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DOCN 2025 Q4 财报电话会议

Operator: Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the DigitalOcean Holdings, Inc. Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. To withdraw your questions, simply press star one again. I would now like to turn the conference over to Melanie Strate, Head of Investor Relations. Please go ahead. Thank you, and good morning. Thank you all for joining us today to review DigitalOcean Holdings, Inc.'s fourth quarter and full year 2025 financial results and an investor update. Joining me on the call today are Padmanabhan Srinivasan, our Chief Executive Officer, and W. Matthew Steinfort, our Chief Financial Officer. Before we begin, let me remind you that certain statements made on the call today may be considered forward-looking statements, which reflect management's best judgment based on currently available information. Our actual results may differ materially from those projected in these forward-looking statements, including our financial outlook. I direct your attention to the risk factors contained in our filings with the SEC as well as those referenced in today's press release that is posted on our website. DigitalOcean Holdings, Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made today. Additionally, non-GAAP financial measures will be discussed on this conference call, and reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings press release as well as in our investor presentation that outlines the discussion on today's call. A webcast of today's call is also available in the IR section of our website. And with that, I will turn the call over to Padmanabhan Srinivasan. Padmanabhan Srinivasan: Thank you, Melanie. Good morning, everyone, and thank you for joining us. We had a fantastic quarter and a very strong finish to the year, and I am excited to share the details with all of you. We ended the year with 18% revenue growth in Q4, reaching $901,000,000 for the full year. We delivered $51,000,000 in incremental organic ARR, the highest in the company's history. Our million-dollar customers reached $133,000,000 in ARR, growing at 123% year over year. We maintain financial discipline and strong profitability with 42% adjusted EBITDA margins and 19% adjusted free cash flow margins for the year. There is a lot to be excited about, and given this momentum that we are seeing and the progress we are making against our long-term strategy, we wanted to provide a more comprehensive update today rather than wait for a separate investor day. Our prepared remarks will be slightly longer than usual. We will advance slides from our earnings presentation on the webcast as we go, and we will leave plenty of time for questions. AI is reshaping entire industries, and we are built for this shift. Software is being disrupted not by incremental AI features, but by a structural shift to agentic systems operating at scale. Cloud and AI-native disruptors are moving beyond AI experimentation at a breakneck speed. They are deploying agents that reason, act, retain memory, and run continuously. In this structural shift, we see a secular hyperscale-sized opportunity by serving AI and cloud-native companies driving this disruption. When markets are disrupted like this, there is typically a short window to take advantage of the opportunity, and let me tell you how we are seizing it. First, our top customers are now our growth engine. We have turned what was once viewed as a weakness into a competitive strength. Our top digital-native customers, or DNEs, which include cloud and AI-native companies, are now our fastest growing cohort, and, in fact, growing significantly faster than the market on DigitalOcean Holdings, Inc. In a nutshell, scaling our top customers was once a constraint. Today, it is our growth engine. Second, we are on the right side of software disruption driven by AI. Modern cloud and AI-native companies are going after large markets with this disruptive AI-centric software innovation. They are increasingly choosing DigitalOcean Holdings, Inc. as their natural platform to build and scale their authentic AI software. And when these companies disrupt and scale at unprecedented rates on our platform, we win. Third, we put the cloud in Neo Cloud. These AI natives need more than just GPU rentals or inference APIs. They need access to optimized AI models, both closed and open source, production-grade inferencing, and a full-stack cloud for their software. All working together at global scale. We deliver all of it in one integrated agentic inference cloud. And finally, we are building a durable and profitable growth engine. We are investing responsibly while driving balanced growth. Without chasing the GPU training arms race, we expect to deliver 21% revenue growth in 2026, reaching 25% plus growth by Q4 2026, and 30% growth in 2027. We are on a path to being a weighted rule of 50 next year, on the back of our existing committed data center capacity alone. Put simply, we are accelerating growth the DigitalOcean Holdings, Inc. way. In December, we crossed a major milestone, surpassing a billion-dollar revenue run rate. This is a remarkable achievement for a company that was founded through Techstars in 2012. This success is a testament to our passionate team and the vision of our original founders. I also extend my deepest gratitude to all our incredible customers who have supported us throughout this journey. But what matters more than this milestone is where we are going. We exited 2025 at 18% year-over-year growth and are on a path to deliver 21% growth in 2026 with an exit growth rate of 25% plus in 2026. We are picking up momentum, and we have outgrown the old narrative. Let me elaborate. Our top customers are now our growth engine. For our first decade, we built an iconic developer cloud. That foundation still matters, and we have over 4,000,000 active developers on our platform that absolutely love us. Over the last several quarters, we have deliberately shifted focus towards serving our top DNEs and eliminating any reason for them to leave DigitalOcean Holdings, Inc. at their scale. And that focus is working. In Q4, we delivered a record organic incremental ARR of $51,000,000 and $150,000,000 on a trailing twelve-month basis, both surpassing even our peak COVID-era quarters. This record trailing twelve-month incremental ARR was balanced across AI and cloud customers. ARR from DNEs reached $640,000,000 in Q4, which is now 62% of total ARR, growing 30% year over year. And our DNE NDR reached 102%, continuing to outperform developer NDR. And like I have been reporting for a while now, our largest customers in the DNE cohort are accelerating the fastest. Our $100,000 customers are growing at 58%, our $500,000 customers are growing at 97%, and our million-dollar customers who reached $133,000,000 in ARR are growing at 123% year over year, all well ahead of market growth rates. And NDR also increases meaningfully as these customers scale. Q4 NDR was 102% for our $100,000 customers, 106% for our $500,000 customers, and 115% for our million-dollar customers. For our $1,000,000 customers, churn has averaged 0% over the last twelve months, which clearly shows that our top customers are now scaling with us and becoming our growth engine. You should also effectively debunk any misconception that our most successful customers will outgrow our platform. Recapping this section, we are accelerating past the $1,000,000,000 revenue run rate milestone, and our top customers are driving this acceleration. We are no longer defined just by entry-level developers experimenting on our platform. We are defined by high-growth cloud and AI-native companies running production workloads, scaling revenue, and building their businesses on DigitalOcean Holdings, Inc. Said simply, scaling our top customers was once a constraint. Today, it is our growth engine. On to the next point. We are on the right side of software disruption. There is a structural shift happening in software, and DigitalOcean Holdings, Inc. is emerging as a preferred platform for cloud and AI-native companies that are driving this disruption. The last generation of software as a service, or SaaS, monetized per user, per seat. Value scaled with headcount. This next generation of AI-centric software monetizes per token or inference request. Value scales with intelligence delivered. As AI model capabilities accelerate, entire categories of horizontal and vertical software are being reinvented. Incumbents are reacting to transformational change by layering AI into their workflows, seeking to enhance their existing software. But AI-native companies are starting from first principles. For them, AI is not a feature. It is the very engine that defines their product. Every time they deliver value, inference runs, tokens are consumed, and intelligence is produced. DigitalOcean Holdings, Inc. is uniquely positioned to serve these disruptors, and that is evident in the traction we are getting from leading AI-native companies. We have signed and expanded production workloads with scaled cloud and AI-native companies like Character AI, Orca to, and Hippocratic AI. Companies with product-market fit, real revenue, and rapidly scaling demand. Our work with Character AI demonstrates this clearly. We delivered a 100% throughput increase and roughly 50% lower cost per token for Character AI on our production inference cloud powered by AMD Instinct GPUs at production scale. This is not a lab benchmark. This is on live traffic across tens of millions of customers. This demonstrates our ability to support production-scale inferencing for leading AI companies with our differentiated performance, cost efficiency, and integrated AI and cloud platform built for inference-first production workloads. Another AI native with a proven product-market fit is Hippocratic AI, who builds healthcare-focused conversational AI designed to support clinical workflows and patient engagement. Hippocratic AI selected DigitalOcean Holdings, Inc.'s agentic inference cloud to power HIPAA-compliant clinical AI workloads. This validates not just our performance, but our enterprise-grade security and compliance. For Hippocratic AI, we optimized their multimodal deployment on NVIDIA hardware, reinforcing the importance of vertical innovation from GPUs, networking, kernel optimization, cloud integration, and inference software. These AI natives also scale very differently. While traditional cloud customers may take years to reach $1,000,000 in ARR, AI natives can cross that threshold in months or even weeks. When inference is your product, demand compounds quickly. DigitalOcean Holdings, Inc. is purpose-built for these disruptors. As software becomes more intelligent and AI-centric, we are building the vertically integrated inferencing cloud designed to power the next generation of AI natives, putting us squarely on the right side of this AI-driven disruption. And our agentic inference cloud is catalyzing these disruptors. Next, let me explain how we are enabling this. We do this by putting the cloud in Neo Cloud. Over the last couple of years, a new category of Neo Clouds has emerged that is largely optimized for one thing: large-scale AI model training. Dense GPU farms, high-performance networking, frontier AI model training workloads. This is an important layer of the AI stack. But serving inferencing is different. As AI diffuses into every software company, workloads shift from training a handful of frontier models to running millions of real-world applications. And real-world AI-centric software needs more than GPU farms. They need compute, storage, databases, networking, observability, security, all working seamlessly together with predictable and transparent unit economics. Over the past four quarters, we have evolved our agentic inference cloud to meet that reality. We have combined specialized inference infrastructure with our full-stack cloud platform, purpose-built for production AI, while staying true to what defines DigitalOcean Holdings, Inc.: simplicity, open standards, enterprise-grade performance and SLAs, and predictable and transparent unit economics. A good recent example of this in action is OpenClaw, which recently took the world by storm by demonstrating the power of agentic software, giving us a glimpse into what the AI-centric software future will look like. OpenClaw is an open-source AI agent framework that allows developers to run real-world task-driven agents. When customers deploy OpenClaw on DigitalOcean Holdings, Inc., they need more than just GPUs. Because AI agents are stateful. They reason. They take action. They retain memory. They interact with third-party APIs. All this requires more than just a GPU farm. It takes a full cloud and AI stack working together side by side. Customers increasingly understand this. As inference is the heartbeat of modern AI natives, it is their primary operating cost, their performance lever, and their competitive moat. Their production traction scales directly with model quality, inference performance, and unit economics. As they grow, they do not build their products around a single closed-source model but rather orchestrate multiple models in real time, often leveraging open source and a mixture of expert approaches to optimize both accuracy and unit economics. Our platform delivers flexibility at every layer from serverless inference APIs to dedicated clusters and GPU droplets, allowing customers to precisely match performance and cost to their workload requirements. We pair that with performance open-source models, delivering high accuracy, strong throughput, low latency, and compelling unit economics. And this is not a stand-alone inference platform. It is deeply integrated with our full-stack cloud that we have hardened over the last dozen years so that customers can build, deploy, and scale their entire AI application in one integrated environment with enterprise SLAs. Our agent development platform takes them from experimentation to production with real-world AI agents. Underpinning all of this is a deep lineup of GPUs from NVIDIA and AMD, supported by a rapidly expanding global data center footprint built and operated with years of operational expertise supporting mission-critical workloads. This integrated platform and flexibility of choice is precisely what makes DigitalOcean Holdings, Inc. a natural platform for agentic software. Let me explain this again using OpenClaw as an example. Customers can build and deploy OpenClaw agents on DigitalOcean Holdings, Inc. in two distinct ways, depending on their need for control, scale, and operational complexity. The first path optimizes on simplicity and speed. Customers can launch a preconfigured one-click GPU droplet and have an OpenClaw agent running in minutes. This model gives full control over the environment, ideal for experimentation, customization, performance tuning, and teams that want direct access to the infrastructure layer. The second path optimizes for global scale. Customers can deploy OpenClaw on DigitalOcean Holdings, Inc.'s managed serverless platform where DigitalOcean Holdings, Inc. handles provisioning, scaling, security, container orchestration, and operational management. This approach is ideal for teams that are scaling a global application. Both approaches run on the same integrated cloud with access to managed databases for agentic memory, object storage for artifacts, virtual private cloud networking, observability, and GPU-backed inference. That is what vertical integration looks like in the inference economy. Not just providing bare metal GPUs, or even just generating inference tokens, but providing a secure, scalable, and manageable foundation for intelligent, stateful systems. Within days of launching OpenClaw, nearly 30,000 native DigitalOcean one-click OpenClaw droplets were created, and that was just the starting point. Thousands of other OpenClaw deployments were activated by customers, signaling the emergence of a new ecosystem almost overnight. The success of OpenClaw is an early view of how the AI market will continue to evolve and can serve as a blueprint for AI-native businesses on how a new generation of software will be built around autonomous agents that orchestrate complex multistep workflows across systems, continuously reason with data and context, and execute tasks end to end with minimal human involvement. As these AI-native companies move from proof of concept to production agents, the richness of the underlying platform, the security posture, manageability, scalability, and predictable unit economics become mission critical. And that is exactly where DigitalOcean Holdings, Inc. is fast emerging as the natural platform for building and scaling AI agentic software. The competitive landscape is crowded with companies speaking to their ability to address the inference market. But our differentiation from these competitors is very clear. Neo clouds rent out GPUs. Inference wrapper providers stop at inference APIs and model libraries. We continue to effectively compete with hyperscalers who bring scale but also come with complexity and cost structures that are aimed at traditional large enterprise companies. Each of these competitors address a component of the inference value chain. Real-world agentic software requires a tightly integrated environment where inference, orchestration, persistence, networking, and security are designed to work together with simplicity, global scale, enterprise SLAs, and predictable unit economics. That is where DigitalOcean Holdings, Inc. wins. This differentiation is clear to our customers, but it is also very clear in our financial profile. As a full-stack cloud provider that has operated mission-critical workloads for cloud and AI natives for over a decade, we look very different from a financial perspective than other players in the AI training market or components of the inference market. Where Neo Clouds have very high revenue concentration with just a few very large customers making up the vast majority of their revenue, DigitalOcean Holdings, Inc.'s top 25 customers represent only 10% of our revenue. While GPU rental providers own bare metal revenue and margins on their infrastructure, DigitalOcean Holdings, Inc. drives higher revenue and margin from our full-stack inference and cloud solution. And when a growing number of Neo Clouds are investing massive amounts of capital and burning near-term profits and cash for future returns, DigitalOcean Holdings, Inc. is already profitable and generating cash. Our traction with cloud and AI natives is no accident. It is the result of relentless focused investment and disciplined execution. We recently strengthened our executive team by adding Vinay Kumar as our Chief Product and Technology Officer. As a founding member of Oracle Cloud Infrastructure, or OCI, Vinay brings deep hyperscale expertise and leads our product, platform, infrastructure, and security teams. Having built a hyperscaler from the ground up at OCI, he looks forward to scaling up another one at DigitalOcean Holdings, Inc., one that is purpose-built to meet the complex needs of cloud and AI-native workloads globally. In the meantime, our R&D team has been very busy continuing to ship products and features that are helping our customers scale on our platform. On CoreCloud, we launched remote MCP support, embedding AI directly into the control plane, enabling secure zero-setup infrastructure management. On our AI platform, we introduced the agent development kit and enhanced agent evaluation tools to help customers move from experimentation to production with measurable performance and reliability. With GPU observability, managed NFS, and multi-node GPU support, we significantly expanded our ability to run large-scale mission-critical inference in production. This is what vertical integration looks like: infrastructure, inference, observability, agent tooling, all built to seamlessly work and scale together. And we are just getting started. We will share the next wave of innovation on our agentic inference cloud at our next Deploy conference in San Francisco on April 28, as we continue building the platform purpose-built for the inference economy. Our differentiation is durable and will continue to grow as the market shifts from training to inference. To give investors clearer visibility into this momentum, we are introducing a new metric: AI customer revenue. AI customer revenue includes all revenue from customers leveraging our AI products, including both inference and core cloud services, because AI natives do not just buy GPUs. They build, operate, and scale applications, which need a full-stack inference cloud. In fact, 70% of our AI customer ARR in Q4 2025 was already coming from inference services or general-purpose cloud products rather than from bare metal GPU rentals. And these customers are growing rapidly with Q4 AI customer ARR reaching $120,000,000, growing 150% year over year, now making up 12% of total ARR. In summary, we do not just rent GPUs. We run production AI. We are not a GPU landlord. We are an AI cloud platform. We deliver hyperscaler-grade infrastructure and reliability, purpose-built inference services co-located and integrated with a full-stack general-purpose cloud designed for the next generation of AI natives. Or put simply, DigitalOcean Holdings, Inc. puts the cloud in Neo Cloud. Now on to my final takeaway. We are building a durable and profitable growth engine. At our Investor Day last April, we laid out a plan to return the business to 18% to 20% growth by 2027. On our last earnings call, we pulled that growth projection forward by a full year, guiding that we would reach that 18% to 20% growth range in 2026. And just nine months after setting that original plan, we have already reached the bottom end of the target range at 18% growth in 2025, achieving it two full years ahead of our original target. And the momentum we are seeing gives us even greater confidence. We now expect to deliver 21% revenue growth for the full year 2026, with an exit growth rate of 25% plus by Q4 and reaching 30% growth in 2027. As we ramp into our committed 31 megawatts of incremental capacity this year, there will be measured near-term pressure on gross margin and adjusted EBITDA. But we remain confident in our 18% to 20% unlevered adjusted free cash flow margin guide for the year. The near-term pressure is just a physics problem, given the startup cost timing and revenue ramp characteristics of quickly adding new capacity. It is the natural result of pursuing high-return growth opportunities. But we remain disciplined operators. Demand continues to far outstrip supply, and we will take advantage of opportunities to further accelerate growth when they present themselves. We will do so responsibly, and we will continue to pursue investments with attractive returns, match investments with revenue timing, maintain a strong balance sheet, and allocate capital with rigor. Even as we accelerate, growth and discipline are not tradeoffs for us. They are both operating principles. With that, I will turn it over to W. Matthew Steinfort to walk through the quarter and the year in more detail and to provide additional color on our updated outlook. Matt, over to you. W. Matthew Steinfort: Thanks, Padmanabhan. Morning, everyone, and thanks for joining us today. As Padmanabhan just shared, we are a very different company today than we were just a few years ago. It is an exciting time at DigitalOcean Holdings, Inc. We are a rapidly growing and profitable company that is incredibly well positioned to take advantage of the hyperscale-sized inference market opportunity. This excitement is clearly evident in both our recent financial performance and in our higher near-term and long-term outlooks. Revenue growth has reaccelerated. We have reversed declines from our top customers, turning them into a key driver of our growth. We have scaled our AI customer ARR to $120,000,000, growing at 150% year over year. And we have done this profitably, growing adjusted EBITDA and adjusted free cash flow on both an absolute and a margin basis. While we are pleased with our progress over the past several years, it is our recent momentum that gives us the confidence to further increase our near-term and long-term outlooks. Fourth quarter revenue was $242,000,000, up 18% year over year, and we closed 2025 with full-year revenue of $901,000,000. We delivered sustained acceleration through 2025, driving a 500 basis point increase in Q4 growth from the same period just a year ago. We delivered the accelerated revenue growth with strong margins and growing profits even as we increased our investments. Fourth quarter gross profit was $102,000,000, up 13% year over year, with a gross margin of 59%. For the full year, gross profit was $540,000,000, up 16% year over year, with a gross margin of 60%. Adjusted EBITDA in the fourth quarter was $99,000,000, an adjusted EBITDA margin of 41%. Full-year adjusted EBITDA was $375,000,000, a 42% adjusted EBITDA margin. Trailing twelve-month adjusted free cash flow was $168,000,000 in Q4, or 19% of revenue. We maintained our attractive free cash flow margins in 2025, in part by expanding our financial toolkit to include equipment financing. This better aligns infrastructure investment timing with the revenue that it supports. We will continue to utilize a combination of upfront asset purchases and equipment leasing as we invest to fuel our growth. We continue to be disciplined financial stewards for our investors. We prudently use stock-based compensation to attract and retain our critical talent while repurchasing shares to mitigate dilution. SBC declined to 9% of revenue in 2025, down from 12% in the prior year. To put that number in context, we have a 33% margin if you subtract SBC from adjusted EBITDA. At 33% margin, we are just above the 80th percentile of a broad software comp set on an adjusted EBITDA less SBC, and we are well above the 13% median of that group. Non-GAAP weighted average shares outstanding increased slightly from 103,000,000 to 105,000,000 over the same period. To reduce dilution, we repurchased 2,400,000 shares in 2025 for $82,000,000, an average price of approximately $35. Note that we ended 2025 with our full $100,000,000 buyback authorization in place, and that authorization continues through 07/31/2027. While we continue to view share repurchases as an important long-term tool, our near-term capital allocation priorities are squarely focused on organic growth and balance sheet flexibility. GAAP diluted net income per share in the quarter was $0.24 and $2.52 for the full year, a 183% year-over-year increase. Non-GAAP diluted net income per share in the quarter was $0.44. For the full year, non-GAAP diluted net income per share was $2.12, a 10% year-over-year increase. As a quick reminder, recall that our 2025 net income per share metrics were impacted by the actions we took in 2025 to strengthen our balance sheet. In 2025, we proactively addressed the upcoming maturity of our 2026 convertible notes. We did this through a series of successful financing transactions that have given us significant balance sheet flexibility. These transactions included the establishment of an $800,000,000 bank facility, issuance of $625,000,000 of 2030 convertible notes, and the repurchase of the majority of our then outstanding 2026 convertible notes. Excluding the effects of these financing transactions, non-GAAP diluted net income per share would have been $2.29 for the year and $0.53 for the quarter. With our 2026 notes largely addressed, we ended the year with a strong balance sheet. We have sufficient liquidity and projected cash generation to address the remaining $312,000,000 balance of our outstanding 2026 convertible notes. Having drawn down the remaining $120,000,000 on our term loan A in February, we will repurchase or redeem the remaining 2026 notes for cash before or at the maturity in December 2026. Beyond this, we have no other material maturity until 2030, and we entered 2025 with approximately 3.2 times net leverage. Before I get into guidance, I want to highlight an action we are taking to further concentrate our investments on our key growth levers. We are sunsetting a small legacy dedicated bare metal CPU offering. We expect approximately $13,000,000 of ARR to roll off by the end of 2026. As this revenue is noncore, we have excluded this legacy product revenue from our customer-specific year-over-year growth metrics. Shifting back to guidance. We entered 2026 with tremendous momentum and confidence that is focused on material demand we are seeing for our agentic inference cloud. We also continue to improve visibility on our near-term revenue growth, as we increased RPO in Q4 to $134,000,000, up 121% sequentially, up close to 500% year over year. With this growing demand and visibility, we are again increasing our near-term growth outlook. For the first quarter of 2026, we expect revenue in the range of $249,000,000 to $250,000,000, which is approximately 18% to 19% year-over-year growth. We expect first quarter adjusted EBITDA margins in the range of 36% to 37% and expect non-GAAP diluted net income per share of $0.22 to $0.27 based on approximately 111,000,000 to 112,000,000 weighted average fully diluted shares outstanding. For the full year 2026, we expect revenue growth between 19% and 23%. This is 21% at the midpoint, beyond the 18% to 20% growth outlook that we shared just last quarter, and it is important to highlight that this would be 21% to 24% projected growth if we exclude the impact of our discontinued legacy bare metal CPU offer. We will deliver this accelerated growth while maintaining attractive margins. We project full-year 36% to 38% adjusted EBITDA margins, and 18% to 20% unlevered adjusted free cash flow margins, which is $207,000,000 at the midpoint. We expect non-GAAP diluted net income per share of $0.75 to $1.00 on 111,000,000 to 112,000,000 weighted average fully diluted shares outstanding. This growth outlook is based on the incremental data center and GPU capacity investments that we have already committed that will come online over the course of 2026. As we look at the quarterly progression within 2026, it is important to understand the timing of this incremental capacity and how that timing impacts our financials. We are bringing 31 megawatts of new data center capacity online in three new facilities in 2026. The smallest of our three new facilities will start ramping revenue in the second quarter. The remaining two start ramping revenue in the second half of 2026. Aligned with this capacity ramp, we expect second quarter revenue growth to remain around 18% to 19%, with revenue growth then ramping in Q3 before exiting the year at 25% plus in Q4. While there are always supply chain and implementation timing risks to manage, we believe our implementation timeline is realistic. Increased data center lease expense and equipment depreciation expense will both hit our financials several months before we generate our first revenue in these facilities. Given this lag between expenses and revenue, cost of goods sold from higher GPU-related depreciation and operating expenses from new data center operating leases will increase in the early part of the year as we ramp into the new capacity. These increased costs will cause the expected upfront drops in gross margin and net income that we have seen when we turned up previous data centers. The initial impact will just be larger as we are turning up more capacity at one time than we have done in the past. Near-term adjusted EBITDA margins will also be impacted somewhat from these dynamics, although the impact is less as adjusted EBITDA is only impacted by the higher data center operating leases. Net leverage is projected to be above four times in the short term, as we add finance lease obligations to fund our GPU and CPU investments, and this increases net debt several months ahead of revenue and adjusted EBITDA ramp. We anticipate returning below four times net leverage over the medium to long term as we increase utilization in these data centers and ramp revenue and adjusted EBITDA. We will achieve these growth targets by focusing on our two primary growth levers: scaling our top DNE customers and expanding our base of AI-native customers. We will focus our investments on meeting the needs of our top DNE customers so that they can continue to scale on DigitalOcean Holdings, Inc. as they grow their own business. We will continue to invest both in our differentiated agentic inference cloud and in the data center and GPU capacity required to support AI natives. While we are excited by our growth potential in 2026, we are just getting started. As we reach full utilization on our existing committed capacity, we expect to reach 30% revenue growth in 2027. We will drive this growth while delivering projected 20% plus unlevered adjusted free cash flow margins, which would make us a rule of 50 plus company in 2027. We will achieve this