, already reaching 67%, and we will achieve our 80% target through the pipeline, joint ventures and disposals. We are on site with both of our joint ventures and the financial constraints on universities are increasing partnership opportunities at sensible returns and we're making good progress with our capital allocation, the USAF disposal showing our proactivity, and we've been decisive in our approach to developments and using the proceeds from those developments to launch our GBP 100 million share buyback program earlier this year. And we do recognize it will take some time to reposition the portfolio, but delivering these priorities will underpin our return to growth. As we've got into the Empiric business, we really are excited by the extent of the opportunity, giving us a brand and a platform to compete with HMO, which is home to over 1 million students, and this will increase the size of our addressable market. I've been out visiting the properties. I've been to Cardiff, Birmingham and Bristol, and I've been impressed with the quality of the portfolio and the fit with the Unite portfolio as well as the quality of the people in those cities. There are loads of opportunities for us to use our sales platform to drive performance. And yes, the sales position is disappointing, and that reflects some distraction from the acquisition as well as the market challenge and the fact they didn't pivot away from their core market of Chinese post graduates. So the '25-'26 income will impact our '26 earnings by 1p to 1.5p, which Mike will cover. And there is more work to do on our '26-'27 sales, and we are on it. We will partially offset some of the shortfall by the increased synergies and driving our sales performance through both '26 and '27 to deliver earnings accretion from Empiric. In summary, this slide highlights our 2025 performance. We've delivered EPS of 47.5p underpinned by the good performance in the majority of our cities. but at the lower end of our guidance due to the 95% occupancy overall. And the TAR of 2.1% is below our usual standards, driven primarily by yield expansion and also a slowdown in development activity. So I'll now hand you over to Karan, who will take you through the '26 sales in some more detail. Karan Khanna: Thanks, Joe. As Joe highlighted earlier, on occupancy, we are currently at 68% versus 71% same time last year. Nominations are back 4% year-on-year, and I'll share a bit more detail on nominations on the next slide. On direct let, bookings are actually slightly ahead of last year, having adjusted prices and tenancy length to attract more undergraduates to compensate for the softness in the international postgraduate market. We're also making good progress in stabilizing our recently opened and refurbished properties, where bookings are up 25% year-on-year. This has been achieved on the back of strong student feedback, improved marketing, demand for nominations as well as adjustments to tenancy length. Rental growth, which is on a RevPAR basis, is currently at the lower end of our 2% to 3% guidance at 2.4%. Our inflation-linked multiyear nominations continue to underpin this rental growth with some of it being offset by adjustments made to secure single year nominations as well as more undergraduate direct-led customers. Like last year, we are seeing a later demand cycle as students wait to get the best scale possible. So we are preparing for a big push in the latter half of the cycle again. A bit more on nominations. As you know, with nearly 60% of our beds on nominations, of which 85% are on multiyear linked inflation-linked contracts with an average tenure of six years, they're a big part of what makes Unite successful. For the current sales cycle, which is still quite early, we are behind what we achieved last year. To add a bit of color on that, when we started discussions with our university partners towards the end of last year, we found that they were a bit more cautious in resigning to the same volumes that they took from us previously. Quite simply, to manage their financial risk, they needed clarity on their own student numbers before they could make firm commitments to us. The majority of these handbacks, as you can see, were from lower and medium tariff universities, which have been losing share to the higher tariff. Encouragingly, though, since the release of the UCAS application data, we have seen an uptick in the request from universities to take more rooms now that they know their application rates. The headline UCAS data shows continued positive trend in student number growth. Overall applications from 18-year-olds were -- was up nearly 5% as application rates held steady at 41%. Like last year, higher tariff universities continue to win share, growing applications at 6%. They now account for nearly 50% of all student applications. Additionally, higher tariffs have seen an increase in applications from students who intend to live away from home, so effectively seeking accommodation. This highlights that students and parents continue to see value in the full residential experience at these universities, and it validates our portfolio strategy to align ourselves to these institutions. So our focus right now is very much to leverage our relationships to convert as many of these discussions into firm bed commitments and secure an additional 1 to 2 points of occupancy on our current position. That said, the low visibility we have on nominations at this stage and the continued late nature of the direct let cycle is leading us to guide to the lower end of our 93% to 96% occupancy target. Stepping back, we are seeing three major themes come through our discussions with universities. Firstly, there is still strong demand from all universities, whether you are high tariff or low tariff for well-located, high-quality accommodation at the right price points. The cost of living pressure on parents and students and the growing number of stay-at-home students means that universities are very keen to secure more affordable options. And this plays to our portfolio, which is 90% cluster flats. And in most cities, we already have the price points and the tenancy lengths that these universities are looking for compared to so much of what's been built recently, which is at much higher price points and full year occupancies. Secondly, it is essential for universities that the partners that they work with share the same values they do on student experience with a strong welfare component that complements their own. Here again, the investments that we made in our 24/7 operating model in resident ambassadors who build great local communities in our student support framework, all of that has meant that we are at the front of the queue when the universities are looking for accommodation partners, not just another supplier of beds. Finally, there is strong belief within the more selective universities that they will continue to be the net winners. And for them, to continue to grow students, student numbers sustainably, they need a pipeline of high-quality accommodation for the long term. So we are actively working on renewing several of our longer-term deals with universities. The alignment of our strategy with these trends is what gives us the confidence that we will remain the partner of choice for the best universities in the U.K. So, what happens next? I thought it might be worth revisiting the structure of a typical sales cycle. Firstly, we're just four months into the current cycle. So there's a fair bit of runway ahead of us. So far, our focus has been very much on securing rebookers and undergrad returners. We will start our new customer acquisition campaign from end March going into April and May. This is really when undergrads start to act on their offer letter from universities. On nominations, universities tend to firm up their commitments with us in June once the acceptances come back from students. Our goal is, therefore, to have 87% to 90% of our inventory sold by the time we get to clearing in August. Now clearing is always massive for the undergraduate segment, between 65,000 to 70,000 students use clearing, either to find a new course or to switch their universities or both. Last year, we did nearly 6% of our sales during clearing. We expect this trend of a larger clearing to continue as we know, students are first waiting to secure the university place and then book their accommodation on the best possible offer out there. So far, we are seeing the market stay disciplined on incentives. They tend to be usually between 2% and 4% of the value of the annual contract, but this could increase towards the end. So we are keeping a close eye on it, and we will react accordingly. The post-graduate cycle actually does work a little bit differently. Currently, students are in the research phase, and they tend to book later in the cycle with peaks really coming through July onwards, especially for international postgraduates who also need to secure their visas. While the Unite Students portfolio was historically mostly undergraduate, now with Hello Student, we do have a new offer to take to postgraduates, and they will be a big part of our focus later in the cycle. Talking about Hello Student, I wanted to share a little bit more on how we are integrating Hello into the Unite operating platform. As Joe said, Hello Student provides students with a very different proposition to what we do at Unite. They have a high-quality portfolio aligned to high tariff universities where they deliver an excellent experience. And we will be keeping them as a separate brand to address the returners need for a more independent living experience. That said, their sales performance was below our expectations, but we are confident that as part of our platform, we can drive significant commercial improvements. One of the big areas where we will add value is through the scale of our international sales network. We work with 3x as many agents as they do across multiple markets. We have a dedicated sales team, many of whom are native Chinese speakers and also have a dedicated local office in China, all tools that the Hello team didn't have access to before. Additionally, we are already using our data and insights capabilities to help them make the right revenue management decisions, so where to adjust prices and tenancy lens and where to price recent refurbs so they can rebuild the base. We're also putting in place a cross-selling program, both to retain existing returning students across both portfolios, but also try and secure some norms for some of our Hello Student properties. Some of these will have a near-term impact, but the full benefit really comes from the next sales cycle when we will also have fellow students on our technology stack. And talking about our best-in-class operating platform, a final bit for me. I know a lot of focus right now is on our sales performance, but we can only deliver that if we deliver a great experience to our students and HE partners. And here, we've had another stellar year. Our student NPS is at a record high, and we are now rated gold by GSLI. Our higher engagement NPS is also at a record high, a reflection of how aligned we are with our university partners. And we're in the final stages of our technology upgrade program. We've already upgraded our finance, service and people platforms and the last piece of the jigsaw, which is our new booking engine and our new property management system is due to go live in the second half of this year. Once the transformation is complete, we will deliver nearly GBP 7 million of operating cost savings per annum. This, together with how students and universities feel about us, gives me the confidence that we will remain the best operating platform in the sector. And on that note, I'm going to hand over to Mike. Michael Burt: Thanks, Karan. I'll now take us through a review of financial performance in 2025 as well as the outlook for income and earnings in the year ahead. We delivered like-for-like income growth of 4.9% in 2025, thanks to strong rate growth, which more than offset the reduction in occupancy. Operating costs increased by 9% on a like-for-like basis, primarily driven by higher staffing costs at property level, resulting from increases in the rural living wage and higher employers' national insurance. We also saw cost increases linked to higher council tax liabilities from vacant rooms as well as building insurance. Property activity over the past two years added a net GBP 15 million net operating income as the impact of development completions and acquisitions more than offset income loss through disposals. The EBIT margin reduced to 65.9% as a result of lower occupancy and inflationary cost increases. Adjusted earnings increased by 9% in the year, reflecting like-for-like growth in net operating income and investment activity. Overheads net of recurring management fees were broadly flat in the year. Adjusted earnings also included a nonrecurring fee of 0.9p on formation of our Newcastle University joint venture. Finance costs increased as a result of higher borrowings and a 30 basis point increase in the average cost of debt to 3.9%. Capitalized interest was also higher, consistent with the pickup in development activity over the period. On a per share basis, adjusted EPS increased by 2% to 47.5p, reflecting the increase in share count from the equity issue in mid-2024. Net tangible assets per share reduced by 2% in the year to 955p. This reflected a 0.5% like-for-like revaluation deficit in the rental portfolio, where rental growth substantially offset the impact of an 11 basis point increase in the portfolio yield, which now sits at 5.2%. Our development portfolio also recorded a revaluation deficit linked to our decision to defer or exit projects. This included our TP Paddington scheme, for which we incurred a 2p write-down, having taken the decision to not proceed with the scheme on viability grounds. Fire safety CapEx, net of recoveries through our claims, saw a 3p reduction in NTA. This was in line with our expectations, and we expect a similar impact in 2026. Total accounting returns were 2.1% for the year, reflecting the change in NTA and dividends paid in the period. We now move on to discuss the outlook for income, costs and earnings for 2026. As Karan discussed, we've seen a slower start to this year's sales cycle. This has been most impactful for nomination agreements where we expect a reduction of around 1,000 to 2,000 beds. We continue to target additional nomination agreements and have various conversations underway with university partners. Where required, we will pivot these beds to our direct let sales channel. Rental growth for our bookings in the year-to-date is 2.4%. As expected, growth has been stronger for nomination agreements and lower for direct let beds, particularly in those markets where we've reduced price to drive increased occupancy and income. Based on current trends, we expect performance for the next academic year to be at the lower end of the guidance ranges provided at our investor event in November for occupancy of 93% to 96% and rental growth of 2% to 3%. Together, this translates to 0% to 2% expected growth in like-for-like income for the academic year, which is at the lower end of our initial guidance for 0% to 4% growth. There remains six to seven months to go in the sales cycle and significant time to influence performance. While undergraduate student numbers look encouraging, we've learned the lessons of last year and are calling the risks as we see them today. We will review guidance over the remainder of the sales cycle as we firm up university demand for nomination agreements and make progress with our direct let sales, which are more heavily weighted to the end of the sales cycle. Cost discipline is one of our strategic priorities, and we're taking steps to rightsize our cost base to reflect a more competitive operating environment. We've identified GBP 30 million of annual cost efficiencies across the Unite and Empiric businesses, which will be executed by the end of 2026. Before the year-end, we reduced our central team costs by approximately 20%, responding to lower income and making savings where we'd invested in anticipation of stronger future growth. In addition, we're starting to realize the benefit of our investment in new technology platforms with GBP 2 million of our GBP 7 million of annual savings expected to be realized in 2026. Together, these changes will help to offset the impact of inflation, meaning we expect to hold the Unite cost base flat in 2026. For Empiric, we're now one month into our ownership and have spent the time reviewing the synergy assumptions made at the time of our offer. Our original target assumed GBP 13.7 million of annual cost savings on a risk-adjusted basis through removal of duplicate activity and roles and the benefits of our economies of scale. We've now confirmed those cost savings, giving us the confidence to increase our annual synergy target to GBP 17 million. We expect to recognize GBP 9 million of those savings in 2026 and achieve the full run rate in 2027. We have a strong balance sheet, and we will ensure we maintain leverage appropriate for the operational and capital intensity of our business. Net debt EBITDA is within our target range of 6x to 7x following completion of the Empiric acquisition, and we will continue to manage leverage through our disposal program so that we remain within our targets. This translates to a loan-to-value ratio of around 30% to 35% on a built-out basis. We expect a further gradual increase in our cost of debt as we refinance at higher marginal borrowing costs. We are forecasting a 40 basis point increase in the cost of debt to 4.3% in 2026 and then further increases of around 20 basis points per annum thereafter. Liquidity remains strong for new debt, and we've seen the cost of new borrowing reduced by around 25 basis points over the past year through lower rates and tighter spreads. Joint venture capital is a key part of our capital structure and an attractive source of funding for the group. Just under half of our operational beds are held through funds, which generate recurring management fees equivalent to around 2/3 of our overheads. We will look for opportunities to leverage new third-party capital and are pleased to have agreed the disposal of St. Pancras Way to USAF. The GBP 186 million disposal will be funded through GBP 115 million of existing cash in USAF and an equity issue in USAF underwritten by Unite. The transaction helps increase USAF's exposure to London, the U.K.'s largest and most liquid PBSA market through acquisition of a prime Central London asset. For Unite, the sale allows us to remain invested in a high-quality property and earn additional management fees. It also recycles capital to fund the cost of delivering our university partnerships and committed developments. The transaction will see our stake in USAF increase to a maximum of 32%, which we then expect to reduce over time. Our earnings guidance for 2026 reflects the outlook for income, costs and funding described on the previous pages. In November, we highlighted a 7% to 10% year-on-year reduction in EPS for Unite from a combination of factors. This included lower occupancy for existing properties and new openings, the loss of nonrecurring JV fees linked to our university partnerships, the initial earnings drag from disposals and the impact of higher funding costs. Since we issued that guidance, we've committed to an initial GBP 100 million share buyback, which will deliver modest earnings upside in 2026. However, we've also seen the outlook weakened for '26, '27 academic year income, meaning we expect earnings for the Unite business to be at the lower end of our previous guidance. Our 41.5p to 43p adjusted EPS guidance also includes Empiric for 11 months of the financial year. As we said previously, Empiric's income was below our expectations for '25/'26 academic year, which will particularly impact earnings in the first half of '26. This impact is partly offset by increased cost synergies. However, we still expect a 1p to 1.5p reduction in EPS in the year. Thereafter, we're continuing to target earnings accretion from Empiric through an improvement in income performance and the full benefit of cost synergies from 2027. We intend to hold our dividend flat in 2026, which would mean an increase in our dividend payout ratio just under 90%. We expect this to normalize back to our existing payout ratio of 80% over time. I'll now take you through a review of our investment activity in the property portfolio. In November, we set out our revised capital allocation framework based around 4 key priorities. And I'm pleased to say we've made good progress against each in the past three months. We formed our first two university partnerships in Newcastle and Manchester and started construction of new on-campus beds. For our off-campus developments, we reflected a more challenging leasing environment, which has seen us exit or defer future schemes. We're also committed to accelerating disposals and have today announced the sale of St. Pancras Way to USAF. This capital allocation supported our decision to launch a GBP 100 million share buyback in January. As Joe set out earlier, we see a clear trend towards the strongest universities outperforming and growing student numbers. These are also the institutions where students see most value in the residential experience, and we see the most enduring demand for our product. Our target is to increase our alignment to high-tariff universities to 80% of our portfolio over the medium term. Our investment activity in the past year has supported this goal by exiting lower-growth markets, developing in our most supply-constrained cities and acquiring Empiric's high-quality portfolio, all of which have increased our high tariff alignment to 67%. Our future investment activity will see us focus our portfolio on fewer cities and the strongest university partners. This will be achieved through the delivery of our university partnerships and developments and by accelerating our exit from lower-growth assets and markets. We've been delighted with our progress with university partnerships over the past year. We're now on site in Newcastle and Manchester for the delivery of 4,300 new beds. Universities recognize the value we bring through our design, planning and development expertise, which has helped to unlock these substantial projects in a difficult environment for new development. There has been significant appetite to lend to our university partnerships with Rothesay and PIMCO providing debt at borrowing costs below our initial underwriting. As Karan mentioned, the strongest universities want more high-quality affordable accommodation on their campuses. As a trusted partner with a growing track record of on-campus deals, we have a significant opportunity to add future joint ventures. We have half a dozen live opportunities with high tariff universities, and our target is to secure one of these deals per year. We're targeting low to mid-teens unlevered IRRs for future projects with demand underpinned by university partners who have an aligned financial interest in the schemes. I'll now turn to our off-campus developments. We delivered two new developments in 2025 in Bristol and Edinburgh totaling 1,000 beds, and we have a further two schemes under construction in London and Glasgow for delivery in the next two years. The cost to complete our committed schemes are around GBP 100 million. Our 2025 deliveries were 65% less in the year of opening. And as Karan said, these properties are leasing up well for the '26, '27 sales cycle. Our focus is on stabilizing the 2025 openings and leasing upcoming deliveries. Together, this would add GBP 27 million to net operating income from the end of 2027. At Hawthorne House in Stratford in London, we will complete construction in June for the delivery of 719 new beds in an academy school let to the Department for Education. The project is our first development delivery subject to approvals by the building safety regulator. We recently secured the second of three gateway approvals and are fully engaged with the BSR to derisk opening in time to welcome students for the start of the '26-'27 academic year. Our uncommitted pipeline also includes sites for an additional 2,400 beds where we own the land, for which the bulk of the value is in consented schemes in London. We will be highly disciplined over new development starts and recently took the decision to exit our TP Paddington project due to it no longer being viable. We've also deferred the development of our Freestone Island site in Bristol. We're currently exploring all options to realize value from these uncommitted projects, including outright sale as well as joint ventures where a partner would fund future CapEx. In the wider market, we see other developers facing the same challenges around development viability. New supply of purpose-built student housing increased in 2025, but remains around half of pre-pandemic levels. Net of beds leaving the market due to obsolescence, new supply remained modest at around 1.5% of stock. High build costs and longer development programs due to the Building Safety Act gateways mean weekly rents now need to be at least GBP 230 for projects to be viable. This is above the rents in 80% of our markets and runs contrary to what Karan said about universities focusing on more affordable product. Where new supply is coming forward, it tends to be focused on more premium studio product and the small number of prime regional cities, which can support rents at these levels. We expect new supply in 2026 at similar levels to 2025 with markets such as Birmingham, Leeds and Glasgow set to absorb the highest levels of deliveries. Looking beyond 2026, we expect to see a material reduction in new supply as indicated by fewer new planning submissions for PBSA schemes over the past year. We also see the same viability challenges impacting development of build-to-rent, which has become a source of competition at the premium end of the student market. We saw good levels of investment activity in the student housing market during 2025 with just over GBP 4 billion of assets traded. Interestingly, we've seen a change in the makeup of transactions, which have shifted from funding of new development towards purchases of standing stock. This reflects the viability challenge for new development in the current market. Institutional investors remain active with the likes of AustralianSuper, QuadReal, L&G and KKR, all deploying capital in 2025. After a year of softer occupancy, leasing performance for the '26, '27 academic year will be key to pricing for upcoming transactions. We're targeting GBP 300 million to GBP 400 million of disposals in 2026 from a combination of lower growth or mature assets that have made a good start through the sale of St. Pancras Way. We will be bringing further assets to market in the coming months and have identified around GBP 100 million of future disposals from the empiric portfolio. Positively, we're seeing good interest from value-add investors for portfolios at affordable rents valued significantly below replacement cost. We expect further disposals to follow the conclusion of the '26-'27 sales cycle in the autumn. This reflects the importance of current leasing performance as well as the time required to complete technical due diligence linked to fire safety. We are fully focused on deploying capital where it delivers the strongest risk-adjusted returns. This was demonstrated in January through the launch of a GBP 100 million share buyback program to return surplus capital to shareholders. This was funded through reduced off-campus development. Looking ahead, we expect to generate around GBP 100 million to GBP 200 million per annum of surplus capital as we execute on our disposal plan and development CapEx reduces over time. Share buybacks and university partnerships remain the best uses of our capital, and we will decide how and where we invest based on the opportunities we have available to us. New investment must demonstrate clear accretion to both earnings and net tangible assets, and we will not compromise on maintaining a robust balance sheet. This means future investment will need to be funded out of disposal proceeds. And with that, I'll hand you back to Joe. Joe Lister: Thanks, Mike. So, we set out a clear plan in November, and we've made a good start. We know that we've got a lot to do, and it will take some time, but we are really clear on our near-term priorities. We will be relentless in our focus on sales from both nominations and direct let across both Unite and Hello Student. We will deliver further cost efficiencies from the delivery of our tech platform, complete the integration of Empiric by the end of the year, securing additional synergies and drive earnings accretion from our sales platform. We've announced the sale of an asset to USAF and launched a portfolio that supports the portfolio repositioning, and we will be pragmatic and agile in the delivery of that. And we will be disciplined in our approach to allocating capital to new development, prioritizing nominations and joint ventures, and we will consider further share buybacks as we make progress with disposals. We remain positive on the sector and believe that the fundamentals remain strong. U.K. higher education is an amazing asset to this country. It is globally recognized. There is a more stable policy environment and the strongest universities are growing and targeting further growth. We're confident in our platform and our ability to integrate and drive value from the Empiric acquisition and our university relationships, and we are underway with our portfolio repositioning and seeing new supply slowing. We are pleased with the progress that we're making, and we believe that we are well positioned for the future and building momentum in our performance. On that, I'm going to open up for some Q&A. So I suggest we start in the room, and then we can go online. I got a couple of mics at the back. Callum Marley: Callum Marley from Kolytics. Two questions. First one on Empiric. So, Empiric occupancy came in weaker than expected. And Joe, I think you mentioned that they failed to pivot away from their core postgraduate market. Was this priced into your original offer? And I guess, was this a foreseeable miss? Joe Lister: So we did reduce our price because we saw that there was weakness in their sales, but they still came in below that. So that was a disappointment in terms of where they've ended up. And I think that was in part, as I say, because of that lack of failure to effectively reposition and also just from some of the market changes that we saw across our own portfolio. Callum Marley: Okay. Then the second one, why should investors have confidence that today's guidance represents a floor rather than another step down? Joe Lister: Look, I think that we set out in November that the -- effectively the fundamentals of our business that we believe that we should be focused in on those high-tariff universities that we have seen changes in the marketplace coming from the move to more students staying at home and the growth or the fall in international postgraduates and that repositioning the portfolio will take some time. We've also been encouraged by the applications data that has come in for the next academic year, both from U.K. undergraduates and from international undergraduates. And that gives us confidence that we will continue to see that high tariff -- that growth of high tariff universities, but it will take us some time to reposition the portfolio. Paul May: It's Paul May from Barclays. Just following on from that last one. I think you mentioned a few times in the presentation about making good progress since November, but yet you announced another profit warning, which is your third in four months. What confidence can you give us that you have full control and understanding of the market? You highlight demand should be stronger year-on-year and yet you're guiding to the bottom end of operational expectations. There was stronger demand last year and yet the market suffered from operational challenges. How do we know that this is not the start of a multiyear rebasing in occupancy and rate growth given the supply-demand dynamic appears to have broken. Joe Lister: Yes. Universities are taking a more cautious approach, and we've seen that. And the current occupancy position is driven primarily by that shortfall in nominations agreements. I think we are encouraged by the quality and number of conversations we've had since the release of that applications data. But that's why we are reducing our occupancy guidance to the lower end of our range. We set out in November 93% to 96%, and we are saying that given that current position that we are saying that we will be towards that lower end of the range. The reduction in the earnings guidance is primarily because of the Empiric acquisition, the 1p to 1.5p, and that's because of their sales performance before the business was in our control. We fundamentally, and hopefully, we set out our belief of why we see the longer-term performance of the sector and aligning to the high-tariff universities where we have seen strong growth in numbers. We've seen a return in growth or growing numbers of undergraduate students as well. But fundamentally, that's why we believe that we will be able to return to that core occupancy back to where we've historically been. Paul May: So I think in November, you also mentioned an expectation to bounce back to 97% plus occupancy and inflation plus rental growth from academic year '27, '28. I assume this is no longer expected. Joe Lister: Yes. I think the delivery of that to 97% was when we repositioned the portfolio. I'm not sure that we sort of believe that will all be done by '27, '28. I think that we do need to go through that portfolio repositioning. And we've highlighted GBP 300 million to GBP 400 million of sales this year. We've launched the portfolio. As I say, we will be pragmatic in the delivery of that, and we will have to go again into '27 as well. So I think the delivery of that is around the alignment point and that we will need to effectively get back to that focus or greater focus on high tariff to enable us to get to that levels of occupancy. Paul May: A very quick one. then share count you're using for EPS guidance just given the issuances and other things. Michael Burt: Yes. What I can say, Paul, is there's a few moving parts in the share count, clearly. So, the Empiric acquisition completed at the end of January. So, essentially, you have 11 months of own shares. The other variable is clearly the share buyback. We've talked about deploying GBP 100 million over the course of essentially the first half of the year. So you should probably assume around nine months of those shares being out of the share count. So clearly I can't give you a precise number, but hopefully, that gives you the key moving parts. Paul May: Sorry, last one on Pancras Way. Obviously, sold to a related party, one could argue. Why did you decide to sell to USAF? Was this a competitive process? If so, what was the price of the underbidder? And how much was the asset written down in '25 versus the portfolio? Michael Burt: Yes. So it's probably fair to say for context. So USAF is a fund in which we established it over 20 years ago. We remain a big investor. We've got a 30% stake in the fund. And clearly, these are investors who want to -- they see value in the student accommodation sector and they want to be invested there. We've been talking to USAF over the course of the last two years because they've made a number of disposals, which have freed up capital. So the fund has had capital. We've historically sold into the fund and generally, that's helped us recycle capital to fund things like our development pipeline. We knew USAF had a requirement to grow in London. It's about 15% of their portfolio, and they'd like to upweight. And we discussed the number of assets with them. That was on a bilateral basis, but it's arm's length. So the way decision-making works in USAF is for them to approve a transaction, there's a vote which is outside of -- Unite is excluded from that vote essentially. In terms of the valuation of that asset, we saw the yields move out by about 15 basis points over the course of last year, which net of the rental growth meant it was modestly up in value terms, but that's pretty consistent with what we saw in the broad market. But it's fair to say this was an arm's length negotiated transaction. We're pleased to sell it to USAF, and I think USA are pleased to have acquired it from us. Rebecca Parker: Just wondering if you can talk to the markets that you had to execute pricing adjustments in and whether you expect any other markets, I guess, with oncoming supply to be impacted there. Karan Khanna: I can take that. So I think as we've set out in the Capital Markets Day, there were three cities where we had the most challenged performance, Nottingham, Leicester and Sheffield. So in those three cities, we did make pricing adjustments. And we've done a combination of adjusting the headline price, but also adjusting tenancy length to marry to the needs of the universities. So where we may have historically have had 51 weeks, we've gone to some of those 44 weeks as well. In a lot of the other cities, we've done tactical price changes. I don't think we've done strategic citywide price changes. So individual properties. A good example of that is the 2 new properties that we launched last year, Avon Point in Bristol and Burnet in Edinburgh. We've adjusted some of the pricing and tenancy lens there as well to rebuild the base and secure the rebookers as well. Apart from that, it's different in different cities, but those are the key ones where we've made adjustments so far. For the rest of the cycle, obviously, we will see how the performance varies and then depending on where we see demand coming or softening, we will make more adjustments. Rebecca Parker: Also, just with the direct let, I guess, underperforming nomination agreements, how, I guess, under-rented are those nomination agreements? And does that come up in your discussions with universities that nominations are achieving a higher rental growth than the market? Michael Burt: Yes. Rebecca, it varies by agreement clearly. But sort of broadly speaking, they tend to be sort of around 10% under-rented on an annual contract basis versus direct let. However, what we get with those agreements is clearly visibility and security of income. So there are some benefits. One of the other things we think about the nomination agreements beyond the income security are the savings we make in cost of acquisition as well. So they can be something in the order of 3% to 5% of booking for a direct let sale. So we tend to think about these things in the round. Yes, we hope to capture reversion, but we're also looking to grow that nominations space, as Joe discussed. Rebecca Parker: Yes. And then just on Empiric's letting performance, you expect it to be in line with the direct portfolio. Just wondering if you can give some, I guess, some numbers around that. And then also just given the current slower leasing cycle, just wondering if you can talk to, I guess, because they have that higher weighting towards tariff universities, what's really going on here? Yes. Michael Burt: Yes. So if you look at the Unite guidance for this year, we've talked about being at the lower end of the 93% to 96% and nomination agreements being probably around the mid-50s as the share of beds. What you can imply from that is our direct let occupancy would be in the mid- to high 80s, and we think Empiric's portfolio will be in a similar place. And I think your second question, Rebecca was on high tariff and how that's performing for them. Fundamentally, those institutions have performed well and their properties are located in strong micro locations. I think the impact on performance has been around that post-graduate intake. So we often talk about high tariff in regards to the undergraduate data, which is trending very positively. However, what we have seen is softness in post-graduate demand and particularly a reduction in bookings from China for Empiric. Thomas Musson: It's Tom Musson at Berenberg. Just a question on the portfolio valuation. Am I right in thinking that in this period, the valuers will have made a specific deduction to the value in some places due to lower occupancy? Or is the portfolio still valued based on assumption of full occupancy? Michael Burt: Yes. So, yes, Tom, you're right. When we have buildings that are under-occupied versus, say, a standard 97% occupancy assumption and valuation, what the valuers will do is make a pound per pound reduction for the shortfall in that income for the next 12 months. However, what they will also reflect and they have reflected in the Q4 valuations, in some cases, are reductions in expected rents because of the lower occupancy performance. So what you will have seen in the Q4 valuations is they've taken account of the sales outlook that we've reflected in our guidance for the '26, '27 academic year. Thomas Musson: In pound million terms, are you able to sort of say how much that is? Michael Burt: The pound per pound reduction in the income, Tom. It would essentially be that gap. So if we're saying we were 95.2% occupied for the academic year, it would essentially be the 1.8% occupancy reduction relative to the value. Thomas Musson: All right. And then just quickly on software implementation costs. You mentioned the upgrade program will complete next year. How much more cost should we assume for '26? Anything else beyond that? Michael Burt: We have about GBP 10 million to go, Tom. Ana Taborga: Ana Escalante from Morgan Stanley. One question on the nomination agreements because in January, you reported 56%, if I'm not mistaken, of reservations coming from nominations, and that has gone down to 55% now. So I was wondering why -- or what's the reason behind that reduction? And if that 55% that you are reporting today is totally secured for academic year '26, '27? Karan Khanna: Yes, I can take that question. So the reason for why it's sort of gone down since the January update is we were still in the middle of the conversation with universities on what volume they were going to take. And what we have seen is that we've lost very few accounts in full. What we have seen is where universities may have taken 1,500 beds, they've sort of said we're going to take 1,300, and we're going to guarantee you 1,300, but we need to see where the applications are going to be before we can commit to the next 200. So they've sort of taken the top off a little bit, and that's kind of what has led to the number going down from 56 to 55. So it's a lot of small little adjustments rather than one or two big accounts that we have sort of lost as well. Sorry, I missed the second part of your question. Ana Taborga: Yes. Of that 55% that you've currently reported, how much do you think is 100% secured. Karan Khanna: Yes. So we're pretty confident on the 55% that's in there right now. So they represent either contracts that we have already signed. Most of them are multiyear agreements. So they are pretty secure. We also have a pipeline of further conversations, which are what we are hoping will get us the 1 to 2 points of additional occupancy on that 55% right now. Ana Taborga: And then the discussions that you're having with universities are mostly around what they're saying, right, that they don't want to commit on certain number of beds? Or are they, to some extent, some price sensitive and therefore, they are demanding for some price adjustments? Karan Khanna: It is very much the former, which is do we have confidence that we will have the student numbers securing -- seeking accommodation. I think overall, they are actually very happy with our relative price points. They are happy with the rate of rental growth that we've got in there. And historically, we've been quite prudent with what we've sort of pushed through as rental growth as well. I think they've been quite appreciative of the fact that we've adjusted tenancy lengths to reflect where they might need a 41-week or a 44-week rather than last year, we might have sold that as a 51 week. So we have a lot of positive commentary from them around our flexibility and not really a lot of issues around the headline price right now. I think ultimately, what they want to just get confidence on is the application that they're seeing, which is more positive than initially may have thought is actually that turning into acceptances, which really does happen through May and June. Maxwell Nimmo: It's Max Nimmo from Deutsche Numis. Just on the integration with Empiric, I think you were talking about kind of technologically bringing that together for the next sales cycle. Just how confident are you on that in order to get that kind of sales rate back up? Is it sort of a plug and play? And kind of related to that, you mentioned also about the build-to-rent risk as well in the market, particularly in some markets where there's quite a lot of new supply, and we're hearing of build-to-rent assets with 40% to 50% of students in them. Just how you see that risk versus the kind of the rent reform bill and things like that. Karan Khanna: Yes. So, Max, on the first point, I wish it was plug and play, but I think from -- I think anybody -- any of us who ever been in a technology upgrade knows that it takes the complications and the surprise as you get through your deployment. I think the advantage for the Empiric team coming over to the Unite platforms is that we are actually going through that process within the Unite properties first. So we've already transitioned to our new service platform. We've implemented Fusion in finance. So a lot of the core platforms that they'll be coming on to, we have already tested, embedded within the Unite system. So we know how to move them across platforms. The big unknown for us right now is our property management and booking engine because we're in the final stages of its design and testing and the testing really starts in earnest in April. So that's probably the unknown where if that goes well for the United systems, United Properties, then actually the process to bring an Empiric on would be just another group of properties. But again, I think it -- I need probably the next three to six months to see how the testing goes before I can give you the confidence whether it will be a plug and play. But the intent is very much to have it ready in time for the sales cycle for the next year. I think on your second question with build-to-rent risk, we have seen build-to-rent emerge as a competitor, especially for international students and especially for returners who are looking for that more independent living experience. That's part of the reason why we were quite excited by the Empiric portfolio, which offers a very different proposition. There will be more risk within build-to-rent because they will be -- they will not have the benefits of the assured tenancies that we will still have within the student portfolio. So we think there is more volume that we can shift from the HMO market where if you're a landlord, it's yet another challenge that you have to deal with. So we're hoping the supply side does become a little bit better for that second and third year in the returning market, which will benefit Empiric as well. Joe Lister: Not sure we'll allow a second go, Paul. Paul May: Apologies. Just had one which came up, I think, at the Capital Markets Day, which you mentioned about a reduction in utilization of space through the year. Just wondered if you're seeing that in the continuation in the direct let in terms of shorter lease cycle. Michael Burt: We are seeing a slight shortening in lease duration, Paul, and that's reflected in the price guidance we give. So when we said being at the lower end of 2% to 3%, that's annual contract value. So that's the combination of weekly rate and the length of tenancy. We saw that length of tenancy tick up for a number of years, and we saw it slightly reduced last year, and we're seeing a similar sort of attrition in that this year. So it's reflected in the guidance, but it's fair to say that probably that affordability trend means that we're seeing those contracts get slightly shorter. Joe Lister: And part of that is driven by the shift of international postgrad towards undergraduates and generally, the undergraduates want a shorter tenancy length than the postgrads. Paul May: I think you mentioned some leasing per term. Have you seen an increase in that as well? Michael Burt: Not really. Karan Khanna: Not massively, Paul. But we are actually quite good at backfilling our rooms where we do have either vacancies or somebody needs to leave early because of any issues. We've done fairly well. We have seen some jam starts come through as well as universities have started to add courses in that particular period as well. It's something that we're actually fairly good at. It's never been a huge part of our business, that in summer income. But as we have shorter tenancies, we've actually bulked up that business development muscle. Michael Burt: And it's fair to say, Paul, when you end up selling a first semester, let's say, it's generally because you might have vacancy. So we haven't really started doing that yet. It's focused on annual contract values. As you get towards the end of the cycle, you may pivot towards selling some of those shorter tenancies as well. Paul May: And very last one. I mean, we've obviously seen quite a share price decline over the last basically a year or six months, another decline today. Just wondering, should we expect to see direct purchases of shares going up seeing your confidence in the future has increased or deferring a part of your salary into share options given that confidence? Joe Lister: Yes. I think we've already increased our shares that we've been buying, and there is also a bonus deferral element to our remuneration. So yes, it's something that we actually consider. I think that along with the share buyback program that we've announced is sort of hopefully demonstrating the commitment and confidence that we've got in the value of the business going forward. Mike, I think we've got a few coming online. Do you want to pick up any that we haven't sort of covered? Michael Burt: Yes. So I'll start with a couple from Marc Mozzi at Bank of America. First one, are university partnerships included in your earnings guidance? Yes, they are. It's fair to say though that we're in the development stage. So it's just a case of the CapEx coming through and those beds will become operational in future years. Marc then had a separate one on what is the initial yield we should expect for your disposals? It will be a blend of different types of disposals. We've clearly made the disposal to USAF we've announced today. We do think that the yield on disposals will probably be in the order of 5.5% to 6%, albeit some will be high yielding, some will be low yielding. I'll then turn to Denese Newton at Stifel. What is the likely impact of your price matching offer where early bookers will still get the best price? Karan Khanna: Yes, I can take that. So any time that we are considering a price reduction from what we have already launched, we do look at what's the actual net impact of that from -- in terms of incremental revenue it can drive net of what we have to give back to students, be it on the incentive or the headline price as well. In most cases, it's not massively significant. So if you're offering a GBP 250 incentive and there's 100 existing students, that's GBP 25,000 that we'll be doing. So, so far, it's not material, but it is an active consideration when we look at price reductions because we want to make sure that we are making net-net more cash rather than just trying to drive pure occupancy in itself. Michael Burt: Got one from Andres Toome at Green Street. How do you perceive the risk of missing income for 2026 new openings? Are you able to fully let new schemes open in 2025? v Karan Khanna: I can take that. So we've got one scheme coming up in London, which is Hawthorn House. 