while making smart investments, earning attractive margins, and maintaining a healthy balance sheet. We have both the tools and the discipline in place to continue to take advantage of opportunities as they arise. We will continue to share details on our leading indicators and our progress as we execute. We are increasingly confident in our ability to build a durable and profitable growth engine. With that, I would like to turn it back over to Padmanabhan to close us out before we get to Q&A. Padmanabhan Srinivasan: Thank you, Matt. Before we move to Q&A, let me leave you with a few thoughts. We crossed a billion-dollar revenue run rate in December. But that milestone is not the headline. The headline is where we are heading. We are no longer a niche developer cloud. We are the platform that high-growth cloud and AI natives are increasingly choosing to run production AI workloads at scale. We are projecting to exit 2026 at 25% plus revenue growth with a clear path to 30% growth in 2027 with the existing committed data center capacity alone. Our top customers are accelerating and are growing significantly faster than the market on DigitalOcean Holdings, Inc. We have outgrown the old distillation narrative. Scaling our top customers was once a constraint. Today, it is our growth engine. Our million-dollar customers are at $133,000,000 ARR, growing at 123% year over year. The world of software is shifting from seats to tokens, from experimentation to production, from model training to inferencing at scale. And in that shift, the winners in inference will be more than just GPU landlords. They will be vertically integrated AI cloud platforms that deliver performance, great unit economics, and simplicity that embraces open source. Exactly what we have and what we continue to build. Our AI customer ARR reached $120,000,000 in Q4, growing 150% year over year, with 70% of that coming from inference and core cloud products, not from bare metal. And we are doing it without chasing the GPU training arms race, without sacrificing discipline, without compromising profitability. We are building something durable. AI is reshaping entire industries, and we are built for this shift. I am incredibly excited to be part of DigitalOcean Holdings, Inc. at this critical inflection point where a new era of software is being ushered in. I take incredible pride in building a platform that AI pioneers are increasingly leveraging to disrupt software. I thank all of you for your partnership and support, and I hope you will join us in San Francisco on April 28 to learn about our platform, our innovation, and our customers. With that, let us open it up for your questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your questions, simply press star one again. We would like to ask everyone to limit themselves to one question and one follow-up only to accommodate all questions. Thank you. Our first question comes from the line of Raimo Lenschow with Barclays. Please go ahead. Raimo Lenschow: Perfect. Thank you. Congrats from me. That is amazing how our company is transforming right in front of my eyes. And, Padmanabhan, can we just talk a little bit about the customers that you are seeing? The talk in the market, a lot of that is just OpenAI and, Anthropic, maybe Google, and they are basically doing everything, nobody else really comes up. When you talk with, you know, looking at your customers, looking at the pipeline of customers out there, how do you see that inference market evolving in terms of how broad that will be? Is it just one topic doing everything, or what are you seeing out there in the field? And then I had one follow-up for Matt. Padmanabhan Srinivasan: Yeah. Raimo, thank you for the question. It is a very thoughtful way to get started. Of course, OpenAI, Gemini, and Anthropic get all the headlines in the mainstream news coverage. But as we talk to AI-native companies, and even examples that I was using in my script, and you will hear a lot more about this at our Deploy conference with very specific benchmarks and data. But what we are hearing from these AI-native companies is that while these closed-source models are really, really good, the open-source alternatives are extraordinarily important to manage the unit economics as these companies scale. Because the cost per token for the open-source models is about 90% cheaper, with very comparable accuracy as these open-source models mature. So we have many AI-native customers that are using, as I mentioned, a variety of open-source models at real time when they are doing inferencing. They want us to manage a multitude of open-source models and even route the request intelligently to these open-source models and, of course, use closed-source, expensive models on a case-by-case basis. It could be for certain prompts which are better served by these closed-source models and route everything else to these open-source models so that they can have a balanced unit economics. So it is by no means, and if you look at data from OpenRouter, 30% of the traffic already today is served by open source. That is without a lot of optimization. That is without companies like DigitalOcean Holdings, Inc. really stepping up and taking full ownership and guardianship of these open-source models. So we are doing a lot of work in this regard over the next couple of months, and you will see it in our Deploy conference. But this 30% is only going to grow. As these real-world AI-native workloads explode, we are going to see a lot of open-source adoption. Even in the OpenClaw deployments that we are seeing, there is a very healthy adoption of open-source models serving these OpenClaw agentic agent farms. So it is really interesting to see how this is evolving. And I want to say there is definitely a world beyond these closed-source models. The open-source ecosystem is thriving, and it is only going to grow in strength from here on. Raimo Lenschow: Yeah. Okay. Perfect. And then thank you for that, Padmanabhan. And, Matt, one question that comes up a lot at the moment is on the weighted rule of 50 numbers. If you look at your weighting, and then there are a lot of questions about the free cash flow margins that you think about in 2027. Can you maybe go a little bit deeper there? Because that comes up a lot here at the moment. W. Matthew Steinfort: Yeah. Thanks, Raimo. The weighted rule of 50 is pretty simple for us. We multiply revenue growth by 1.5 and add 0.5 times the free cash flow margin. And that is effectively saying that you are counting revenue growth three times as valuable as a point of free cash flow margin. But the important thing to note is while we talk about weighted rule of 50, if you look at the growth projections we provided, we are actually a regular weighted, or a regular, rule of 50 as well, with projected 30% revenue growth in 2027 with 20% unlevered free cash flow margins. So that is, I think, a very big testament to the growth opportunity that we have in front of us, but also the disciplined financial discipline that we have been employing. With the ability to accelerate revenue growth while still maintaining very attractive EBITDA margins and very attractive free cash flow margins is kind of part of the model, and it is the benefit of us not chasing the GPU training kind of an arms race. We believe that we will differentiate based on software and a differentiated platform, and we see a tremendous opportunity to drive really attractive margins as we expand and invest appropriately. Operator: Your next question comes from the line of William Kingsley Crane with Canaccord Genuity. William Kingsley Crane: Hi. Thanks for taking the question, and congrats to the whole team on results. I think you have done an excellent job with the investor update. I actually want to circle back to the Inference Cloud dynamic with open-source models. We have been looking at OpenRouter data as well. I mean, some of these models come and go pretty quickly. How many models can you cater to? How are you thinking about quickly providing support for those classes and models? Is there any operational tax to quickly provide support? And then just how to think about them driving growth both from a revenue and profit standpoint. Could there be more of a Jevons paradox dynamic there with the lower-cost models? Thanks. Padmanabhan Srinivasan: Yeah. Thank you, Kingsley. That is a good question. So you asked two different questions. One, from an operational overhead, in terms of day-zero support to these models. Obviously, we have been extending day-zero support for a vast majority of these open-source models as they come out. And there are a couple of things there. One is, obviously, there is a little bit of manual overhead in supporting these models. But a large portion of this test and readiness harness is automated, and it is only going to grow in automation, and you will see a lot more details around this at our Deploy conference. And the second part of your question was really around the Jevons paradox of as these open-source models proliferate, how should we think about the growth profile of not just our platform, but also these companies. I think it is only going to aid in the deployment of AI-native software in pretty much every segment of the market. And I think we should also not think about AI-native workloads as open source or closed source. What we are seeing is a mixture of both. For the same use case, for the same inference call even, some parts of the application stack, based on the prompts, we do intelligence routing. Right now, it is fairly manual, but we are working on different types of algorithms to route it in a much more intelligent and smart fashion. So you will see a universe going into the future where prompts are going to get routed to different models all working together at the same time, to deliver high throughput, low latency, acceptable accuracy, with great unit economics of token throughput. So this is coming. We are already seeing it from many of our AI-native workloads, and that is how I see the market evolve. As open-source models continue to catch up with these closed-source systems, the closed-source systems are really important to be on the bleeding edge of innovation, but a vast majority of these long-running, authentic software like OpenClaw can very materially run on these open-source systems. William Kingsley Crane: Thanks, Padmanabhan. And then for Matt, you know, obviously, $22,000,000 per ARR per megawatt is a clear differentiator. I am curious now that Atlanta is close to full utilization. Any insights you have on just what a fully utilized megawatt can look like in terms of a revenue efficiency standpoint for AI? Thanks. W. Matthew Steinfort: Yeah. That is a great question, Kingsley. If you look at the public data that is available for a Neo Cloud, which is more of a bare metal model, they show, like, $9,000,000 to $12,000,000 in ARR per megawatt. Clearly, we believe we can deliver more than that. If you look at the guidance that we have given, what you will see is that while it is $22,000,000 now, that is, again, with a small, less than 10% or right around 10% of our ARR in AI. So as we grow AI, it will come down. We will add incremental ARR per megawatt greater than what you are seeing from the Neo Clouds. But the drop from a bigger mix of AI, by the end of 2027, once we are fully ramped with the incremental 31, it will only drop by a couple million. It will be around $20,000,000. And so if you think of us as not having, okay, well, we have got AI investments, and we have got core cloud investments, but we have more of an overall AI cloud platform that has GPUs, it has got CPUs, it has got core compute and bandwidth, and all the capabilities that you need, we still expect to deliver materially higher ARR per megawatt than what you are seeing in the Neo Cloud space. So we feel really good about the returns that we are getting and the margin that we are able to drive. This is only going to increase. I mean, you saw the chart in the deck about how much of the AI customer revenue is coming from non-bare metal. That is 70%. That is only going to increase, and that smaller sliver of core cloud is only going to increase as customers become entrenched on our platform and they start putting in database and storage and some of the other higher-margin capabilities that are sticky. We are very excited about our ability to serve the kind of full addressable wallet of the AI natives. Operator: Our next question comes from the line of Joshua Phillip Baer with Morgan Stanley. Joshua Phillip Baer: Congrats on the strong results and impressive targets. Just wanted to clarify, the incremental 31 megawatts, that all comes online by the end of 2026, driving that 25% revenue growth, exiting the year, but then as utilization increases, the capacity is enough to reach the full 30% growth in 2027 revenue. W. Matthew Steinfort: That is absolutely right, Josh. You nailed it. We said in the call that the smallest of the three facilities, which is six megawatts, is going to start ramping revenue in the second quarter. But the other two start ramping in the second half. And just with what we believe is appropriate assumptions around the timing and the ramp of that, we will hit 25% in Q4 as an exit growth rate, 25% plus. And then if all we did was fill those up, we would hit 30% for the full year in 2027, and we feel very good about, again, the returns that we would generate there and the growth trajectory that we would be on at that point. Joshua Phillip Baer: Okay. That is helpful. And was just hoping you could sort of review some of what Vinay Kumar's top priorities are at this point. There have been so many positive changes from a product and innovation perspective over the last couple of years. What are his priorities? What changes should we expect going forward? Padmanabhan Srinivasan: Yeah. Thanks, Josh. As I was mentioning in my prepared remarks, given his background at Oracle Cloud, he has really hit the ground running. His top one or two priorities are going to be continuing to build out the inference cloud. You will see a lot of very detailed updates on April 28 at our Deploy conference on how the next generation of this inference cloud capabilities is going to look. The team is super heads down and busy working on it now. We also will continue to raise the bar on our core cloud capabilities because our cloud-native, digital-native enterprise companies are also scaling tremendously on our platform, and they require continuous innovation from our side on advanced things like different types of databases and different scalability aspects of our database-as-a-service and various parts of our core cloud infrastructure, like high-performance storage, network file systems. One of the things that Vinay is working on is delivering innovation in our core infrastructure that is applicable to both AI native and cloud native. There is a huge intersection. If you look at companies like the AI natives that we are rapidly scaling up on our platform, they require very similar things from, say, high-performance storage, as an example. I do not want to preannounce stuff that we are working on, which we will come out on April 28 with, but a lot of those things are very similar to what our cloud-native companies can also benefit from. So there is quite a robust lineup of capabilities that we are working on for both the inference cloud as well as some of the underlying infrastructure enhancements that will be applicable to digital-native enterprise companies. That is what he is focused on delivering. As I mentioned, given his background, he has almost hit the ground running in terms of ramping up the innovation on the core inference cloud. Operator: Our next question comes from the line of Wamsi Mohan with Bank of America. Please go ahead. Yes. Thank you so much, and great to see this growth acceleration here. Wamsi Mohan: Firstly, maybe, Padmanabhan, just visibility around the 30% growth. How should we think about that in terms of, I mean, historically, obviously, DigitalOcean Holdings, Inc. is a very different company today. But historically, you did not really have long-term contracts, long-term visibility. You are talking about very meaningful acceleration as you go to 30% plus. Maybe if you could dissect some of the underlying drivers of what you are looking at, which give you the confidence, and maybe just split that between infrastructure-as-a-service and platform-as-a-service. That would be maybe a different way to slice and give people a view over there, and I have a quick follow-up. Padmanabhan Srinivasan: Thank you, Wamsi. I think Matt broke down some of the physics of the acceleration. We have new capacity that is ramping up throughout this year and going into next year as well. So that gives us a lot of visibility. First of all, maybe I should take a step back and talk about the fact that the demand that we are seeing now is very, very robust, and it far exceeds the supply that we currently have from an infrastructure point of view. So we are being super responsible in ramping up our capacity. We are being super aggressive in the timelines. We are working very closely together with the data center providers and the OEMs to get this capacity online in the fastest possible speed-of-flight scenario as much as we can. Given the schedule that we are currently working on, we feel very confident that as we bring this capacity online, we have enough demand in the pipeline to be able to fill up this capacity with very responsible economics. That is what is giving us the confidence to provide the outlook of 25% plus exiting this year and 30% for next year. And, also, our RPO has been going up steadily, and that is one leading indicator. But, also, I should add the fact that inferencing is very different. These are real-world workloads. As opposed to training, where a company can just raise venture capital money and just commit to a two-year, three-year contract to burn dollars to build a frontier model, inferencing workloads are typically paid by end customers. For us, that is super exciting because we are typically working with post-product-market-fit companies that have real revenue, working with real consumers or business-to-business like Hippocratic AI. They are deploying in some of the world's largest healthcare providers. So we know that as their demand picks up, they are going to need more and more inference capabilities. Our confidence really stems from the visibility we are getting into our customers and the real-world inference demand. I feel if you look at it from a customer perspective or you look at it from capacity point of view, those are the data points that we use to triangulate our guidance for exiting this year and next year. Wamsi Mohan: Okay. Thanks, Padmanabhan. And then maybe one quick one for Matt. Can you just talk a little bit about the margin progression? I guess you mentioned some near-term margin compression given your capacity ramp. Should we expect that will persist through all of 2026 given the timing of the ramp, and then as you ramp into 2027, we should be back to 2025 levels? Thanks so much. W. Matthew Steinfort: Thanks, Wamsi. Yeah. There is certainly going to be some near-term pressure, as we said, on gross margin, for example. But the metrics that we think are the best indicators of profitability for us continue to be adjusted EBITDA margin and free cash flow margin, both on an unlevered basis and a levered basis. And if you look at the margin guidance that we provided for the full year 2026 and the ranges for 2027, you see exactly what you just described, which is we will have a little bit more pressure this year as we ramp, but then as we grow into that and the utilization increases, that catches back up and then you should see an upward trajectory on the margins. The mix of AI services versus the core cloud, that is certainly a longer duration impact because as we add more AI capabilities and more AI revenue, the AI margins are lower than the core cloud margins, so you will have a little bit of a mix impact in addition to the timing impact. But all of that nets out in the very, very strong adjusted EBITDA margins that we are projecting and the very strong adjusted free cash flow margins and unlevered adjusted free cash flow margin. Operator: Our next question comes from the line of Gabriela Borges with Goldman Sachs. Please go ahead. Gabriela Borges: Hey. Good morning. Congratulations to the DigitalOcean Holdings, Inc. team. Padmanabhan, I have a little bit of a long-term question for you. If I think about DigitalOcean Holdings, Inc.'s core value proposition, democratizing access to cloud, that has been true for many years now. My question for you is, what do you think is structurally different with the AI compute cycle that will allow DigitalOcean Holdings, Inc. to essentially capture and hold on to a higher share of wallet in AI inference compute relative to the cloud cycle? And the reason I am asking is because there are 32 companies that show up in this SemiAnalysis cost-to-max benchmarking report. We know that the market is early. We know that the AI inference cycle is early. How do you think about DigitalOcean Holdings, Inc.'s ability to durably capture higher share of wallet relative to the 31 of the competitors over the long term? Thank you. Padmanabhan Srinivasan: Thank you, Gabriela. I am sure if SemiAnalysis was around in 2011 or 2012 and cloud was taking off, there would have been 32 IaaS providers as well, and we went from that to a billion-dollar run rate in 12, 13 years. If I take a step back and think about how durable our mission is in the world of AI, I think I hit on a few different points. I fundamentally believe that inference workloads are also workloads or real-world applications as well. As the application scales, you need a variety of different things all working together. AI natives do not want to just use one provider for token generation, go to another provider for database, go to a third provider for their application experience, and go to a fourth provider for some of the other core storage and other artifacts. They want an integrated cloud that is co-located, and all of these primitives to work hand in hand together so that they can focus on building their business and not mess around with infrastructure. The other part that I feel very confident about is something that we are going to be talking about a lot in our Deploy conference on April 28, which is this emergence of a mixture of AI models that is required to run efficient unit economics in inferencing mode. The difference in the unit economics between closed-source models and open-source models is 90%. Open-source models are 90% more cost-effective compared to closed-source models, and open source already has 30% market share with just a handful of open-source models on the market. I feel this is only going to go from strength to strength, and that has been a big differentiator for DigitalOcean Holdings, Inc. throughout the years as well. We talk about 32 companies showing up in some of these market landscapes, but when OpenClaw became viral a couple of weeks ago or a month ago, we were one of the natural places where developers started deploying it. As I said, we have more than 30,000 of these agents running, and we barely did anything from a marketing point of view. In fact, we did no marketing. All we did is scramble our jets to make sure that developers have first-class experience deploying these agents on our platform, and we were such a natural choice for running these long-running, agentic software because they need a lot more than just access to GPUs or just access to inference tokens. I feel very good that our 70% of our AI customer revenue already is from non-bare metal, and that should give us a lot of confidence that our platform services, higher-margin services, are resonating with our customers. They are increasingly coming to us as they recognize that bare metal is not going to be sufficient for them. Gabriela Borges: Yeah. Really good color. Thank you. I will stay on this 70% non-bare metal data point, and I will ask the question to Matt. Payback period on GPUs. The last time we talked about this, I think you told us it was around three years, but that was before you all had focused on maximizing or improving the ARR per megawatt of capacity. So my question for you is how are payback periods on GPUs changing? Thank you. W. Matthew Steinfort: Well, that is a great question, Gabriela. One of the things that I want to make sure everybody understands is if you think about why did we lease gear, like, why are we doing equipment leasing, it is to address exactly this challenge. If you said, okay, well, you are going to spend hundreds of millions of dollars on GPUs, and you are going to have to wait three, four years to pay them back, that is a model. That is not the model that we are pursuing. Our model is leasing the gear, which means we are earning more ARR per megawatt for the associated GPU investment than what a Neo Cloud would earn, but we are also earning cash on that within months of actually deploying. As soon as we deploy that and we start earning revenue and it ramps, we are paying on a monthly basis for that gear over four or five years, and we are earning more than two times that in revenue. From a payback period, we still have the same kind of payback hurdles that we have had before. You would like to see three-year paybacks on most of your investments. You might be willing to extend that to win some early customers. But if you actually think about the mechanics, that is a little bit of an intellectual exercise because we are already paying our gear back within a month or two because we are earning more cash than we have spent on that gear. That is the reason you align your investment with revenue. Operator: Our next question comes from the line of Radi Sultan with UBS. Please go ahead. Radi Sultan: Yes. Awesome. Thanks for taking the questions. One for Padmanabhan, kind of on a similar line of questioning. Just sort of that longer term, the next several years. Padmanabhan Srinivasan: Yeah. Thank you. We look at many, many factors, but the dominant one is we look at our customer demand, look at what they are dealing with, how they are projecting their needs. That is a big input factor for us. The second one is we look at the footprint from the perspective of, for inferencing, obviously, we need to have a really good geographic spread. Co-locating, and for all of our new data centers, we have both core cloud as well as AI capacity all running on the same server stack. So that is an important aspect for us to have all of these things co-located. The third thing we always look at is how we are going to keep up with the generational leapfrogs of OEMs, including AMD and NVIDIA, and perhaps others in the future. These are all important factors that we take into account as we consider how our footprint is going to look over the next several years. We are always making this evaluation. We are looking at various options as we build out our long-term plan. As I said, the primary driver is always looking at our customer needs, customer demands, what kind of workloads are they ramping up. The demands for their application is a big driver for us. Those are some of the input factors that we use to plan our capacity. Radi Sultan: Got it. Just a quick follow-up for Matt. Does the 2027 EBITDA margin and free cash flow guidance contemplate any additional capacity investments next year? Or is that just reflective of the 31 megawatts you are bringing online this year? W. Matthew Steinfort: It is just reflective of the 31 megawatts that we are bringing on this year. Operator: Our next question comes from the line of James Edward Fish with Piper Sandler. James Edward Fish: Hey, guys. Maybe just following up on that. If AI is growing as fast as it is, and you guys are needing to bring on capacity now to meet all this demand, are you not going to need more capacity then? And, Matt, additionally, it looks like you are excluding finance leases in the free cash flow metric. Why treat it like this? As if it was not financed, you would still have CapEx. It does seem to imply, I am getting a lot of this question premarket here, it seems like you are implying about 10% reported free cash flow in 2027. So can you walk us through that? And I know this is a loaded question, but a lot of those that are providing leased servers are implementing memory cost increases. So I guess, how are you thinking about what commitments you actually have from them and potential pass-through of memory costs? W. Matthew Steinfort: Yeah. I will take that in reverse. We have seen increased component costs, the same as others in the industry, and that is all reflected in our guidance. It has not changed our return expectations or the economics that we would see. It just means that there is more cost associated with some of the servers that we are bringing on. But this is, I am glad that you brought this up, which is you have to think about our free cash flow in tiers. So you say, okay, well, you have got unlevered free cash flow, which, again, you should be using from a valuation standpoint, and that we are talking about being in the 18% to 20% range. When you add the interest expense, you get the levered free cash flow, which is what we have historically, that is our adjusted free cash flow margin, and you are only giving up a couple of percentage points there. That interest right now is half the TLA, and it is half equipment leasing. And then, as you point out, you have the principal payments that are more of a financing transaction. That is why they are not captured in either the adjusted free cash flow or unlevered free cash flow. But if you take those financing transactions, and if you are going to lump everything in it, and you say, okay, what about the mandatory prepayment of $25,000,000 a year on your term loan? Okay. We will throw that in there. If you take all of the cash payments, including the principal payments, including the prepayment of the term loan A, that is all financing stuff. So, again, you are mixing metaphors here. If you throw that all in, we are still generating cash. So you are saying, hey, well, it is 10. I am like, hey, it is 10. It is like we are generating cash while we are accelerating the growth of this business into the 30s. And on an unlevered free cash flow basis, it is 18% to 20%. So it is a testament to our ability to dramatically accelerate growth. We have taken growth from 11%, 12%, 13% to guiding to 30%, and we are generating incredibly strong unlevered free cash flow. We are generating very strong levered free cash flow. If you throw the kitchen sink in there and all the payments that we have to make, we are still generating cash. I mean, that is an incredibly strong position to be in, and we have a very flexible balance sheet. So we feel very good about the cash generation that we are setting out while we are delivering this growth. James Edward Fish: And, Padmanabhan, for you, on slide 20, I got asked a couple questions ago to a degree, but by 20, you point out that difference between you guys and Neo Cloud and inference wrappers, and maybe being humble about it, you point out that you are about 75% of the way in the first three categories. And so is this something that we should be expecting to hear about at the April event, or what do you guys need to do to get to that full 100% difference? Padmanabhan Srinivasan: Yeah. Fish, I do not know if I will ever call myself 100% in those things because that market is changing so fast. If we ask five of our customers today what they want versus what they thought they wanted three months ago, it is meaningfully different. Because as they are growing their customer base and deploying their solutions, new things come up all the time. The capability of AI models evolves all the time. This is going to be a moving target for the next couple of years. But the first part of your question, absolutely, that is where our R&D team is super heads down inventing new parts of the stack. You will hear a lot more about this on April 28. But I would say this is where I feel very confident that we already have a lead, and that lead is only going to grow over the next few quarters. Operator: Thanks, guys. Next question comes from the line of Thomas Blakey with Cantor Fitzgerald. Thomas Blakey: Guys, congratulations on a great quarter and a great outlook here. Maybe some follow-ups to my peers. Padmanabhan, you mentioned, I think it was to a previous question about demand outstripping supply and giving you great visibility that you have alluded to in this call. Not expecting you to give calendar 2028 commentary. If you wanted to look out two years on the April 25 call, that would be great. But in addition to that, I am interested in what you are seeing in a pricing dynamic. If demand is outstripping supply, you are lining up these new AI natives. Just maybe some commentary on pricing would be helpful from this cohort. Padmanabhan Srinivasan: Yeah. Thanks, Tom. I think we have already talked about what we are going to talk about for 2027. In terms of the demand, demand is clearly there, and we are moving as fast as we can to first deliver on these three data centers that Matt talked about. From a pricing point of view, we have competition from all kinds of different players. The pricing is holding, and in some cases, it has gone up. We are very, very attuned to what is going on in the market, and there is a lot of scarcity of supply across the board. We are also in a position where we work very closely with our customers to ensure that we are calibrating the price that we have, both on-demand as well as contractual prices, to keep pace with what the market dynamics are at this point. But I would say nothing has materially changed. The pricing is also a function of the generation of the GPUs that we are talking about. At the lowest level, if a customer wants access to GPUs, it is priced GPU dollars per hour, and at that layer, it really depends on the generation of the GPU, whether it is Blackwell or the Hopper series from NVIDIA or the 350, 355s from AMD or the 300 or 325. It really depends on the nature of the generation. There are also other dependencies like the cluster sizes, the cluster configuration, what kind of networking they want, and so forth. As you move up stack, if you look at my slide 19, and the one thing that I did not mention in slide 19 is that customers can enter our stack at pretty much any layer of the stack. The higher up you go in the stack, you are not pricing by dollars per GPU hour, but you are pricing per token. There we have a lot more degrees of freedom in terms of how we price versus competition, because there you are doing dollar per token, but also you have the flexibility of running it in different types of hardware. You can also change up the AI model that is servicing this token request. We have more degrees of freedom, and some customers need that flexibility, and they are willing to live with the higher orders of the stack rather than dictating which generation of hardware they want to run in. Thomas Blakey: That is super helpful, Padmanabhan. And just maybe an extension of that flexibility, it was impressive to hear about the zero churn in the large $1,000,000 plus cohort, 115% NRR. I would love to know what the overlap there is regarding the AI-native exposure. If you could maybe talk about just those customers and how much of that is from AI. And for Matt, relatedly, in your improving NDR, are we finally including AI and ML revenue there, and if not, when can we expect that? Thank you, guys. W. Matthew Steinfort: Yeah. Thanks, Tom. On a customer count basis, it is about half of the million-dollar customers are AI customers and half are core cloud or general-purpose cloud only. It is a little bit more on a revenue basis or an ARR basis, a little bit more AI, but not a lot. It is not too far off of 50/50. And as you saw in the materials, 48% of the trailing twelve-month incremental ARR is coming from those AI customers. So that is kind of how the split is. In terms of the NDR, no, it is not in there yet. The reason that we disclosed the AI customer revenue—and we will continue to disclose that as a metric and the growth rate—and also looking at the RPO, which is, again, a decent chunk of that, not all, but a decent chunk of that is also AI, is trying to give you better leading indicators of the performance of the AI customer base. The NDR, if you look at some of the charts that we showed with some of the bigger inferencing providers, they just got started on the platform in kind of the June, July time frame. There is a big difference in the size and caliber of the customers that we have been winning in the last six months—now seven, eight months, I guess—on the AI side. Those, we think, will have more of your traditional kind of NDR-like characteristics where they grow and expand on the platform using inferencing, which is more of a production workload, versus a lot of our earlier customers were smaller customers doing experimentation, doing projects, and they just do not look like—revenue was growing like crazy because we would be adding a ton of those customers—but if you looked at any of the individual customers, it was hard to see a pattern. NDR as a SaaS metric looks for patterns where you bring on a customer and you can expect them to do X, Y, Z over the next twelve months, and we just did not see that. There is a lot of noise in our AI customer revenue lumpiness early that we see changing. So we will continue to evaluate that every quarter, and at the appropriate time, we will contemplate rolling that in. But it is probably still twelve months away. Operator: The next question comes from the line of Patrick Walravens from Citi. Please go ahead. Patrick Walravens: Oh, great. Thank you. Congratulations on the quarter, and I have to say congratulations on the slide deck. It is fantastic, and I am sure all of your investors are going to appreciate it. So, Padmanabhan, I was looking back at my note from two years ago when you joined, and at the time, one of the things you said was that a durable competitive differentiator for us long term is going to be in the software layer. And you said you were focused on bringing simple, easy-to-use AI/ML capabilities on both hardware and software to developers. So what I am wondering is, as you look back, and you were growing 11% when you joined and decelerating, as you look back, which of the growth drivers that have caused you to accelerate—now we are talking about 30%—did you anticipate, and which were fortuitous is probably the wrong word, luck favors the prepared, but which were sort of unexpected? Padmanabhan Srinivasan: Yeah. Thank you, Patrick. I would say what was surprising to me—and maybe I will take some creative liberty in answering your question—what took a few quarters for us to get right was, as I mentioned several times during this call, we had a constraint in keeping up with customers that were scaling rapidly and scaling big on our platform when I joined. So it took us a few quarters to really understand, get to the bottom of their needs, and there was a lot of work that had to be done for us to get to the 0% churn that I was so proud to share with all of you this morning. That took a lot of engineering effort, and I am super proud of my team. It is a lot of very complex technology work all the way from advanced networking to fortifying our storage to inventing new things in our database offering, and so forth. That took a tremendous amount of heavy lifting, and that job is not done yet. We started with $100,000, then we focused on $500,000 customers. Now we are focused on million-dollar customers, and who knows? In the next couple of years, we will be talking about $5,000,000 and $10,000,000 customers. That bar-raising is an ongoing endeavor for us. On the more fun side of things is literally participating from the starting point with the AI-native ecosystem. We are learning as they are learning, and we are inventing alongside them. That is a great luxury to have because we feel like we can ride their growth curve, and as their needs increase and they are learning the right way to do this from a workload perspective, we are just trying to keep up pace, and they are super appreciative of us inventing on their behalf to make their life easier so that they can focus on their domain and invent new things for their customers. We will share a lot more of this on April 28, but that is how I would answer your question, Patrick. Patrick Walravens: That is great. Thanks, Padmanabhan. Operator: Next question comes from the line of Michael Joseph Cikos with Needham and Company. Please go ahead. Michael Joseph Cikos: Hey. Thanks for taking the questions here, guys, and congrats on the strong growth guardrails you are providing us. Matt, if I could just come back, and I know that the free cash flow topic has come up a couple of times here, but you can see as well as anybody just how sensitive the investors are in this market to the AI CapEx investments that are required or different financing vehicles that are out there. Just to be clear, when we look at the calendar 2026 versus the calendar 2027 guide, that unlevered adjusted free cash flow or adjusted free cash flow guide, the three-point delta is expected to widen to about 10 points in calendar 2027. If we take that one step further, and I know that your guidance for those guardrails for 2027 currently does not contemplate additional capacity coming online, but it seems fair that we should be assuming more capacity. If that is the case, would that delta between the unlevered and the levered free cash flow margin widen further from there? Is that fair? W. Matthew Steinfort: The way I think you have to think about it is, again, if you are looking at the levered free cash flow, it has got other stuff in it besides equipment leases. It has got TLA interest. It has got other things. If you look at, as Fish was saying, if you look at the other cash, there are mandatory prepayments of the term loan A. You have to be real careful about what you are using for what. If you said, hey, what is the steady-state cash flow generation capability of this business? Again, because we lease equipment, we do not have an upfront capital requirement that makes it super lumpy. We can make that smoother, and we can grow. However, when you are growing a business, even with that model, and you are adding data center capacity, you have a couple of months where you are actually taking data center lease expense and you have not generated any revenue. When you lease gear, unlike if you buy gear, you put it in your warehouse, you actually do not expense it until you deploy it. When you lease gear, you start that lease expense as soon as it ships. So you have front-loaded costs that do not catch up to the revenue right away. But because you did not have a big giant slug of capital, as soon as the revenue starts generating, you are immediately generating cash, and you are improving your margins with utilization. The steady state—if you said that is why we have been very crisp about what is included in the numbers—it is to give you a sense of what the margins look like on a steady-state basis. If we just continually assume, well, we are going to add incremental capacity, which I cannot tell you how much incremental capacity we are going to add because we have not contracted it, and we have not committed anything to incremental capacity. What we are showing is when we add 31 megawatts, as an example, you roll that forward a year, you have incredibly strong cash flow characteristics to that. There is going to be a short-term impact on gross margins and net income because of the timing thing I described, but that works itself through relatively quickly. You would expect that as we saw other opportunities to accelerate our business with similar economics that we would make similarly good decisions, and that engine will keep going. I view it in a very different way than what you are describing. I view it as, hey, if we are going to commit to more capacity, it is because we have more growth opportunities, and the returns are incredibly compelling. We are doing it in a way we match the revenue and the cost, and we are not going out beyond our skis and making massive commitments chasing the data center and GPU arms race. We are doing it methodically. We are doing it where we have an advantage, where we earn a good return, and we are able to do it while, again, taking 11%, 13% revenue growth to 30% while still maintaining really good margins. We are really excited about the potential we have and the economics that we are delivering. Michael Joseph Cikos: Thanks for that, Matt. Maybe for a quick follow-up here. Understood on the accelerating growth you guys are looking at throughout calendar 2026 just based on the megawatts coming online. One thing I wanted to ask, and I am sure that you guys have your own models as you are looking at the AI customers ramping. But to drive that 25%-ish growth exiting calendar 2026, can you provide any additional color for what you are assuming in terms of ARR directly from those AI customers? If I am thinking about the $120,000,000 that we see today exiting calendar 2025. W. Matthew Steinfort: The only thing I would say is what we said is that the AI customer ARR in Q4 was $120,000,000 growing 150%. We have more demand than we have supply. We are bringing on supply. You should expect that it does not slow down. Operator: Our next question comes from the line of Mark Zhang with Citi. Mark Zhang: Hey. Great. Thanks for taking my question. Just given the strong demand environment, should not we see more capacity commits coming, I guess, announced today? If that is not the case, then is there enough incremental capacity or megawatt capacity in your current footprint to support continued growth? Just any insights there will be appreciated. Thanks. W. Matthew Steinfort: Sure. So, Mark, as we said, there is enough capacity in committed capacity. There is enough growth potential in the committed capacity to get us to 30% growth in 2027. Clearly, we are very cognizant of the data center market and very active in terms of the evaluation of that. We have not made any commitments at this juncture to share with the market. If we get to a point where we make a commitment, we will certainly share that. At this point, again, we thought it was incredibly important for people to understand how to digest capacity as we bring it on, and that is why we have guided to what we have based solely on the 31 megawatts we have already committed. It gives you a good sense of how it ramps and what the economics are. Should we bring on incremental capacity, you will have a good model to add on to the growth ramps that we have already articulated. Mark Zhang: Okay. Great. And then maybe related to that, can there be a sense of utilization of your current estate? Maybe give a sense of the current capacity—or we know the current capacity—maybe any sense of the contracted capacity that you have on the books? Thanks. W. Matthew Steinfort: Yeah. From a contracted capacity standpoint, again, if you are talking about data centers, we have 31 megawatts that we are adding to our roughly, call it, 43 or 44, which will put us at just about 75 megawatts when we are done. The six megawatts—so we are sitting at, call it, 43, and we are adding six that will come online, start generating revenue in the second quarter. The balance of the incremental 31, which is about 25, will come on and start ramping revenue in the second half. We expect to reach whether we are at full utilization is a function of whether we decide to fill them all with GPUs right away or we do it over time because we like to stripe out the generations of GPUs. We do not like to go all in on one type of generation of GPUs, but we will be at a very healthy utilization at some point in 2027, which is enabling us to get to that 30% growth. Mark Zhang: Thank you. Operator: At this time, we have no further questions. That concludes our Q&A session and today's conference call. We would like to thank you for your participation. You may now disconnect your lines. Have a pleasant day.

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FWRG 2025 Q4 财报电话会议

Operator: Thank you for standing by, and welcome to the First Watch Restaurant Group, Inc. Fourth Quarter Earnings Conference Call occurring today, 02/24/2026 at 8:00 AM Eastern Time. Please note that all participants are currently in a listen-only mode. Following the presentation, the conference call will be open for questions, and instructions on how to ask a question will be given at that time. This call will be archived and available for replay at investors.firstwatch.com under the News and Events section. I would now like to turn the call over to Steven Marotta, Vice President of Investor Relations at First Watch Restaurant Group, Inc. to begin. Hello, everyone. Steven Marotta: I am joined by First Watch Restaurant Group, Inc.'s Chief Executive Officer and President, Christopher A. Tomasso, and Chief Financial Officer, Henry Melville Hope. This morning, First Watch Restaurant Group, Inc. issued its earnings release for the full year and 2025 on GlobeNewswire and filed its annual report on Form 10-K with the SEC. These documents can be found at investors.firstwatch.com. This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements. Such statements include, without limitation, statements concerning the conditions of the company's industry, and its operations, performance, financial condition, outlook, growth plans and strategies, and future expenses. Any such statements should be considered in conjunction with the cautionary statements in the company's earnings release, and the risk factor disclosure in the company's filings with the SEC including our annual report on Form 10-K and quarterly reports on Form 10-Q. First Watch Restaurant Group, Inc. assumes no obligation to update these forward-looking statements whether as a result of new information, future developments, or otherwise, except as may be required by law. Lastly, management's remarks today will include reference to various non-GAAP measures, including restaurant-level operating profit, restaurant-level operating profit margin, adjusted EBITDA, and adjusted EBITDA margin. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the company's earnings release filed this morning. Any reference to percentage growth when discussing the fourth quarter or full year performance is a comparison to 2024 and fiscal 2024, respectively, unless otherwise indicated. And with that, I will turn the call over to Christopher A. Tomasso. Thanks, Steve. Good morning, everyone. Thank you for joining us to discuss our 2025 results as well as our plans for 2026 and beyond. 2025 was noteworthy for First Watch Restaurant Group, Inc. and I am proud of our team's performance throughout the entire year. Our total revenue growth was more than 20% and same-restaurant sales grew by 3.6% with positive same-restaurant traffic. We also opened 64 new restaurants across the system. Our 2025 new restaurant class represents the most openings in our company's more than 40-year history and exemplifies the depth of our development pipeline and our ability to execute against our growth opportunity. As always, I want to thank our more than 17,000 employees nationwide without whom this would not be possible. I am particularly pleased with the results considering that, according to Black Box, industry traffic was negative and casual dining was only slightly positive as a result of macro environment pressure throughout the year. Despite the headwinds, our teams effectively executed on our growth strategies, and we excelled by focusing on controlling what we can control, and by playing the long game. For example, we successfully and patiently navigated through soaring commodity inflation early in the year. We were able to balance preserving the value proposition for our customers by carrying moderate pricing while still delivering restaurant-level operating profit margins of 18.5%, well within our targeted long-term range. To strengthen our performance in the third-party delivery channel, we enhanced our key partnerships with two primary goals in mind. First, to drive traffic in that channel, and second, to do so profitably. We achieved both. We also successfully launched our new digital marketing initiative to roughly one third of our comparable restaurant base, generating a positive return on our investments. The results were compelling in building brand awareness and driving traffic, and we are excited about rolling it out to a wider base of restaurants in 2026. Stepping even deeper into marketing and our focus on the customer, throughout 2025, we advanced our multiyear effort to enhance our paid marketing and customer analytics capabilities. Following disciplined testing in 2024, we deployed a more sophisticated marketing strategy across select geographies, and drove consistent increases in both aided and unaided awareness, and increased customer visits. These results have given us the confidence to expand the program further to the majority of the comp base in 2026, and we are excited to continue leveraging this evolving competency. Our marketing strategy is data and audience driven, with heightened personalization from what might not have been possible for us just a few years ago. We segment our markets using population data, market awareness, and competitive intensity. Our objective is to serve the right message to the right consumer at the right time, to nurture that relationship into a first-party connection and ultimately a restaurant visit. Tangible benefits have been realized from connected TV, online video, paid search, and programmatic digital that connects to households and transaction insights as well as our owned data. Along with our focus on staying top of mind is our obsession with delighting customers the moment they walk into our restaurants. This comes to life through our innovative seasonal menus, warm hospitality, and concerted effort to make days brighter. We are proud to see this focus pay off. And in 2025, our restaurants earned a range of awards and accolades that underscore the strength of our execution. We were pleased to be named to Yelp's Most Loved Brands, ranking number four among other highly distinguished and well-known consumer brands. This recognition validates that we have created a welcoming environment known for great food and great service. In the spirit of continuing to raise the bar, I am happy to announce that earlier this month, we rolled out a new core menu to all First Watch Restaurant Group, Inc. restaurants, the first significant redesign and reengineering of our menu in almost ten years. Our overarching objective with this redesign is to meaningfully elevate the experience for our teams and our customers. This effort again reflects the extensive feedback we have gathered over the past several years, reinforcing our commitment to continuous improvement and ensuring the long-term relevance of our brand. We added some of our most popular seasonal menu items to the core menu, including two dishes that feature a premium protein in the form of barbacoa. Steven Marotta: The barbacoa breakfast tacos, Christopher A. Tomasso: and my favorite, the barbacoa chilaquiles breakfast bowl. Other permanent additions include our best performing sweet item, strawberry tres leches French toast, and an additional shareable, the Holy Donuts. We know our customers will be excited by the return of these beloved items and will also appreciate the work we did to improve menu navigation and add common customer-requested add-ons. At the same time, we used this effort as an opportunity to address slow-moving items, eliminate single-use SKUs, and reduce complexity for our back-of-house teams. We are very optimistic about this initiative. In addition to improving our core menu, we also took the opportunity to elevate the design of our seasonal menu as well. With inspiration from our food ethos of “Follow the Sun,” we introduced more color, vibrancy, and thoughtful illustrations each season to better tell the story of our rotating menu and the innovative items that we introduced. Currently, we are featuring the chimichurri steak and egg hash, as well as the return of the bacon, egg, and cheddar sandwich, otherwise known as the BEC, served on thick artisan sourdough. Our new core and seasonal menu initiative is comprehensive and was vetted and tested for more than one year at a meaningful number of First Watch Restaurant Group, Inc. restaurants. One final marketing topic related to our delivery channel. As our industry has continued to rapidly evolve, we too have evolved. Christopher A. Tomasso: We are committed to meeting our customer where they are. Our delivery efforts in 2025 reflected that principle. And our digital marketing priorities illustrate our primary focus on the direct relationship with our customers. Our information indicates that the delivery occasion is largely incremental, but likely not always with a unique customer. Said differently, we believe consumers and our customers specifically seek a variety of occasions in their everyday lives, and by leaning into delivery, we are better positioned to stay top of mind for an eventual in-restaurant occasion. We continue to test and measure a variety of ways to grow our share of total occasions while driving positive margin dollars. Shifting to real estate development and growth. 2025 was yet another record-setting year, highlighted by our high number of openings and strong new restaurant performance. As a group, the 2025 restaurant class is exceeding our expectations, with first-year sales trends running 19% above their underwriting target. We also achieved the highest opening week sales on record at our Costner's Corner, Virginia restaurant, which generated more than $90,000 in first-week sales, reinforcing the strength of our model. In Boston, we followed our initial suburban entry with a high-profile flagship opening on Boylston Street in January, helping establish brand visibility in one of the most dynamic urban centers in the country. Our disciplined approach to market analytics and site selection allowed us to confidently enter five major markets in 2025: New England, Las Vegas, Salt Lake City, Boise, and Memphis, each of which represents a meaningful long-term growth opportunity for our brand. In fact, as a group, these markets as of today represent up to a 155-unit opportunity. Our class of 2026 restaurants are essentially scheduled and we are already deep into 2027 and 2028 site selection. We remain the fastest growing full-service restaurant brand in the United States and are exceptionally well positioned to build on our record performance. Our priorities for the year include deepening our presence in newly entered markets as we shift from market entry to market densification while continuing to strategically fill in core and emerging markets. We know and have demonstrated for many years that when we adhere to our disciplined, data-driven approach to site selection, we can meet and even exceed our investment return metrics. These plans, combined with the strength of our team and the proven effectiveness of our development strategies, give us confidence in our ability to continue to deliver sustainable, best-in-class growth as we march toward our target of 2,200 restaurants. Also, in 2025, we continued to make significant investments in our talent pipeline and leadership development, aligning with our strategic growth priorities. As I mentioned on last quarter's conference call, First Watch Restaurant Group, Inc. was named America's number one Most Loved Workplace by the Best Practice Institute for 2025, a recognition we also earned in 2024. And just last month, based solely on employee voting, we were named in Glassdoor's list of 25 Best Places to Work in Consumer Services in 2026. These accolades are welcome, but what matters most is that they represent direct employee feedback and experiences at First Watch Restaurant Group, Inc. Our general managers play a crucial role in our success. In 2025, we updated the GM job description to reflect a renewed focus on operational excellence and people development, providing robust tools, techniques, and best practices for managing employee development. This comprehensive approach ensures our restaurant-level leaders are empowered to nurture talent and maintain high standards throughout our operations. These initiatives, among others, further strengthen our organization as the results have made clear. Restaurant-level employee turnover declined in 2025 and we realized a 40% increase in applicant volume compared to the prior year. Looking ahead, industry data from Black Box continues to point to yet another challenging year, with their current outlook calling for a roughly 3% industry-wide same-restaurant traffic decline in 2026. Despite that backdrop, we remain confident that the initiatives we have put in place position First Watch Restaurant Group, Inc. to once again outperform the industry just as we did in 2025. We believe our disciplined execution and strategic investments will continue to drive market share gains in 2026. There is no one in our daypart with the combination of scale, operational acuity, proven growth, and total addressable market as First Watch Restaurant Group, Inc. In fact, with consideration to those attributes specifically, no one even comes close. We are the segment leader, and we will continue to increase our share. There is a lot to be excited about in 2026 and beyond, and we look forward to making days brighter for our employees and our customers every day. Christopher A. Tomasso: Now before I pass it over to Henry Melville Hope, I want to address the announcement we made this morning regarding Mel's decision to retire later this year. This transition to retirement is much deserved and will be well planned. Mel has been with First Watch Restaurant Group, Inc. since 2018 and was a critical part of our IPO in 2021. While he will certainly be missed, I am optimistic about our company's promising future and next steps related to his retirement, including an executive search that will start immediately. Mel will continue as CFO until we have a successor in place and onboarded. He also plans to stay on as an adviser into 2026 to ensure a completely seamless transition. Mel, I want to thank you for your dedicated service and partnership for all these years. We wish you and Trish nothing but the best in this next stage of life. And with that, I will pass it over to Henry Melville Hope. Thank you, Chris. That is very generous. I am proud and grateful to be a member of your team. And I am glad to play a role in facilitating a smooth transition. Let us return to the discussion of the company's performance. Total fourth quarter revenues were $316,400,000, an increase of 20.2% with positive same-restaurant sales growth of 3.1%. Our top line growth in the fourth quarter is attributed to positive same-restaurant sales growth and 179 non-comp restaurants, including the 78 company-owned new restaurant openings and the 19 franchise locations acquired since 2024. Same-restaurant traffic growth was negative 1.9%. Food and beverage expense was 22.9% of sales compared to 22.7%. As a percent of sales, costs benefited from carried pricing of around 5%, partially offset by commodity inflation of 1.1%. Excluding vendor contributions related to our 2024 leadership conference, which were reported in the prior year results, food and beverage expense, as a percent of sales for 2025, would have been lower versus 2024. Labor and other related expenses were 33.5% of sales in the fourth quarter, a 20 basis point improvement from 33.7% reported in 2024. Carried pricing offset the impact of 3.1% labor inflation in the fourth quarter while our labor efficiency was essentially flat compared to the fourth quarter last year. We realized restaurant-level operating profit margin of 19% in 2025, a 20 basis point improvement compared to 2024. Our income from operations margin was 2.9%. At $31,800,000, general and administrative expenses were 10.1% of fourth quarter revenue, which was a 160 basis point improvement versus the prior year. The favorability as a percent of total revenue was largely driven by the timing shift of our leadership conference and also benefited from levering certain home office expenses. Later on this call, I will share a bit of good news about our expanded equity compensation program. Adjusted EBITDA increased 38.7% to $33,700,000, a $9,400,000 increase versus the $24,300,000 reported last year. Adjusted EBITDA margin grew to 10.6% compared to 9.2% we realized in 2024. Our 2025 income tax benefit was $10,700,000 and includes a sizable non-cash benefit. Specifically, our year-end 2025 assessment of the future realization of the company's accumulating FICA tip credits was more favorable than in years prior. The recognition of our net deferred tax assets includes the effect of this year-end determination. Net income was $15,200,000 and net income margin was 4.8%. We opened 13 new system-wide restaurants during the fourth quarter, of which 12 are company-owned and one is franchise-owned. And we finished 2025 with 633 restaurants across 32 states. The net effect of acquisitions, which includes only the impact of purchases made within the last twelve months, increased fourth quarter revenue by about $9,000,000 and adjusted EBITDA by about $1.5 million, and full year by about $35,000,000 and $6,000,000, respectively. For further details on the fourth quarter, please review our supplemental materials deck on our Investor Relations website beneath the webcast link. Now I will provide our initial outlook for 2026. We are expecting same-restaurant sales growth to be between 1% and 3%. As a reminder, our pricing philosophy is such that we evaluate menu pricing at the beginning of the year and again around