51% of that building is already nominated with the London university, which is a great sort of base to come from. We've also had interest in that asset from another high tariff university in London, which if we're able to secure, which we'll know in the next few weeks, I think that will then put that property on the track of full occupancy. It's a great asset in Stratford, really well-priced rents as well. So -- and sort of taken the lessons from last year around what we need to do to drive initial occupancy, initial pricing incentives, et cetera. So right now, we are confident that we can -- on the back of the nominations that we should be in a good position. Michael Burt: We've then got a couple of questions that I'll combine on build-to-rent. How is your build-to-rent strategy progressing? Have you thought about repurposing PBSA into BTR where you may be facing lower occupancy? Joe Lister: Yes. So we've got the one asset build-to-rent in Stratford. I think just given the current capital position of the business, we won't be looking to grow and add to that portfolio. Indeed, we'll probably add that one to our overall disposal program either in '26 or '27. I think in terms of repurposing student accommodation to build-to-rent, that does come with some real complexities around affordable housing and change of use. So I think where we have more flexible consents, we may look to open up lettings and actually, the Empiric portfolio plays into that, but it's not something that just given the overall demand and the outlook that we're spending too much time on at this moment. Michael Burt: I think got one from Roy Kulter at ABN AMRO. Historically, you've guided to a total accounting return target of 8% to 10%, excluding you movements. given the current environment, do you still expect to hit that figure? So I think we've laid out the sort of the key elements really that sort of go in to give you the total accounting return. Generally, in any given year, about half of that 8% to 10% comes from recurring earnings. You can clearly see the guidance for this year, which is for a slight reduction in earnings, but you would still expect about 4.5% of return on the NAV from that recurring earnings growth. Thereafter, the valuation impact will be a function of the rental growth we achieve. We've given you a sense of how we're trending and clearly, the property yield movements that may or may not happen, but we don't guide on those. I think that's it. Joe Lister: Great. I don't know if we've got any calls on the -- questions on the calls. Great. Well, thank you all for coming and joining us this morning. Thank you for all your questions, and look forward to seeing you all.
Steve Foots: Good morning, everyone. So many thanks for joining us for today's presentation, and it's great to be with you all. As well as running through our financial results, we're going to do a deeper dive on the plan we're expecting to grow -- executing to grow earnings and improve results. And we will also set out our financial framework for the next 3 years. So a slightly longer presentation than normal, which Stephen and I will carve up between us before taking your questions at the end. So starting with our performance in 2025. Overall, we're pleased with how the business has performed in a very uncertain environment. Sales grew 7% in constant currency, reflecting the benefits of a much stronger portfolio. And sales of patented ingredients were up 9%, with demand for innovation at its highest level since before the pandemic. And our Net Promoter Scores increased by 11 points as service, collaboration and more importantly than that, trust continue to improve across our customer base. And whilst margins remain well below where we want them to be, they improved both in Consumer Care and in Life Sciences, contributing to an 8% increase in profits with PBT in line with our guidance. Free cash flow also improved in the second half due to lower working capital and CapEx, strengthening our balance sheet. So good progress. There's much more to do, but our actions are beginning to bear fruit, which is encouraging. So more from me shortly, but first, over to Stephen for the numbers. Steve? Stephen Oxley: Thank you, Steve. Good morning, everyone. I'll start with the financial headlines for the full year before taking you through our sales for the fourth quarter. So in constant currency, sales were up 7% to GBP 1.7 billion. Adjusted operating profit was up 8% at GBP 295 million, and adjusted profit before tax also grew 8% to GBP 276 million. Free cash flow was GBP 162 million, supported by reduced CapEx and lower working capital in the second half. Net debt was GBP 524 million with leverage of 1.3x EBITDA. And we proposed a final dividend of 63p, bringing the full year dividend to 111p, a small increase on the prior year. Turning to sales for the fourth quarter. These were up 5% in constant currency, slightly stronger than we expected. Our Consumer Care business was up 9%, driven by another strong quarter in Fragrances and Flavors and supported by higher growth in Beauty Actives. Life Sciences were up 8%. Within this, Pharma delivered its strongest quarter of the year, driven by higher excipient sales. And momentum continued in Crop Protection with sales up 12%, though we expect this to slow going into 2026. Industrial Specialties was down 19% against a particularly strong quarter in the prior year. The trends we saw in the third quarter continued into the fourth with volume growth moderating, a more favorable mix than the first half and like-for-like prices largely consistent with the previous year. Turning to sales now for the full year. We delivered growth of 7% in constant currency despite an uncertain trading environment. Consumer Care sales finished up 8% with another standout year for F&F, which grew 15%. Beauty Actives was up 6% and Beauty Care grew 4%, supported by higher volumes. Life Sciences grew 8% with Crop Protection up 14% as demand returned after an extended period of destocking. Seed Enhancement continued to deliver good growth of 8%. Pharma sales grew 4%, which was below our expectations as U.S. policy impacted sales of vaccine adjuvants. Finally, Industrial Specialties was down 2% as direct sales growth largely offset a decline with Cargill, which now represents just 20% of IS sales. There was growth across all regions, led by EMEA, where sales were up 9%. Asia lagged other regions as customer exports in pharma and industrial markets were impacted by U.S. tariffs. And growth in North America improved in the second half, supported by a recovery in Beauty. As Steve said, we're starting to see early progress from our business transformation. This chart shows how operating margin progressed over the year from 17.2% to 17.4%. Sales growth delivered an uplift of 0.7 percentage points as higher volumes were partially offset by price/mix, which was mainly mix. There was also a 1.6 percentage point benefit from transformation cost savings. This more than offset inflation and the costs associated with recent investments coming online. Unfortunately, a foreign exchange headwind of almost 1% masked this margin recovery. With cost savings gaining momentum, second half operating margin was 17.6%, giving us confidence margins will continue to expand over the coming years. Turning now to profit. This shows a bridge of adjusted profit before tax of GBP 276 million to reported profit before tax of GBP 91 million. In addition to recurring amortization of acquired intangibles, there were exceptional charges of GBP 150 million. We incurred exceptional cash costs relating to transformation of GBP 26 million, including redundancy charges. The rest was largely noncash. This includes a GBP 45 million full impairment of our lipid site at Lamar in the U.S. with an associated onerous contract provision of GBP 16 million for standby costs. We've carried out a detailed review of our pharma lipid capacity across our 4 sites. And whilst we remain excited about the future, we have adequate capacity across 3 sites to satisfy medium-term demand. So we've started -- decided not to start commercial production at Lamar and have instead placed the facility in standby mode. This eliminates future financial exposure and cost while fulfilling our commitment to the U.S. government, who provided most of the site's funding to produce lipids in the event of another pandemic. Other noncash charges of GBP 62 million include a GBP 29 million write-off for assets under construction, which will save CapEx following a detailed review of future investment requirements. A GBP 22 million impairment for closure of our U.K. distribution center, which we announced last summer as we optimize our European supply chain and an GBP 11 million impairment of acquired technology intangible assets where we've discontinued certain development programs. There are likely to be further impairments as we continue to optimize our footprint. Moving now to free cash flow and net debt. EBITDA increased 5% to GBP 397 million. As you can see, there was a working capital outflow of GBP 8 million compared to an inflow of GBP 21 million in the prior year when we benefited from the settlement of a GBP 48 million one-off COVID receivable. Typically, I'd expect a working capital outflow of between GBP 20 million and GBP 30 million to fund growth each year, but we can reduce this by making structural improvements, which I will come back to later. Following a detailed review of current and future investments, CapEx reduced from GBP 138 million to GBP 108 million, below our guidance of GBP 135 million. Combined with stronger earnings, this supported free cash flow of GBP 162 million. After paying the dividend and purchasing shares for our employee share ownership plan, net debt reduced slightly to GBP 524 million. Leverage improved from 1.5x EBITDA at the end of June to 1.3x at year-end. Turning to guidance, where my comments are in constant currency. We expect adjusted operating profit to be in line with current market expectations with organic sales growth of 3% to 6% and a further increase in operating margin. First quarter sales are expected to be similar to the same quarter in 2025, which is a strong comparator with growth of 9%. And we expect sales to split roughly 50-50 between the first and second half. So in summary, we delivered good growth in 2025 despite uncertain end markets, and we're encouraged by early signs that the transformation program is improving both margin and returns. Now back to Steve to take you through our plans. Steve Foots: Many thanks, Stephen. So the plan we're executing builds on the 5 points we talked about last year. It combines growth actions with transformation initiatives to drive improved performance. And it's all about growth and efficiency. We need them both. And that's starting to happen, and we expect that to continue. I'm going to spend some time on what we're doing to deliver more consistent growth. So what we're specifically doing to refocus innovation, improve customer experience and maximize returns from investments to drive consistent growth in key markets such as beauty and pharma. I'm really pleased with the progress being made, executing on our transformation initiatives. The whole business has responded well. And as we pushed hard to deliver change quickly, the organization has responded. And by implementing permanent structural improvements, we're becoming a more efficient company. We are streamlining our supply chain and procurement, digitalizing key processes and exploiting the use of AI and data in the business. So it's all about simplifying, modernizing and standardizing the way we do things across the business to make both the customer and the employee experience a much better one. This is leading to an improved financial performance, which Stephen will expand on in a moment. So before I come back to our actions, I want to talk through the foundations of our plan, which are Croda's core strengths. There's 3 things that sets us apart, I believe, from our competitors. Firstly, it's our business model. It's fundamentally a differentiated model built on the importance we place on customer intimacy through direct selling. This allows us to better understand the unmet needs of our customers and drive innovation, and you're starting to see that come through. Secondly, it's our core capabilities. We have a leadership position in both innovation and sustainability across all key markets, and we make it very difficult for our customers to formulate out our products. And thirdly, not last, on the right, there is our portfolio. We've come to the end of a period of significant portfolio investment, and it's now pointed to higher growth and focused on niche markets with compelling long-term trends. This has enabled good year-on-year growth over the last 18 months, even in these tough conditions. So coming to each of those strengths in turn. This slide outlines how our business model actually works in practice. At its heart, Croda is a specialty ingredient company, where we refine and purify natural raw materials and supply thousands of ingredients to thousands of customers that are included in their products, often actually at very low inclusion levels. The pictures across this slide show each step of the model and what our teams are doing to create performance difference through imagination, creativity, but above all, exacting science. And we're selling the benefits of our ingredients, not the chemistry. And whether that is applying our unrivaled purification expertise for drug delivery, utilizing high throughput screening to create new beauty claims, tailoring ingredients to meet the demands of our crop customers or using our expertise in formulation development to combine ingredients into solutions for high-profile brands. And we bring all of that together with world-class claims, which often transform the value of our customers' brands. Next is our core capabilities. We leverage common science with common processes and common products. And the diagram on the left illustrates how smart science is the starting point for everything that we do. It touches the areas -- all areas of our business, and the same can be said for our processes as well. Ingredients sold to beauty, home care, crop protection, industrial specialties as well as many pharma customers are produced at our shared manufacturing facilities. It accounts for 60% of our sales and 70% of our volumes. And many of our ingredients are sold in different markets. So what might start out as a product in beauty can often end up in a crop application as well, the same product. And we optimize the exact specification by ensuring that our sales teams work in close collaboration with R&D to create solutions for our customers. Our ingredients portfolio is unique with 1,700 patents and sales of patent ingredients increased by 9% last year. We also lead the way in sustainability as validated by our external rankings, including our long-standing AAA rating from MSCI. Look, these capabilities are fueling our ability to serve fast-growing niches, each with compelling and common characteristics, which I'll discuss in more detail later. So following a period of heightened investment over the last 5 years, our portfolio is aligned with the higher growth and long-term sustainable niches. 89% of our total sales now come from consumer, pharma or agricultural markets. That's up from 73% in 2019. These are the areas where customers value our innovation the most, and those industries have got big megatrend structural drivers behind them. We have invested in exciting high-growth niches like plant stem cells, fragrance and flavors and biologics to access faster growth and they're all growing twice as fast as the market. And we're also selling to faster growth customers, notably local and regional customers and now represent 82% and 56% of sales, respectively, for consumer and Crop. Geographically, 48% of our sales are now from outside of Europe and North America, up from 37%. Half of our business is in fast-growing countries. So from a market, customer and regional perspective, there has been a material shift in our portfolio towards faster growth, and you're starting to see the early signs of that coming through. This slide explains operating margin development over the last few years, with each column accounting for approximately 1/3 of recent margin dilution. Firstly, on the left, it was a consequence of lower volumes, which was mainly macro driven due to volatile demand post pandemic, but compounded by the divestment of most of our industrial business in 2022. Secondly, it was driven by a higher cost base, as shown in the middle column. And whilst product and gross margins have remained relatively stable, reflecting the quality of our business, our cost base, particularly SG&A, became significantly higher. And thirdly, on the right, whilst this period of heightened investment has positioned us for growth, it's also increased our invested capital base, contributing to lower returns on invested capital and resulted in more incremental costs as new investments come online. So some of our acquisitions are also high growth but lower margin, notably F&F. So until recently, our margins have set us apart from our peers, a leading position that we are determined to recover. And encouragingly, 2023 was the low point of sales and profit with progress in '24 gathering further momentum in '25 and as we ramped up our growth and efficiency program. So there have been 4 major challenges that we've learned in the last few years, and we're stepping up this execution around them. Firstly, customer behaviors changed post the pandemic, and they temporarily prioritized supply and demand challenges ahead of innovation. And secondly, we allowed our cost base to run ahead of sales. We were slow to address this, and now we're dealing with it. Thirdly, our strategic investments need to make a bigger contribution to profits. And finally, we were too concentrated on higher growth opportunities, notably in pharma, where we focused on vaccines ahead of our heritage business. And our growth and transformation actions are a direct response to these learnings. We're a curious company, we must learn as we go. And we've increased our focus on execution, and you can start to see this coming through in our results. There's also more to come given the natural lag between action and outcome. So we finished the year in '25 much stronger than we started the year. We expect to finish '26 much stronger than the start of the year in '26. So I'm going to go through each of the 4 growth areas that -- and what we're doing to differentiate our performance. Importantly, our business is very well invested. So we're not having to ramp up investments to deliver consistent growth. It's already there. So starting with innovation, with consumer and regulatory trends changing quicker than ever, customer demand for innovation has rebounded, but customers now want different things. And we've responded by implementing a more rigorous innovation framework, rebalancing R&D resource making it more customer-centric and focused on 3 big things: firstly, launching new ingredients, which is the DNA of Croda. Historically, this is where we focus the hardest. Secondly, creating new benefits for our existing ingredients; and thirdly, increasing co-creation activity with customers. So running through each of these in turn and starting on the left, sales of new ingredients increased 10% in '25. And last year, we launched KeraBio developed from a new scalable technology platform for hair repair that enables brands to compete with market leaders. We're the first to market with a groundbreaking ingredient. And with the last batch we produce selling out within a day. Next, we're opening up big opportunities by creating new benefits from our existing ingredient range to meet unmet needs. For example, we've developed our existing lipid range to address new markets for pharmaceutical generics. And finally, we're doing much more with our customers to tailor individual ingredients and formulate multiple ingredients to meet their specific requirements. The average pipeline value of each customer co-creation project increased by 12% in 2025. So a good example of this is a peg-free rheology modifier that we developed in collaboration with a global beauty brand. So turning to customer experience and what we're doing to improve that. Our direct selling model and our co-creation expertise cement strong levels of trust and loyalty. Over 90% of our customers have stayed with us over the last 5 years despite the market volatility. We are now deepening those relationships by building a more granular understanding of different types of customers through the new segmentation program that we've got, introducing more tailored solutions and bespoke service packages for local and regional customers, regional giants and multinationals. They all want different things now. And for local customers, we are now globalizing claims testing and formulation support. So for example, in Beauty Actives, this has historically been done exclusively from our Sederma site in Paris. We're now replicating this capability in key locations across Asia. And last year, sales to this consumer -- this customer segment grew by 9% in Consumer Care. We're also deepening the relationships with Asian giants across beauty, pharma and crop protection, helping sales to top the 5 -- helping sales to the top 5 Asian beauty giants grow by 19% CAGR over the last 2 years. And crop sales to Tier 2 customers were also up 36% in 2025, partly driven by the rise of Chinese generic pesticide manufacturers. We're powering the world's biggest brands across our key markets and are a core supplier of beauty actives for every multinational company globally. And in 2025, we grew sales with 4 out of 5 top beauty customers and by 14% with our major crop protection customers. And our Net Promoter Scores, which we value very highly, prove that we're doing the right thing. We're benchmarking at the top of the industry for product quality, the most important driver of customer preference, but we're also in the top quartile for innovation, sustainability and above all that, trust. And we're driving best practice in order delivery, customer service and access to information. And with 89% of total sales now in strong and niche positions in these structurally advantaged markets, we're in a good position to continue the early growth momentum that is coming through. Turning to investments then. We're scrutinizing future commitments and past performance with much greater rigor, and Stephen will explain how we're applying our capital allocation framework shortly. We're also driving all of our recent strategic investments much harder, leveraging our global distribution network, maximizing sales and broad scientific expertise to accelerate technology transfer and development. And starting on the left with growth-focused CapEx, which was largely spent on assets in Asia and scaling up pharma lipids. Last year, we commissioned our new low emissions production center in Dahej, India, further