midyear with the objective of offsetting what we view as permanent inflationary pressures. We manage the business with a disciplined focus on sustaining same-restaurant sales growth while protecting the long-term health of the brand. Given our current outlook for commodity inflation and, importantly, in keeping with what we believe is in the best interest of our customers, we elected not to take any pricing at the outset of 2026. Therefore, our guidance includes carried pricing of around 4% in the first half of the year which blends to about 2% for the full year. We expect total revenue growth of 12% to 14% with around 100 basis points impact from acquisitions. We expect a total of 59 to 63 new system-wide restaurants including 53 to 55 company-owned restaurants and nine to 11 franchise-owned restaurants with three planned company-owned restaurant closures. Our company-owned new restaurant development pipeline is somewhat weighted to 2026, the fourth quarter in particular. We expect full-year commodity inflation of 1% to 3% driven by increases in coffee and bacon, partially offset by expected deflation in eggs and avocados. Restaurant-level labor cost inflation is expected to be in the range of 3% to 5%. Our adjusted EBITDA guidance range is $132,000,000 to $140,000,000 including the net impact from 19 restaurants we acquired in April which are expected to contribute about $2,000,000 to our adjusted EBITDA this year. We expect capital expenditures of $150,000,000 to $160,000,000. While we do not typically provide quarterly earnings guidance, we believe you may find a few considerations helpful to your models. We expect positive same-restaurant sales growth in each quarter of the year, including our third quarter when we will face our most robust comp comparison. Second, as it relates to the first quarter, we elected not to take price in January and experienced several weather-related disruptions during the month which reduced operating days in our comp base. And third, as noted on our last call, we held our leadership conference in January 2026 and accordingly expect G&A expense to be materially higher in the first quarter than any other quarter this year. Lastly, as was mentioned earlier, we strengthened the alignment of our operational senior leadership incentives with the interests of our shareholders by enhancing our equity-based compensation and expanding eligibility to include our divisional operators. These actions reinforce accountability across the organization and better position the company to attract and retain talented colleagues who drive results. The equity compensation program does not impact our adjusted EBITDA and the related accounting charges associated with the incremental non-cash awards will be recognized in G&A, which may limit our ability to leverage G&A this year. Four years after our IPO, I am proud of the results our company has delivered and we remain fully committed to driving similarly strong performance ahead. We have grown our system from 428 restaurants at the time of our IPO to 633 at the end of 2025 and nearly doubled adjusted EBITDA along the way. Compelling evidence that the growth strategy is working and that our execution remains both disciplined and consistent. These milestones reflect the strength of our model, the quality of our teams, and the momentum we have built. Our real estate and talent pipelines are the healthiest they have ever been, giving us confidence in our ability to achieve our growth objectives for both 2026 and beyond. And with that, operator, will you please open the line for questions? Operator: 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 pressing the star key. We ask that analysts limit themselves to one question and a follow-up so that others have the opportunity to do so as well. One moment, please, while we poll for questions. Our first question comes from James Ronald Salera with Stephens. Please proceed with your question. James Ronald Salera: Hey, Chris and Mel. Good morning. Thanks for taking our question. Christopher A. Tomasso: Mel, first of all, it has been great working with you. Congratulations on an incredibly successful career, and I wish you all the best, whatever comes up next for you. Henry Melville Hope: Thanks, Jim. James Ronald Salera: I wanted to maybe drill down a little bit on the commentary for FY 2026. I appreciate the commentary around pricing and how that should flow through the year. Can you just give us a sense for what you are underwriting for the industry for 2026 and kind of how your expectations layer on top of that? And maybe if you could also provide some color on the mix component of your tickets. Henry Melville Hope: When you say underwriting for the industry, I just think you asked me to speculate about the climate that we are going to be operating. Yeah. So I think that your guide kind of implies, you know, sort of down modest traffic for the industry, and you guys being, you know, in line to modestly better. Can you just, any details on that you could provide? Yeah. I think you know, Jim, I think there is reason to be cautious about the environment that we are operating in now. I think, historically, for our particular category and different cohorts of peer comparisons, against Black Box data, we seem to outperform that quarter over quarter. So, I do not expect that particular characteristic to come to an end, but I do think that the entire category has reason to be cautious here in February about what is going to ensue for the balance of the year. James Ronald Salera: And then mix as a component. I know you gave us some details on pricing, but just how should we think about mix progressing through the year? Would that be a relative headwind still or maybe some opportunity for that to turn positive? Henry Melville Hope: Yeah. In our guidance, we do not typically project where the different components would come out for the year. What you know, what we do with our same-restaurant sales is what we are guiding to is that 1% to 3% for the full year, and we will take a read on how we defend within that range as the year progresses. Christopher A. Tomasso: Jim, I can also give some insights there. I think we saw positive mix from our core menu test rollout. And so taking that to the entire system we believe we have some mix upside there, which was one of the consideration factors with not taking price in Q1 like we have in years past. And then on the Black Box, to be more specific, in my commentary, I talked about their current projection for the year is roughly a 3% industry-wide same-restaurant traffic decline. So as we have done in the past, we have outperformed the industry and that is kind of the position we are taking now. Mel is exactly right. There is a reason to be conservative based on what the industry-wide impact in Q4 specifically and even more specifically in December. But we have been able to outperform the overall industry, and there is no reason for us to believe that we will not do that again for 2026. Operator: Our next question comes from Jeffrey Bernstein with Barclays. Please proceed with your question. Jeffrey Bernstein: Great. Thank you very much. And I echo the congratulatory comments for Mel. Hope you get to enjoy retirement. Henry Melville Hope: Thanks, Jeff. Jeffrey Bernstein: Sure. My question is just on the 2026 unit growth looks like we are looking for maybe 9% to 10% net growth another long-term algo has been for many years kind of low double digits. I am just wondering you know, maybe how you think about the constraint to greater growth, whether it is real estate or people. It just seems like on an ever larger base, maybe before considering lowering the long-term guidance to maybe more of the high single digit range because the focus is really on getting the operations right. It is really not about the speed of openings considering you have so much runway ahead. So just wondering whether we should expect more tempered growth or whether there is some reason why 2026 might be a little bit more subdued? And then I had a follow-up. Christopher A. Tomasso: This is Chris. I think our long-term targets of around, you know, a low double-digit unit growth, we have exceeded that in the last couple of years. There will be ebbs and flows as it relates to that. The reality is the absolute number of restaurants continues to increase when you stick to that percentage. So we are always going to look at it in terms of what is best for the overall organization. The number one priority is the health and performance of the core system. And so as we continue to grow and that number continues to go up, we will monitor it and make sure that it is not putting any undue strain on the system. But I will say that, regardless of the actual number or the percent, we are delivering quality growth year after year. Our 2024 and 2025 NRO classes are delivering average weekly sales that are higher than their underwriting targets. And our comp base and the class of 2025 alone is 19% higher than their underwriting targets. So we are really focused on the quality growth and the number will ebb and flow, like I said, year to year. But I also think that is a good long-term target for us, and that is why we kind of restated that. Henry Melville Hope: This is a good time for me to just slip in here real quick that our earnings release was a little bit awkwardly worded about our new restaurant opening guidance, which was 59 to 63 net system-wide restaurants, and the net includes three restaurants that are company-owned that we expect to close this year. Jeffrey Bernstein: Understood. And my follow-up, Chris, in your prepared remarks, or I should say even in the press release, you talked importantly about the evolving digital marketing platform. I know it is more focused on direct marketing. But I just wondering if you could share maybe, since that seems like that is the biggest initiative for this year to drive comp, maybe greater learnings from the tests, the greatest opportunity this year, maybe the dollars spend, any kind of broad brush commentary you can share on the excitement around the evolution of that program? Thank you. Christopher A. Tomasso: Sure. Thanks, Jeff. I will let Matt talk about the specifics. But I just want to make it clear. I am excited about a number of levers we have this year. Marketing is certainly one of them. What we saw in the test was very, very encouraging to us, and we are excited to expand it to a majority of the system this year. I have to say I am just as excited about our new core menu rollout. When you think about the transformation of First Watch Restaurant Group, Inc. over the years and the acceleration of our growth, it came about ten years ago when we did a similar exercise. What we have seen in test there is also why I am encouraged about 2026. And, Matt, if you want to get some specifics on the marketing. Matt Eisenacher: Yeah. Sure. Hey, Jeff. It is Matt Eisenacher. So as Chris said, there is a variety of levers I echo his sentiment that we are really optimistic about the new core menu. Obviously, we are excited to be able to scale our marketing program from last year where we focused on particular geographies, and now we will be scaling that to the vast majority of our comp base. And it allows us to continue to use those things that worked last year and amplify those, starting to put more emphasis into video and driving awareness. Last year, we saw in those geographies an increase in both aided and unaided awareness. And so you have that and then the relaunch of all of our new digital platforms like our new app, you start to see how you can drive trial, then you have the analytics to be able to get more efficient with that media spend over the long term. So all of those things kind of play together. Operator: Our next question comes from Sara Senatore with Bank of America. Please proceed with your question. Sara Senatore: Thank you. Maybe just a couple of questions on the commentary about the comp expectations through the year. Not necessarily looking for kind of quarter-by-quarter guidance, but you mentioned that you expect comps to be positive in the first quarter even with the kind of weather, and I assume that is kind of calendar only as opposed to taking into consideration the current weather impact. But I just wanted to clarify as you think through the doors being closed, you know, presumably, traffic will be, you know, be ahead on which of five points of price. So, you know, I guess, is it safe to assume that it is sort of modestly positive? And then as you get through the year, you mentioned that the toughest compare in the third quarter, but I think your pricing implication was that price might be the low single digits in the second half of the year just given the average of around two. So, again, I wanted to understand kind of your confidence or how you are thinking about the drivers of traffic both with the headwind earlier in the year and then more difficult traffic compares at least in the third quarter. And then I do have one quick follow-up, please. Henry Melville Hope: So the full-year guidance at 1% to 3% already incorporates what we are seeing sort of in the current environment as you mentioned. We are deliberately guiding only to same-restaurant sales because we have different timing coming on board with regard to the new menu, with regard to rolling some fairly robust third-party delivery sales last year, and then just the general environment. So you know, a little bit harder for us to be confident in exactly what the cadence is going to be. But I do think that we are probably currently looking at, you know, maybe a more challenged quarter by weather than the rest of the year. And then we do have some, you know, it does get a little bit tougher in the third quarter. I will say that our year-to-date trends are improved versus December. And so, we believe we are on track to meet our annual same-restaurant sales guidance when you carry that forward. Sara Senatore: Okay. Thank you. So just sort of thinking about the cadence. I appreciate the color. And then just the follow-up was on the new, you know, the 2025, and I apologize if I have missed this somewhere. I know you mentioned you are 19% higher than underwriting targets. I know your sort of underwriting targets are, I think, the bar is a little bit lower than what we have been seeing in the past. So how do the AUVs compare, I guess, to previous cohorts to earlier years? Are you still seeing kind of increasing new unit volumes? And is that largely with kind of the size of the footprint or anything different there as you think about the returns on the new units? Christopher A. Tomasso: As you know, we have grown AUV significantly over the years. And just a reminder of our 2026 unit economics, you know, third-year sales expectations of $2,800,000. The 18% to 20% restaurant-level operating profit margins, you know, that we talk about, that penciling out to an 18% IRR and a 35% actualized cash-on-cash return. So yes, the AUVs continue to increase. So when we talk about you know, a class being higher than their underwriting targets, I cannot think of a year where that number has not been higher than the year before from an AUV and underwriting standpoint. So just healthy underlying growth for us on a new unit standpoint. As far as what is driving that, we have talked about the bigger footprints. We have not necessarily seen a correlation on size of the restaurant, per se, but we know that when we stick to our underwriting criteria, our site selection criteria, the data that we use, that it sets us up for success. And we have proven that year over year, and we feel that we will be able to do that in 2026 and and like I said on the call, or Mel said, we are well underway for 2027 and 2028. So if anything, growth is a strength for us, the unit growth and the performance. Again, it is quality growth. Operator: Our next question comes from Andrew Charles with TD Cowen. Please proceed with your question. Andrew Charles: Great. Thank you. And, Mel, best wishes for retirement. Hope the next chapter gives you more time for golf. Andrew Charles: Chris or Matt, on marketing, you guys talked about a positive return on spend. Can you help us understand what you are observing with the same-store sales outperformance at those one-third of stores that are utilizing marketing efforts versus the two-thirds that are not? And just really looking ahead, I think you said the vast majority of the comp base will benefit from marketing. How soon is that planned to scale? Is that more of a first half or a second half driver? Matt Eisenacher: Yeah. Sure. Happy to take those. So I think as we stated last year in those select geographies, we did see a several hundred basis point lift in traffic, pre/post test-control. And so we would be applying the same playbook and strategies to this year, with a couple optimizations. So it is not like we are deploying radically different strategies than we did last year. We are just scaling it to more restaurants. To your second question on the cadence of the spend, we actually just started moving into markets. Obviously, that takes time to build. And like last year, that will extend throughout the year. We do try to align that with our seasonality. So you can think about the spend following our seasonality. So, obviously, you probably have more in the back half of the year, and then would taper down as you go throughout the rest of the year. Andrew Charles: Okay. And then, Mel, if you could just help us understand the cadence of commodity and labor inflation as we think about 2026. I was thinking on the commodity side, theoretically, you should see more tame first half of the year just given what you are lapping over. On the labor side, you have the Florida minimum wage increase going on for September 30, but any help on the cadence there would be helpful. Henry Melville Hope: I think that we expect the inflation to be somewhat higher in the second half of the year, so quarters three and four, than we are experiencing right now and in the second quarter. Operator: Our next question comes from Jon Michael Tower with Citi. Please proceed with your question. Jon Michael Tower: Thanks, and Mel congrats. Maybe starting off, Chris, you had mentioned, obviously, the new menu, or the core menu improvements you are excited about. I think you had talked about even ten years ago or so, seeing some fairly strong growth post changes. So I am curious, from obviously hitting on things that consumers want more of, are there actual operational improvements as well? It sounds like you reduced some of the SKUs, but should we expect, you know, better speed of service, any other benefits that you could speak to from this core menu enhancement? Christopher A. Tomasso: Yeah. A lot of those efforts we talked about a lot in 2024 and 2025 with the back-of-house improvements, improving our throughput, especially during peak sales hours. The efforts around the menu will definitely deliver some efficiencies like I talked about. You know, removing some single use item SKUs. Bringing back some of these favorites and things that the teams have executed before as seasonal menu items. So there is a muscle memory there that will help them execute that. But, really, this is much more heavily weighted toward the consumer side and the appeal and bringing back some of these favorites. But it does it does have some back-of-house benefits like reducing prep time and things like that. But that was not the main focus. Jon Michael Tower: Got it. Makes sense. And maybe just kind of flipping to the backdrop, curious, in your guidance for the year, Mel, how you are thinking about tax refunds and how that might be impacting your business? Or asked differently, in the past when you have seen elevated tax refunds, how has the business responded? Henry Melville Hope: Yeah. That is interesting. Historically, we have believed that our typical customer does not react necessarily to tax refunds in terms of attendance in our restaurants. But we are certainly aware of it, and it is just going to be easier for us to read after it occurs. But our customer demographic tends to skew a little bit higher on the household income scale. And as a consequence, we have oftentimes been a little bit insulated from certain cost pressures in terms of going down, and when there is a windfall or tax refunds, we may not benefit quite as much as you see in quick service restaurants. Jon Michael Tower: Great. Thanks for taking the questions. Operator: Our next question comes from Andrew Marc Barish with Jefferies. Please proceed with your question. Andrew Marc Barish: Hey, guys, and congrats, Mel. Just trying to frame up how we should think about the delivery business within the context of your guidance? I know I have seen some free delivery offers and things like that. Can you maintain sales in 2026 versus the big growth that you saw in 2025? And one quick follow-up as well. Christopher A. Tomasso: Sure. Andy, this is Chris. Obviously, we have been really pleased with our progress in this channel over the past year. Our teams worked really hard to create a true partnership with those vendors that we work with. And so we are happy with the third party where it is and direct off-premise as a percentage of our overall mix. And, we are not specifically commenting on future traffic assumptions in that channel. But we also did not fund free delivery. I mean, it was a much deeper partnership on how we got together and aligned on goals. It really is about transactions for both of us and then margin for us. And we achieved both of those, and we will continue to work to build on that. Andrew Marc Barish: Gotcha. And then on the new unit growth, so just want to be clear. On the company-owned side, it will be 56 to 58 gross and then the three closures that had been primarily contemplated? Henry Melville Hope: That is right. Andrew Marc Barish: Okay. And is the kind of market densification, I guess, implying you are not going to go into five new major markets as you did in 2025. Is there a little bit of an NRO margin benefit that we should see? Or is it not as material just given the size of the company now? Christopher A. Tomasso: Are you talking about, when you say margin benefit, can you expand on that? Andrew Marc Barish: Yeah. Just densifying existing markets, which is obviously positive, and not going into, I am presuming, as many new markets, which is also obviously positive as it takes a little time to ramp margins in those newer markets. Christopher A. Tomasso: Yeah. If you will recall, we have very similar performance for our NROs across geographies. So that is not really a large consideration. Where that really shows up, though, Andy, is in pre-opening costs and training costs. If we do it in a core market, we can pull trainers and staff from around the region. Whereas if we are going remote like we did in Las Vegas or when we entered Boston or New England, the pre-opening costs are higher. But the margin performance is pretty similar across geographies and the maturity of the market. Henry Melville Hope: Hey. And, Andy, I think I misspoke in response to your question. The range of new company restaurants, which is what I think you were asking about, is net of the three closures that we expect to execute this year. So that range at 53 to 55 is the net range. So it considers the closings. Andrew Marc Barish: Okay. Thank you. Sorry about that. Operator: Our next question comes from Todd Morrison Brooks with Benchmark. Please proceed with your question. Todd Morrison Brooks: Hey, thanks. And, Mel, I add my congratulations on your upcoming retirement. Couple more follow-up type questions here, but wanted to dig in on the enhanced marketing efforts, and correct me if I am wrong, but my understanding of the focus in 2026 in the test kind of third of the base was finding breakfast daypart users that were not necessarily First Watch Restaurant Group, Inc. customers and stimulating them to try the brand. Was that the case for the entire year? And is there another lever that gets pulled as you broaden the program out where we actually use the enhanced marketing efforts into the existing First Watch Restaurant Group, Inc. customer base in an effort to drive additional frequency there as well? Matt Eisenacher: Yeah. Hey, Todd. It is Matt Eisenacher again. So it is a good question. What I was saying, we are really taking the playbook of what we saw work last year and applying that this year. The strategy would be the same as you stated where we are using information and customer data to target those that are already active in the breakfast daypart. We are still in the early stages of a marketing lever here at First Watch Restaurant Group, Inc., and so we see that as a responsible way to be efficient with our dollars. Now, again, if you look many years out, eventually, you can start to move outside and start to grow the overall occasion. But, as we all know, that could be a little bit more difficult. So we are, for this year. And, yes, to answer your question, that was the focus all of last year as well and will be this year as well. Todd Morrison Brooks: So, Matt, any pivot to some of the effort being against existing First Watch Restaurant Group, Inc. customers versus just overall category users, or does that measure of overall category users include your existing customer base? Matt Eisenacher: Yeah. So as we talked about before, we apply different strategies, channels, and creative if we have not seen you before or if you are part of our customer base. If we are trying to introduce the brand to you, we want to establish that we are a great place for everyday breakfast. As we start to get more information on you, we will start to pulse through our seasonal menu program, given that you know who we are. So we have a variety of segmentations and cohorts, and our first-party audience is part of that as well. Operator: Our next question comes from Brian Hugh Mullan with Piper Sandler. Please proceed with your question. Brian Hugh Mullan: Hi. Thanks. I would just like to echo, Mel, congrats on the retirement. Henry Melville Hope: Thank you. Brian Hugh Mullan: So question, no problem. Can you just comment on what you have seen lately across the dayparts, between weekday breakfast, weekday lunch, and the weekend business? Just curious if there are any notable differences or if they are more behaving similarly, and how you expect those to behave in 2026. Christopher A. Tomasso: So we talked about, I think, on the last call that we saw strength in the weekday breakfast segment, and we certainly saw that in Q4 and all of last year. And then in Q4, also, weekends also slightly outperformed. Sorry. Not just Q4, but also for 2025 as well. So whereas we saw some weakness, I think, back in 2024 in weekday breakfast, we recovered that in 2025. Specifically. Brian Hugh Mullan: Okay. Thanks. And then, follow-up, just menu innovation, just high level, the beverage offerings. Just wondering what the team is working on, if anything, and what the biggest opportunity is over the next few years. Christopher A. Tomasso: Yeah. The beverage category for us continues to be a big driver. We launched our fresh juice program, I think, almost ten years ago now, and it still continues to blow us away at the mix of those items. We have a new juice on every seasonal menu. And, thoughtfully, over the years, we have added a couple of those juices to the core menu. We have also innovated around cold, carbonated beverages, which is now a permanent part of our menu. And those do well. So absolutely looking at the beverage category as an opportunity, in addition to the alcohol platform that we rolled out a couple years ago. So we see opportunity there in our innovation pipeline. Operator: Our next question comes from Gregory Francfort with Guggenheim Partners. Please proceed with your question. Gregory Francfort: Hey, thanks for the question. I guess my first question is just on the pricing. I think you guys evaluate pricing twice during the year. And I am just wondering, as you looked at the guidance, what you embedded? I guess there is no incremental pricing in the first half, but do you embed an assumption for a pricing increase in the second half? Christopher A. Tomasso: So we talked about the carried pricing that will end up being 2% blended for the year. But honestly, for our same-restaurant sales guidance, the 1% to 3%, it is really based on a combination of a number of potential impacts this year that we may not have had in years past, and a number of levers that we have, whether it is the new core menu, the increased marketing activity, mix upside from our seasonal menus, and pricing is one of those levers as well. But we will look at that and see where we are midyear and make that decision. But I think, based on the consumer environment right now, and doing what is right for the customer, that is why we elected not to take any price at the beginning of this year. Henry Melville Hope: In other words, we will not make that call until the second quarter. Gregory Francfort: Oh, okay. Got it. And then just on your margin outlook, I think the implied assumption is maybe just a little bit under 19% for the year. What would it take, I guess, to get back towards the high end of the 18% to 20% long-term range that you guys have targeted? Maybe in 2027 or 2028? Henry Melville Hope: Thanks. There is a lot of influence on the overall margin based on the number of juvenile restaurants that we have in the mix. So our legacy cohort, the comp cohort, consistently delivers 200 or more basis points above the consolidated average. And then because we have such high-volume new restaurants that are getting to mature margins, they currently are on the road to that. They have an impact on the margin and it is outsized because their sales are so large. They tend to over-index on the average. So, really, probably the immediate driver to get margins, as you said, to the upper end of the range would be to accelerate the growth of the more juvenile restaurants in terms of their margin production during the year. And we see a lot of opportunity in that, but also there is sort of a natural curve when you have a new restaurant and have new crews, and you are operating in new areas. We press to get them to mature margins as swiftly as possible, but they also have a life cycle and we do not want to tarnish the customer experience by being too hasty. Christopher A. Tomasso: And, Greg, I think if you think about our philosophy of pricing to defend margins, if there ever was a year where that was challenged, it was last year, and we were able to deliver 19% margins in Q4, 18.5% for the year, right smack in the middle of that range. And so we have got some relief, hopefully, this year on the commodity side. But I think our ability to hit in that range and our history of doing that is well documented, and I think we will continue to be able to do that when we leverage our philosophy. Operator: As a reminder, if you would like to ask a question, please press 1 on your telephone keypad. Our next question comes from Brian Michael Vaccaro with Raymond James. Please proceed with your question. Brian Michael Vaccaro: Thanks. And, Mel, congrats on your retirement. I am still going to email you on egg inflation, so I hope that is okay. Henry Melville Hope: Good. I am here. Brian Michael Vaccaro: But just two quick ones for me. On the G&A side, you have leveraged that line, I think, about 60 bps in 2025. And you did mention the new executive comp plan as well. So could you just level set or give us a ballpark on your G&A in 2026 just to make sure we are all on the same page? Any guardrails you could provide there? Henry Melville Hope: So we do not guide to G&A, but I would say that we continue to expect to lever our cash-based G&A as we continue to grow, and the non-cash piece is what would be challenged in order for us to overcome the increase this year. But we will try and communicate that clearly as we publish our results going forward so that people understand how we are looking at that cash-based leverage. Brian Michael Vaccaro: Okay. Alright. Thank you. And on the commodity inflation outlook, the up 1% to 3% for the year, maybe just unpack that a little bit further, just kind of the puts and takes, what that might embed for eggs or other key commodities. And I guess the other question I had, as you lap, I think, around 8% in the first half, and obviously, you finished with close to 1%. But as you lap that 8%, are there any quarters that you would expect to see deflation on a year-over-year basis? Henry Melville Hope: Among some of our commodities, I do expect that we are going to see some deflation. We are deflating on avocados. But we have not seen a lot of relaxation in the inflation in terms of our coffee or our pork prices at this point. So we do have some favorability in a couple of big things. Still having to wait out what is happening with the market on a couple of others. Operator: We have now 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.

82天前Insight Analytics约5分钟阅读

TILE 2025 Q4 财报电话会议

Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to Interface, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Christine Needles, Corporate Communications. Please go ahead. Good morning, and welcome to Interface, Inc.'s conference Christine Needles: call regarding fourth quarter and full year 2025 results. Hosted by Laurel Hurd, CEO and Bruce Hausmann, CFO. During today's conference call, any management comments regarding Interface, Inc.'s business which are not historical information are forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements regarding the intent, belief, or current expectations of our management team as well as the assumptions on which such statements are based. Any forward-looking statements are not guarantees of future results. There are risks and uncertainties that could cause actual results to differ materially from any such statements, including risks and uncertainties described in our most recent Annual Report on Form 10-K filed with the SEC, as supplemented in our first quarter 2025 10-Q. The company assumes no responsibility to update forward-looking statements. Management's remarks during this call also refer to certain non-GAAP measures. Reconciliations of the non-GAAP measures to the most comparable GAAP measures and explanations for their use are contained in the company's earnings release and Form 8-Ks furnished with the SEC today. Lastly, this call is being recorded and broadcasted for Interface, Inc. It contains copyrighted material and may not be rerecorded or rebroadcast without Interface, Inc.'s express permission. Your participation on the call confirms your consent to the company's taping and broadcasting of it. After our prepared remarks, we will open up the call for questions. I will now turn the call over to Laurel Hurd, CEO. Thank you, Christine, and good morning, everyone. 2025 was a record year for Interface, Inc. as net sales, adjusted operating income, and adjusted EBITDA reached their highest levels in the company's history driven by a One Interface strategy. We introduced the One Interface strategy in 2023, committing to a set of initiatives that focus on building strong global functions to support our world-class local selling teams, accelerating growth through enhanced commercial productivity, expanding margins through global supply chain management and simplifying operations, and leading in design, performance, and sustainability. Since launching this strategy, we have carried out these initiatives and delivered growth and margin expansion that has outpaced the industry through strong execution across the business. For the full year, currency-neutral net sales increased 4% year over year, driven by broad-based growth across all regions and key market segments. In addition, all three product categories grew in both price and volume. This growth coupled with operational efficiency gains expanded our adjusted gross profit margin to 39%. Commercial productivity has been a fundamental growth driver and remains central to our strategy. Our combined U.S. selling team model is a key enabler allowing us to harness the full strength of our sales organization and present a single cohesive interface to our customers across carpet tile, LVT, and nora rubber. The U.S. team is successfully cross-selling, competing more effectively, winning more of the floor plate, and deepening customer relationships. The growth of our nora Rubber business in 2025 is a standout example of how our combined teams can help drive momentum. Global rubber billings were up 17% in 2025 compared to the prior year. We will continue to build on this in 2026 and beyond. The success in the U.S. reinforces our confidence in the scalability of this model, and it provides a lot of runway for us to expand our business in health care and education across the globe, further leveraging our local selling team. We are just getting started and excited to build on our early success. Supporting this commercial momentum, we have continued to strengthen and globalize our manufacturing and supply chain team. In 2025, we further aligned our global supply chain around productivity, continuous improvement, and technology-enabled solutions. Our ongoing investments in automation and robotics generated productivity gains and margin expansion. During the year, we automated key processes in our U.S. carpet tile operation, including material handling and other labor-intensive sets. We also invested in automation in our nora plant to support growth in our core nora platform. These actions have improved efficiency, reduced waste, and enhanced customer service levels while positioning us for growth. Building on the success of automation in our U.S. carpet tile operations, we are now extending these robotic solutions to our facilities in Europe and Australia. We are also further automating our carpet tile facilities to include more efficient cutting and packaging processes that will drive additional efficiencies. Looking ahead, we will continue to reinvest efficiency-driven savings into additional automation, productivity initiatives, and workflow optimization, scaling proven solutions across our global operation. Paramount to our strategy is a continued focus on product innovation that expands our addressable market as a key driver of growth. With this as the backdrop, this week we are launching Noravant, a groundbreaking rubber flooring innovation that will open new design possibilities in the resilient category. This sheet platform that is PVC-free combines high performance, design flexibility, and enhanced sustainability, complementing our existing Norament and Noraplan platform. We have developed a completely new rubber offering that will compete at the premium end of the vinyl sheet category. This is an incremental growth opportunity that we expect will meaningfully expand our addressable market in resilient over time. Importantly, it will allow us to deliver elevated rubber aesthetics to more spaces where we continue to see opportunity for growth, particularly in health care and education. The initial product, Noravant Timber, is the industry's first wood grain design in rubber flooring and expands the range of environments where rubber might be specified including patient rooms, classrooms, corridors, and waiting areas. Looking specifically at our opportunity in health care, patient rooms represent a sizable portion of the hospital's floor plate. Noravant Timber is ideal for this type of application. We launched with a wood grain look to support strong demand from health care customers for patient rooms to look more like luxury hotel rooms. Noravant is a design-forward PVC-free sheet solution that also meets elevated performance cleaning and durability requirements, needs that are not fully served by other products on the market or in our portfolio. We view Noravant as an important multiyear growth platform. Given nora's longer selling cycle, which can span several quarters, we expect Noravant Timber to begin contributing to growth in 2026 and build over time. We will continue to invest in nora automation to support growth in our existing nora platform while also expanding capacity to meet anticipated demand for Noravant. We also continue to lead in design. We have been focused on expanding our addressable market by offering collections at more approachable price points while pushing our design leadership at premium price points. We have done this with the Open Air collection in carpet tile and with our 3 millimeter offering of LVT. These collections are largely incremental to our business, and help us to better serve our customers' needs and to drive market share gains while also achieving our gross margin goals. We have a high confidence that this is working, and we will continue to expand our offerings in these areas in 2026. Our commitment to sustainability continues to underpin our development and innovation, and it differentiates us in the marketplace. We make sustainability specifiable with a broad range of low-carbon products, the highest amount of recycled and bio-based materials globally in the flooring industry, and tools that make it easier for our customers to understand the carbon impact of their choices, like our carbon calculator and carbon footprint data on our floor plans. In 2025, we unveiled the first-ever cradle-to-gate carbon negative rubber prototype and began incorporating captured carbon in our U.S. and European carpet tile manufacturing processes. We also continue to be recognized externally including earning a spot on Newsweek's Most Responsible Companies list and being named for the 28th consecutive year in GlobeScan and ERM's 2025 Sustainability Leader Survey. As we move forward, sustainability remains embedded in how we design and innovate, and how we stand out and differentiate in the market. Let me now turn to our financial results. For the full year, we delivered 4% year-over-year currency-neutral net sales growth, with both price and volume increasing across all three product categories, reflecting strong execution and continued share gain. Growth was fueled by strong performance in the Americas, where currency-neutral net sales increased 5% year over year, driven by our One Interface combined selling team and strength across key market segments, particularly health care and education. In EAAA, currency-neutral net sales increased 2% for the year, reflecting improving trends despite still challenging macro environment in certain markets. Turning to our market segments, in 2025, global health care billings were up 21% year over year with double-digit gains in the Americas and EAAA. Our broad and differentiated product portfolio with segment-focused offerings across carpet tile, LVT, and rubber is helping us capture opportunities as the global health care sector evolves. We are seeing increased investment in health care facilities to adapt to the needs of an aging population and a growing focus on preventative care. nora remains a standout performer in this segment, and we continue to accelerate investments to support sustained growth in health care globally. Education billings increased 8% for the full year, reflecting the success of our expanded, more approachable collection offering. We remain well positioned across both K–12 and higher education. Our design leadership, durable performance characteristics, and low-carbon footprint products are resonating with specifiers and procurement teams. Macro tailwinds continue to underpin multiyear demand as modernization continues, and our broader range of price points help us win projects across a wide range of budgets. Corporate office billings were up slightly for the year as expected. We continue to take share in Class A spaces where our brand positioning, design leadership, and sustainability credentials differentiate us. Companies continue to reinvest in higher-quality spaces and execute targeted refresh programs to support return-to-office and hybrid work environments. We are capturing refresh and spec opportunities that position us well for continued growth. As we look to 2026, our focus is to continue leveraging what is working and to advance to the next phase of our One Interface strategy. We expect to continue gaining share by expanding our addressable market through approachable price points in addition to our premium design, through launching innovative new platforms like Noravant Timber, and through scaling commercial productivity globally. This will deepen our presence in health care and education to further strengthen our market segment diversification effort and continue to drive growth. Progress we have made under our One Interface strategy also gives us confidence in our ability to continue expanding margins. We will continue to pursue automation and productivity gains in our manufacturing facilities, and leverage mix by prioritizing growth in our most profitable categories and markets. We will maintain a disciplined approach on SG&A, prioritizing investments that drive profitable growth and innovation while continuing to deliver efficiencies that expand margin. I will now turn the call over to Bruce Hausmann. Bruce Hausmann: Well, thank you, Laurel, and good morning, everyone. All comparisons provided are year over year versus 2024 unless otherwise noted. Fourth quarter net sales were $349,400,000, up 4.3% as reported and 1.6% on a currency-neutral basis. Fourth quarter currency-neutral net sales were flat in the Americas on a strong prior year comp of 9.6% and up 4.1% in EAAA. Adjusted gross profit margin in the fourth quarter was 38.6%, up 169 basis points on favorable pricing and favorable product mix, partially offset by higher input costs. In 2025, we recorded a nonrecurring inventory reserve adjustment that benefited adjusted gross profit margin by approximately 80 basis points. This item will not recur going forward. Adjusted SG&A expenses were $96,600,000 in the fourth quarter, compared to $90,800,000. The increase was primarily due to FX translation, higher salary and fringe on merit-related inflation, and higher variable compensation on increased sales and profits. Adjusted operating income was $38,200,000, up 16.7% compared to $32,800,000. Adjusted EBITDA was $49,800,000, up 8.2%. Our fourth quarter adjusted effective income tax rate benefited from the release of a $2,900,000 valuation allowance primarily related to the use of foreign tax credits. This benefit is not expected to recur, and this nonrecurring benefit added $0.05 to our fourth quarter and full year adjusted EPS. Fourth quarter adjusted EPS was $0.49, up 44.1% compared to $0.34. Fourth quarter consolidated currency-neutral orders increased 2% year over year. The Americas was up 3% on top of a prior year order growth rate of 9%. EAAA's fourth quarter order growth was flat year over year on a softer macro environment. Turning to our full year 2025 results. All comparisons provided are year over year versus fiscal year 2024 unless otherwise noted. Full year net sales totaled $1,390,000,000, up 5.4% and at the high end of our expectations. Currency-neutral net sales increased 4.3%. Currency-neutral net sales in the Americas increased 5.5% while currency-neutral net sales in EAAA increased 2.4%, reflecting improving trends in our international markets. Full year adjusted gross profit margin increased to 39%, up 187 basis points driven by favorable pricing, improved mix, and manufacturing efficiencies partially offset by higher input costs. This includes a 50 basis point benefit from a nonrecurring inventory reserve adjustment as a result of strong inventory management. Excluding this benefit, adjusted gross profit margin would have been approximately 38.5%. Adjusted SG&A expenses were $366,700,000 in 2025, compared to $346,700,000 and flat year over year as a percentage of net sales. The increase in SG&A dollars was primarily due to FX translation, higher salary and fringe on merit-related inflation, and higher variable compensation on increased sales and profits. For the full year, adjusted operating income was $173,800,000, up 22.9% compared to $141,400,000. Adjusted EBITDA was $217,900,000, up 15.3% compared to $189,000,000. Adjusted earnings per diluted share was $1.94, a 33% increase versus $1.46. With these strong results as context, I would now like to turn to capital allocation. As we have described previously, we follow a balanced capital allocation strategy that prioritizes investing in the business in areas like innovation and productivity with the goal of driving operational efficiencies, margin expansion, and growth. Second, we focus on managing leverage through a disciplined use of debt to manage net debt conservatively. Third, having achieved several operating goals ahead of schedule, reinforcing our confidence as we move into the next phase of our One Interface strategy, we will continue exploring potential M&A opportunities through a rigorous and disciplined process. We do not need M&A to achieve our goals, but we will continue to evaluate opportunities that are aligned with our current strategy and that can accelerate growth and margins. Lastly, and importantly, we continue to be committed to returning excess cash to shareholders through a combination of dividends and disciplined share repurchases. These four objectives encapsulate our balanced capital allocation strategy. To recap our progress on these objectives, I would like to highlight several key accomplishments from fiscal year 2025. We generated $167,900,000 of cash from operating activities in 2025 versus $148,400,000 in fiscal year 2024. With investing in the business as our top priority, capital expenditures were $46,200,000 in fiscal year 2025 compared to $33,800,000 in 2024. In fiscal year 2026, we expect capital expenditures to increase to $55,000,000 as we invest in additional automation and productivity initiatives to support operational efficiencies and growth, including equipment investments related to the new Noravant product line. We also managed net leverage conservatively through a disciplined use of debt. In December 2025, we opportunistically amended and extended the maturity date of our syndicated credit facility to 2030. The amendment added a new $170,000,000 term loan facility that was used along with cash on hand to fully redeem our $300,000,000 of senior notes that were due in 2028. These transactions strengthened our balance sheet by reducing interest expense and extending our remaining debt maturities while providing flexibility to continue paying down debt. During fiscal year 2025, we repaid approximately $124,000,000 of debt. In addition, we remain focused on returning excess cash to shareholders. In 2025, we repurchased $13,000,000 of Interface, Inc. common stock and for the full fiscal year, we repurchased $18,200,000. In 2026, we plan to continue executing share repurchases in a disciplined and opportunistic fashion. In addition, our Board recently approved an increase in the quarterly dividend from $0.02 to $0.03 per share, reflecting confidence in our cash flow generation and our earnings durability. Turning to our outlook. We entered 2026 with solid orders and a healthy backlog, up 7% year to date, while remaining mindful of ongoing macro uncertainty and a competitive industry environment. Notably, fiscal year 2026 includes 53 weeks, a realignment that happens every five or six years to synchronize our fiscal calendar with the calendar year. With an extra week in 2026, and the way that holidays fall in 2026, net-net, we anticipate this will add approximately $5,000,000 to $10,000,000 to net sales for the full fiscal year. With that context, we anticipate the following. For the first quarter of 2026, net sales of $315,000,000 to $325,000,000, adjusted gross profit margin of approximately 38% of net sales, adjusted SG&A expenses of approximately $94,000,000, adjusted interest and other expenses of approximately $4,000,000, an adjusted effective income tax rate of approximately 18%, and a fully diluted weighted average share count of approximately 59,100,000 shares. And for the full fiscal year of 2026, we anticipate net sales of $1,420,000,000 to $1,460,000,000, adjusted gross profit margin of approximately 38.5% to 39% of net sales, adjusted SG&A expenses approximately 26.2% to 26.4% of net sales, adjusted interest and other expenses of approximately $16,000,000, an adjusted effective income tax rate of approximately 25% to 26%, and capital expenditures of approximately $55,000,000. I will now turn the call back to Laurel for concluding remarks. Laurel Hurd: Thanks, Bruce. I want to close by saying how proud I am of what our team has accomplished in 2025, and I want to thank our customers for trusting us and choosing Interface, Inc. This was a record year for the company delivered through strong execution of our One Interface strategy, and we are just getting started. We enter 2026 with confidence in our strategy and our ability to create long-term value for our shareholders. We will now open for questions. Operator? Operator: Ladies and gentlemen, we will now begin the question and answer session. If you would like to withdraw your question, please press 1 again. One moment please for your first question. Your first question comes from the line of Brian Biros of TRG. Please go ahead. Brian Biros: Good morning. Thank you for taking my questions. Can you maybe talk a little bit further about the One Interface selling strategy here? You know, it seems like it has been very successful so far, years into it. Given the outperformance in sales and margins so far, maybe just help us understand a little bit more on what is still to be rolled out and felt across the business. Laurel Hurd: Yes. That is a great question. So we are really proud of the execution to date and the One Interface strategy, as you said, is especially with the combined selling teams in the U.S. is off a really strong start. We are making a lot of progress as you saw. Our health care billings in the year were up 21%. Our nora business was up 17%. And I really do think that is a lot to do with this combined selling team. But I think we are just getting started. We have two main opportunities that I will hit on. The first is the launch of Noravant, which is really exciting for us. This is a wood grain look in rubber, a first of its kind, and we expect that to be a really exciting long-term growth opportunity. As you know, our nora selling cycle is a bit longer. So we expect that. We just rolled it out last week at our sales meeting, and our sellers now have samples in hand. So they are now starting to share that with customers. And we expect that to start generating revenue by the fourth quarter. It will probably be somewhere $5,000,000 to $10,000,000 this year, but then expand over time. So we are excited about that. And then secondly, you know, we have learned a lot about our combined selling teams in the U.S., and we are taking those learnings across the globe. We still have a lot of runway to go to expand health care and education not only in the U.S. market, but in markets around the world. Operator: Thank you for that. On gross margins, came in very strong at the end of the year here, I guess, on an adjusted basis, kind of at that aspirational 38.5% you have talked about before. Great to see. 2026 guidance? Also great to see continued expansion there, 38.5% to 39%. I guess, maybe just talk about some puts and takes for margins in 2026? Bruce Hausmann: Yes. So, Brian, thanks for noticing. It was great to see us achieve our long-term ambition of 38.5% ahead of schedule. And as you mentioned, you know, anything north of that baseline of 38.5% will be improvement. So just to put a finer point on it, you know, if we achieve our high end, it is actually about 100 basis points of improvement that we will achieve this year. There are two components to that. We are offsetting about 50 basis points of tariff-related headwinds, and then we are offsetting about 50 basis points due to the inventory adjustment that we mentioned in our prepared remarks. That got us to the baseline. So we are very pleased with the progress that we have made around gross profit margin. A lot of the benefit is going to continue coming from the automation that we have put into place in our existing factories. I sometimes call that we will get a little bit of a wraparound effect of that. And we are also putting some more of that same equipment into our international markets. We are putting some equipment into our Australia plant, equipment into our plants in Northern Ireland, and we continue to also make investments in automation and efficiency-related equipment in our nora plant. So you put all that together, and, you know, we are expecting to continue to drive gross margin expansion. I think that we are really pleased with the progress, and, I mean, we are off to a good start continuing to drive for this year. Operator: Nice. I see where that goes for 2026. Last one for me. Can you talk about the introduction of these more accessible price point products—kinda if that is fully rolled out already or if there are still more products in that kinda category to introduce in 2026. And maybe if there is any difference in kind of the sales growth between those products and the other kind of legacy products. Thank you. Laurel Hurd: Yes. Sure. So we have one platform that we continue to build on. We call it the Open Air platform or the Open Collective as we continue to expand it. So we are seeing a lot of success in that collection. We continue to roll out new colors and styles there, which is great. We have got some warmer colors rolling out there. And then we will be launching a whole new collection as well in the middle of the year, which has a different design look and feel. So we are finding, you know, we do a lot, as you know, we do a lot of test and learns, and we want to make sure that we could maintain our premium offering in carpet tile as an example while expanding incrementally this more mid price point for us. And we really have proven that we can do that. We have also done the design work. I am, you know, I am really proud of our design and manufacturing teams working together. So the designs that we come out with in those price points, we still are happy with the margins on, so we are not dilutive there. So we are pleased with the progress, and we will continue the momentum from there. Operator: Got it. Thank you. Thanks, Brian. Your next question comes from the line of David MacGregor of Longbow Research. Please go ahead. David MacGregor: Yes. Good morning, everyone. Congratulations on all the progress. It is wonderful to see. I guess I wanted to begin by just asking you about the difference between kind of the corporate growth, which was kind of flat versus what was obviously very strong health care and education. How would you characterize the corporate market right now? And was there something that was there as an offset that left you flat? Or just maybe help us better understand that differential. Laurel Hurd: Yes. So I would say this. The corporate business, you know, we have said we wanted to grow that business this year. We were up about half a point globally for the year, and that was about in line with our expectations. The market continues to—we feel great about the overall corporate market. As we have said before, the Class A space remains in demand. We are also excited to see that markets like New York and San Francisco are coming back stronger. Globally, it is a competitive market and we continue to focus on gaining share in that space, which we are doing nicely. And then as you said, our health care and education grew very nicely for the year, for the quarter. And feel good about that. Our retail business in the quarter—so I think that is what you are poking at in the quarter growth. Our retail business can be a little bit choppy as we have seen over time, and that was a little bit soft in the quarter. So that dragged us down a bit, but more than offset by the health care and education growth. Bruce Hausmann: And, David, I think what you are seeing is strong execution in place. You know, we have talked a lot about diversifying the company around product categories, which we have done with carpet tile, LVT, and rubber. We have also talked about continuing to strengthen the company through segmentation. And we are really seeing that demonstrated on the P&L through these growth rates in education and health care, which is fantastic to see. So often you see companies state a strategy and you wonder where is that showing up on the P&L. And I think we are the dead opposite of that. You know, our strategy is actually revealing itself on the P&L, which is fantastic to see. David MacGregor: Good. Thank you for that. And then you talked about the 7% increase in backlog. Could you just kind of open that up a little bit to the extent you can or you feel comfortable discussing? And help us understand North America versus EAAA and the contribution from the Open Air platform versus, you know, the premium spec product and just maybe a little more detail around that backlog number. Bruce Hausmann: So it is our normal blended business. It is a good solid backlog. We feel really good about it. And we feel, you know, that gives us air cover as we enter into 2026, which also gives us comfort. And so with our order rates and our backlog, as you can see, we gave a good strong guide for Q1. It gives us confidence as we enter into 2026 and enter our guide for Q1. Laurel Hurd: And it is pretty consistently spread across all the initiatives. I do not think there is one thing weighing it more heavily than others. David MacGregor: Yes. So it is pretty broad. Okay. That is interesting. Thank you. Yep. Yep. And then let us just talk a little bit about—you talked about the SG&A discipline on your prepared remarks. I mean, a lot of growth opportunity here, which is really encouraging, but how do you make sure that as you pursue those growth opportunities, you are also kind of managing that SG&A and we do not repeat the sins of the past that occurred long before your arrival, but were obviously a big issue. And just talk about the leverage opportunity there. Laurel Hurd: Yes. I would say this, and Bruce is an awesome partner on SG&A control. I feel very comfortable. We know where every dollar is, and are very, very disciplined in what and how we spend it. We do a lot of gating of spend as well, so we are sure that, you know, we are ready to spend the money. As we have mentioned before, we are focused on making sure that we drive the front end of the business, so the selling, the sales and innovation get the investment, while we do everything possible to be efficient on the back end of the business. And as you know, also a lot of our SG&A is variable compensation that is tied to revenue. So that is also another nice element that we have that will flex up and down. David MacGregor: And then the last question for me was just costs. And, you know, you talked about costs a couple times both on the quarter and on the annual numbers as offsets to price/mix benefit. How should we think about what you have got embedded in your guide and kind of where the surprises could potentially occur? Bruce Hausmann: Well, let us talk about our assumptions first. We are assuming some modest inflation in our raw materials. We are assuming status quo around tariff-related costs. Obviously, that is a moving target that we are watching daily. You know? And, David, the second part of your question was surprises. You know, I think that one of the things that we are really focused on is that that is a good management team, and as being strong operators, surprises are going to come our way. We just have to navigate through them. And we just have to work through them, and we need to—for example, if there is an increase in tariff cost, we just need to make sure that we offset those through continued pricing and productivity initiatives. And so we take this business day by day, week by week, month by month, and we make sure that whatever is coming at us that we continue to navigate through it and that we achieve our goals. Operator: Got it. David MacGregor: Congratulations on all the progress. Thank you. Laurel Hurd: Thanks, David. Operator: Your next question comes from the line of Reuben Garner with Benchmark. Please go ahead. Reuben Garner: Hey, thanks. I was wondering if you had any insight into your business in the U.S. by geography and or customer size? In other words, any signs of acceleration in maybe some of the major cities? Any signs of acceleration with some of your larger customers of late? Laurel Hurd: Yes. We have seen, you know, in the U.S., I would say this is maybe particularly to the corporate side of the business. We have really seen New York and the Bay Area come back strong, so they were definitely, you know, obviously harder hit in COVID. It took a longer time to recover, but we are seeing those really strengthen, which is encouraging. Texas remains strong. The Southeast again remains strong, so we are seeing that regional migration continue to happen. And with respect to our customer side, you know, we do a lot of our business—about 80% of our business is renovation and 20% new construction. So I do not have a lot to add with respect to customer size. I think they are all kind of in the same trend. Bruce Hausmann: Yes. And one thing that helps us, Reuben, is that our customer concentration is so low that, you know, I think that that is another strength of the business. We are not dependent on any one or two or three or four customers. We have a big diverse group of customers, which I think is actually a strength. Reuben Garner: Great. And then, the health care and education pieces of your business were very strong. Can you dive a little more in how much of that you think is share gain? How much kind of runway you see in spending in those two particular categories as we get into 2026 and beyond? Laurel Hurd: Yes. Sure. You know, we love the macro environment about around both health care and education for Interface, Inc., but I will take each of them. Education is—both K–12 and higher ed have some nice tailwinds around them. There is investment happening there, and they prefer products like Interface, Inc. So we have got a strong product offering. They care about their carbon footprint and are really well aligned to our strategy. There are some share gains in education. A lot of the expanding our approachable price points across both LVT and carpet tile has given us more access and share gains in K–12 especially. So that has been a nice win for us. And then health care, again, great macros there with the aging population, more focus on preventative care, a lot of technology happening in health care that we think will continue to benefit us. So strong environment, and then again, share gains there. This is the place that has been most strongly impacted by our combined selling team, where we have our sales force focused on each market. They are focused on all of the product categories that we sell, Interface, Inc. and nora, and that is really unlocked some health care environments. So an example of that—where we may have had a really strong nora business at a particular health care customer, but we had not had carpet tile in the waiting room or LVT outside of an elevator bank—we are now selling them the full suite of products, which is really helping us grow our overall health care business. Bruce Hausmann: And, Reuben, one of the things that is great about these two market segments is we just have such a strong right to win inside of them. If you look at how our products are made and how they are catered around design, performance, and sustainability, both of these market segments are just so well suited for exactly what we do and how we do it, which is, you know, that is why we are, I think, seeing the traction that we are seeing. Reuben Garner: Great. Thanks for the detail, guys. Congrats on the strong close to the year, and good luck in 2026. Laurel Hurd: Thanks, Reuben. Operator: Your next question comes from the line of Alex Paris of Barrington Research. Please go ahead. Alexander Peter Paris: Hi, guys. Thanks for taking my questions, and I will just do a few cleanup cats and dogs here. Congrats on the quarter. Much better than expected even if you exclude that nonrecurring inventory adjustment. I think adjusted gross margins would have been 37.8% if you exclude it, and that is above both our estimate and consensus. Bruce Hausmann: Yes. Exactly. Alexander Peter Paris: And then EPS, $0.44 excluding that. So and that still exceeds. So I just wanted to talk, first of all, about Q1. I get it, extra week. Oh, and also before we get into it, adjusted gross margin is really just gross margin because the amortization is—the add back of amortization is behind us. Right? Bruce Hausmann: That is right. Are you referring to the nora purchase accounting amortization? Alexander Peter Paris: Yes. I am sorry. Yes. Bruce Hausmann: Yes. That is no longer hitting the P&L. That is fully burned off. Alexander Peter Paris: So okay. And that was essentially the add back for adjusted gross margin. So we are just—we are talking GAAP gross margin. Bruce Hausmann: That is right. Alexander Peter Paris: The gross margin forecast for first quarter is above our expectations. Why is the tax rate so low? Does that have something to do with the inventory adjustment? Bruce Hausmann: I know you are referring to Q1. Yes. The main reason is that this is when stock options—or when our employees have their LTI vest, and this is pretty mechanical, but I will get into it. So if you take the strike price between the market price, that is a tax deduction that the company gets. And you get that deduction in the period of vesting, which happens in Q1. And so that is a tax deduction in the quarter in Q1, which is why the rate—our tax rate—is lower in Q1. Alexander Peter Paris: Gotcha. Because for the full year, it is 25% to 26%, which is more in line with our expectations. Bruce Hausmann: Exactly. But in Q1, we get a nice—we get a deduction for what I just described. Alexander Peter Paris: Gotcha. Appreciate that color. And then, Bruce, your comments about gross margins lead me to another question. For the full year, you are guiding for adjusted gross margins of 38.5% to 39%. You said at the high end that would kind of represent a 100 basis point increase because you have got a couple of grow overs, the tariff impact and the inventory adjustment. First question about the tariffs. What was the impact of tariffs in 2025? And what is the impact of tariffs based on what you know now, I know it is a moving target, in 2026? Bruce Hausmann: So in 2025, if you look at our gross profit percentage, it diluted our percentage by around 20 basis points. And we are anticipating that it will be about 50 basis points year-over-year impact going into 2026. Alexander Peter Paris: So is that part of the—is it because there was no impact in Q1 2025? You have got four quarters of it this time? Bruce Hausmann: That is right. The tariffs started kicking in sort of in the middle of last year. They started, I think, in Q2, but, you know, they really started kicking in the back half. So, anyway. I just want to clarify. We are covering dollar for dollar. So I just want to make sure that I am doing a good job communicating. We are covering dollar for dollar, but it does have a dilutive impact on our GP percentage. Alexander Peter Paris: Yes. I think you mentioned it last quarter. Appreciate that. Yes. And then any impact that you could determine at this point with the Supreme Court decision to strike down the previous tariffs and replace them with 10%–15% reciprocal tariffs. Is there any incremental impact, or is it too soon to figure that out right now? Bruce Hausmann: Great question. We are obviously watching, you know, day by day. It was interesting. You know, we were at 15% tariffs last week, and then the Supreme Court struck that down as you just mentioned. And then on Saturday, we were back to 15%, kind of right back where we started. So we will see. It is to be determined. It is obviously a moving target day by day. Alexander Peter Paris: Okay. Thanks. And then I think my last question here. Can I get global billings by category—health care, corporate office, education—for Q4? You gave it for full year. Laurel Hurd: Yes. I can give you that, Alex. So let us see. Corporate globally in the quarter, corporate was flat. Education was up 11.6%, so between 11% and 12%. And health care was up 11.7%. Alexander Peter Paris: Great. Just trying to see if there is anything else here. No. I think that is it. Again, great quarter, and great guide. Thanks for the additional color, and we will follow up offline. Laurel Hurd: Sounds great. Thanks, Alex. Operator: Your next question comes from the line of David MacGregor of Longbow Research. Please go ahead. David MacGregor: Yes. Thanks for taking the follow-up. Just, I guess, a high-level question that kind of ties back to Noravant. And, you know, you have made such great progress with One Interface in terms of the reconfiguration of how you go to market. So much more efficient. Your coverage is so much better now than it has been in the past. Does that lead you to, you know, within the broader thought capital allocation, thinking more about investing in new product development and coming up with, you know, whatever comes after Noravant and just pursuing other product categories, other market tiers? Just maybe talk about the inclination to lean more aggressively into product development and leverage the benefits on go-to-market. Laurel Hurd: Yes. Thanks for asking the question, and we are really excited about Noravant. I think you are hitting on exactly the right point, so I appreciate you bringing it up. We are really focused on innovation. And I think we are just getting started here as well. Obviously, innovation takes time, and we have got incredible folks across our R&D organization, our product organization, and design who have incredible ideas and technology that really support our strategy and align with our brand. So very sustainable technologies, and we are lining them up. As you know, we added a new leader of product category management who is really focused on helping us identify the commercial opportunities that take all of the great innovation that we are working on and bring it to market effectively. So Noravant, I think, is a really big platform for us that we expect to drive growth. You know, we would say this product category, and it is really a new category for us, could deliver somewhere $50,000,000 to $100,000,000 over the next five years. So it is a really important platform, and we will continue to bring out the beauty of this product category. We are starting with a wood grain look. But it gives us a ton of design flexibility, and the ability for us to bring Interface, Inc.'s design capabilities to rubber in a whole new way is really, really exciting. So I think you are going to see a lot of runway on this category for us. And we have got more in the works. So, again, it takes time, but we are really focused on it and think there is a lot of ammunition here for us to go. Operator: There are no further questions at this time. And with that, I will now turn the call over to Laurel Hurd, President and Chief Executive Officer, for final closing remarks. Please go ahead. Laurel Hurd: Great. Thanks, Paul. I just want to thank the entire Interface, Inc. team for all of the progress in 2025. Just a fantastic year, and thanks to everyone's support. Thanks to all of our customers. And thanks to everyone for joining the call. Operator: Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.