rebalancing our global manufacturing footprint to higher-growth countries. It will support faster growth in Asia this year and its lower cost per unit will enhance profitability. Capital expenditure to enable large-scale pharma lipid manufacturing was joint funded by the U.S. and U.K. governments. The investment has positioned us for breakout growth in due course, but it's going to take more time. So we've decided to put our new U.S. lipids facility on standby to minimize costs. In hindsight, we should have invested in scale-up facility, not 2, and that's the learning here. But we have world-class facilities that can quickly ramp up when needed and enough lipid capacity to satisfy near- and medium-term demand. Moving across to M&A, acquisitions made during this period are delivering good growth, and we have rigorous plans in place for each of these businesses to support continued growth in the year ahead. So over the last 5 years, we've shifted to highly attractive markets primarily small niches, which offer prospects for above-market growth. It's the principle that runs through Croda for many years. And we've also allocated resources to higher-growth geographies. Our Beauty business has a circa 10% share in the $8 billion addressable market, as you can see on the left. Ingredients space with top 3 positions in niches that are growing faster than the market as a whole. In Beauty Actives in the second -- in the left-hand column, we have #1 or 2 positions in niches growing at 4% to 7% a year, and we're a top 3 player in Beauty Care Ingredients in niches growing at least 3% annually. Turning to our F&F business. It's -- we're a small but fast-growing player in a $25 billion addressable market. We focus almost entirely on local and regional customers in emerging markets, a segment that is growing twice as fast as the broader market. That unique positioning will continue to drive above-market growth in the years ahead, which we will support through light touch CapEx following more significant investment recently. Our agricultural business has a circa 9% share of a $4 billion addressable market. All of these markets have got good growth in them. And we have a top 3 position in niches growing at least 1.5x market growth. And as regulations tighten and crop care formulations become ever more complex, customers have significant development needs, providing us with opportunities to innovate. And this is reflected in strong demand for the highly differentiated ingredients at the top end of our portfolio, which have grown at 10% CAGR since 2019. And finally, pharma is a top 3 supplier of delivery systems in niches, growing at least 5% CAGR. And I want to quickly update -- provide an update to some more detail on the actions that we're taking to reinvigorate Beauty and rebalance Pharma. Both these businesses has margins above the Croda average. So driving consistent growth here, of course, helps enhance group profitability. Starting with Beauty, where we're looking to drive a more consistent performance in both the top and bottom line. In Beauty Care, following the pandemic, many of our big customers prioritized tactical competitive activities like resetting supply chains ahead of innovation. This impacted industry innovation, causing it to slow temporarily. Well, ingredient innovation is now firmly back, and we've seen that pick up over the last 18 months, particularly with the multinationals. On top of this, customers want different things from our innovation programs. And at the start of last year, we responded by implementing this more rigorous innovation framework I just explained, ensuring spending is well controlled by reallocating resources to maximize the value we can create for our customers and, of course, ourselves. In Beauty Care, we have 2 key priorities. Firstly, capturing exciting new near-term opportunities in commercializing our advanced biotechnology pipeline. KeraBio is the first -- you should see this as the first of a number of new platforms ready to be commercialized. And secondly, showcasing Beauty Care as a delivery system for actives, leveraging our ability to deliver tailor-made solutions to customers comprising multiple ingredients, and that supported increased growth last year. In Actives, we're seeing greater demand coming from outside of Europe. So again, we have 2 clear priorities there. Firstly, internationalizing our actives capabilities beyond the traditional center in Paris. This will include regionalizing testing and claim substantiation capabilities, particularly in Asia. Our new class of ceramide ingredients is helping to accelerate active sales as we globalize our offer as well. Secondly, we're taking advantage of new markets opening up. Our Actives have traditionally been used in high-end brands, and that is continuing, but they are now starting to go into more mainstream markets as well. So we're delivering benefits to masstige products, affordable luxury, you may say. That's helped support higher sales growth in the second half of the year, particularly in North America. And we expect Beauty to contribute to organic sales growth of 3% to 6% to 2028 for Consumer Care, with Beauty Actives growing faster than Beauty Care. And the sales growth across Beauty is accretive to group margin, it will enhance profitability at the group level. And finally, Pharma. We've improved our focus and the customer experience by splitting our Pharma business into 2 portfolio-led focus areas. These are pharmaceutical ingredients, which many of you will know, which represent over 2/3 of pharma sales, but wasn't our priority during the pandemic. And as we concentrated on higher growth opportunities, we've now organized this business on a regional basis, leveraging long-standing customer relationships through our regional model. It comprises 2 things: ingredients for Consumer Health, where we're benefiting from Croda's broader skin care expertise for topical applications and advanced ingredients such as high-purity excipients that are used as delivery systems across the full range of current generation drugs. And to strengthen our leadership, we're creating new high-purity excipients for injectables and new bioprocessing aids as well, new market opportunities for us. And for example, our recently commissioned super refining process at our site in Leek has supported the launch of a super refined Poloxamer uses both an aid to sell growth during upstream processing as well as an excipient, great new growth opportunities. And moving across to the right, Pharma Solutions provides lipid technologies and vaccine adjuvants, which together represent less than 1/3 of pharma sales. Here, we have the opportunity to accelerate overall pharma growth, albeit with a more volatile year-on-year performance as illustrated by its exceptional growth during the pandemic, followed by a reset in demand. This is now organized as a specialized global business, working closely with customers and partners, principally on new drugs in development. In lipid Technologies, we're targeting new applications for lipids in generics and expanding our range of more than 2,000 lipids for drug research, for example, with Certest and to accelerate development of sustainable vaccine adjuvants as well, an important part of our R&D program. We are working with external partners with recent portfolio additions, including sustainable squalene, which has demonstrated extended stability compared with the competitors shark-based alternatives. Pharma will contribute to organic sales of 4% to 7% each year for Life Sciences, a growth rate, which excludes any breakout growth projects that could represent a potential upside. So growth across all pharma platforms is accretive to group margin and will help enhance the group profitability. So let me pause there, hand over to Stephen, who can talk about our transformation program and how all of this translates into our near-term performance. Stephen Oxley: Thank you, Steve. Right. So moving on to our transformation program. So last summer, we set out a program designed to enhance growth, drive stronger execution and deliver cost efficiencies. So what are we doing? First, we're optimizing value by reducing complexity in our product portfolio and customer base. We're also delivering commercial excellence through improved pricing discipline, customer segmentation and account management. Second, we're transforming our supply chain, where there's a significant opportunity to reduce cost and working capital by optimizing our procurement, manufacturing and distribution. Third, we're simplifying our organization by streamlining management layers, headcount and support functions. This is underpinned by actions to enhance our performance culture, aligning incentives to our financial framework as well as a program to leverage AI, digitalization and better use of data. Collectively, these steps are expected to deliver total annualized savings of GBP 100 million and a working capital reduction of GBP 50 million for full year 2028. Though it's still early days, we've made good progress in each area. So let me give you some examples, starting with optimizing our portfolio. Our customers value the breadth of our product range, which includes over 100,000 individual SKUs. However, this brings complexity and cost to our supply chain with a long tail of low-volume items where we don't always make money. So we're rationalizing our product SKUs with a minimal impact on sales, which will allow us to focus on the most important products, save costs and improve working capital. We've completed a pilot for one global product group and we'll now apply this to the rest of the portfolio. We've also segmented our customer base so that we can tailor our service better. For example, we're improving account management for our multinationals. We're setting minimum order values for smaller and regional customers, and we're accelerating adoption of our digital portal, reducing cost to serve. We're also driving best practice in pricing across the portfolio. As we told you at the half year, we're closing and outsourcing our U.K. distribution center as part of our supply chain transformation as well as fast tracking an operational improvement program for our 11 shared manufacturing sites, which account for around 70% of volumes and 60% of sales. By the end of the year, we've begun to realize savings in 6 sites with a further ramp-up this year as we benchmark and standardize best practice. We're also starting to consolidate manufacturing processes into fewer locations. For example, we currently produce alkoxylated products at 8 sites around the world, and we'll halve this by the end of the plan. In total, we have more than 40 manufacturing plants and most of our costs are not associated with the 11 shared sites. So we'll also focus on the rest of the footprint in 2026. Centralizing procurement is a major part of our transformation program, rebalancing local agility with the need to exploit our purchasing power. At the moment, Croda largely buys products and services on a site-by-site basis. We're establishing regional and global procurement by cost category, starting with raw materials, packaging and logistics. We've also launched a working capital improvement program and have identified structural savings of around GBP 50 million across inventory, receivables and payables. Looking at simplifying the organization, we reduced headcount by around 5% in 2025, excluding F&F. In our back office, we've begun to transform finance, HR and IT with a greater use of shared services and outsourcing as well as better use of data and automation. Now this slide aligns the savings we set out last year with the pillars of the transformation I've just outlined. GBP 65 million comes from optimizing our operations and procurement as we transform our supply chain and GBP 35 million comes from simplifying the organization through headcount reduction and streamlining our support functions. In total, we still expect to deliver recurring savings of GBP 100 million in 2028 at a cash cost of GBP 80 million. As you heard earlier, we delivered GBP 28 million of savings in 2025, slightly ahead of our plan. This offset underlying inflation and the cost of recent investments coming online. From 2026 onwards, we expect transformation cost savings to more than offset inflation and investment costs, contributing to margin recovery. Of course, we'll continue to identify new transformation opportunities, particularly in our supply chain, and we'll keep you updated on progress. So turning now to our financial framework for 2028. As Steve said, we have leading positions in attractive markets and are well positioned to deliver consistent growth. Assuming prevailing economic conditions continue, we expect organic sales growth of 3% to 6% in Consumer Care and 4% to 7% in Life Sciences, both underpinned by growth in all our business units. Industrial Specialties is not a priority for capital allocation, though we will selectively target growth opportunities. We expect sales here to be broadly flat as modest growth in direct sales is offset by reductions with Cargill. Together, this amounts to average organic sales growth for the group of 3% to 6%. Volume growth will moderate from 10% in 2025 as we increasingly focus on our most highly differentiated higher-margin products with price/mix turning positive. So how does this all translate into margins? We expect to increase adjusted operating margin from 17.4% in 2025 to more than 20% for full year 2028. A 20% operating margin is equivalent to an EBITDA margin in excess of 25%, which benchmarks favorably against our peers. Our principal cost headwind is salary inflation, which was GBP 12 million in 2025. We also expect a GBP 10 million step-up in depreciation in '26 as recent investments come online, but this should be the final significant increase. Margin recovery will be driven by remaining transformation benefits of GBP 75 million as well as top line growth with growth contributing a slightly larger portion. Turning to free cash flow. I'm pleased with the early progress we made in 2025, generating GBP 134 million of cash in the second half. We expect to make further improvements reducing working capital by GBP 50 million for full year 2028. This will be delivered by improving supplier terms and payments as we centralize procurement, standardizing receivables terms and optimizing collection as well as reducing inventory as we transform the supply chain. Capital expenditure has also been coming down as we complete the pharma investment program and several other large expansion projects. We reduced CapEx to GBP 108 million or 6% of sales in 2025, and we expect it to continue at around that level over the next few years. The benefit of lower CapEx and working capital, together with growing profits, will support a continued improvement in free cash flow. As you can see, we're targeting free cash flow conversion of 12% for 2028. Our definition of free cash is now more prudent as it includes the cash cost of delivering transformation. Turning now to capital. As I said at the first half, our capital allocation framework remains unchanged, but we're applying it with greater rigor. Our first priority is organic investment, where there's been a period of heightened intensity and greenfield site investments, which are now largely complete. We're putting a strong focus on returns, risk and execution in our upfront commercial assessment of future CapEx and we'll prioritize smaller, lower-risk opportunities with faster cash payback. Second, our policy is to pay 40% to 50% of adjusted earnings as ordinary dividends, and we remain committed to at least maintaining the dividend as we grow back into this payout ratio from the current level of 76%. Third is acquisitions. After significant M&A activity in recent years, our focus is now on driving greater returns from these investments. We will continue to look at small technology-led bolt-on acquisitions if we see opportunities to accelerate innovation. But any spend here is going to be modest and typically below GBP 10 million. Fourth, we plan to maintain net debt within the range of 1 to 2x EBITDA, providing the opportunity for additional shareholder returns as we generate free cash flow over and above regular dividend payments. So to summarize, our new financial framework sets out our targets for the next 3 years to 2028 and a scorecard for tracking future progress. Our ambitions, of course, go well beyond this, but let's first get the business back to generating good growth, margins and cash flow. We expect to deliver average organic sales growth of 3% to 6% a year through to 2028 based on current market conditions. Together with benefits of our transformation program, this will result in adjusted operating margins of more than 20%. We're targeting free cash flow relative to sales of more than 12%. And finally, with earnings growth and lower capital intensity, we expect return on invested capital of more than 10%. Many thanks, and I'll hand back to Steve. Steve Foots: Many thanks, Stephen. So as you've heard, there's a huge amount of activity going on right across the business. Our plan is built on Croda's core strengths, underpinned by multiple self-help areas to drive growth and transform our business for the next chapter. It's all about delivery and it's all about transformation. And our performance objectives are clear: to maximize value to our shareholders by delivering consistent growth and enhanced profits alongside increased cash flows with improved returns. Progress is underway. There's much more to do, but we look to the year ahead with confidence, and we look forward to keeping you updated along the way. So let's stop there and take your questions. I think what we'll do just for housekeeping, plenty of questions. When you put your hand up, there will be a mic coming, if you just say your name and firm. And then for those that are dialing in online, just plug in your questions and David will read them out later. Thank you. Steve Foots: Charles, do you want to start? Charles Eden: Charles Eden from UBS. My first question is on margins. And how should we think about the cadence of the margin progression over the coming years? Is there any reason why the progression towards over 20% by 2028 will not be reasonably linear over the next 3 years? And perhaps you could also talk us through how you're thinking about the various contributing buckets to this between operating leverage, transformation cost savings, incremental cost inflation and any other factors you wanted to call out? And I don't want to get ahead of ourselves, but you mentioned your ambitions go way beyond the targets set out for '28. So is it fair to assume that means nothing has changed regarding the EBIT margin trending back towards the mid-20s over the longer term? And then my second question is on price/mix expectations for '26. Can I just confirm, is the expectation still for flattish list pricing with mix negative to start the year, but to see improvement through the year? Is that the right way to think about it? And are there any variances between Consumer Care and Life Sciences to be aware of? Steve Foots: A few questions, sorry. Stephen margins and mix. Stephen Oxley: I'll deal with your last question first. The way you've described that is exactly right. Just think about the momentum that we've got going through '25 into '26. Coming back to margin, I'll talk about the 3-year period, not start thinking too far beyond 2028. But let's think about what we've seen. I think good margin recovery in 2025. There is an FX headwind of 1% that masks that. And that's the progression that we will see going into next year. So exiting second half at 17.6% -- and yes, you should think broadly linearly across the 3 years. And as I set out on the slide, we've got the combination of sales growth and business transformation really driving that, sales growth being slightly more than transformation. And of course, like any business, we then have inflation headwinds and everything else. The key point to make, of course, is that the business transformation benefits are structural, right? So that GBP 100 million of savings continues beyond 2028. Look, our ambition is to get beyond 20%, but let's first get to 20%. When we compare the business now back to 2019, it is a much better business. It's a higher value, higher-margin business, but it's also a different business, a different mix and a more heavily invested balance sheet, but we're not going to rest at 20%. Steve Foots: Lisa? Lisa Hortense De Neve: Lisa, Morgan Stanley. I have 2. I would just like to come back to your capital allocation comments. At the end, you talked a little bit about potential special returns. If you could just provide a little bit of detail or framework around that, that would be great. And then two, you had a quite strong end to the year on the top line. It was quite impressive. How should we think about that trending into the first quarter? I know that you mentioned that comp sales would be broadly flat year-on-year, but it would be good to get some qualitative color on the subsegments, especially pharma and the subsegments of Consumer Care. Steve Foots: Should we start quarter 1 then, just a high-level message on quarter 1, and then we'll come back to special returns as well. Stephen Oxley: Yes. So Lisa, it's unusual for us to guide for a quarter. I did that because what I don't want is a surprise coming out when we report in April, quite frankly. But there's nothing unusual about what's going on. We've exited 2025 actually in the way that we expected. January is looking bang on expectations. It's just for Q1, we're lapping a very strong quarter in 2025, as I said, with 9% growth. But in terms of phasing for the full year, it will be kind of a normal 50-50 split. Steve Foots: Okay. And then on the special returns, I think the capital allocation policy has been there for many years. We're not doing any more big CapEx. It's back to 6%, around 6%. And a lot of it is -- and we're not doing any M&A as well. So we expect to grow the business very hard. I mean a lot of the focus is on EBITDA growth and free cash flow growth. So we need that free cash flow to grow. And we've got options -- we've got optionality on the balance sheet. But Stephen can probably add to that, if you want. Stephen Oxley: Yes. Look, I think for me, it's about running a prudent balance sheet. So we're 1.3x levered at the moment. We've been very, very clear that we'll be generating more free cash flow. I think it's important that we grow back into the dividend. And as a point of discipline, we don't borrow to buy back shares or pay special dividends, all right? So we're very clear that the cash will first cover the dividend. As we generate more cash, we and the Board will obviously look at how we deploy that. Steve Foots: Okay. Sebastian? Sebastian Bray: Sebastian Bray of Berenberg Bank. I would have 2 questions, please. The first is on Industrial Specialties. The company has provided flattish comparable sales growth indication to 28%. Can you talk about the expected margin development over that time because this business used to make double, if not higher, operating margins versus what it does today. Is sitting within that guidance, the expectation that the profitability of the segment will improve on a relative basis faster than the 2 main segments of Croda, the Life Sciences and Consumer Care. And my second question is on part of Consumer Care, which is Flavors. You didn't mention it in the presentation, but it looks like it was the fastest-growing business at Croda in 2025 with, I believe, over 20% growth. What's going on there? And is this an area that let's say, could become a little more important in the future? Steve Foots: Yes. Well, let's do flavors and then back to IS, and we'll both probably chip in on IS. I mean Flavors, it's a good business with minimal distraction at the top of the company. It's part of a very good team in the F&F team. So it's -- we've given it about GBP 3 million or GBP 4 million worth of capital about 2 years ago. It's all it needs to keep growing. So the growth is coming from that capital that's gone into the business. And it's really good growth around the world. So our job there is it's not easy, but it's increasing its EBITDA without distraction from the top of the company. And we like the business, and it doesn't need any more capital for the future. So becoming more important because of the growth, but it's still part of flavors and fragrance business, which is growing very well as well. So this last year, it's done very well. But we shouldn't forget about fragrances, which is growing 13%, 14% as well. So we like the business, and it should continue to grow. IS, I mean, let me start with IS. IS, the majority of IS has got good margins in it. In there, you've heard that 20% of IS is the relationship we've got with Cargill. A smaller percentage of that is the tolling and residue cold stream business. So the majority you can work out is broadly 2/3 of that is good quality quota business, something that I've run for 15 years in Croda. So it's got good margins. We expect that core business