82天前Insight Analytics约5分钟阅读

AS 2025 Q4 财报电话会议

Operator: Thank you for standing by. Name is Jael, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amer Sports Fourth Quarter Full Year Fiscal Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Omar Saad, Head of Investor Relations. You may begin. Hello, everyone. Omar Saad: Thanks for joining Amer Sports earnings call for 2025. Earlier this morning, we announced our financial results for the quarter and year ended 12/31/2025, and the release can be found on our IR website investors.amersports.com. A quick reminder to everyone that today's call will contain forward looking statements within the meaning of the federal securities laws. These forward looking statements reflect our current expectations and beliefs only, and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please see the safe harbor statement in our earnings release and SEC filings. We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliations to the most comparable IFRS financial measures. We will begin with prepared remarks from our CEO, James Zheng, and CFO, Andrew Page, followed by a Q&A session until approximately 9AM Eastern. James will cover key operational and brand highlights, then Andrew will provide a financial review at both the group and segment level and also walk through our guidance for the first quarter and full year 2026. Arc’teryx CEO, Stuart Haselden, and Salomon CEO, Guillaume Meyzenq, will join for the Q&A session. With that, I'll turn the call over to James. Operator: Thanks, Omar. James Zheng: Fourth quarter was a great finish to a breakout year for Amer Sports. Our growth was led by our flagship Arc’teryx brand, and the rising star, Salomon, which recently surpassed the $2,000,000,000 US dollar sales bar. In 2025, we generated 27% revenue growth to $6,600,000,000 and a 170 basis point adjusted operating margin expansion to 12.8%, with double digit growth across all segments, regions, and channels. In the fourth quarter, we grew sales 28%, and the strong momentum continues into Q1. Our performance was led by technical apparel and outdoor performance, with solid contribution from winter sports equipment and ball and racket. All four regions achieved solid double digit revenue growth. Although we generated solid gross margin expansion in Q4, adjusted operating margin declined 110 basis points. This was entirely due to accelerated SG&A investments to support key growth opportunities, particularly for Salomon. Looking forward, we believe we are well positioned for strong and profitable growth within the premium sports and outdoor market, which continues to be one of the healthiest segments in all of consumer. Several factors give me confidence in our outlook. First, we own a unique portfolio of premium innovation-driven sports and outdoor brands. Second, Arc’teryx is a breakout brand with leading growth and profitability for the outdoor industry driven by its disruptive direct to consumer model. Third, Salomon footwear has a compelling and unique brand position but still only a small share of the global sneaker market. Fourth, our Wilson and winter sports equipment franchises already have leading market positions and will deliver slower long-term growth, except for Wilson soft goods, which has significant growth potential. And fifth, we have a strong differentiated platform in Greater China, where we continue to deliver best-in-class performance across brands. Before I turn it over to Andrew, I will briefly recap key highlights from our three segments. Starting with technical apparel. Arc’teryx delivered another excellent quarter of broad-based strength across regions, channels, and categories, especially footwear and women’s. Technical apparel generated a very solid 16% omni-comp driven by strong full-price growth and also healthy segment margin expansion year over year. Technical apparel sales up 34% was our highest growth quarter of the year. We continue to envision Arc’teryx as a truly global brand with significant runway in all major markets and we’re encouraged that the brand is generating double-digit omni-comps across all four regions. Women’s was Arc’teryx’s fastest growing category in Q4 with 40% growth. We continue to enjoy rising brand awareness with women across regions as we improve fit, style, color, function, and newness. We created a significant amount of newness in women’s this past quarter, which drove notable incremental growth in key product categories. We saw especially strong momentum in ski and insulation with the Atom SV, and also the new Andessa Down jacket, which is a warm waterproof ski jacket at a pinnacle price point. Women’s bottoms also continued to be popular following the successful launch of the Clarke Pant, the Outeir, and the Neopant in 2025. Moving to footwear, which grew nearly 40% driven by strong growth in all markets. Top performing models were the Norvan LD4 trail shoe, our most successful launch to date, followed by the Kopek GORE-TEX hiking shoe. Looking forward, Arc’teryx has an exciting pipeline of shoe launches for 2026, and we continue to believe footwear will be a large and profitable growth avenue for Arc’teryx. Our Veilance sub-brand is still small, but it grew strong double digits in Q4, and we are very excited for the future of this unique brand. Veilance drew a lot of interest at Paris Fashion Week, with showroom appointments tripling from last year. We expect strong double-digit growth from Veilance in 2026 as we further develop our collections and expand distribution. Circularity and ReBird continue to be at the heart of our brand. We opened eight new ReBird centers in Q4, bringing the total to 43. We increased the credit customers receive in Q4 when they trade in used Arc’teryx product to 30% from 15% previously, which has driven a notable jump in trade-in activity. I would also like to highlight recent leadership announcements at Arc’teryx. First, we welcome Avery Baker, our first-ever Chief Brand Officer, who joined most recently from Tommy Hilfiger. Avery is stepping into a newly created enterprise-wide role that will bring together global marketing strategy as well as consumer experience, insight, and analytics teams. We also welcome Tobias Prvedere, our new Head of EMEA. Tobias brings more than twenty years of international leadership experience across EMEA and APAC, most recently at The North Face and Gucci. I would also like to mention Peak Performance, our other technical apparel brand, which delivered solid growth in Q4. 2025 marked the brand’s return to growth with sales increasing across all regions and channels. The brand also continued to improve profitability driven by our concentrated efforts to reduce promotions and increase full-price selling. Moving to the outdoor performance segment, which was led by another outstanding quarter from Salomon footwear and apparel, and a solid performance from winter sports equipment. 2025 was a breakout year for the 77-year-old Salomon brand, which grew 35% to more than $2,000,000,000 of sales. Footwear momentum continues across all regions, especially Asia, with high demand for sportstyle and performance. There are several ongoing factors that give us confidence that Salomon footwear is well positioned for significant profitable growth in the years ahead. Number one, global sportstyle momentum continues. One of Salomon’s unique strengths as an outdoor brand is that we are connecting with women and younger consumers in a way traditional outdoor brands haven’t. Sportstyle is critical to Salomon’s position as the modern outdoor sneaker brand, and the success of XT-Whisper is the first example of how we can successfully expand focus beyond the XT-6 franchise. Second, our performance and running lines are also having great success. We continue to believe our new DRIVER franchise is helping to unlock the run category for Salomon like never before. Salomon is gaining traction in the run specialty channel in North America and EMEA, and even China, which has been a sportstyle-centric market, is seeing strong traction in performance product. Third, we installed amazing brand equity in Greater China and Asia, where we believe we operate the most productive and profitable sneaker shops in the industry. In 2025, Salomon grew sales very strong double digits in Greater China, driven by both sportstyle and performance, as well as strong growth in apparel. Beyond Greater China, Salomon is experiencing surging demand in Korea and Japan, both large sneaker markets. Fourth, our epicenter strategy is working. Our strategy to open a handful of brand stores and refine strategic elevated wholesale distribution in key metro markets is critical to elevate Salomon’s presence and awareness globally. Epicenter cities include Paris, London, Shanghai, Beijing, New York, LA, Milan, and more to come. Fifth is the strong pull demand we are seeing from consumers in Europe, Salomon’s home market, driving strong reorders, preorders, and sell-through. Sportstyle continues to be the growth driver, but we have also seen a real inflection in trail in Europe, supported by marketing campaigns, in-store events, and running activations. We are seeing especially strong performance in European epicenters like Paris and London, with strong double-digit omni-comps. Also, Salomon opened its first ever office and showroom in Paris, which is designed to elevate our brand presence in the city, strengthen our connection with buyers and the community, as well as support top talent acquisition. Sixth is North America, which is still a much smaller sneaker market for us compared to Europe or Asia. North America growth accelerated in Q4 driven by sportstyle. We remain focused on ramping up our North America direct-to-consumer and wholesale expansion with key strategic partners. Early signs are positive as our North America order book is experiencing strong growth. Salomon is also making key investments in leadership. In January, we appointed our first-ever Creative Director, Haki Salomon. Haki arrives following a tenure at Diesel and most recently MM6, and will lead both product design and brand creative direction. Lastly, I also want to mention our winter sports equipment franchise, which had a very strong Q4 despite challenging weather conditions. The market remains healthy despite low snow in certain regions. Bookings, participation, and enthusiasm for ski and snowboard are at record levels this winter. The recent Milano-Cortina Winter Olympic Games were a big moment for Amer Sports Group, especially Salomon, who outfitted all 27,000 official staff and volunteers head-to-toe. Between Salomon, Arc’teryx, Peak Performance, Armada, and Atomic, which is already one of the most successful alpine ski racing brands in history, our brands sponsored more than 200 athletes at the Games, winning an incredible 59 medals. A dominant performance. Congratulations to our athletes and teams. Moving to ball and racket, which had a strong Q4. Sales grew 14% driven by continued strength in softgoods, a return to growth in baseball, and an acceleration in golf. Wilson softgoods continued its explosive growth in 2025, including very strong double-digit growth in Q4. Our Wilson softgoods offering is resonating with consumers in both wholesale and direct-to-consumer channels and across all major regions. Wilson is unique in its ability to outfit tennis athletes from head to toe, including rackets and accessories. And we are excited to have signed six new Wilson Tennis 360 athletes on tour, including World Top 10 player Alex De Minaur, bringing our total count to 16 players. Beyond tennis, we also saw a return to growth in baseball, driven by strong bat sales, led by the Louisville Slugger Supra and five other bats among the top 10 this season. Lastly, before I turn it over to Andrew, I'm pleased to announce Carrie as the next President and CEO of Wilson brand, effective March 1. Carrie is a proven brand CEO and C-suite executive with great experience in global softgoods, sports, and outdoor industries, including Helly Hansen, Levi’s, and Nike. She began her career as an officer in the United States Navy, serving both in the US and abroad. We are excited to welcome Carrie to the Wilson and Amer Sports team. With that, I will turn it over to Andrew. Thanks, James. Andrew Page: We had another strong performance in Q4 with healthy sales growth, gross margin expansion, and EPS, despite our decision to accelerate investment behind Salomon. The strong sales and profitability of the Amer Sports portfolio allows us to accelerate resources behind the large Salomon sneaker opportunity, while still delivering great results at the group level. Let's first take a moment to reflect on the key highlights of 2025. Amer Sports Group delivered 27% growth in 2025, with broad-based strength across brands, segments, regions, channels, and categories. James Zheng: Arc’teryx continued its very strong trajectory, Salomon softgoods entered rapid growth mode, and Wilson Tennis 360 moved the needle in our ball and racket segment. Andrew Page: We delivered meaningful adjusted operating margin expansion from 11.1% in 2024 to 12.8% in 2025. We also continued to reduce our leverage ratio, effective tax rate, and annual interest expense leading to strong operating and free cash flow generation. Now turning to our Q4 results. Amer Sports grew sales 28% in Q4 on a reported basis, 26% in constant currency. James Zheng: The strong group sales performance was led by technical apparel and outdoor performance, while ball and racket also delivered solid growth in the quarter. Andrew Page: By channel, the group continued to be led by D2C, which grew 38% led by Salomon softgoods. Wholesale grew 18% globally, which was led by Arc’teryx. Regional growth was led by Asia Pacific, which grew 53%, followed by Greater China, which increased 42%. EMEA grew 21%, and the Americas generated 18% growth. Moving down the P&L. Adjusted gross margin increased 140 basis points to 57.8% in Q4, primarily driven by positive segment, regional, and channel mix shift. Adjusted SG&A expense as a percentage of revenue deleveraged by 220 basis points and represented 45.5% of revenues in Q4 versus 43.3% of revenues last year. The deleverage was primarily driven by outdoor performance, as Salomon made the decision in Q4 to accelerate investments to support healthy long-term growth. Also, the strong growth of Wilson softgoods continues to drive elevated SG&A investment within ball and racket. These factors were partially offset by technical apparel, which achieved SG&A leverage in Q4. Driven by the higher SG&A investments, as well as lower other operating income, our adjusted operating margin declined 110 basis points from 13.6% last year to 12.5% in Q4. Corporate expenses were $40,000,000, up from $12,000,000 in Q4 last year, driven by higher share-based compensation. In addition, last year in Q4, corporate expenses benefited from certain one-time accounting reclassifications related to net finance costs. D&A was $106,000,000, which includes $48,000,000 of ROU depreciation. Adjusted net finance cost in the quarter was $21,000,000, which comprised primarily of $20,000,000 of interest expense. In the quarter, our adjusted income tax expense was $65,000,000 which equates to an adjusted effective tax rate of 27%, compared to $90,000,000 in the prior year period. Adjusted net income was $176,000,000 in Q4. Adjusted diluted earnings per share was $0.31, compared to $0.17 last year. Turning to segment results. Technical apparel revenues increased 34% to $1,000,000,000 led by Arc’teryx. Growth was fueled by both 37% wholesale growth and 34% D2C expansion. Technical apparel generated a strong 16% omni-comp, led by full-price selling as we intentionally pulled back our participation in key promotional events, including Black Friday and Double 11. Guillaume Meyzenq: Regionally, the technical apparel growth rate was led by Asia Pacific, Greater China, the Americas, and EMEA. All regions grew strong double digits. Q4 was the first full quarter post the Korea distributor acquisition, which contributed a low to mid single digit percentage to technical apparel’s growth rate in Q4. In Q4, Arc’teryx opened 15 net new stores, with 21 openings offset by the closure of six legacy locations as part of our ongoing strategy to optimize the quality and productivity of our store fleet. New store openings included the new Arc’teryx Alpha store in Rockefeller Center in New York City, and Mountain Town stores in Aspen and Park City. Arc’teryx also opened stores in Canada, Japan, Australia, and China in the quarter. Looking back at full year 2025, we opened 24 net new stores excluding the Korea acquisition, and we plan to open 25 to 30 net new Arc’teryx stores in 2026, with the largest number coming in North America and also China. Our store opening plan incorporates a similar level of gross new stores as in 2025, partially offset by the continued closure of certain outlets and other suboptimal locations. In Greater China, as planned, we had slight net store closures in 2025, which includes partner stores. However, we still grew our own store count and overall square footage in China by opening larger format, higher quality, more productive locations. James Zheng: In North America, I want to highlight our second New York City Alpha store, which opened in October on 5th Avenue at Rockefeller Center. The store is the most pinnacle expression of the brand in the US, and we are encouraged by the strong sales this winter. The newly opened Mountain Town stores in Aspen and Park City are also off to great starts. We were very pleased by technical apparel’s strong operating margin expansion in Q4. Adjusted operating margin expanded 160 basis points to 25.9%, driven by strong flow-through of revenue upside in the form of SG&A leverage. This is a great proof point behind our confidence in the scalability of Arc’teryx’s highly productive store model as they comp positively over time. Moving to our outdoor performance segment, which saw revenues increase 29% to $764,000,000 driven by very strong performance in Salomon footwear, apparel, bags, and socks, and also supported by strong double-digit growth in winter sports equipment. By channel, outdoor performance D2C grew 55%, led by new doors and higher productivity across markets in APAC and Greater China. Outdoor performance generated a 28% omni-comp with strength in both stores and online. Wholesale grew 17% driven especially by strong results in Greater China and EMEA. Regionally, the outdoor performance growth rate was led by APAC and Greater China, followed by EMEA and the Americas. The popularity of Salomon footwear continues to inflect globally, and we are doing everything we can to ensure we are well positioned to fully develop this large opportunity over time. Salomon is positioned for significant growth in all three major consumer regions, and we are working hard to build the right team, operational, go-to-market, and brand-building functions to support our growth. In Asia, D2C continues to be the critical growth channel for Salomon, led by our highly productive Salomon compact shop format. We opened 33 net new Salomon shops in Greater China this quarter, including both owned stores and partner stores, bringing our total count at year end to 286 stores, adding nearly 100 new doors in 2025. In 2026, we expect to continue store expansion in Greater China, but at a more moderate rate adding approximately 35 net stores to the fleet. In December, we reopened the Salomon flagship store in Chengdu. The store design is inspired by local Sichuan mountain scenery and it is the first flagship store combining winter sports and trail running. In APAC, we opened net eight new Salomon stores in Q4, including Japan, Australia, and Korea. The region finished the year with 113 Salomon stores, including partner stores, with 44 net new openings in 2025. Overall brand awareness and demand for Salomon footwear is growing rapidly across Asia. Andrew Page: In the Americas, Salomon softgoods growth further accelerated as we continue to lay the groundwork to support significant future growth. We are excited to see very strong order books for both Spring/Summer and Fall/Winter for 2026 with growing demand across a variety of high-quality retail partners, including REI, Nordstrom, JD Sports, run specialty shops, and other specialty retailers. We also have improved our inventory position to answer the growing demand. Our brand awareness continues to rise across the greater New York area as our shop in SoHo continues to show great traction with consumers, and we opened our second New York store in Williamsburg, Brooklyn in Q4. The Williamsburg location strengthens our presence in the core New York epicenter, performing very well out the gate. Globally and in North America, we will continue to focus on our epicenter strategy in 2026 and beyond, particularly New York, Los Angeles, and Miami. We currently plan to open seven to ten new Salomon shops in the US this year. In EMEA, we continue to expand our store fleet in key epicenters, including a third brand store in Milan and a fourth in London, and we will further develop our Europe epicenter into Spain, Germany, and other key UK cities in 2026. For our winter sports equipment brands, Q4 was a strong quarter, with double-digit growth despite lower snow levels in the Alps and the Rockies. In addition to strong market share in our core ski, boot, and binding franchises, we continue to see incremental growth opportunities in areas such as snowboarding and protective equipment. Moving to outdoor performance P&L. Adjusted operating profit margin contracted 490 basis points to 6.2% as Salomon made the decision to accelerate SG&A investments to support its significant growth opportunity in the global softgoods market. Outdoor performance gross margin continued to expand driven by positive mix shift across product, region, and channel. This was more than offset by higher SG&A in Q4, driven by key investments to fuel Salomon’s long-term global growth. These investments include impactful marketing campaigns to drive long-term brand awareness, including XT-Whisper and gravel running, Olympics-related marketing, accelerated retail expansion, and increased investment in talent and operations, especially in China where we opened 25 net new brand stores in Q4, including higher incentive compensation given Salomon’s performance versus plan, new talent acquisitions such as our new Creative Director and his team, and opening Salomon’s new Paris hub. I want to emphasize that we're seeing tangible benefit and high returns from our accelerated investments, including meaningful uplifts in Salomon’s brand awareness since 2023, which has increased 15 points globally, including plus 15 points in Paris and plus 10 points in London. Moving to ball and racket. Revenue increased 14% to $337,000,000 driven by softgoods, baseball, and golf. We continue to see very strong momentum in Wilson Tennis 360 globally. By category, the growth was led by softgoods, up very strong double digits with continued momentum in all regions. Softgoods now represents approximately 15% of segment revenue. Rackets had slower growth in the quarter due to timing of product launches and wholesale shipments, while underlying demand remained strong. With double-digit growth, 2025 was a great year for rackets, and we have exciting performance racket launches in 2026. Baseball returned to growth driven by strong performance in bats, driven by successful product launches in 2025, and golf ended the year with improved margins and solid growth, especially in EMEA and APAC driven by a strong product offering. In other categories, we saw inflatables stabilizing in Q4 and returning to slight growth following a challenging first nine months. James Zheng: We had 10 new owned Wilson brand stores opening globally in Q4. Unknown Executive: Wilson Tennis 360 shops are performing well in China and we opened 13 new shops in Q4, including partner doors. This brings the total owned and partner store count to 77. And in 2026, we plan to open approximately 30 Wilson Tennis 360 shops in China, between owned and partner doors. APAC also continues to drive meaningful Wilson softgoods growth. Our first store in Japan, in Tokyo's Marunouchi district, and two stores in Melbourne, Australia are off to great starts. In North America, improving ball and racket growth was led by baseball and softgoods. In softgoods, we saw strong ecommerce comp growth in the region. Our expansion into warmer southern markets is continuing to drive strong results. Our Dallas NorthPark mall store continues to perform very well, and we continue to expand our new Tennis 360 concept store into more southern and coastal locations, including our new shops in Beverly Hills and Miami. We also continue to expand our Tennis 360 offering into more Dick's Sporting Goods locations, including House of Sport. Ball and Racket segment adjusted operating profit margin improved 110 basis points to negative 2.6% driven by solid gross margin expansion related to less promotional activity and better regional and channel mix. This was partially offset by SG&A deleverage due to investments in softgoods. Now turning to the group balance sheet. We ended 2025 with $291,000,000 of net debt, and only 0.3 times net leverage; our financial foundation has never been stronger. We generated $730,000,000 of operating cash flow in 2025 compared to $425,000,000 last year, driven by strong profit growth and disciplined working capital management. James Zheng: Additionally, given our strong financial position, post year end in January, we announced a redemption of $80,000,000 of our outstanding $800,000,000 6.75% senior secured notes at a redemption price of $1.03. We ended 2025 with inventories up 33% year over year, slightly elevated compared to our 27% sales growth, as expected. We remain very comfortable with the level and quality of our inventory. The higher inventory growth is primarily related to four factors. Number one, earlier receipt of seasonal Arc’teryx merchandise to prepare for better in-stock position. Two, higher Arc’teryx goods in transit resulting from the greater use of ocean shipping versus air freight. Three, FX translations from the weaker US dollar. And four, the addition of the Arc’teryx Korea inventory following the recent acquisition. We expect inventory growth rate to normalize beginning in 2026 as we start to cycle our improved in-stock positions and the higher use of ocean freight. A quick housekeeping item as we turn to guidance. Beginning in Q1 2026, we will discontinue allocating certain corporate expenses that are not directly attributable to the operating performance of our reportable segments. There will be no impact to our overall group adjusted operating profit margin. It is simply reallocating certain costs from segments to corporate. For the full year of 2026, we expect group corporate expenses to increase by approximately 60 basis points or approximately $50,000,000 related to costs reallocated from the segments. These cost reallocations to corporate will most benefit the outdoor performance and ball and racket segment margins, and have a much more muted benefit to technical apparel. Now turning to guidance. Guidance assumes the latest tariff rates on all countries will stay in place for the remainder of 2026 and beyond. James Zheng: 2026 is off to a strong start. Unknown Executive: And given the continued momentum from our highest margin Arc’teryx franchise, accelerating into ’26. For the full year, we expect reported group revenue growth between 16–18%, which assumes a 200 basis point benefit from favorable FX impact at current exchange rates. We expect group adjusted gross margin of approximately 59% for the full year, with the margin expansion continuing to be driven by mix shift benefits. As we said in the past, we are confident in our position to manage through a variety of tariff scenarios given our relatively low exposure to the US, strong brand portfolio with pricing power, and clean balance sheet. We continue to expect an immaterial impact on our group P&L from higher tariffs in 2026. We expect adjusted operating margin of 13.1% to 13.3%, towards the low end of our long-term guidance of 30 to 50 bps of improvement, primarily due to the accelerating Salomon investment—opting for long-duration profitable growth over near-term profit flow-through. We are committed to investing behind the large growth opportunities in front of Arc’teryx, Salomon, and Wilson Tennis 360, while still delivering against our long-term financial algorithms. Arc’teryx’s size and profitability and our strong sales growth and gross margin expansion at the group level allow us the flexibility to invest behind Salomon and Wilson Tennis 360 in a way they could not as stand-alone entities. We believe this is a unique advantage of our portfolio. James Zheng: Corporate expense is expected to be approximately $225,000,000, which includes approximately $50,000,000 of costs previously allocated to the segments that I mentioned above. We assume full year net finance costs of $105,000,000 to $110,000,000, higher than 2025 due to a normalizing FX impact on the revaluation of certain nonmonetary assets as well as higher imputed interest expense on store leases as our retail network grows. The effective tax rate is expected to be approximately 28%. This is an increase from 2025 as we generate a higher percentage of our taxable income in higher tax jurisdictions, and also as we cycle a one-time discrete tax benefit in 2025. Andrew Page: We expect adjusted diluted EPS of $1.10 to $1.15, which is based on approximately 564,000,000 fully diluted shares. Also, we are assuming depreciation and amortization of approximately $400,000,000 including approximately $170,000,000 of ROU depreciation. CapEx is expected to be approximately $400,000,000 versus $310,000,000 in 2025. The increase is mainly driven by increasing key investments in IT infrastructure and retail expansion. Turning to the segments. Our full year sales forecast incorporates 18% to 20% growth in technical apparel, 18% to 20% growth in outdoor performance, and 7% to 9% growth in ball and racket. For technical apparel, we expect adjusted operating margin of approximately 22%. We expect outdoor performance segment margin of 14.5% to 14.8% and we expect ball and racket margin of 4.7% to 5%. All three segments should generate gross margin expansion driven by mix shift partially offset by higher SG&A reinvestment. While we don't usually provide quarterly segment guidance, given the Q4 2025 margin fluctuation in outdoor performance resulting from accelerated Salomon investments, I want to provide a little extra margin color for Q1 2026. Although we will continue to invest heavily to support Salomon’s growth, we do expect outdoor performance to return to modest year-over-year margin expansion in Q1. Turning to first quarter guidance. We expect reported revenue growth for the group in the range of 22% to 24%, which assumes a 500 basis point benefit from favorable FX impact at current exchange rates. We expect adjusted gross margin to be approximately 59% in Q1 2026, adjusted operating profit margin to be 14% to 14.5%. Our net finance cost for the quarter will be approximately $27,000,000 and the effective tax rate would be approximately 28%. We expect adjusted diluted earnings per share of $0.28 to $0.30. Lastly, I would note that should strong trends continue, and better than anticipated demand materialize, we believe we are well positioned to deliver financial performance ahead of our expectations. With that, I'll turn it back to the operator for Q&A. Operator: Thank you. The floor is now open for questions. Please join the queue. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And we do request for today's session that you please limit yourself to one question and one follow-up. Your first question comes from the line of Michael Binetti of Evercore ISI. Your line is open. Michael Binetti: Oh, hey, guys. Thanks for taking our question here. Appreciate all the help. A couple of technical ones for the model here. The fourth quarter gross margin is usually a little bit above third quarter in the past. I'm just curious because there's a lot of moving parts here. Is there something structural that we should consider going forward in fourth quarter? Or were there any one-timers in one of the segments that we should consider as we model going forward? And then I guess, Andrew, the Salomon investments in 4Q, it sounds like those are the reason for the operating margin guidance in 2026 to be at the lower end of the long-term algorithm. So those investments from 4Q continue in the first quarter. Just curious if maybe you could walk us through what some of the investments are in the first quarter. And then bigger picture, as you think about the Salomon investments and the incremental growth to the algorithm you presented, are the investments incremental to the algorithm that you've talked about with us? Or it sounds like there's at least an element of it being pulled forward, and I'm wondering if you're stepping up these investments if that means there’s an element of gating the margin expansion today because you can imagine a bigger brand revenue level for Salomon than what you've talked about with us in the past. Andrew Page: A lot to unpack there, Michael. Happy to address a bunch of these. So as you think about the fourth quarter gross margin versus third quarter, keep in mind that the fourth quarter, as you think about outdoor performance, is our largest quarter for winter sports equipment. James Zheng: Winter sports equipment actually outperformed as well in the fourth quarter, and so that is going to create a bit of a drag on gross margin. Obviously, strong business, but the fact is it’s a lower gross margin business. When it outperforms, it affects it. The other thing you also want to think about is on a comparative basis, recall that in 2023, we stood up a cost optimization program. You started to see the impact of that cost optimization in outdoor performance in the back half of 2024. And then in 2025 you saw the anniversary of that cost optimization. So through 2025, you saw material margin expansion in outdoor performance, and then it anniversaried itself because now you’ve reset the gross margin to its new go-forward cycle. As you think about your first question around Salomon investments, Unknown Executive: In the fourth quarter, we opportunistically made key investments behind strong momentum of Salomon. Over recent years, we’ve had one big brand—Arc’teryx—on fire, and we’ve made key investments behind that growth. Now we have multiple high-return opportunities to invest in, especially with Salomon really inflecting right now. Also keep in mind in Q1, you will see Salomon margins return to moderate growth. Again, Q4, we opportunistically made the right investments behind that accelerated momentum. This is the power of our portfolio. We run what we call our brand-direct offense, and because of that, we can get behind accelerating momentum in our brands in ways that these brands can’t do on an individual stand-alone basis. We continue to be committed to investing appropriately behind large growth opportunities in front of Arc’teryx, Salomon, and Wilson Tennis 360, and we’ll continue prioritizing long-duration opportunities over near-term profit flow-through. James Zheng: The last thing I want to say about that is that the gross margin mix, including outdoor performance, continues. Q4 had healthy gross margin mix shift at the product, region, and channel level. Full-year op margin for the portfolio—recall—expanded 160 basis points for the full year, after consideration of the key investments we made in fourth quarter. Long-term, we still expect SG&A leverage. I’ll turn it over to Guillaume to give you some color on discrete investments we made. Guillaume Meyzenq: Good morning, everybody. Yes, we took the opportunistic decision to choose Salomon’s long-term expansion in Q4, and we have a few strong examples where we decided to accelerate our positioning in the market. First, we are driving a few marketing campaigns in some key areas, supporting XT-Whisper, which, as James explained, helps us build a portfolio of key franchise products. On top of XT-6, we need a variety of product expressions, and XT-Whisper looks like a very promising opportunity. We are pushing the same for gravel running, which is our point of difference in the market. Finally, we prepared for the Milano-Cortina Olympics—you see the results now—and there was preparation in Q4. On top of that, we continued retail expansion. We opened several stores in China in the quarter. You mentioned Los Angeles, where we opened the store in Melrose, and at the same time we were building a campaign. This shows how we build the ecosystem in every city where we open a store. We partner with our B2B partners—Shoe Palace, for example, which is present in Los Angeles—and then we drive media and campaigns to attract consumers, and it was very successful. This model requires some resources at the beginning in the epicenters. The last one is about talent and organization investments. Salomon grew 35% in ’25, and we need to structure the company for a new scale. We supported incentive compensation and started new talent acquisition. The example of appointing a Creative Director is a very good signal of the level of ambition we have for Salomon. Another was the opening of the Salomon Paris hub. We have our roots in Annecy in the Alps, and we keep that, but the scale of the company requires more facilities in different places, and Paris was an obvious opportunity for us. It’s a place where we can capture trends and world-class talents in the future. Michael Binetti: Okay. Thanks for a lot of this color. James Zheng: Michael, I’ll just wrap on one point, because I think the last one we talked about was whether there is something structurally different about our algo. It’s not. As I said, we delivered 160 basis points to the bottom line after that investment. Our algo has consistently been 30 to 50 basis points plus on the bottom line. We opened this year with our guide at 30 bps. We believe that’s responsible. It does not reflect a structural change in our investment. As Guillaume highlighted, we will opportunistically get behind growth momentum while still continuing to maintain our earnings outlook. It’s early in the year, and should strong trends continue and greater demand materialize, we see no reason why we can’t outperform our guidance. Andrew Page: Just want to clarify. 30 to 50 bps. 30 to 50 is the range. Yep. Michael Binetti: Alright. Okay. Thanks everybody for all the help. Lot of detail. Appreciate it. Operator: Your next question comes from the line of Matthew Boss of JPMorgan. Your line is open. Matthew Boss: Great. Thanks and congrats on another nice quarter. So, James, following the breakout year that you cited for the portfolio, could you elaborate on the current momentum entering the first quarter? Maybe what opportunities do you see for the Salomon brand to accelerate market share further in ’26? And, Stuart, have you seen any change in top-line momentum at Arc’teryx relative to the fourth quarter? Or what's embedded to moderate within the 18% to 20% full-year forecast relative to mid-thirties that we just saw exiting 2025? Andrew Page: Matt, we're going to have Guillaume answer your question on Salomon. James will talk global outlook for the space, including China, and then Stuart will finish on Arc’teryx. Guillaume Meyzenq: When we speak about the Salomon momentum itself, we see a very strong outcome. 2025 was the year we confirmed that we are winning in all regions. You saw the traction in China and in Asia Pacific, but our domestic market—Europe—was really coming back strongly. All the investment we have been making in epicenter strategy with Paris, with London, and now looking to Milan, is starting to pay off. We see that we have the right strategy to drive momentum in both sportstyle and performance. Lately, we also see that the US is becoming a new place of growth. We are still quite small compared to the market, which is on one hand a challenge, but also a great opportunity. We see early momentum in sportstyle. The epicenter strategy in New York and LA, and we opened a store in Chicago which is performing very well. Through our data we see other US cities starting to pop up. Lastly, we see early positive signals for running in the US. If we are able to combine sportstyle and running in the US, then Salomon could have very promising growth. James Zheng: Good morning, Matt. Thank you for your questions. As I mentioned, strong trends have continued worldwide across borders. We already gave guidance for our Q1, with top line expected to grow between 22% to 24%. Our three segments all have very good forecasts to achieve their targets. Specifically, I want to mention performance in China during the Chinese New Year. We saw very positive consumer trends during the holiday in our brands, and also for the whole sports market overall. Consumption was very strong, and I think later on you will get similar color from other brands in their reports. It’s a good moment for us. However, it’s still a bit too early for us to say this is a very bullish situation in China. At least, we are off to a good start in 2026. Stuart? Stuart Haselden: Hey, Matt. It’s Stuart. Off to a fast start in the first quarter, really pleased with the trends that we're seeing across all our regions. We’re seeing especially strong momentum in North America over the last few weeks. That’s contemplated in the guidance that Andrew shared. On your question versus the 18% to 20% guide, this is consistent with our prior practices. We view this as responsible guidance for investors. There’s nothing structural that would prevent us from capturing higher sales should demand materialize. We’re well positioned, with a strong inventory position as Andrew noted, to convert upside should it materialize. We’re happy with the trends we’re seeing and confident in the outlook for 2026. Operator: Your next question comes from the line of Paul Lejuez of Citigroup. Your line is open. Paul Lejuez: Thanks. Curious if you could talk a little bit more about the wholesale expansion opportunity in the US within the Salomon business? And what sort of growth should we expect with Salomon’s wholesale versus DTC this year? And then, Stuart, also curious if you're thinking about adding any new wholesale partner doors for Arc’teryx this year? How should we think about growth there? Andrew Page: First, Guillaume, then Stuart. Guillaume Meyzenq: Thanks, Paul, for asking. Clearly, our strategy is about omnichannel. If we want to become a large sneaker and footwear brand in the US, we absolutely need to partner with the key players. We speak a lot about our D2C and ecommerce because this is where we can express Salomon best, but the strategy is truly to become omnichannel and partner with key players. We have renewed support with REI, our historical partner in the US when we were focused on winter sports equipment and outdoor, and now we are back on track with them. In parallel, we have Nordstrom, JD Sports, and most of the run specialty shops as current targets to drive growth. We are not building a big push all at once, but working door by door, city by city, with close partnerships and good business foundations. We drive demand with them. We think this is the best way to win the share battle, and expand doors over time. The key driver in the end is consumer demand and how we work with partners to drive it. Stuart Haselden: From an Arc’teryx standpoint, wholesale is emerging as an important channel across three of our key growth strategies: footwear, Veilance, and women’s. In footwear, this is an important channel of distribution, different from apparel, so we see the need to have a stronger strategy here. We’ve been building a sales team as part of our footwear business unit in Portland, and we’re engaging with specialty run accounts and premium big-box retailers, all on the premium high end with very technical positioning. For Veilance, premium wholesale—tier zero as we call it—will help create higher brand awareness and drive the business. And for women’s, we see wholesale as an interesting expansion of our distribution footprint to be relevant where she shops. Across those three strategies, we continue to evolve our wholesale approach. Operator: Next question comes from the line of Brooke Siler Roach of Goldman Sachs. Your line is open. Brooke Siler Roach: Good morning, and thank you for taking the question. At Salomon, I was hoping that you could unpack the proportion of growth that you expect to realize by region for the brand in 2026. And then if there are any specific regions that will receive an outsized SG&A investment this year. As a follow-up, how much of the growth at Salomon do you expect to come from existing distribution partners versus new distribution partners in 2026? Thank you. Guillaume Meyzenq: We expect to have growth in all regions in 2026. Asia and Greater China continue to show very strong momentum, EMEA is really back on track with high-quality sales at premium price points, and North America is definitely small scale today but very high growth and high demand, especially from the last quarter, and we see that momentum well engaged for 2026. On existing versus new distribution, we see existing partners growing with the momentum, and we also have a new strategy in Europe and the US because we have entered the sneaker market with sportstyle, which requires some new types of doors. For example, JD was not a customer of Salomon five years ago and now is becoming one of the strategic partners. So we will add new distribution in Europe despite already strong numeric distribution, and of course in the US as we build distribution there. Operator: Your next question comes from the line of Ike Boruchow of Wells Fargo. Your line is open. Ike Boruchow: Hey. Thanks. Congrats, everyone. So, obviously, revenues solid. Some questions this morning on the margin. Andrew, can we just dive in a little bit on the cadence of the investment? You've got about 200 basis points plus of deleverage in Q1. But based on the full year, it does seem like you should start to be scaling the investments, especially in the ones you talked to for 4Q. Can you comment on that? Does it seem like the business should be scaling and leveraging the expense base in the back half of the year, specifically in Q4? And does that give us some visibility to scale in the out years and beyond? Thanks. Andrew Page: One of the things embedded that is not easily seen: some of the Q1 deleverage on a comparable basis is driven by the fact that Q1 last year in ball and racket had meaningful pull-forward because of the threat of tariffs that was on the horizon. So Q1 last year, compared to Q1 this year, last year was a lot more pull-forward; this year is more normal. You saw a lot more profitability in Q1 last year. So it looks like deleverage, but underneath that, as we talked about, both Arc’teryx and outdoor performance are performing well. Outdoor performance is expected to show margin expansion. So it’s much more of a Q1 comp issue related to ball and racket in the prior year. Ike Boruchow: That is helpful. But my bigger question is about the pacing of the expense into the back half. Are you planning to start scaling those as you exit the year? Does that give better visibility into SG&A leverage as you exit and into fiscal 2027? Andrew Page: In 2025, we invested a lot—opportunistically—in Q4. Empirically, that would suggest that the Q4 2026 comp is going to be pretty easy. So yes, we’d expect better scaling and leverage as we exit the year, all else equal. Operator: Your next question comes from the line of Jay Sole of UBS. Your line is open. Jay Sole: Great. Thank you so much. My question is for Stuart. Stuart, give us a little bit of an update on how some of the initiatives around women’s and footwear have gone for Arc’teryx in the quarter and what your outlook is for this year? And also, just with all the news on tariffs over the last few weeks, how has the landscape changed? How might it impact the company? Thank you. Stuart Haselden: Thanks, Jay. On tariffs, it’s not nothing, but it’s a modest impact for Arc’teryx. It is not influencing how we’re pricing our products or operating the company, and we see it as an opportunity to take share from companies that might respond differently. We feel we’re in a good spot managing the tariff situation. On women’s and footwear, as James mentioned in the prepared remarks, both are really healthy—each grew about 40% in the fourth quarter. In women’s, continued strength across new products, including women’s-only pants—the Clarke Pant, the Loose, and the Neopant—offering a new lever of growth. We also saw strength in ski and insulation with the Atom SV and the Andessa Down, two new products we introduced in the quarter. Women’s continues to grow faster than the overall company; we expect it to exceed 30% of total sales by 2030. In footwear, top models included the Norvan LD4, our top seller, and fast sales in our Kopek hike shoe. We’re launching the new Sylens 2 on March 6—our pinnacle trail running shoe—with strong athlete feedback already. And within footwear, our Portland-based footwear business unit—sales and marketing—continues to come together nicely. We’re very bullish; footwear is an important pillar of growth for us for some time. Andrew Page: Hey, Jay—this is Andrew—just to wrap on tariffs at the group level. We’re confident in our position to manage through a variety of tariff scenarios given our low level of US exposure, strong brand portfolio and pricing power, and clean balance sheet. The two businesses most impacted would be ball and racket and winter sports equipment. We are aware of the recent Supreme Court decision and follow-up presidential action to impose the 15%, but looking at high-level scenarios, our position does not change. Andrew Page: We have time for one more question. Operator: Your last question comes from the line of Lorraine Hutchinson of Bank of America. Your line is open. Lorraine Hutchinson: Thanks. Good morning. Andrew, now that the leverage is down to 0.3 times, can you talk a little bit about your expectations for the capital structure and uses of cash going forward? Andrew Page: Yes. In 2026, CapEx is guided to $400,000,000. We still believe a high-return use of our cash is to grow our business—investing in IT, retail expansion, and strategic capabilities. We also believe it is an efficient use of cash to pay down inefficient debt, as it does not provide the requisite tax shield. We’ll continue to focus on growth, and continue to pay down inefficient debt. We like our leverage position as it stands now—close to zero. Operator: That concludes our Q&A session. I will now turn the conference back over to management for closing remarks. Andrew Page: Thanks everyone for joining. We'll see you in three months. Have a great spring. Operator: This concludes today's conference call. You may now disconnect.

82天前Insight Analytics约5分钟阅读

SHLS 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Shoals Technologies Group, Inc. Fourth Quarter 2025 Earnings Conference Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Matthew Tractenberg, Vice President of Finance and Investor Relations for Shoals Technologies Group, Inc. Thank you. You may begin. Thank you, Karina. Matthew Tractenberg: And thank you everyone for joining us today. Hosting the call with me is our CEO, Brandon Moss, and our CFO, Dominic Bardos. On this call, management will be making projections or other forward-looking statements based on current expectations and assumptions, are subject to risks and uncertainties, and should not be considered guarantees of performance or results. Actual results could differ materially. Those risks and uncertainties are listed for investors in our most recent SEC filings. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the nearest comparable GAAP financial measures. Please note that the slides you see here are available for download from the Investor Relations section of our website at investors.shoals.com. With that, let me turn the call over to Brandon. Thank you, Matt, and thanks to everyone joining us on the call. Brandon Moss: I will begin by sharing key results from the fourth quarter and our full year key wins and milestones. We will then discuss the current demand environment and review progress on our strategic growth initiatives. Dominic will dive deeper into the fourth quarter results and provide our first quarter and full year 2026 outlook. We will finish the call with questions from our analysts. Fourth quarter revenue was in line with our expectations, approximately $148 million, up 38.6% over the prior-year period. Our commercial team also drove significant growth in our book of business, adding approximately $175 million in new orders in the period. This resulted in a company record backlog and awarded orders, or BLAO, of approximately $748 million, an 18% year-over-year increase. We delivered a seasonally strong book-to-bill of 1.2 this quarter, which continues to support the growth we see in 2026. As of year end, approximately $603 million of our BLAO has shipment dates in the upcoming four quarters, or full year 2026. We are set up very well for another successful year of growth. Commercially, we are achieving our objectives of growth diversification. Profitability, however, was softer than anticipated in the fourth quarter. Our fourth quarter adjusted EBITDA of approximately $30 million grew by 15% year over year, representing 20.4% of revenue. This was largely driven by higher legal expenses, the ongoing impact of tariffs, product mix, and high labor and shipping costs in the period. As we discussed with you last year, we see very strong underlying demand drivers across the markets we serve. This, when paired with the incremental capacity we will have at our new facility, warrants a more flexible, agile approach to how we determine which projects and which customers to engage with. Opening the lens with which we look at the opportunity set to drive higher revenue in 2026 and beyond while remaining within a reasonable margin range will ultimately result in higher profit dollars and free cash flow, which will be reinvested back into the business. This approach removes self-imposed constraints, enabling us to make the right decisions for the long-term health of the business. Again, I am very proud of our performance in 2025. It was a busy but exciting year for us. After a challenging 2024, we came back strong and grew top-line revenue by 19%, exceeding our initial expectations and long-term range shared with you at our 2024 Investor Day. Our U.S. utility-scale solar business grew by almost 11% for the full year, accelerating in the back half of the year and growing 30% when compared to 2024. International revenue expanded from less than $1 million in 2024 to approximately $13 million in 2025. Our CC&I and OEM businesses exceeded expectations, and we have laid the foundation for our BESS business that is poised for rapid growth in 2026. Engaging with our customers, we introduced multiple new products in 2025, effectively expanding our addressable market and capturing additional share. We continue to diversify our customer list to include several new EPCs. For example, in 2023, we had three customers that accounted for less than $6 million of revenue. Today, those same customers account for almost $140 million of our BLAO. And we have made big meaningful operational changes as well, including our ongoing move into a consolidated state-of-the-art manufacturing facility. This will enable critical improvements to productivity and scalability as we continue to grow and diversify our business. Given the industry growth we see, it could not happen at a better time. During the year, we also completed remediation for all reported instances of the defective Prysmian wire. This effort was funded through our own cash flow and reinforced our commitment to customers that we stand behind our products and services. So in summary of the full year, we are pleased with our performance. We have come a long way in the last few years. Our strategy of protecting and growing our core business while diversifying our offering and exposure to end markets is yielding results. Our focus on improving our operating capabilities while maintaining the commercial momentum you have seen is how we intend on driving attractive returns for our shareholders. Turning to our various business lines, I would like to provide some context to our performance in the fourth quarter. The fourth quarter was another strong period of growth within our core utility-scale solar market. Our quote volume in the quarter exceeded $700 million of unique projects, adding to our strong pipeline. Note that these are projects that would generate revenue in 2027 and beyond, further supporting our long-term growth trajectory. And also related to the core U.S. utility-scale solar market, in early 2025, Shoals brought a second patent infringement case against Voltage before the U.S. International Trade Commission utilizing our new and expanded patent portfolio. While the legal process will likely continue for another quarter or two, we are very pleased that the court recently issued its initial determination in our favor. It is a great first step, and we will remain patient for the Commission's final ruling in early June. I am also encouraged by the progress we are making in international markets as evidenced by our increased quote activity and customer engagement. The products introduced in 2024 are generating interest with key decision makers, while our experience and reputation for quality is winning projects. We recognized approximately $13 million of revenue in 2025 from international projects and have a record $90 million of international BLAO, which will drive continued growth in 2026 and beyond. Our community, commercial, and industrial, or CC&I, business is performing well. We are engaged with large, well-respected electrical distributors that are driving meaningful quote volume increases. Our OEM business is tracking ahead of expectations, growing at 47% for the full year as our partner continues to see strong demand for their panels. We expect to continue in 2026 with another year of attractive growth. We began disclosing our BESS backlog and awarded orders last quarter, which at the Q3 stood at $18 million. That information was designed to provide a starting point that you can use to track our progress against a rapidly evolving market opportunity. I am excited to share with you that as of year end, we have $67 million in BLAO, a testament to the upfront engineering competencies and future manufacturing capabilities Shoals offers. We would expect more than half of this amount to be recognized as revenue in 2026. We continue to invest in scalable production capabilities for BESS. We expect our first new production line to be operational within the coming weeks. And I am pleased to announce a partnership with ON Energy, a leading developer of advanced power systems for grid-safe data centers. Together, we will address a fast-emerging constraint for AI-driven infrastructure: securing resilient backup power at scale, while enabling data centers to operate as grid-interactive and firming assets. Our partnership brings together two U.S. innovators with complementary strengths in power architecture and execution. ON Energy will pair its medium-voltage uninterrupted power supply systems with Shoals advanced DC recombiners to deliver a solution for AI data centers that accelerates deployment timelines, safeguards operational continuity, and future-proofs energy infrastructure. 2025 saw a return to growth at Shoals. Our markets have been resilient, and our competitive position continues to improve. We have entered new markets with new products, made meaningful progress on our legal actions, and began our move to our new consolidated facility. While the regulatory landscape has been distracting to many, we remain focused on executing our strategy. With that, I will now turn it over to Dominic, who will discuss our fourth quarter results in more detail and our outlook for the first quarter and full year 2026. Dom? Dominic Bardos: Thanks, Brandon, and greetings to everyone on the call. Turning to our fourth quarter financial results, revenue increased by 38.6% year over year to $140.3 million. The increase in revenue was primarily driven by higher domestic project volume from both new and existing customers. In addition, as Brandon mentioned earlier, our strategic growth channels of international, CC&I, and OEM contributed to year-over-year revenue growth in the quarter. Gross profit was $46.9 million compared to $40.2 million in the prior-year period, an increase of 16.7%. Our GAAP gross profit percentage was 31.6% compared to 37.6% in the prior-year period, and lower than we anticipated. We estimate that fourth quarter gross profit dollars were impacted by $2.1 million of incremental tariffs and logistics costs, $2.5 million of additional labor to support new products packaging and delivery requirements, and $0.5 million of additional plant overhead expenses, partially offset by higher volumes. These items negatively impacted our fourth quarter gross profit percentage by approximately 350 basis points versus our expectations. While you have heard us consistently communicate our long-term aspirational goal of 40-plus percent gross profit percentage, we were very clear in 2025 regarding our expectations of gross margin percentage to be in the mid to high thirties. In the long run, we continue to believe that a company like Shoals, who delivers highly customized and engineered-to-order solutions, deserves an attractive return profile. But we must also balance those aspirations with the real market opportunities we have in front of us today. Part of the transformation you see at Shoals includes a renewed focus on innovation, flexibility, productivity, and the maximization of cash flow. The top-line strength we drove in 2025 and to continue in 2026 is in part attributable to a larger opportunity funnel consisting of both traditional and newly introduced products, and a more flexible and customized approach to how we package and ship our solutions. Our strategy of driving incremental operating profit and finding balance between growing the business and driving profitability is one of the most important decisions we can make. And I believe we are doing the right thing. In the long run, the scale and leverage we will get on those incremental projects will allow us to continue to invest, diversify, and grow. The flexibility to make these important trade-offs to maximize profitable growth and ultimately create shareholder value cannot be done with a focus on a single profit percentage metric. For these reasons, for the foreseeable future, a gross margin percentage of low to mid thirties will provide us with the flexibility to win new customers, deliver new products, enter new markets, and continue the transformational journey we are on today. Moving on to selling, general, and administrative expenses. SG&A was $27.3 million, which is $5.8 million higher than the prior-year period, driven by increased legal expenses, partially offset by a reduction in stock-based compensation. Please note that in 2025, we spent a combined $30 million on legal professional services, an increase of 100% over the prior year. Recall that $18.3 million 2025 legal expense related to the case against Prysmian is identified and backed out of adjusted EBITDA. While these elevated legal costs impacted our results in 2025 and will continue in 2026, they will not occur in perpetuity, and we expect them to decline in 2027. Income from operations, or operating profit, was $17.4 million compared to $16.5 million during the prior-year period. Operating profit margin was 11.7% compared to 15.4% a year ago. Net income was $8.1 million compared to net income of $7.8 million during the prior-year period. Adjusted net income was $17.5 million compared to $14.1 million in the prior-year period. Adjusted EBITDA was $30.3 million compared to $26.4 million in the prior-year period, representing 14.7% growth. Adjusted EBITDA margin was 20.4% compared to 24.7% a year ago, driven primarily by lower gross margin flow through. Adjusted diluted earnings per share of $0.10 was 22% higher than the prior-year period. I now want to provide more color on what is driving the shift in profit percentages going forward so you can understand the gives and takes, what we can influence, and what are more macro in nature. Let us start with tariffs. While our intent was to broadly pass them on to our customers, in several cases, it does not appear to be possible at this time. We estimate tariffs had a $3.7 million impact to COGS in 2025, or an 80 basis point impact on consolidated full-year gross margin percentage, heavily weighted in the second half of the year. While this issue is uncertain and rapidly evolving, at this time, our guidance incorporates a similar tariff impact in 2026. We also began our move into our new consolidated factory in late 2025. While this is a huge undertaking, the full economic benefits will not be felt for some time. There are redundancies, additional training, setup, and processes that need to be redesigned and implemented. These initial inefficiencies are incorporated into our 2026 guidance and will be reversed over time as we increase throughput and drive lean process improvement through our manufacturing organization. This was the right strategic decision that will provide the capacity we will need for years to come. As we have stated in recent quarters, our plan is to be fully operational in the new facility by the middle of this year. You are likely familiar with the three legal actions currently in play at Shoals: litigation against Prysmian for defective wire, the related shareholder class action and derivative lawsuits, and the ITC case and subsequent district court case against Voltage. The cost for the defective wire case, both in terms of legal expenses and product replacement work we have done since 2023, is shown in our filings and adjusted out of our non-GAAP EBITDA results. However, the legal expense for the two remaining actions has not been called out specifically, and so investors may not appreciate the impact or timing of them. As a result of the expected elevated legal costs in 2026 related to these actions, we will provide investors with additional visibility. In 2026, we will also adjust EBITDA for the spend on the class action and derivative lawsuits. Our communicated strategy of defending share within our core markets and expanding our reach through new, innovative products that solve customer problems has yielded tangible results. It has enabled revenue growth of 19% in 2025, and an acceleration in 2026. While they have been well received by many new and existing customers, not all are accretive to gross margin percentage. Some expand our total addressable market, which opens opportunities by increasing the value to developers and EPCs. Evolving from offering a narrow product set to a diversified portfolio that resonates with a broader customer set will take time and patience, but it is the right thing to do for our customers and shareholders alike. Operationally, we consumed $4.1 million of cash in the fourth quarter, driven by higher accounts receivable and inventory balances at year end, and partially offset by higher accounts payable and higher deferred revenue. On a year-to-date basis, we have generated $17.1 million in operating cash flow. Free cash flow was negative $11.3 million in the fourth quarter, reflecting both the $7 million impact of remediation costs and elevated capital expenditures related to our new facility. These two items impacted free cash flow by a total of $14.2 million in the quarter. Our balance sheet remains high quality, and we ended the quarter with cash and equivalents of $7.3 million and net debt to adjusted EBITDA of 1.3 times. Our net debt was $129.4 million, a slight increase over the prior quarter. Backlog and awarded orders ended the fourth quarter at a record $747.6 million, a sequential increase of $26.7 million. Backlog constitutes $326.2 million of the total BLAO, providing us with confidence that the growth projections we have for the upcoming periods can be achieved. As of December 31, $603.4 million of our backlog and awarded orders have planned delivery dates in the coming four quarters, with the remaining $144.2 million beyond that. So turning now to the outlook. For the quarter ending 03/31/2026, the company expects revenue to be in the range of $125 million to $135 million, representing 62% year-over-year growth at the midpoint, and adjusted EBITDA to be in the range of $16 million to $21 million, representing 