to grow. We want it to grow. So we wanted to selectively grow. And I think it will help, of course, that growth to the respective businesses in the front here for Life Sciences and consumer in the shared assets. So it should continue to grow, but a lot will depend on the overall growth with the relationship we've got with our Cargill partner and also cost stream should be just a function of the activity that we do as a business. Stephen Oxley: And Sebastian, margins in IS will recover, but both as we target specific growth opportunities and as the business benefits from transformation, obviously, from a relatively small base. Katie Richards: Katie Richards from Barclays. Just a quick follow-up on the margins. If I remember correctly, at Q3, you said that you felt you'd be able to recover 750 basis point adjusted EBIT decline and are now targeting above 20%. So is there any reason for your conservatism on this slide? And as well, having now disclosed the sort of midterm targets towards 2028, what can we expect from the CMD in the first half of this year, if that's still happening? And my second question would be on the utilization and the winning back of volumes. If I look at the slide on the bottom left on Page 19, it looks like the utilization rate in the second half of this year has been flat or maybe 1 percentage point up. Are you still comfortable with getting back to 100% of utilization rates by the end of 2026? Steve Foots: Okay. A few questions in there, margins, utilization and your point about Capital Markets Day. So Steve, why don't we start with margins and utilization. I'll come back on the Capital Markets Day point. Stephen Oxley: So look, is 20% walk in the park? No, it's not. I think that's a stretch. It's early days on transformation, but we're pleased with progress. We've set out a clear path back to more than 20%. As I said earlier, we're not resting on that as our ambition. What was the utilization? Spot on 93% for the full year. It's up a little bit. Look, we want to get back towards 100%. This isn't an exact science. It's multiple sites. It's multiple processes. When we talk about 93% utilization, that's wonderfully simplistic. What you've seen through the year is the trend of volume coming down and the mix offset coming down as well, all right? So think about 10% volume growth for the full year. Q4 volume growth was 5%. Mix for the full year, 3% against -- and then that's come down, obviously, in Q4. That's the trend that we expect to continue going into '26 and beyond. Steve Foots: And your Capital Markets Day point is don't expect a full-blown Capital Markets Day for us. What we want to do is similar to '22 for many of you in the room that were there is start to do deep dives in our businesses. We've got 4 big businesses, Pharma. We've got Ag, we've got Beauty and we've got F&F. So we're going to start with pharma. So we'll come out with some dates for a deeper dive on pharma in due course. David, we'll take one from David first. David Bishop: It's a question from Martin covering analyst at Kepler, and it's on the margin again. Regarding your framework and your EBIT margin aspiration of over 20% by 2028, to what extent will this be driven by top line growth, including the leverage effect? And how much will cost savings contribute? Is it an equal split? Stephen Oxley: Yes. Thank you, Martin. Look, just to reiterate that growth is driven by both with growth slightly higher than transformation. Steve Foots: I think the wider point we want to make to -- and we make in the business as well is we want every business in Croda where sales value is ahead of sales volume and profits are ahead of sales value. And what we really mean by that is that the growth in margin is driven by innovation, but also with transformation. And we're not far away from that in some of our businesses. Matthew? Matthew Yates: It's Matthew from Bank of America. Sorry to come back to the margin question again. I'm trying to connect what I think is Slide 19, which is the backwards-looking waterfall of effectively what's gone wrong and Slide 36, which is the forward-looking bridge on your targets because I mean you framed it in the way that these 3 equal buckets. And I guess my question is, of those respective buckets, how much of the problem do you think you can fix versus what, for whatever reason, unfortunately, is still a persistent headwind? And the second question is on top line. This idea of delivering consistent growth I think with respect, that isn't necessarily something that Croda has proven in the past. So the question is, why is this time different? Is it a change in culture, a change in asset base? Why should investors have that confidence when the track record has been so inconsistent? Steve Foots: Let me start with top line and Stephen on margin. I mean, hopefully, what you see from the slides, in top line growth, we've had 18 months of good top line growth in an industry that isn't growing. And you can compare us to anybody in the industry. We're growing very well. I think the encouraging sign in second half is that our heritage Croda businesses are growing well as well. So you've got Beauty Care, Beauty Actives and Pharma Ingredients all supporting growth now, which is really important for the group. So that's point one. Point two, 90% of our business, the portfolio is a stronger portfolio today than it was. And if you look at the slide that I presented on virtually 90% of our business is in structurally growth markets with big strong positions. We should grow. We expect to grow. We're pointed to customers with a lot of growth, particularly the local and regional customers and the regional dynamos we call them. And thirdly, virtually half of our business is in fast-growing geographies now versus 37% before. So the shift in the portfolio is significant to faster growth. So we would expect that. So all of those should come together to give us more consistent revenue growth. And we're encouraged. We're not getting ahead of ourselves, but we've had 18 months of good growth. I expect that to continue. So we'll stop there. And then on the margin point. Stephen Oxley: Yes, Matthew, exactly the right way to look at it. So the first slide sets out the margin going down. So that's volume, partly destocking, partly obviously the disposal of the PTIC business. We put a lot of cost into the business, and we've been clear that we were too slow in taking that out. And then finally, the third leg is the cost of investments that are not fully paying back, which is obviously what will drive growth. So that's the past. If you then look forward to the future, we've set out that the margin up over 20%, go back to what I said a moment ago, driven really by growth -- top line growth of 3% to 6% and transformation growth being a slightly larger portion with GBP 75 million of transformation benefits to go. And then, of course, we do have the routine headwinds going the other way. I think Chetan has got. Steve Foots: Yes. Sorry, Chetan from... Chetan Udeshi: Chetan from JPMorgan. Maybe just a bit of a critical question to begin with. I think many of us for the first time is seeing a little bit of -- I think, Steve, you mentioned learnings, which probably we've not heard enough in the past, at least publicly. And I'm just curious, you are now talking about 6% of sales, which still seems high because in essence, we are seeing we've got too much assets or too many assets which are not fully sweated out yet. So I'm just looking at all the impairments. I'm just curious, how are you managing that so that we don't see 4 years from now, new plan with a lot of impairments. Steve Foots: We got another question. Chetan Udeshi: Maybe I have, but if you want to. Steve Foots: Let's talk through that because I'd be to get Stephen. Look, I mean, we're a curious company. We have to learn. We don't like some of the things that happen, but you have to deal with them. And we've lived through 4 years of a very volatile industry. So I think every management team has to deal with it. We are. I think in terms of the focus in the business, we're really pleased with where the growth is coming. We've got 18 months of good growth. I think the other thing that we didn't mention to Matthew's question is you've got innovation coming back in a lot of our industries, which has been temporarily subdued, largely by our customers. That's coming back. And the Croda model is we like innovation, but we need it from our customers as well. And you're getting that. And it's not just -- I'm not just talking about beauty, it's pharma ingredients, it's crop. there's formulation churn back in the industries that we operate in. Croda likes that because we get our next best product in there. So they all won't grow at the same speed. They'll be -- they won't be linear, but they'll grow. And we feel even in these tough markets, as we say, the growth rates that we're posting now, we're encouraged with. And we've got a lot of capacity to grow into. But Stephen, anything else you want to add? Stephen Oxley: Yes. So Chetan, I think as we think about capital investment, capital allocation, the key word for me is discipline, all right? We've been through a period of significant investments. And those investments are largely -- they're big greenfield sites that, by definition, have a longer payback. That's done. We've got all the investments that we need. Growth is being driven by the portfolio and the asset base that we've invested in. We will spend around 5% -- sorry, around 6%. That's a combination of both what I call maintenance capital, sustaining capital with some very small growth unlocks. But what we want there are small investments that are low risk with really fast cash payback. And that bite on cash payback for me is the real discipline. Chetan Udeshi: Maybe if I follow up on the same point. This co-development with customers, is that a new concept at Croda? Because I think historically, you wanted to develop and leverage over a wider customer base? Is that a change that has happened over the recent years? Steve Foots: It's an emphasis change. They all want different things now. And when we talk about customers, there's multinationals, there's regional dynamos and there's local players, they all want different, but we have to personalize our innovation with some of them. And some of the best returns that we get for innovation is through bilateral relationships, and we've got many in the pipeline, some really exciting stuff. But that comes from a position of trust. So when we talk about NPS scores and things like that, we are at a very high level of trust with our customers, and that fosters more and more innovation. So we're at our best when R&D in Croda is speaking to R&D at the customer and you're fostering innovation. And you're starting to see that coming through in all of the businesses. So that's helping us with your point on growth. Innovation will drive us there, but we've got self-help. We shouldn't forget that transformation is in our hands. It's not anybody else's -- it's up to us to deliver that self-help. So we have that as an additional sort of by in our armory. Yes, David has been waiting patiently here, our Head of IR. David Bishop: It's a question from Ranulf, the Citi analyst. Please, can you provide an update on the competitive dynamics, particularly emerging from Asia? Steve Foots: Yes. I mean, look, I mean, probably a China question, but more broadly, I mean, first point we would say is, look, currently, that Chinese competition is pointed to big customers, big products and big volumes. No matter what industry you're in, that's broadly where it is. In our industry, that lends itself to petrochemicals and upstream and some diversified. Some of you call it semi specialties, which fair enough. But it's not anywhere near Croda. We don't see that. I think the second point is, look, we -- we don't take competition for granted. We're not complacent nor are we fearful for that. We would expect competition to move towards us. And the third point in response, it's the Chetan point, it's innovation. It's personalizing our customer activities, and it's giving our customers something different. And we've got that capability through the business model. It's a very effective business model. It's meeting customer unmet needs. And you're starting to see Croda get back to its normal cadence with customers on innovation. So that will keep us ahead of the competition. Stephen Oxley: And Ranulf, just to add, Asia and particularly China are obviously great growth opportunities for us, and you saw some really good examples of that in the presentation. Ming Tang: It's Nicola Tang from BNP Paribas. I just had one just to do a small mini deep dive into your Pharma business. And just can you explain a little bit what's changed versus your previous or historic performance and also previous targets? Because I think you used to talk about low double-digit growth for pharma, if I'm not mistaken, versus this greater than 5%. So is the change a function of changed expectations on end market growth? Or is it more a change in terms of what you've done and how you've rebalanced your portfolio? Steve Foots: Yes. So let me answer that. I mean, firstly, we've got 2 businesses. Pharma Ingredients is 2/3 of the business, which is that business, which you know very well. There's no change in that since 2022. We expect growth rates to be mid-single digit there. We're exiting '25 at those rates actually. So within there is -- and Thomas you can talk to Thomas afterwards. It's all around refocus, innovation, and it's the nuts and bolts of Croda. So we think there's a lot of opportunities with this rebalancing of our innovation framework to drive further growth. So 2/3 of that business hasn't changed. The bit that has changed is the 1/3, which is Pharma Solutions. And all we're saying there is, look, we're not putting any of the breakout growth in our 3-year plan. We are still very excited about the progress. Every time we look at the number of projects that we've got in there, it's not reducing. And there's lots of opportunities there. But we will get significant growth in Pharma Solutions without that. And that's coming from -- at the heart is Avanti. It's research for lipids. We've got opportunities for generics and lipids. And we've also got opportunities for non-mRNA lipids and other new vaccines as well. So we see those growth rates being good. The reason that the headline rates probably come down is because we've taken out some of the 3-year breakout growth because it's not in our hands. It may come through, but we're being cautious with that. David Bishop: I've got a long list, so I can keep going. So again from Ranulf. With regard to the Lamar lipid facility, can you give a view on when operations may resume and what necessary conditions would be... Steve Foots: Yes. I mean I'll take that. I mean, look, we don't like impairments at the best of times. It's not Croda, but we have to respond to market conditions. I think we've mentioned before that, look, everything has been pushed out to the right for lipids, but it hasn't gone away. It's definitely not gone away. And we feel that we've got adequate capacity to meet the near-term and medium-term demand. I think we see that as a very important asset. It's got world-class facilities in there. It's probably more valuable than it was 12 months ago. But back to the question, a lot will depend on breakout growth. If we get something in the clinical programs in the advanced stage that hits the market, and it's something which is more significant than we think, and we can't meet that demand from our current units. And of course, we will bring that back. So we've got plans to step that plant up pretty quickly if we need to. Maurizio Carulli: Maurizio Carulli with Quilter Cheviot Investment Management. Further question on Lamar. If you are mothballing it for the time being, what are the costs involved with that? And the aim is to keep cost at the minimum and then to have a one-off cost when it restart or to keep ready to restart virtually immediately, i.e., having a bit more of cost and then 0 cost when it restarts. And ideally, also to get a sort of a quantitative sense of these costs, if possible. Stephen Oxley: Yes. Okay. Let me put it up. So we've not -- really importantly, we've not mothballed Lamar. We put it on standby, right? And that means that we're ready to fire it up at short notice as and when there is a volume requirement right? So we've made a commitment to the U.S. government that part funded -- majority funded actually the investment. We have the plant up and running in sufficient time for their needs and of course, any other needs that we see. So it is recur having an ongoing standby costs. That's what we've provided for at year-end. So there is no financial -- remaining financial exposure here. That's completely covered. There's no downside risk. It's fully impaired. So from a financial perspective, you should think of this as a great asset actually. It's all upside when we get the volume opportunity. And in the meantime, we'll just rebalance across the other 3 sites being prudent in how we're managing the cost base. Steve Foots: Back to you, David. David Bishop: The question is from Virginie at Deutsche Bank. We're seeing some AI-powered fragrance companies emerging. Why do you think this shouldn't be a threat to your business? Steve Foots: Yes. I mean AI is -- I think every board in the world is looking at AI in different ways, and we're as excited as anybody else about AI. And it's no surprise probably to the room that our focus is on innovation on AI and how does it help us with innovation. And actually, in fragrances, we're working with this and embracing that. And actually, it's a real strength. And we see it as a positive because we're taking fragrances and mapping formulations and vice versa and getting products to market quickly. And our model is getting over 2,500 references to customers on a monthly basis. So we see this as powering our model rather than a threat. And I think AI more broadly is exciting. We see it as a net opportunity for us. It can drive the screening programs. It can help us with thinking about claims. It can get products to market quicker for -- so that's how we view AI. Chetan, with your left hand. Chetan Udeshi: Follow-ups. First one was I heard Stephen talk about raising the minimum order value from customers. Isn't that completely the opposite of what your small customers actually like from you, which is not a commitment on volumes or value? And the second question was there's a little bit of question mark right now on what's happening in the ag ecosystem. And I do know this has been a big driver of volumes for Croda in terms of recovery in the last 18 months. Are you seeing any shift in the momentum in that market? Steve Foots: Yes. Well, let's do the tail. I mean the 2 points, what we're doing in the tail is it's the tail, tail, by the way. It's the small, small, very small. But there's 2 things we're doing there. One is to improve profitability, we think we can, minimum order quantities, we can apply because we can and we should. And separately, it's -- Stephen mentioned, it's the lower cost to serve, putting them on portals and online and scaling that. We are there, but we just want to scale that up. We think there's a better way of managing that. And separately, which is probably more beneficial to us is simplifying the tail as well. And we're talking about product SKU. So for some products, we have -- [ Alexandre ] is not here. We have multiple specifications for individual products, and we have multiple packs for individual products. That's Croda through and through. All we're saying at the tail we're trying to streamline that a bit more because that will be advantageous for us to get better throughput through the factory, nothing more than that. So it's spring cleaning, but there's -- with a target on profitable growth there. Ag, yes, I mean, look, ag has gone through 4 years of unusual trading. So 2 years of boom and 2 years of reset. I think all we're saying there now is, look, we're now -- I think stock levels are broadly where you would expect them to be across the crop environment. Don't forget we're in Europe, North America and Brazil. So we would expect -- as expected, we would see that as a more normalized growth rate now, like you saw from Croda 2010 to 2020, it was growing about 5%. It has the seasonality and the cyclicality, but it's actually quite a normal -- it grows pretty much that similar each year. So that's all we're saying we're expecting that to get moderate to its normal levels. David Bishop: Okay. No further coming analyst questions on the webcast. Steve Foots: Okay. Well, thanks very much. Thanks for coming as well. I mean we'll see you April 22. But also, I mean, look, the big things around for Croda, what you've heard all through the session is it's about growth and transformation. Transformation is in our hands and self-help there, but we have got good growth, encouraging signs. It's early days, but we're focused as a management team on driving that growth and driving returns for everybody. So we'll stop there. We'll come back to you with deep dive timings for pharma through the year. But thanks again. Thank you.
Constantin Baack: Good afternoon, and good morning, everyone. This is Constantin Baack, CEO of MPC Container Ships, and I'm joined today by our Co-CEO and CFO, Moritz Fuhrmann. Thank you for taking the time to join us for our fourth quarter and full year 2025 earnings call. Earlier today, we published our financial results for the fourth quarter and the 12 months ending December 31, 2025. The stock exchange announcement and the accompanying presentation are available in the Investors section of our website. Before we begin, please note that today's discussion includes forward-looking statements and indicative figures. Actual results may differ materially due to risks and uncertainties inherent in our business. Before turning to the presentation, we -- I would like to briefly reflect on the year 2025. We are pleased to report another strong quarter, concluding a year characterized by persistent macroeconomic uncertainty, geopolitical tensions, evolving trade policies and continued volatility in container markets. In this environment, our focus remained firm on disciplined execution. During the years, we have concluded multiple vessel transactions, including multiple strategic transactions with leading liner companies. We accelerated our charter backlog and fleet renewal, forward fixed vessels at attractive levels to increase earnings visibility and maintain a strong and flexible balance sheet with substantial investment capacity. As a result, we enter 2026 with a more modern fleet significantly enhanced forward coverage and a structurally stronger platform for long-term value creation. We'll explore these themes in more detail during the presentation. And with that, I'm happy to hand over to Moritz. Moritz Fuhrmann: Good morning and good afternoon, everyone, also from my side, and welcome to MPCC's earnings call for the fourth quarter of 2025. Our agenda for today starts with the review of our Q4 highlights, after which we will spend some time on the current market dynamics as well as a first outlook into 2026. Starting with the highlights on Slide #3. We see a continuation of our very strong quarterly performance based on $126 million in revenue and $75 million in adjusted EBITDA. For the fourth quarter of 2025 full year operating revenue is $518 million and $306 million for adjusted EBITDA. As the result of the continued solid financial performance, the Board has declared the company's 17th consecutive dividend with $0.05 per share, representing 50% of the adjusted net earnings for the fourth quarter also being the upper range of our dividend payout ratio range. On the asset and fleet transition side, we have continued with an expansion of our [ dividend ] book by adding six 3,700 TEU vessels, bringing the total MPCC newbuilds on order to 17. The latest additions to the book have been contracted against 10-year time charter contracts with a top-tier liner operator. The total contract price of these additional vessels is around $293 million, which is nicely covered by the projected EBITDA of around $288 million. On general note, what is important to note is that all our newbuildings have been ordered against long-term charter contracts of 3, 7, 8 and 10 years allowing for substantial derisking throughout the fixed time charter period while at the same time, retaining significant upside potential during the remaining lifetime of the vessels. And these transactions, very importantly, are cementing our position in the market as a leading tonnage provider and feeder segment and also underscoring our strategic importance and the relationships that we have fostered over the last years with the top-tier liner operators. The newbuilding activity is also a very good reflection of the continued resilient container feeder markets. The majority of our fleet is fixed for 2026 with only 3% open days and nonetheless, we continue to discuss forward extensions as we speak with our customers to further lock in good rates and durations that stretch the coverage further into 2028 and 2029 based on the currently available durations of between two to three years. Our open days coverage has increased to 97% and 58% in 2026 and 2027 with a total revenue backlog of USD 2 billion. Looking ahead into 2026 and as the market remains very dynamic, we don't see, as of now, any negative implications as a result of the most recent Red Sea announcement. In any case, we will continue focusing on the execution and funding of our newbuilding book as well as remaining opportunistic towards further potential transactions in the space. And as for the 2026, we set our revenue and EBITDA guidance at USD 450 million to USD 460 million and USD 240 million to USD 260 million, respectively. Turning to the next slide and looking at some of the KPIs for fourth quarter and the full year 2025. Gross revenue and adjusted EBITDA came in above the previous quarter with close to $130 million and around $75 million, respectively. The markets are very supportive and the charter rates and durations remained strong, however, not at levels seen in 2021 and 2022. Full year 2025 gross revenue, again, $518 million and EBITDA on an adjusted basis of $306 million. Looking at the bottom left of the slide, our balance sheet is growing now at USD 1.5 billion while the net debt is down relative to the previous quarters to $150 million, our leverage ratio increased slightly to 33%, which remains very moderate. As mentioned before, the Board has declared a dividend of $0.05 per share which will be paid out in March 2026, bringing the full year dividend recorded in 2025 to $0.23 per share. Operational cash flow generation remains strong with $302 million for the full year of '25. Operationally, we booked a high -- a very good utilization with more than 98%, while OpEx has come down relative to the previous quarter, which is partly driven by year-end shifting effects into 2026. Looking at Slide #5, we reflect on what has been an incredibly active year 2025 for us here at MPCC, both operationally, but also investment-wise, which has been driving to a large extent, our fleet renewal. We concluded 20 fixtures throughout 2025, and year-to-date 2026, we managed to fix our vessels on an average of 2-year durations with rates north of $20,000 per day, and most of our fixtures were done on a forward basis, meaning renewing or extending the charters well ahead of the expiration date. We have also done package deals, meaning chartering out a number of vessels simultaneously to one client, providing valuable solutions to our customers. And I think importantly to note, our most recent picture for -- as Christiana at more than $27,000 per day for two years with delivery in Q3 '26, again, underlines the continued strength in the chartering market, which we take advantage of and increase our backlog and coverage. As to making our existing fleet more efficient, we have invested around USD 8 million across 12 retrofits. That includes high dynamic measures, improving vessels, efficiency by up to 25% in certain instances. On the divestment side, we have proactively divested 11 vessels with an average age of around 18, and an average capacity of 1,500 TEU, hence older and smaller vessels. Given the strong secondhand market pricing, we achieved total sales proceeds of more than $150 million, implying an NAV of between NOK 30 to NOK 35 based on our calculations. Part of the sales proceeds have been reallocated towards our newbuilding program that we have contracted in 2025 worth around $850 million across 16 vessels. The construction cost is almost fully covered by the contracted EBITDA as well as recycling value limiting our downsides while keeping substantial upside potential with vessels that are on average 8 years old at charter exploration. However, we will zoom in on newbuildings on the following slide being #6. So please turn to the next slide. After having ordered 8, 4,500 TEUs and 2, 1,600 high-cube TEU container vessels in the second half of '26. We have, as I mentioned before, shortly before Christmas announced another newbuilding transaction of 6, 3,700 TEU. That brings the total number of vessels ordered since the summer of '16, of which all again come with long-term charters. These additional vessels follow our usual and prudent approach as we combine asset investments with cash flow visibility, providing significant derisking throughout the fixed time charter period. As you can see on the left-hand side of the graph, total new building CapEx is around $850 million, which almost fully covered by contracted EBITDA and the recycling value of the ship -- the ships -- the attached time charters provide substantial earnings visibility as well as derisking -- and this essentially enables us to realize the upside value once the vessels are running off the initial charter periods. The vessels will be, as mentioned before, on average, roughly 8 years of age. And to put things into perspective, the current adjusted value for these vessels is north of $600 million to $650 million or even $700 million, i.e., a great combination of the minimum residual while retaining maximum upside potential. In general, we have taken and will continue to take a prudent approach to these investment cases, in order to minimize residual risks, the ability to structure and execute these transactions speak for itself and is, I think, a great testament to the importance of MPCC as a strategic partner to top-tier liner operators globally. And needless to say that these investments are further milestones in our fleet position efforts and wanting to underline that we have confidence that building an enhanced and future-proof asset portfolio will support generating sustainable and long-term shareholder returns for investors. On Slide 7, we have illustrated the fleet transition we have executed over the past four to five years and what measures were driving these. Firstly, as you can see on the left-hand side, the share of Eco vessels, meaning new builds and more than second-hand vessels as well as retrofitted vessels has substantially increased, standing at 75% today. Equally important is the fact that at the same time, our fleet has been growing to 68 vessels including the recent newbuildings we ordered and the average age of fleet has been reduced quite significantly over that time period from an average 2007 build to an average 2015 build as of today, and this transition ensures that our asset portfolio remains competitive and attractive to our customers, the line operators in particular, in times where regulatory and sustainability pressure on the industry is increasing. How did we achieve such a remarkable change in our fleet composition on the right-hand side of the slide, we have quantified our measures since 2021 being 21 newbuilds across multiple transactions worth around $1.1 billion. We have acquired 9 modern secondhand vessels in two distinct transactions for a total consideration of around $300 million and last, but not least, we have undertaken significant retrofit investments into our existing fleet, which, as shown previously, have resulted in substantial savings of up to 25% when it comes to efficiency. We will, going forward, continue focusing on accretive investments either into existing vessels or acquisitions that will enhance the overall composition of our asset base. Turning to Slide 8, the cash flow in the fourth quarter of '25 was again dominated by a good operating cash flow of around $75 million. On the investment side, we have paid down the first installments in relation to our two 1,600 high TEU container vessels. We ordered against an 8-year time charter. The overall positive cash generation improved the company's cash position and investment capacity to around $425 million by the end of December 25. In addition to the balance sheet liquidity, we retain further flexibility through our undrawn RCF, which has been renewed and upsized to $130 million. Lastly by paying our 16th consecutive dividend in the amount of $22 million in December, MPCC continues returning capital to shareholders north of $1 billion have been distributed ever since we introduced our recurring dividend. And as the Board has declared the next dividend, it serves as a good testament that we will continue to reward shareholders through capital returns. Going to the next slide, we see MPCC's balance sheet, which remains conservatively structured. We have in 2025 executed on a number of measures, namely vessel divestments as well as flowing secured and unsecured debt facilities to improve the company's liquidity position and therefore, investment capacity as we face needed fleet renew. By the end of '25, liquidity stood at $425 million. However, pro forma adjusting for expected yard payments in the first quarter of '26, MPCC has a pro forma liquidity of $477 million, including an undrawn RCF. In view of our fleet renewal efforts and newbuilding CapEx commitments to corresponding investment capacity is certainly essential, and at the same time, we managed to achieve this capacity without compromising the overall robustness of the balance sheet as well as flexibility. Following the recent prepayment of one of our senior secured facilities, MPCC's conservative leverage ratio stood at 33%. And with 32 debt-free vessels with a fair market value of close to $800 million. While gross debt stands at $472 million net debt, adjusted for pro forma liquidity remains very low and the invested portfolio with the charter-free market value of $1.5 billion provides additional comfort. Not surprisingly, the current newbuilding commitments will be partly funded through debt, which will be secured and sourced in due course, initial discussions we have had with potential lenders indicate a very healthy appetite for modern feeder tonnage, secured by long-term charters. Once fully delivered, the company's gross debt is expected to grow, however, leverage will be supported by the cash flow visibility attached to those vessels. Worthwhile to mention is our sustainability performance, in particular, concerning our senior unsecured sustainability-linked bond where our greenhouse gas reduction KPI for the MPCC fleet of 10% by 2029 has already been met now, with a recorded reduction of 16.5%, largely due meaningful retrofits on the existing vessels as well as sales of older, less efficient tonnage. Going forward, we will ensure to use the investment capacity as prudently as we have done in the past by identifying and executing on shareholder accretive transactions that help building a future-proof fleet. And on that note, I hand over to Constantin for the market update and the outlook section. Constantin Baack: Thank you, Moritz. I would like to continue with the next agenda point, the market. Throughout the previous quarters, we have noted that volatility is here to stay. And looking back at the year 2025, this has been indeed a structural theme. Looking ahead, we expect elevated uncertainty to persist well into 2026 and likely beyond. Three major forces shape our current outlook, moderating macroeconomic growth, ongoing geopolitical fragmentation and normalization in container markets after an extended period of elevated earnings. Starting with the global economy illustrated on the left-hand side, the IMF forecast global GDP growth of approximately 3.3% in 2026 and 3.2% in 2027. World trade growth, which is estimated at around 4.1% in 2025, is expected to moderate to roughly 2.6% to 3% in 2026 before recovering thereafter. Risk remain tilted to the downside. Protectionist policies, fiscal pressure in key economies and the lagged effect of monetary tightening continue to create headwinds. The key dynamic for 2026 is the political bullwhip effect. During 2025, we observed elevated front-loading activity as importers accelerated shipments ahead of anticipated tariff and policy changes. As the effect unwinds, some normalization in trade volumes should be expected and is already observed today. Turning to geopolitics. The Global Economic Policy Uncertainty Index shown in the middle of this slide, remains structurally elevated. Unlike previous disruption periods, uncertainties to longer spiking and receding. It remains persistently high. Rising trade tensions and protectionist policies are reshaping global supply chains. Cargo flows are being rerouted. New trade alliances are forming and strategic bottlenecks such as the Suez Canal and the Red Sea remain pivotal variables for 2026. A sustained return to Suez routing would release effective capacity back into the market with direct implications for freight rates and overall supply and demand balance. For liner operators, that represents earnings risks. For nonoperators like MPC container ships, forward tonnage availability remains tight, and the majority of our fleet is committed at attractive levels for the 2026 and beyond. The key takeaway is that structural volatility rewards resilience, balance sheet strength and forward contract coverage. Companies that anticipate and adapt will outperform. That is our clear view. While freight rates softened, and that can be seen on this slide, compared to the peak levels seen in 2024, they remain above long-term historical averages. At the same time, time charter rates have proven notably resilient throughout 2025, holding at historically attractive levels, despite ongoing freight volatility. The Harper Petersen Time Charter Index that you can see here, moved largely sideways at elevated levels during the year, demonstrating that charter markets have been largely unimpressed by short-term freight swings. Carriers have continued to pursue freight and tonnage simultaneously even as Liners profitability has diverged. Some operators have already reported slightly negative margins in the fourth quarter, while others remained slightly profitable yet overall demand for vessels has continued to be firm. As I mentioned on the previous slide, forward availability of tonnage continues to be tight. Market data indicates -- and that can be seen on the very right on this slide that roughly 25%, we have 25% lower year-on-year availability and significantly lower availability than historical averages seen in the pre-COVID period. This is underlining the limited prompt supply. This sustained demand is also reflected in the asset market. Secondhand vessels or vessel prices increased throughout 2025 with the Clarkson secondhand price index reaching levels last observed in 2011, excluding obviously the extraordinary pandemic period. Meanwhile, new building prices have remained broadly stable as can be seen on this chart. The message is clear, supply discipline, particularly in the smaller vessel segments continues to underpin the charter market. With that context in mind, let us now examine how global trade flows are evolving and looking at the demand side. Looking at this slide, one of the dominant themes throughout 2025 has clearly been the escalation of U.S. tariff conflicts, where tariff levels in the rest of the world have remained around 3.5%, the effective U.S. tariff rate increased from below 4% at the beginning of 2025 to approximately 18.5%. This development, as illustrated on the right -- on the left-hand side actually has materially influenced global trade patterns. At the same time, global container trade grew by around 5% in 2025, which has exceeded expectations. However, the composition of their growth shifted significantly. North American container imports declined despite ongoing economic growth while Far East exports recorded strong expansion. Recent estimates indicate the China's total trade surplus increased by roughly 20% during 2025, reflecting a continued reorientation of trade flows towards China and Asia. The polarization becomes particularly visible when looking at specific trade lanes. And that can be seen on the left hand side. Despite overall global container demand growth of approximately 5%, the transpacific trade connecting the Far East with North America declined by around 2% to 3% during the year. In the contrast, other shorter trade lanes expanded rapidly, including routes from the Far East to the Middle East and to parts of Africa. In other words, trade volumes are not collapsing. They are being rerouted -- after several recent trade agreements that did not involve the United States, global trade appears to be reorganizing with closer integration among other regions while the U.S .bond volumes soften. For our business model, the shift is highly relevant. Intra-regional and emerging market trends at trades rely disproportionately on the feeder and midsized vessels, which aligned closely with our fleet focus. With that shift in trading patterns in mind we now turn to the structural composition of the supply side. When you look at fleet fundamentals on -- in general, what we can observe is a clear structural imbalance in the smaller vessel categories and more broadly, a disconnect between where we think ships are being ordered and where, in our view, they are most needed. In our core segment of 1,000 to 6,000 TEU, there are currently more than 800 vessels above 20 years of age. The order book in this segment even after the recent increase in contracting activity amounts to roughly 430 units. In other words, the replacement pipeline does not fully offset the aging profile of the existing fleet, and order book-to-fleet ratios remain moderate. In contrast, the ultra large segment above 12,000 TEU shows a very different picture. And all of that can be seen on the graph on this slide. Basically, looking at the polarization between fleet age and new ordering, this is what makes a structural imbalance increasingly visible. At the same time, emerging markets are expected to deliver a stronger GDP growth in advanced economies and have been driving instrumental container demand in recent quarters. In the third quarter and in the fourth quarter, global container demand increased by approximately 1.5%. Excluding North America, September growth was close to 9%, underlying the growth in ports of emerging markets. Having said that and having looked at this imbalance in -- on the supply side, let's move on to the supply side and to the market drivers. As we look ahead, the container shipping market continues to be shaped by a range of uncertainties. At the same time, these challenges also create opportunities. The very forces that are disrupting global shipping are also acting as catalysts for innovation, differentiation and long-term resilience. First, the ongoing back and forth U.S. trade policy announcements continues to create a volatile and largely unpredictable framework for global container markets. Tariff measures are being introduced, post, escalated, renegotiated at a pace that makes medium-term planning increasingly difficult for importers and carriers alike. The practical consequence is a market characterized by reactive booking patterns, shorter lead times and elevated freight rate volatility. Second, the Red Sea. The Red Sea remains one of the most consequential variables for container shipping in 2026. While we have seen initial lineup transits through the corridor, the timing of a broader and sustained return remains highly uncertain. Security conditions continue to evolve and liner operators are understandably cautious about committing to routing changes that involve operational risk and additional costs. It is therefore important to recognize that even a gradual normalization of Red Sea routing would not automatically be positive to the market. A phased return would progressively release effective capacity that has been absorbed by longer voyages around the [ Cape of good Hope ]. This additional capacity could weigh on freight rates and indirectly on harder demand. We are obviously monitoring these developments closely. Against this backdrop of mainland trade uncertainty intra-regional trades have once again demonstrated resilience. Five exports into emerging markets have recorded consistent growth and intra-regional routes outperformed mainland trades during 2025. The outlook for 2026 remains constructive. This is structurally important for our fleet positioning. Intra-regional and feeder trades rely disproportionately on smaller vessel sizes, which directly align with our fleet focus. Finally, despite a record high aggregate order book across the container shipping industry, the feeder segment remains structurally underinvested. The sub-6,000 TEU fleet carries an order book-to-fleet ratio of roughly 15% to 20%, significantly below the levels seen in larger categories. In summary, uncertainty remains elevated, but the structural setup in our core segment remains constructive and supportive. With that, let me now turn to the next part of today's presentation our company outlook. Let me start with the charter backlog on our fleet. On the left-hand side, you can see our forward contract coverage which has been significantly enhanced for 2026, 2027 and the years beyond. As Moritz explained earlier, we have actively utilized the strong charter market, including the conclusion of forward fixtures at attractive levels. Combined with the employment secured for our newbuilding program, this has allowed us to meaningfully increase our backlog. In total, we have secured approximately USD 2 billion in forward revenue backlog, which translates into around USD 1.2 billion of projected EBITDA based on minimum contracted periods and conservative assumptions. Our contract coverage stands at 97% for 2026, 58% for 2027 and 35% for 2028. The backlog includes 17 newbuildings under construction, all integrated into our forward employment profile. This level of coverage provides strong multiyear earnings visibility in what remains a volatile market environment. In fact, our forward revenue visibility for the next couple of years has never been stronger than it is today. On the right-hand side of the slide, you can see how the backlog has developed over the past 12 months, illustrating both the revenue consumed during the year and the additional backlog added bringing us to the approximately USD 2 billion today. Discipline and rational decision-making has been central to how we -- we navigate MPCC through changing market conditions and we will continue to act in the best interest of both our customers and our shareholders. With that foundation of earnings visibility in place, let us now turn to our open positions and then discuss how we continue to enhance our fleet and position the company strategically going forward. Looking at Slide 18, the number of days for 2026 available days, open days is limited, when viewed against our total available days for the year and overall contract coverage. This is a deliberate outcome of our forward liking strategy and reflects our focus on earnings stability. The exact number of upcoming open positions depends on whether the charter customers really win the vessels within the agreed redelivery window. The chart on the right -- sorry, on the left takes a conservative view and considers the minimum period, i.e., the earliest possible delivery date. In total, this would translate into 15 vessels being up for charter renewals in 2026. Applying the maximum period, this number will reduce to only 7 vessels in 2026, which is represented by the gray column. The graph on the bottom right of the slide also shows the distribution across vessel sizes this in 2026 based on minimum periods. Now putting the open charter positions into perspective with the current market, please refer to the table at the top right, where the current market rates and the periods are shown for standard feeder vessel sizes, modern Eco designs would likely get premium rates and/or even longer periods. What I can say is that on our very own fleet, we are already entertaining a number of discussions on charter forward fixtures -- we are, for example, presently we have a ship on subs on a Q4 2026 redelivery position for a 2-year period in line with the range as far as the rate is concerned, is here at the top right. So overall, we continue to see a firm charter market, both for prompt as well as forward positions and let us now turn to our strategic execution and how we are positioning the company for the years ahead. Taking a step back, over the past periods, we have executed what we would describe as a transformational yet disciplined fleet renewal. Importantly, this has not been growth for growth's sake. Every transaction has been assessed against return threshold, balance sheet impact and very importantly, long-term strategic fit and relevance. A central pillar of this renewal has been our focus on charter-backed newbuildings and strong partnerships with our charter customers who have become very selective in whom they partner with, in particular for longer-term strategic charter transactions -- by securing employment in parallel with our investments, we have materially derisked our capital expenditure program and protected the forward cash flows. This approach has allowed us to modernize the fleet while maintaining earnings visibility and financial stability. At the same time, and as Moritz has explained in detail, we have actively captured market opportunities on both the sale as well as the purchase side. We have divested older tonnage at attractive levels and reinvested selectively into modern vessels, strengthening our relationship with top-tier liner companies. On the financing side, we have continued to diversify our funding base, enhance our financial flexibility and reduce our average cost of debt. This has strengthened our balance sheet resilience and expanded our strategic room to maneuver. In total, we have executed over the years to more than 100 vessel transactions. Simultaneously, we have distributed more than USD 1 billion to shareholders demonstrating free to renewal growth and shareholder returns are not mutually exclusive, but can we deliver the parallel through disciplined capital allocation. Today, we stand with significantly modernized fleet, approximately $2 billion in secured revenue backlog and a strong flexible balance sheet with the potential liquidity at hand. This combination defines our structural position as we enter the next phase of the market cycle. Looking ahead, our priorities remain clear and consistent. Now looking ahead at 2026, our forward focus remains structured and consistent with our strategy. First, we will continue pursuing balanced charter line fleet renewal. This means investing selectively in modern, efficient tonnage where employment visibility supports the investment case while avoiding speculative exposure. Renewal will remain paced, return-driven and aligns with our customers' demand. Second, we will continue to optimize our portfolio through active high grading of the fleet, where attractive opportunities arise, we will divest older on noncore vessels and recycle capital into assets that strengthen our competitive position, improve efficiency and enhance our earnings quality. And third, we will remain prepared to deploy capital opportunistically in volatile markets. Market dislocations often create compelling entry or access points and our balance sheet strength allows us to act with speed and disciplined when risk-adjusted returns are attractive. At the same time, we will continue to diversify our funding sources and maintain strict cost discipline, preserving financial stability, flexibility and maintaining the competitive cost of capital, which we believe is essential to navigate in this uncertain market environment. We also intend to further deepen our strategic partnerships with leading liner customers, long-term relationship is very important in the container market. Finally, we remain committed to a reliable capital stewardship and sustained shareholder distributions balancing reinvestments for future growth with attractive returns to our investors. In summary, our objective remains clear to combine resilience with long-term value creation through disciplined execution across cycles. With that, let me conclude. So let me close by summarizing-- by summarizing the key messages. First, we have further enhanced our charter coverage and built a strong backlog. With approximately $2 billion in secured revenue, we have achieved contract coverage 97% for 2026, 58% for 2027 and 35% for 2028. This provides substantial earnings visibility and clearly underpins cash flow stability over the coming years. Second, we continue to execute a proactive fleet strategy. We have divested older vessels at attractive levels and revested into modern efficient tonnage, strengthening our strategic positioning and ensuring long-term competitiveness in our core segments. Third, we remain focused on shareholder value creation. Our approach combines recurring distributions with disciplined reinvestment into attractive growth opportunities. This balanced capital allocation model is designed to generate sustainable long-term value across midcycles. For full year 2026, we guide revenues in the range of USD 450 million to USD 460 million and EBITDA between USD 240 million and USD 260 million. This guidance reflects our high level of contract coverage and current market visibility. Finally, while the market outlook remains uncertain, our strategy is clear. We focus on what we can control. Disciplined execution, opportunistic capital deployment, fleet transition aligned with customer demand and maintaining a robust balance sheet. This disciplined and resilient approach positions MPC container ships to navigate volatility while continuing to create value. This concludes the presentation for today. Thank you for your attention, and we're now happy to take your questions. Moritz Fuhrmann: And I would start with the first one, which is regarding dividend policy. And the question is, under what conditions would you consider a return to your earlier more generous dividend policy. As I alluded to in the presentation also over the last couple of quarters, we have revised the dividend policy early last year in order to ensure we maintain a balance between ensuring to invest into long-term value for the company and long-term competitiveness of the company by also investing into fleet renewal versus still maintaining a sustainable and thorough dividends and hence, rewarding investors and shareholders accordingly. And that is obviously also a bit subject to the market environment. That's also why we have now included a range of 30% to 50%. We believe. And for last year, we have paid still a double-digit dividend yield, which we still deem very competitive, in particular, comparing to the market that we operate in, where we, at all times, also want to make sure we maintain the right fleet, a modern fleet that creates long-term value for the company. So if we obviously were to see a very extraordinary market environment, we would, of course, consider to also possibly adjusting returning capital investors to the higher end. Having said that, in a normal market environment, we believe that the dividend policy as we have established it allows us to balance developing the company further, creating long-term value, staying competitive also vis-a-vis our customers as a good partner and at the same time, rewarding shareholders. So I think for the time being, we believe this is a very balanced distribution policy and capital allocation strategy that we pursue. And that we have, in fact, in particular, last year, created a lot of long-term value for the company and its shareholders. Constantin Baack: Coming to the second question, which is somewhat balance sheet related. Last year, net debt decreased about USD 60 million, which is value creation for shareholders. Can we expect an equivalent reduction in net debt this year? I would say, generally speaking, as long as we are cash generative from an operating perspective, which we are -- and we will be able to serve the contractually debt obligation in terms of contractual repayment profile, yes. The net debt is expected to decrease over the course of 2026. You have somewhat an offsetting factor being the next newbuilding installments that are due in '26. However, the lion's share of the newbuilding installments will be due during '27 and '28. Moritz Fuhrmann: All right. Then there is another question. Congratulations on a solid year and outlook. You commented on asset sales and the related implied NAV per share. Currently, would you explain what you mean by the implied NAV per share and how it is calculated. So what we basically do is we reverse engineer the vessel values from the company's equity market valuation. Effectively, we translate the prevailing share price into an implied value per vessel. And the allocation across vessels is based on their relative weight derived from external broker valuations or internal assessments. In other words, at the prevailing share price, each vessel carries a market-implied value as reflected in the company's enterprise value or market cap for that matter. And when a vessel is then sold off, we compare the achieved sales price with this equity implied vessel value. Any difference then represents value creation or dilution relative to what the market had priced in, and this translates into a corresponding NAV per share impact. Obviously, certain balance sheet items such as cash and outstanding debt are considered as well. And just as an example, in case of [indiscernible], which is the latest sale that we have announced the achieved tail price corresponds to approximately mid NOK 30 per share and this is based on this kind of reverse engineered equity market framework. So this is the way we approach it. I think it's not uncommon in the industry. And this is how we arrive at basically creating value by selling certain assets at an implied significant premium to current trading. Next question is, will or have MPCC considered to change currency from U.S. dollar to euros in the accounts in the close future. First of all, shipping is a U.S. dollar-denominated business, which is the functional currency. So to answer the question, we have not and will also very unlikely consider going forward, in particular, as our income, but also most of our expenses are in U.S. dollar. And by using euros in the accounts, we would also expose ourselves to the core and very volatile financial markets, in particular, when it comes to U.S. dollar and euros, which is obviously something that we also want to avoid. Next question is market related to what extent would a return to Red Sea, Suez transits affect the small midsized markets, there are potential pressures from larger vessels cascading down from such a capacity supply shock. I think, first of all, the potential reopening of the Red Sea and Suez Canal contrary to the most recent announcement by a few of the big liner companies remain very uncertain. There was mixed messages from [indiscernible] but also from CMA, who has been particularly outspoken about not using the Red Sea at the same time, seemingly stable rattling between the U.S. and Iran is increasing. So from our perspective, it is very unlikely that we see a meaningful reversal in the foreseeable future. But to your particular question, looking in isolation at the small to midsized market, none of these vessels is actually transiting the Suez Canal. So there's no direct impact once the Red Sea is opening, but there's an indirect impact, obviously. So all the vessels, whether small or large, part of the same supply chain. So there will be a trickle-down effect if a meaningful portion of the additional demand that has been derived from the rerouting around the [indiscernible], there will be a trickle-down effect also to the smaller sizes. The only difference to what we have seen in the past. Now is that -- we have a very interesting constellation in particular on the feeder segment, meaning we have a very old fleet on the water. There's seemingly a lot of vessels going forward being pushed out of the market. You have an order book that is too small to replace those vessels leaving the market potentially in the future. And at the same time, you have a very, very healthy underlying demand, in particular for feeder trades being the intra-regional trades. So from that perspective, in a scenario where the Red Sea is opening again and you see pressure from larger vessels. We believe that the magnitude of that impact is not as severe as some people might expect. Constantin Baack: All right. Then there is another question regarding focus and that is over the past year, you have focused on newbuild ordering to renew the fleet. Could you talk a bit about whether you see any modern secondhand opportunities as well? Or is pricing too steep. We are -- and the year before, so 2024, we have actually acquired some equal secondhand ships last year. In 2025 the opportunities were quite rare. Most of the Eco vessels are either on long-term charters and not for sale or quite a number have actually been acquired by liner companies at quite see prices. So we would be quite interested in also buying some more modern secondhand vessels, because we do believe they have technically and also from a valuation standpoint, at the right price, a solid future. Having said that, price levels are fairly large and the derisking of that large price or high price level is, in our view, not necessarily justifiable. And in addition, as I said, very few vessels available, if any, at this stage, there might be going forward, some resale opportunities. I wouldn't rule that out. But for the time being, we do not see us as a buyer in the secondhand market, we have, as we have shown rather been on the selling side recently. Moritz Fuhrmann: Next question relates to our recently announced joint venture that would it be possible to provide some additional information on which vessels it relates to. Also, will you be reporting that you'll be using the equity method as the vessels are delivered. The vessels and questions are #2 and #4 of that series that we have contracted in the summer of 2025. And given it's a 50-50 joint venture, vessels will be nonconsolidated from a P&L perspective, the vessels will be reported through profit in investments, as we have seen in the past when we had a joint ventures previously. We have also seen the results of those joint ventures coming into our P&L through profits in investments. Constantin Baack: There is another question regarding vessel acquisitions. As you think about incremental vessel acquisitions or orders, is there any appetite to go for tonnage above 5,500 TEU. I would take a step back and say there's appetite to buy the right assets in terms of entry price, derisking and also future proof of the ship, we would think of vessel sizes that we look at anything that is related to intra-regional trades and intra-regional trades develop. So we would also look at ships up to 8, maybe even 10,000 TEU if the value proposition and the derisking is appropriate. Anything above that is at least at this stage, certainly not intra-regional tonnage, and we would not look at. Having said that, the bear fact that we haven't bought any ships of that size also shows where we see value, and that has been more in the -- in the midsized vessel sizes. But I wouldn't rule out that we go also larger than 5,500 TEU -- to the extent the same metrics and the same parameters apply that we deem attractive, similar to the ones that we have done over the last couple of years. Moritz Fuhrmann: Then there's a question relating to the coverage that we have reported of 97% for 2026. Is that percentage dependent on when your customers redeliver the currently leased vessels. Yes, it is. Luckily, we are operating in an environment where the redelivery windows are relatively tight. We have seen different scenarios in the past. In terms of reported coverage, we're rather conservative in using the mid to midpoint of those redelivery windows. So from that perspective, if the market holds up firm, and the liner companies are using the maximum redelivery rate. There is some upsides. There's certainly some upside to the coverage. The next question is relating to our guidance. Your full year 2016 EBITDA guidance implies a 22% year-on-year decline versus a mere 5% -- 4% top line drop. Do you expect inflated operating expenses in 2026. The reason for the discrepancy is a bit unique. So in fact, our revenue is inflated to a certain extent. So purely looking at the time charter equivalent, we have seen or we see a drop in revenues relative to last year. The revenues under IFRS looking at gross revenues is inflated due to an increasing compliance cost in particular, EU ETS and fuel and maritime. That's why the drop in top line is not at the same extent you see as to the compliance cost that is from a bottom line perspective, it's a zero-sum game, so you have inflated top line, but you have also inflated voyage expenses. So bottom line, there is 0 implication on the EBITDA, explaining why you have a steeper drop in EBITDA. Needless to say that on the cost side, we have seen some inflation impact, but certainly not to the extent explaining a big discrepancy, as you pointed out, between revenue and EBITDA. So the main reason for that is that the top line actually is inflated by compliance costs. Constantin Baack: Then there's one more question regarding new buildings. Are you going to order more newbuilding vessels as all ordered newbuildings are already chartered out? I would say that's not the way we look at it. The way we look at it is to find the right ships and the right transactions that meet our criteria of also creating long-term value for the company. It could well be that we're exploring further newbuildings going forward. And to the extent that you know the parameters, and that means, in particular, a solid derisking, a solid let's say, fairly low cash breakeven after the initial charter. Those are, for example, parameters that we look at. And of course, the counterparty and the partnership. We have also been able around new buildings to also extend certain secondhand ships that we have on charter. So it's also more a strategic perspective on newbuilding transactions -- but I would certainly not rule it out, but I think we have done a pretty good job in our view, at least as far as fleet renewal is concerned, bringing down the average building year or bring -- actually up the average building year of our fleet from 2007 in 2022, now 2015. So a significant modern vessel, not just vessel fleet, not only in terms of age, but also in terms of design and specification and future proof of the fleet. So the long answer to your question, short answer is yes, we would still consider to add some new buildings here and there. But we also think that we have already taken some key steps in renewing the fleet and having a very modern and attractive fee creating long-term value for the company. Moritz Fuhrmann: Then question on the costs, OpEx, G&A and net interest were all down quarter-on-quarter. Do you expect this level to continue going forward? I would wish it were to continue. Unfortunately, on the OpEx side, in particular, you had some shifting effects certain items into '26. Hence, the OpEx are bit lower than expected going forward, at least on the budget, we expect similar cost -- similar costs relative to '25. Also G&A, we at least for now, don't foresee meaningful increases, so also rather expecting similar cost to the year before. And as to the net interest at year-end, we had a very, very high liquidity position, which obviously is invested in short-term money markets. Hence, we've been earning quite good interest income. The interest environment is still good, depending on the new Chairman of the Fed in the U.S. depending a bit on what the U.S. dollar treasury rates and interest rate will do expectations in the short term that interest will go down, hence, also having a potential impact on our interest income. So -- from our perspective, we would rather expect the net interest to increase going forward again. Constantin Baack: Yes, there are, at least at this stage, no further questions. So we think we -- we call it a day then. Thank you very much for the questions, for your interest in the company. And as far as we and MPC Container Ships is concerned, we are looking forward to 2026. We have -- we're sure it will be an interesting year. We have good backlog, and we are excited about the year ahead. And again, thanks for your interest and looking forward to continuing the journey with you. All the best. Take care. Bye-bye.
Operator: Good morning. My name is Rocco, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Enviri Corporation Fourth Quarter and Full Year 2025 Results Release Conference Call. [Operator Instructions] Also, this telephone conference presentation and accompanying webcast made on behalf of Enviri Corporation are subject to copyright by Enviri Corporation and all rights are reserved. No recordings or redistributions of this telephone conference by any other party are permitted without the expressed written consent of Enviri Corporation. Your participation indicates your agreement. I would now like to introduce Dave Martin of Enviri Corporation. Mr. Martin, you may begin your call. David Martin: Thank you, Rocco, and welcome to everyone joining us this morning. With me today is Nick Grasberger, our Chairman and Chief Executive Officer; Russell Hochman, our President and Chief Operating Officer and the future CEO of New Enviri; and Tom Vadaketh, our Senior Vice President and CFO. This morning, we will discuss our results for the fourth quarter and the full year of 2025 as well as our outlook for Harsco Environmental and Rail, which are the 2 businesses that will make up New Enviri following their spin-off into a new stand-alone publicly traded company in connection with the sale of Clean Earth. After our prepared remarks, we'll take your questions. Our quarterly earnings release and slide presentation for this call are available on our website. During today's call, we will make statements that are considered forward-looking within the meaning of the federal securities laws. These statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from those forward-looking statements. For a discussion of such risks and uncertainties, see the Risk Factors section in our most recent 10-K and as updated in subsequent 10-Qs. The company undertakes no obligation to revise or update any forward-looking statement. Lastly, on this call, we will refer to adjusted financial results that are considered non-GAAP for SEC reporting purposes. A reconciliation to GAAP results is included in our earnings release today and our slide presentation. Now I'll turn the call to Nick to begin his prepared remarks. F. Grasberger: Thank you, Dave, and good morning, everyone. Let me start with a brief status update on our transaction to sell Clean Earth. We continue to target the midyear closing, and we are working diligently to complete the transaction. The HSR waiting period is scheduled to expire on March 9, absent a request for more information. We expect to publicly file both our Form 10 and proxy documents later in March, and at that point, we'll begin to focus on our shareholder meeting and a date to close the transaction. Finally, we are not yet in a position to narrow the cash payout range of $14.50 to $16.50. The payout will take into consideration the time of the closing and the company's cash flow up to that point as well as the amount of cash we determine is prudent to retain in support of Rail's ETO contracts. We may decide that New Enviri should retain more cash for these contracts than we had hoped a few months ago. We are in the midst of discussions with various parties that will impact the amount of cash that will need to be retained and ensuring New Enviri is soundly capitalized and set up for success is, of course, a priority for us. We look forward to providing further updates when appropriate. And at this time, there's not much more that we are able to say about the cash payout range. As I reflect on the Clean Earth transaction, I'm pleased with what we have accomplished over the past few years. The improvement realized at Clean Earth has been extraordinary. And I credit the Clean Earth leadership team for having the vision to identify strategic initiatives and drive their execution throughout the organization. I'm confident that Clean Earth will continue to prosper as part of Veolia. And while the sale of Clean Earth is a major step towards capturing the sum of the parts value of the Enviri portfolio, it's certainly not the final step. There's more value to be created through New Enviri. Harsco Environmental and Rail are market-leading businesses with strong reputations within their markets, and we are optimistic that underlying demand will improve, and we believe Russell and his team are poised to accelerate positive change within and throughout these businesses. Tom and Russell will comment further on Q4, our outlook and our priorities. So first, over to Tom. Thomas Vadaketh: Thank you, Nick, and good morning, everyone. We finished 2025 with quarterly adjusted earnings that was towards the high end of our expectations. Full year revenues for 2025 were $2.2 billion, led by 4% growth at Clean Earth, which was achieved through a mix of price increases and volume growth. This growth was offset by lower revenues at both Harsco Environmental and Rail due mainly to lower volumes as well as divestitures in the case of HE. Adjusted EBITDA for the year totaled $275 million. Clean Earth again realized record earnings and margins in 2025. For Harsco Environmental, market challenges persisted throughout the year, but we're pleased its performance improved as the year progressed. Our HE team executed well operationally and successfully renewed a larger-than-normal volume of contracts during the year. Looking forward, we're hopeful that underlying steel demand and production will improve for our customers, particularly in Europe, where trade protections are pending and expected to be implemented later this year. Any benefits from these trade actions in Europe are not considered in our guidance for 2026 at this point, and I'll share more on that shortly. At Rail, standard equipment demand remains weak and its ETO contracts continue to weigh on its earnings and cash flow. Despite sluggish demand, Rail's base business remained profitable in 2025 and its cash flow did improve. For the year, Rail's ETOs contributed an EBITDA loss of approximately $20 million and these contracts consumed roughly $40 million of cash during the year. We are pleased with the results of the actions the team has taken to improve efficiencies in the supply chain and manufacturing operations. We are continuing to take aggressive actions at Rail to manage ETO risk and address the challenging demand situation, including a recent additional restructuring to rightsize the business. We'll come back to the path forward for Rail in a bit, and you can find the full year financial summary in the appendix within our presentation. Now let me turn to our fourth quarter performance details, starting on Slide 4. In the fourth quarter, total revenues were $556 million, and adjusted EBITDA was $70 million. Both revenue and adjusted earnings were unchanged compared with the 2024 quarter with year-over-year growth for Harsco Environmental and Clean Earth, offset by Rail. Overall, our earnings performance was towards the higher end of our expectations with the primary driver being Harsco Environmental, which achieved its highest quarterly adjusted EBITDA for the year. HE benefited from better cost performance during the quarter and tax recoveries in Brazil, which were not anticipated. It also benefited from some price and various other adjustments at year-end. Meanwhile, Rail benefited from additional machine shipments in the quarter versus our earlier expectations. I'd note that corporate costs were higher than expected as a result of compensation expense linked to our share performance and other incentives. Our adjusted diluted loss per share was $0.17 for the quarter, excluding the impact of unusual items. These unusual items totaled $57 million pretax and included the following: $15 million of costs directly related to the sale of Clean Earth and the spin-off of New Enviri. It also includes $7 million to accelerate the vesting of certain stock compensation to mitigate the tax impact of the company, which can also be considered as deal related and it includes $24 million of additional estimated costs to complete our ETO projects with SBB and Deutsche Bahn, which we will discuss further. Lastly, our adjusted free cash flow for the quarter was $6 million and for the full year, we ended at negative $15 million. This outcome was better than our latest guidance and reflects improved collections in the fourth quarter. For the year, Harsco Environmental and Clean Earth generated more than $160 million of free cash flow. This total, however, was offset by an interest burden of more than $100 million and Rail's negative cash flow of more than $50 million, both of which are expected to improve as part of New Enviri. A schedule detailing our free cash flow by business is included in our press release. Please turn to Slide 5 and our Harsco Environmental segment. Segment revenues totaled $257 million, an increase of 7% compared with the prior year quarter and adjusted EBITDA totaled $48 million, which translates to a margin of nearly 19%. The year-over-year earnings increase can be attributed to a number of factors, including higher service levels, improvement actions at certain underperforming sites and FX as well as tax recoveries in Brazil. These positives were partially offset by lower product contributions which can mainly be attributed to our ALTEK business. HE's results in Q4 were supported by a modest increase in steel production at our customer sites with growth most prominent in India, the Middle East and North America. Steel output in Europe or our largest market, however, remained very weak in the quarter. And while customer steel output overall did improve somewhat in the second half of the year, we continue to see significant room for upside. If implemented, we expect the trade measures contemplated in Europe mentioned earlier to support its steel industry with benefits for Harsco Environmental possible during the back half of 2026. Proposed changes were recently approved by the EU trade Committee and are now before the full parliament. Our steel customers in Europe expect these policy changes to become effective at the beginning of July this year. Now please turn to Slide 6 to discuss Clean Earth. For the quarter, revenues totaled $244 million, and adjusted EBITDA reached $38 million. Hazardous waste revenues grew approximately 3% through a mix of price and volume. And this increase was partially offset by a lower volume as a result of project-related work completed in the prior year quarter and mix changes in soil dredge materials. CE's adjusted EBITDA margin was just under 16% for the quarter. which includes the impact of higher incentive compensation. Now please turn to Slide 7 and our Rail business. Rail revenues totaled $56 million and its adjusted EBITDA loss was $4 million in the fourth quarter. Compared with the prior year quarter, lower volume across all business lines as well as a weaker business mix led to the decline in adjusted earnings. As we have commented in prior quarters, we have been seeing weakness in the North American market, resulting in contracting volumes. Our Rail team has done a nice job during 2025 to drive completion of several smaller ETO projects, improve our manufacturing processes and have also addressed the weaker demand by taking restructuring actions throughout the year to resize our capacity accordingly. Now let me provide a brief status update on Rail's large European ETOs. Russell will provide some perspective later as well. On the Network Rail contract, we continue to work towards some important project milestones while we continue discussions with our customer to improve the financial terms of the contract. Delivery and on-site testing of the first machine is planned for the summer, soon after which we expect to finalize our revised contract negotiations. For SBB, most of the first group of vehicles, which includes 48 wagons have been delivered and accepted by the customer. The remainder are expected to be accepted by the customer by end of Q3. Homologation for the second vehicle type, which will total 11 machines has started, and we expect to complete delivery of these machines by mid-2027. For Deutsche Bahn, the first 3 vehicles are scheduled to be completed and undergo homologation in the coming quarters under the existing contract. Now let me turn to our outlook on Slide 8. As Nick mentioned earlier, we're targeting a midyear closing for the sale of CE as well as the spin-off of New Enviri. Post the close date, we will likely be providing certain transition services to Veolia for some months, and 2026 accordingly will be a mixed year of Enviri and New Enviri. Therefore, today, we're only providing guidance for Harsco Environmental and Rail, the 2 businesses that will exist within New Enviri. This outlook doesn't contemplate any major improvements in economic or business fundamentals including within the European steel industry as a result of trade protections and in the case of Rail, our expectation is that demand will soften this year relative to 2025 with overall volumes reaching historic lows. While our outlook does consider the cost-out actions and improvements implemented in recent months within both Rail and HE, the benefit of these actions won't reach a full run rate until the second half of the year. Furthermore, our outlook does not incorporate any benefits from other projects underway within the company that Russell will speak to shortly. For Harsco Environmental, adjusted EBITDA is expected to be within a range of $170 million to $180 million. This range reflects that volume from new site startups a modest improvement in customer steel output and cost-out initiatives will be offset by [ cost ] and certain items not repeating in 2026. For Rail, we expect an EBITDA loss of between $26 million and $19 million. This outlook reflects lower demand for standard equipment and contract services as well as lower capacity utilization at our main plant, which will be partially offset by the restructuring actions I mentioned earlier. These expectations translate to pro forma EBITDA for the year of approximately $140 million for New Enviri. This figure is $5 million higher than what we presented in November when we disclosed the Clean Earth sale and reflects pro forma corporate post significant rightsizing of our corporate team and costs. The specific changes contemplated at corporate have been already announced internally and will be fully implemented after the close of the Clean Earth transaction and the completion of transition services. For free cash flow, we anticipate cash generation to be modest for New Enviri in 2026. I'd remind you that our free cash flow is typically negative in Q1 as a result mainly of our bond interest payments. For the year, HE and Rail cash flows are projected to improve compared with 2025, but we expect Rail ETOs to remain negative in 2026 under the existing contracts. Let me conclude on Slide 9 with our first quarter guidance. Here, I'll simplify and note that segment performance for these 2 businesses is projected to be lower year-over-year as well as lower compared to the just completed fourth quarter. These changes reflect lower volumes of demand, low volumes or demand for both businesses as well as contract exits for HE. This guidance also reflects that certain Q4 items such as the Brazil tax credits won't be repeated in the first quarter. Now over to Russell. Russell Hochman: Thank you, Tom, and good morning, everyone. I'm as energized today as when we announced the launch of New Enviri. I'm going to spend some time talking about priorities and the work underway now to position Harsco Environmental and Rail for the future once the spin-off into New Enviri is complete. To start with, we've assembled an outstanding leadership team and announced the return of Pete Minan as our CFO. Many members of the team were integral to the identification, creation and rapid growth of the Clean Earth platform. This team is already hard at work, laser focused and aligned to our priorities. The sale of Clean Earth is the first of many steps that I expect will create value. New Enviri will begin with a prudent capital structure, which is very important and I'm confident that we'll make positive changes within each of these businesses that will result in strong earnings and cash flow growth. In the near term, New Enviri guidance implies stability or some improvement in the case of Harsco Environmental, However, I am not satisfied with this guidance and believe that we can do much better going forward as we focus on improving these businesses, refining our strategic priorities for HE and Rail and taking additional aggressive actions to reduce complexity and drive operational excellence. Since announcing the spinoff, the team has been moving with urgency to implement initiatives that will carry us forward. To begin with, we have taken steps to strengthen Rail's cost performance and are working diligently to reduce or minimize its ETO contract risk, which I see as a critical priority for 2026. Two cost-out restructurings have already been completed at Rail, the most recent of which was in January. In addition, the team has achieved a significant reduction in third-party inventory management costs and taken actions to improve Rail's material, supply chain and reduce inventories while optimizing shop floor throughput. We are not stopping here and are actively pursuing other initiatives to rightsize our manufacturing operations and global SG&A. On the larger ETOs, while I won't comment on specific outcomes for these, we can anticipate improving our financial terms under certain arrangements or meaningfully reducing our ETO exposure. I am committed to accelerating actions to derisk the Rail ETOs this year. As it relates to corporate costs for New Enviri, we recently began efforts to streamline central functions, such as IT, across what will be a much smaller organization following the sale of Clean Earth. We have also launched a deep dive review of HE and Rail operations with the assistance from third-party experts to identify additional levers to improve efficiency, further optimize costs and strengthen our industry positions. In HE, focus areas include SG&A and support function costs as well as site level productivity and spending on personnel and maintenance. It also includes revenue and price initiatives. In Rail, the focus is on ways to simplify our regional manufacturing and global footprint, materials management and support costs. We look forward to communicating with you once our analysis is complete. And while the specific benefits from these initiatives are not contemplated with our 2026 plan, we are confident they will drive significant value for shareholders in the years to come. Harsco Environmental and Rail are both attractive businesses with strong market positions and each is at an inflection point. We remain confident that their respective markets will eventually recover, and we are taking actions now that will drive better margin and returns through economic cycles. In summary, we are optimistic that New Enviri will see significant earnings and cash flow growth over time, and I look forward to updating you on our progress. Thank you, and I will now hand the call back to the operator for Q&A. Operator: [Operator Instructions] And today's first question comes from Larry Solow of CJS Securities. Lawrence Solow: Great. Just quickly just on the Clean Earth just on the fact that it sounds like your cash usage or what you may need to retain at New Enviri sort of running towards the higher end of the range or maybe above that a little bit. So I guess that just infers that the cash payment will be towards the lower end, I guess, is that fair to say? F. Grasberger: No, I wouldn't say that, Larry, it's Nick. In fact, is that there are just many moving parts here. And so we just can't be more specific, but I wouldn't infer from the comments that payout is trending to the lower end of the range. That's not necessarily the case. Lawrence Solow: Okay. That's fair. Well, I can talk about that more offline. Okay, good. So HE had a really nice quarter actually. I know it's just 1 quarter, and it sounds like there were some onetime benefits in there. Your outlook is, I think, in line with expectations, somewhat muted, but in this environment, I think it within expectations. Just curious, looking -- breaking out some of the moving parts, what are your expectations for steel production? Is it flattish still? And I think over the last few years, your customers have actually even been hurt more than overall industry. So just curious if you can help parse that out a little bit. F. Grasberger: Yes. Well, certainly, as I think you know, we are more exposed to the EU steel markets than other geographies, and that's been in particular weak. And Tom commented on that and certainly indicated reason for optimism, even though not built into guidance, and we could begin to see some of those benefits as early as the second half of this year. . But I would say in other geographies, North American volumes are reasonably good. Of course, they continue to be strong in India and the Middle East, Brazil and Mexico were a bit weaker perhaps. But overall, I would probably use the term stable and hopefully improving in the latter part of this year. Lawrence Solow: Got you. And just Harsco specifically, I know you mentioned some newer contracts, and I think you've had a couple of press releases out. But then there's some net exited contracts. So I'm curious, is your -- and I know sometimes you exit discretionarily because of lower margin, but is your -- are you netting a benefit as we look out, you're getting -- you're adding more contracts in that are going out the door? Or any way you can give us color on that? F. Grasberger: Yes. I think for this year, that contract churn, if you will, in terms of revenue will be -- margin should be higher. We believe that we're mixing up in terms of the margin on contracts. And you're correct, the contracts that we've exited have largely been due to price that we're simply not willing to sacrifice margin given the large number of opportunities we have that we view as more attractive. So as we look forward kind of beyond this year, given the visibility we have to our pipeline and the likelihood of entering into some of these new contracts, we expect that churn rate to be positive to both EBITDA and margin. Lawrence Solow: Great. Just one question on Rail. It sounds like just demand environment continues to weaken. Just on the ETO contract specifically, though, I think you said $20 million EBITDA loss, $40 million on free cash flow for '25. It sounds like directionally, we're going a little bit better in '26, maybe not as much as initially expected. But did you actually -- or can you give sort of at least a little more specifics on what that might look like in '26? F. Grasberger: Yes, Tom, do you want to take that one? Thomas Vadaketh: Yes. Larry, we haven't spoken to that and we'll probably stay off it. But yes, we expect improvements as we go along. ETOs will still be a large use of cash in 2026. The $40 million that we had in 2025, if you remember when we started the year, I had talked about completion of small ETO projects. And our Rail team did a real nice job of driving those to completion. And as a result, it got paid for many of those. And that has partly the reason why the $40 million is certainly better than what we had last year, for instance, in 2024. But for 2026, we still expect to see a fairly large cash use from mainly the big 3 European ETOs. Operator: [Operator Instructions] And it looks like our next question today comes from Devin Dodge of BMO Capital Markets. Devin Dodge: A bit of a modeling question, maybe tying back to, I think, the last question. But just the guidance had some directional comments on pro forma free cash flow in 2026 and looking for some improvement year-over-year. I believe there's a table at the back of the deck that outlines the cash flow performance by business. So that's helpful. But Tom, I was just wondering if you can walk us through the puts and takes to get to a reasonable range that pro forma free cash flow number, both in 2025 and 2026. Thomas Vadaketh: I think what I said in my comments were that we expect it to be modest. So whether it's total Enviri or the pro forma of a New Enviri, I would have it breakeven or slightly worse than breakeven. F. Grasberger: But in general, I mean, I think we expect better cash flow in HE, less negative cash flow in Rail kind of offset by some items in corporate. Is that right? Thomas Vadaketh: That's right. Yes. Devin Dodge: Okay. Okay. That's helpful. Okay. On the Rail business, look, I know adjusted EBITDA excludes the impact from the large ETO contracts. But I think if earnings are expected to remain in negative territory in 2026. I think you mentioned it was down $19 million to $26 million. Just I know there's some overhead costs in the business that are tied to supporting those ETO contracts. Can you just remind us how much those are and when those should roll off? And if you back those out, would the business be operating at or above a breakeven level? Thomas Vadaketh: Yes. The -- so the -- the SG&A, Devin, to support those, it's not just SG&A, there's some other overheads as well, is in the $15 million to $18 million range. And so removing those, the business we're projecting will still be at a loss in the base business. And that is because of just the demand, the very weak demand situation. We have taken cost actions and there'll be more cost actions to follow. But it takes time for those to reach a full run rate and particularly in the manufacturing business, even though you save cash costs, it takes time for that to come through the P&L. So we expect to see a full benefit of those towards the back half of the year. And that is partly the reason why we're projecting a loss for the base business. Devin Dodge: Okay. Okay. And then sticking with the Rail business. Do you feel like most or all of the lower revenues that you're seeing, is that due to just soft industry conditions? Or is there a regional mix element to that? Or is there market share losses? Just trying to understand or if you could unpack what you're seeing on the top line performance? Russell Hochman: It's Russell Hochman. Maybe I'll start and then, Tom, if you want to add anything or Nick. Just it's primarily related to the North America base business. We just see continued weakness, really historic weakness. We are hopeful that at some point, the customers will start investing in this equipment, but this is a cyclical low. That's really what's driving a lot of that market contraction for us. Thomas Vadaketh: Yes. And in our guidance, Devin, we didn't want to build in undue optimism. So we have based the guidance for the year based on current demand levels. And as Russell said, hopefully, that will start to change as the year progresses. And if it does, we'll certainly update you. Devin Dodge: For sure, for sure. And if I could just squeeze in one last one. Tom, I think you have some good color on the contracts with SBB and Deutsche Bahn. Apologize if I missed it, but is there any update on the contracts in -- for the ETO contract? Thomas Vadaketh: Devin, I didn't catch you -- I think you mentioned Network Rail, right? Yes. Yes, Network Rail, so this -- we are progressing towards the completion of the very first machine. And once that is delivered, it will undergo what we've referred to before as homologation that will occur in the U.K. We are also in talks with the customer to improve the commercial terms, the financial terms so that the go-forward picture is more attractive for the company. And what we have sensitively agreed with the customer is that upon -- around the timing of the delivery, the arrival of the machine in the U.K., we will also look to finalize this agreement. Basically, that's the focus of our activity for now. There are more machines to be made, but our focus is on completing the first one and then also completing these negotiations. Operator: And our next question today comes from Rob Brown at Lake Street Capital Markets. Robert Brown: Good morning. Just sort of sticking to the ETO contracts. A lot of things are going to happen this year. I guess, what's -- exiting '26, what do you sort of see the ETO exposure and risk level down to? Is it sort of complete by the end of '26? Or I guess, is the Network Rail still outstanding? But just a sense of after these steps happen this year, what's the remaining risk on the ETO side? Russell Hochman: So it's Russell Hochman. I'll start with my thoughts on your question. So with regard to the -- what we're calling the smaller ETOs, those will be essentially completed this year with a minor exception, which will be completed in the first quarter of 2027. And we're -- as we've said before, not taking on any new ETOs. So that will be the end of the smaller ones. With the larger ones, as I said in my comments, my commitment is to derisk the company of these. And so I'm directly involved along with Tom and others in these conversations with these customers. And I would say the message that we've communicated is pretty clear that we will come to terms on these contracts this year. Obviously, something on a mutually beneficial basis or we will look to pursue other ways of de-risking the portfolio, right? But my commitment is to complete those conversations so that the terms are improved or we've derisked the portfolio, as I said, in other manners. Robert Brown: Okay. Great. Got it. And then I guess thinking Rail, the cyclical kind of downturn activity, I know it's hard to predict the sort of recovery. But what are sort of the dynamics as these orders start to recover, how quickly can it come back? And what's the kind of customer -- I assume the longer they wait, the more they kind of have a pent-up demand, maybe that's not how it works. Just a sense of how the recovery cycle tends to happen in the Rail market? F. Grasberger: Well, we haven't seen it this -- volumes this low for a very long time. But Rob, it's a fairly quick cycle kind of business. So these are standard pieces of equipment. We can make them pretty fast unlike, say, the ETOs, for example. So if demand comes back, we should start to see our volumes respond pretty quickly. And we are monitoring, as you can imagine, monitoring the market very closely. For now, our customers are not ordering as much as they have in the past. They're choosing to conserve cash. In some cases, they're looking to remanufacture or refurb some of the old machines and stretch them out. And so yes, it's a matter of waiting at the moment. Operator: And that concludes our question-and-answer session. I'd like to turn the conference back over to Dave Martin for any closing remarks. David Martin: Thank you, Rocco, and for everyone that joined us this morning. Feel free to contact me with any follow-up questions. And as always, we appreciate your interest in Enviri and look forward to speaking with you in the future. Have a great day. Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.