44% year-over-year growth at the midpoint. Turning to the full year. As we enter the year with $603 million of backlog and awarded orders currently expected to ship in 2026, we remain mindful of the elements beyond our direct control. Similar to last year, we estimate the volume of projects that might be delayed out of the year as well as the volume of projects that we can still add to the calendar year. For this year, we need to also incorporate our new BESS customers and product delivery schedules that are dependent upon totally different factors than our utility-scale solar projects. As a result, our expectations for revenue is a range slightly below the $603 million backlog and awarded orders on the books at year end. We believe this range to be reasonable and achievable. Therefore, for the full year 2026, we expect revenue between $560 million to $600 million, representing year-over-year growth of 22% at the midpoint, and adjusted EBITDA in the range of $110 million to $130 million, representing year-over-year growth of 21% at the midpoint. In addition, for the full year, we expect cash flow from operations in the range of $65 million to $85 million, capital expenditures in the range of $20 million to $30 million, and interest expense in the range of $8 million to $12 million. With that, I will turn it back over to Brandon for closing remarks. Brandon Moss: Thank you, Dominic. As we enter the new year, I reflect on where we have come from and look ahead to where we are going. The broader U.S. market appears to be extremely resilient. Our customers are busy moving projects forward, and we remain committed to meeting their needs. As we have discussed, the need for new energy supply is real. The massive investment cycle in AI and data centers combined with the continued industrialization and onshoring of manufacturing will drive load growth far in excess of what we have seen in recent decades. Solar is still best positioned to meet these rising energy needs today and through the balance of the decade. While industry growth forecasts vary greatly, in our view, sustained solar capacity additions are the most likely outcome. We are preparing Shoals to be agile in our production capabilities in a stable or growing demand environment. In 2026, Shoals celebrates its thirtieth year of doing business. It also marks five years since becoming a public company. Since our IPO, our annual revenue has more than doubled from $213 million to $475 million, generated more than $220 million of cash flow from operations that has been reinvested in the business, and we have maintained market leadership by a wide margin. We have built a company with a strong foundation on innovation and quality, and to fully achieve what we know we are capable of—transforming the company from a narrow product offering in a single market and geography to a more diverse and durable business—meaningful change will continue to occur. And today, we are in an exceptional position from both a commercial and operational perspective. The strategic plan we constructed and process improvements we have implemented have begun to yield tangible results. We have protected and grown our core markets. We have reignited the innovation engine. We are building new businesses in new markets that expand our total addressable market while aggressively diversifying our market and customer exposure. We have invested in the right physical assets, including automation and technology, that will drive productivity for years to come. And we have assembled an experienced team of business leaders that will enable us to continue the transformation of Shoals. These changes are both critical and deliberate and come at a time where the world is struggling to keep up with energy needs both here and abroad. The long-term secular tailwinds are intact and strengthening. We are very excited about the trajectory of our business and the markets we participate in. We want to thank our shareholders and customers for their continued trust and our employees for their hard work and dedication. Operator, we are now ready to take questions. Operator: Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Julien Dumoulin-Smith with Jefferies. Your line is open. Please go ahead. Brandon Moss: Hey. Can you guys hear me okay? Yes, sir. Sure can, Julien. Loud and clear. Hey. Top of the morning to you guys. Thanks, Brad. Julien Dumoulin-Smith: So just a couple questions here to hit it off. First off, just in terms of book and book and bill in the year, just when you think about setting that bench here for top-line revenue for 2026, how are you thinking about how much you could actually book in this new environment? You guys made some comments on that in the prepared remarks. And then related here, can you comment a little bit about seasonality? What else is going on when you think about this new, you know, this new set of that you are alluding to here? Just it seems like a very conservative benchmark given what you are coming into the year with and where you are setting your full-year revenue numbers at. And I have got a I will throw you a quick follow-up on that just in terms of BESS. What is the what is the right order rate when you think about the trajectory of continue to add backlog? Pretty impressive, you know, Q4 over Q3. Brandon Moss: Thanks, Julien. Great questions. I will start with the first. When we think about our book-and-turn business, historically, last year and even the prior year in 2024, I mean, it is reasonable to think that $50 million to $70 million in book-and-turn business is probably a pretty reasonable number to think about. And you know, what we have got to keep in mind this year is we are still in an environment where there is some level of uncertainty, but we did not see that level of uncertainty materialize in 2025 still exists in our current landscape. So we want to be prudent about our guidance. Additionally, as we have taken on new customers, you know, they have got different expectations, different project delivery schedules than we have experienced in the past. So we wanted to incorporate that in our guidance. And additionally, as we diversify our business into new products and markets, and you know, those products have yet to deliver yet, we want to make sure that we have given ourselves some room there as well in our guidance. So as it relates to the order book specifically to BESS, as we have mentioned in the past, the bookings for this particular business could be lumpy. They are large projects in nature. And we are very excited about the $67 million of backlog and awarded orders. We have effectively 4x-ed in our bookings number from last quarter. But we think that the bookings there could continue to be lumpy while revenue recognition, once we get going with our new production line here in the coming weeks, will probably be more stable. Julien Dumoulin-Smith: Got it. So this is really just what is it about the business backdrop that you would, if you could just elaborate quickly, that gives you that pause on right as the translation to revenue this year. Is there anything about the environment in particular you want to stress, or it is just truly the nature of new customers here? Brandon Moss: Yeah. I think it is just the nature of the new customers in our traditional solar business. We want to be mindful that they may have different project patterns than our historical customers and just give ourselves room, Julien, to make sure that that book-and-turn business either supersedes any project delays or potentially overcomes project delays. If the year materializes as planned and projects go off as scheduled, I would look for us to be, you know, at the upper end of our revenue range. Julien Dumoulin-Smith: Yeah. That is pretty good compared here. Excellent. Thank you. Thanks, guys. Yep. Matthew Tractenberg: Karina, next question, please. Operator: Your next question comes from the line of Philip Shen with Roth Capital Partners. Your line is open. Please go ahead. Philip Shen: Hey, guys. Thanks for taking my questions. Wanted to check in with you guys on the margin outlook. Dominic, you talked about this new range of low to mid thirties due to a number of reasons, new customers, and delivered new products, etcetera. And so I was wondering if you could give a little more color there. How long should we expect this level or this new range to be in place? So beyond 2026, do you think we should kind of think about this as the range also for 2027 and 2028? And then can you talk about pricing? And to what degree have you guys lowered pricing and is that a big driver of this new margin range? Dominic Bardos: Sure, Phil. So let me start with the 2026 outlook on margin, where we have set it at the low to mid thirties. I think it is very important for us to really focus on some of the more transitory things and then also what might take a little more time to evolve. As we said in the prepared remarks, we do include some tariff impact that is expected to be absorbed by Shoals. As we saw on Friday, this is a very fluid situation. But we do have inventory that has capitalized tariff expense that will still be with us for the first half of the year. Another thing that we have been talking about is the move into our new mega facility. We expect to be moved in in the first half, at the middle of this year. First half of the year, we are moving in. But in the meantime, we do have some inefficiencies created by still operating now in three facilities during this transitional period. So that is something that is certainly factored into our guide with the lower gross margin percentage. As we talk about gaining efficiencies over time, we absolutely will have cost-out initiatives and margin-improvement initiatives going into 2027 and beyond. But I do believe with our product mix, the third component, that we have talked about introductions of new products, capturing new share and new customers that do not use the BLA product system, and those have a margin percentage dilutive issue. An example being a long-tail BLA product as an example. And we have talked about the fact that product mix is important. So I would characterize this year's margin guide as one that should see the lowest margin percentage of the year in the first quarter, and then we will start to see gain back as we start getting some synergies and get costs out as we move into the new facility and we get the scale that we have been talking about to leverage those new fixed costs. So for the short term, I think this is the right margin percentage. And I expect that 2027's margin would be higher. But we are taking off the table any discussion of 40% return in the near term. I just want to be very clear about that. Philip Shen: Okay. Great. Thanks, Dominic. That is very helpful. And then shifting over to a comment I think you guys had in your Q1 guide. I think you guys talked about certain customers changing order patterns. Can you talk about what that is? And then also, what the seasonality or what the kind of cadence of revenue might look like by quarter for the year as well? Thanks. Brandon Moss: Yeah, Phil, I mean, just I guess first and foremost, we believe the market is very, very strong. Do not want this to get misinterpreted as we do not have confidence in the market. We certainly do. There are very strong near-term indicators, whether it is crew counts on the ground installing solar products, tracker installations, which we follow, are very strong. And as we all know, the long-term fundamentals for energy consumption is certainly there. And that is evidenced by a really strong quarter of quoting for us at $700 million. As you know probably as good as anybody, the fourth quarter is usually a softer month as it relates to quoting and installation, and we saw a very strong, you know, very strong quarter. I think as important as anything, we continue to believe there is a strong preference for our solutions that we are providing and executing in the field. And as we mentioned in the prepared remarks, our core business accelerated about 30% in the back half of last year, and that gives us a lot of confidence. We are optimistic about our sustained bookings growth. We have had great bookings growth all year. If you think about 2025 specifically, Q1 we did a 1.1 book-to-bill, Q2 we did a 1.2, we reached record revenue in Q3 and still did a 1.4 book-to-bill, and then we surpassed that revenue record in Q4 and still did a 1.2 book-to-bill. So similar to last year, we see probably, you know, the cadence of our revenue recognition as probably being somewhere in the neighborhood of 45% in the first half of the year, moving to 55% in the second half of the year. But, you know, we feel very, very good about our book of business right now. Matthew Tractenberg: Thank you, Phil. Appreciate it. Karina, next question, please. Operator: Your next question comes from the line of Brian K. Lee with Goldman Sachs. Your line is open. Please go ahead. Brian K. Lee: Hey, morning. Thanks for taking the questions. Maybe just focusing on the top-line guidance here for a moment. There is a lot of moving pieces here. I back out the kind of $35 million or six points of growth you are implying for BESS shipping in 2026. There is still a good 15% growth being implied for the core business. So can you kind of walk us through the pieces—kind of how much is coming from new markets like CC&I, and how much is international, and then how much of this is just pure market share gain in an environment where I do not think most people are expecting double-digit utility-scale volume growth in the U.S. in 2026? So you guys do seem to be out-punching your weight here a little. So if you could walk us through a couple of the pieces beyond the BESS that you already quantified. Brandon Moss: Yes, Brian. Great question. Great to hear from you. You know, maybe I would turn your attention back to a think about our Investor Day in 2024. We identified about 30% of the market that we did not think we were attacking. We were attacking at that point. We believe that we have addressed about two-thirds of that piece of the market. And I think that is really evidenced. We had three specific customers where we did, you know, less than $1 million with that now have about $140 million of our backlog and awarded orders. So again, as I mentioned to Phil's questions, we do think that there is a strong preference for our product, and do think we have the ability to continue to outpace the general market growth in the solar landscape. We have seen, specific to you know, the different business units, we grew our solar business about 11% last year. We did see a record year in our international business, driving, you know, three projects, up $13 million. And I think what is maybe even more exciting than that, we replaced that backlog and reached record backlog and awarded orders in the international space of about $90 million. Our C&I business continues to grow rapidly. The numbers are dotted. Quite frankly, it is a small piece of the business, but we continue to see really nice growth in our C&I business. In our OEM business last year, you know, which is our J-box business, grew 47%. I do not know that we would anticipate another 47% growth here, but we do expect that business to be very, very strong. So I guess net-net, when you look across all of our business units, outside of our battery energy storage business, all are performing quite well, and we expect continued growth in 2026. Brian K. Lee: Okay. And then maybe just a follow-up on the margin question. I might have missed the number, but Dominic, I think you mentioned something like three percentage points, maybe a little over three percentage points of tariff impact in 2025 and expecting a similar level in 2026. Obviously, that is fluid, but how much of the tariff impact is related to AD/CVD? And then if the recent sort of changes stay as advertised in the second half of the year, it sounds like you will be working through the inventory that has the higher costs and paid the tariffs. Do you get all of that back, or what is sort of the rough net math on kind of what margin recapture you could see if tariffs do relax here as we move through the year? Thanks guys. Dominic Bardos: Okay. Sure, Brian. So the tariff question is a bit complicated for us because there are instances where we very specifically are passing through tariff costs to customers. So any reduction in tariffs would also then reduce what we are passing through. It is just a pass-through impact. There are some components where we are structurally holding on to the tariff cost as part of our cost of goods sold. And for that piece, then we would have a benefit if the tariffs are reduced in the back half. For aluminum, we still have 232s. There are still some relatively high tariffs on aluminum. But we would get the benefit of a reduced reciprocal tariff environment there. So I do not want to get too wrapped up over the timing of when tariffs will play through. It is going to be something that as we get more information, as we get guidance, I will be able to share more information in the coming weeks and quarters. But I think right now, we do not know if we are going to get a windfall repayment of tariffs. That would clearly be a lift. I would not bet the bank on that one, but it is certainly an option for this year. Brandon, would you like— Brandon Moss: Yeah. Maybe just to provide some more color on tariffs. And as Dominic said, it is a fluid environment to say the least. AD/CVD tariffs no longer to be collected, I believe, as of today. There has been no decision on refunds, and I agree with Dominic that we have not baked refunds into our plan, and that is probably prudent not to do that. The new Section 122 tariffs are expected to begin being collected and are assessed at 15%. It is notable that those tariffs effectively are in addition to the 232 tariffs. So just so everybody understands, we would pay the 232 tariff on the metals content, aluminum specifically, and then the 122 tariffs would be assessed on top of the non-aluminum components. So, you know, while the change does not benefit our current inventory, as those tariffs have been capitalized, it does provide some positive opportunity for future imports, assuming there are no changes to what we know as of 07:43 Central Time today. So, you know, we are going to continue to be as nimble as we can in this tariff environment and focus on delivering as much value as we can to our customers. Matthew Tractenberg: Thanks, Brian. Karina, next question, please. Operator: Your next question comes from the line of Mark Strouse with JPMorgan. Mark Strouse: Yeah. Good morning. Thank you very much for taking our questions. I wanted to go back to the ON Energy partnership. Just to confirm, is there anything embedded in the guide from that partnership this year? Do you have firm orders yet? And just kind of a reasonable time frame of when you might expect to see orders and associated revenue. I know kind of the conversion of that backlog to revenue is a bit up in the air, but anything you can provide would be great. Thank you. Brandon Moss: Sure. Yeah, we have alluded to excitement over the course of the last year around this opportunity in the battery energy storage space. There is a portion of our backlog and awarded orders that is attributed to ON Energy. We are very excited about that potential partnership with them. I mean, they are a leader in building and operating hyperscale systems that, you know, specifically is serving the AI data center landscape and other mission-critical facilities. And I think what we offer in this space to them and other customers is scale and really bankability. We have built a production line that is positioned to drive, you know, ample capacity in the coming years, and we are very excited about that. As it relates to the order patterns, again, like other customers, it will continue to be lumpy. And like all of our customers, whether it be in the solar space or battery energy storage, we have got, you know, delivery schedules when we take the purchase orders, and we adhere to those delivery schedules. So once we get production started, again, as it relates to ON or other customers here in the coming weeks on our new line, you will see more consistent revenue recognition on into the year. Mark Strouse: Okay. Great. And then just, Dominic, a real quick follow-up. Just to clarify what you said earlier about still operating multiple buildings. When is that complete? When do you fully move into the new building? Dominic Bardos: Our current projections are for the end of quarter we are fully in this building operationally. We are manufacturing already in the building. We have all our BigLead assembly lines are all being produced here in our new 1500 Shoals Way facility. Right now on the floor, our harness lines are going in, but they are not operational yet. Our new BESS line is getting the final touches on for its grand opening here in the next few weeks. So by the middle of this year, we will be in. As we have talked about, we still have a redundant facility that would be rendered redundant this year in Plant 4. That lease does not expire until 2027. But we will start realizing operational savings and synergies in the back half of this year. Matthew Tractenberg: Thanks, Mark. Thank you. Karina? Operator: Your next question comes from the line of Praneeth Satish with Wells Fargo. Your line is open. Please go ahead. Praneeth Satish: Good morning. Thank you. Maybe switching gears a little bit here. So you have talked you are seeing good success on the BESS side. Maybe on the data center BLA product that you are working on, I guess, kind of moving from prototype, beta testing, and I think the latest is kind of waiting on UL certification. So, yeah, maybe just if we could get an update on that, are you still on track to potentially launch a commercial product this year? And then is the expectation to get some meaningful sales in 2027? And just any remaining technical or customer gating items to note? Brandon Moss: Yes. We still are on track with our data center product. Again, we have talked about revenue recognition coming probably more so in 2027 than 2026. Still getting very strong voice-of-customer feedback for that particular product, and working towards certification. So I would say the product is tracking quite well. But again, will not materially impact our financials in 2026. Praneeth Satish: Gotcha. And then I think you mentioned the new BESS production line is going to be online shortly. I guess when this is up and running, how much manufacturing headroom do you have today to kind of support growth beyond the $67 million of orders that you have booked already? Do you see the need for additional investments in the coming years on the BESS side, or this gets you set for the balance of the next few years? And then as a follow-up to that, can you help us understand whether you would need to spend incremental capital to support the data center BLA product as we get into 2027, and how we should think about CapEx in 2027 at a high level? Brandon Moss: Sure. As far as the BESS line goes, nothing would give me more pleasure than to invest more capital to build a second production line for that particular product. We probably do not need to do that in the near term. We have commented in the past that production line is capable of producing hundreds of millions of dollars of product, you know, and is set up for scale. We do have room, when you see our new facility, to put a second production line in effectively next to that line, you know, which can produce the same product or variation of a similar product. So we have contemplated that in the design of our new building. As it relates to the CapEx around the data center product, that product can be run—it effectively leverages our BLA patent portfolio. So you would think of the production setup as being similar to BLA. You know, as that product ramps, might we need to invest some capital to add additional BLA production lines? Potentially so. That is not an overly significant investment should we have to do that. So we are pretty comfortable with us being able to scale that business in the future. As it relates to overall capital spend, we look at our CapEx spending to decline somewhat this year. I think the midpoint of our CapEx guidance was about $25 million. We spent over $30 million last year. We are still, you know, putting the finishing touches on this particular plant. And as we have mentioned before, there is some additional investment in IT and systems architecture for 2026 and probably into 2027. But we will continue to normalize our CapEx spend in the coming years. Matthew Tractenberg: Thank you, Praneeth. Karina, next question, please. Operator: Your next question comes from the line of Colin Rusch with Oppenheimer. Your line is open. Please go ahead. Colin Rusch: Thanks so much, guys. You know, can you talk a little bit about Project Honey? Timing and design related to FEOC provisions? I know they are still a little bit fuzzy, but wanted to get a sense of any sort of product delays that you are seeing, given uncertainty around some of the supply sourcing that folks may be managing right now? Brandon Moss: Yes. Thanks, Colin. I would not say that we are seeing a tremendous amount of volatility in projects related to FEOC. There are some late point changes maybe in modules, which require us to do some redesigns and slow down releases of the projects to our manufacturing floor. That happens. I would not say it is overly predominant. As it relates to FEOC, specific to our product set, as you know, the FEOC guidance that came out was fairly limited and still is pointing everything back to the BESS content tables, which EBOS is not a part of at this point in time. And we continue to try to make it a part of those tables, but have not seen success in getting that completed at this point in time. So not a tremendous amount of volatility, Dave, related to FEOC. Colin Rusch: That is super helpful. And then just on the energy storage product, you know, as we start to see some evolution around some of the configurations, you know, and voltage considerations folks. I am curious about how quickly you guys can adjust to some of those adjustments and how much of that is built into this ON contract. You know, as you look at the evolution of the market, you know, moving towards 800 volt, it seems like there is going to be a significant number of new opportunities, and want to just get a sense of the dexterity of the product to meet some of those needs. Brandon Moss: Yeah. We, you know, we have standardized our recombiner line around specific amperages to handle, you know, the configurations that we see in the marketplace today. We have got a 1,200 amp recombiner product, 2,000 amp. That 4,000 amp recombiner is probably the preferred product in larger AI data centers. We 800 volts of power at 4,000 amps and are, you know, doing somewhere probably north of 3.3 megawatts. So I think we have got the right product at the right time for these particular, you know, solutions that are going into larger data centers. Matthew Tractenberg: Thank you, Colin. Karina? Operator: Your next question comes from the line of Chris Dendrinos with RBC Capital Markets. Your line is open. Please go ahead. Chris Dendrinos: Yeah. Thank you. I just wanted to ask about the backlog and the composition of it. I think you mentioned $67 million related to BESS, but you know, what is the composition of, you know, maybe the CC&I products and that long-tail BLA solution. I am just trying to get a sense for how much that is kind of evolved and changed over the past year or so. Thanks. Brandon Moss: Yeah. The CC&I product is really—that particular market you almost think of as book-and-turn. So very little of our backlog and awarded orders would be related to C&I business. It is, you know, it is a very small number. As it relates to long-tail BLA, probably more so than the CC&I business. I do not know an exact number. We would have to look at project to project, but the adoption of that particular product has been strong in the marketplace and is driving some of the new customers that we have got in our backlog and awarded orders that prefer that solution. I do not know the exact number of that off the top— Dominic Bardos: Yeah. I do not either. Of the $140 million of the customers—the new customer BLAO, I do not know how much that was long-tail, but I do know that some customers have a very strong preference for that solution to centralize their load-break disconnect. So we have not broken down our domestic utility-scale solar BLAO beyond that. Brandon Moss: But, you know, just to give some maybe additional context, a lot of focus on new products, whether it is long-tail BLA or harness, super jumper products, mini BLA. About 6% of our 2025 revenue was related to new products in the solar core business, not related to BESS. And we expect that number to continue to grow as we are partnering with our customers. Chris Dendrinos: Got it. Thank you. That is it for me. Matthew Tractenberg: Thanks, Chris. Karina, last question. Operator: Your last question comes from the line of David Arcaro with Morgan Stanley. Your line is open. Please go ahead. David Arcaro: Hey. Thank you so much. Good morning. You mentioned a couple of discrete margin factors as we look into 2026, but I was wondering if you could just maybe comment on the competitive environment and what you are seeing there more broadly. Is there kind of increased pressure from a pricing perspective or new entrants? Or are you seeing more products pop up in the market that you are competing against here? Brandon Moss: Dom, do you want to take the margin piece, then I will take the competitive ones? Dominic Bardos: Sure. So some of the margin items that we called out and are going to continue in our guide for this year are a little bit more transitory in nature. I think from a competitive pricing standpoint, we have already recognized revenue in 2025 to win new customers over. So the pricing incentives that we offered for folks to change to Shoals is not really considered an on-term item for us. That is pretty much behind us at this point. From a competitive product set standpoint, our BigLead Assembly product does face competition and has faced competition from Voltage. As you know about the findings from the administrative law judge, we have to be patient and work through that. And the IPC market, which, you know, other competitors have been competing with and will fight for scraps over that share of the business. We believe developers are more and more inclined to avoid IPCs. But that is still playing out in the marketplace. But I think from a margin standpoint and the pricing pressures, every job that we do is a negotiation. Every opportunity that we have to look at the competitive set and the quality of Shoals products, we will take advantage of that and emphasize our product quality and delivery. And then the last thing I would say on the margin side is, you know, as we build back some of the margins and have the opportunity to convert people to BigLead Assembly away from home-run solutions or other types of harness solutions, I think what that does for us is it gives us a chance to push people to a better value-driving product for themselves. Also gives us a better margin. But we need the flexibility in margins to do what we need to do to drive operating profit. And that is really where we are focusing, driving cash flow, taking business if we have capacity. Is there a reason I should not take a 30% margin job? Absolutely not. I should take it. It is the right thing for the shareholders. Brandon Moss: Yeah. I think it is just important to reiterate we still believe there is a strong preference for our solutions and our quality product, and that is evidenced in the increase in our book of business and our outgrowth of the overall solar market. I think the commercial team is performing quite well, and the new solutions that our product team is bringing to market are being adopted by our customers. So we are very confident in our book of business and continue to be confident to grow that book of business. Matthew Tractenberg: Great. Thank you, guys. To our audience, that is all the time that we have for questions today. I want to note that we have a very active IR calendar through March. Those events are listed on the Investor Relations section of our website. So if you are attending any conferences and you would like to meet with us, please let us know. If we can help you further, please reach out to investors@shoals.com with any questions. Thanks for joining us today. Have a great day, everyone. Operator: Thank you. This concludes today's call. Thank you for attending. You may now disconnect.

82天前Insight Analytics约5分钟阅读

ARVN 2025 Q4 财报电话会议

Operator: Hello, and welcome to the Arvinas fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. And if you would like to withdraw your question, press 1 again. Thank you. I will now turn the call over to Jeff Boyle, Head of Investor Relations. Jeff, you may begin. Good morning, everyone, and thank you for joining us. Jeff Boyle: Earlier today, we issued a press release with our fourth quarter and full year 2025 financial results, which is available in the Investor and Media section of our website at arvinas.com. Joining us on the call today, we have Randy Thiel, our President and CEO; Noah Berkowitz, our Chief Medical Officer; Angela Cacace, our Chief Scientific Officer; and Andrew Saik, our Chief Financial Officer. Before we begin, I will remind you that today's discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. These risks and uncertainties are outlined in today's press release and in the company's recent filings with the Securities and Exchange Commission, which I urge you to read. Our actual results may differ materially from what is discussed on today's call. A replay of this call as well as today's press release and an updated corporate deck will be available on the Investor and Media section of our website. I will now turn the call over to Randy Thiel. Randy? Randy Thiel: Thanks, Jeff. And thank you all for joining us today. It is an honor and a privilege to lead such a talented and committed team as Arvinas enters a period where we anticipate multiple value-driving milestones at the company. Addition to the team, we have a technology proven in the clinic. An exciting pipeline, and a strong balance sheet, allowing us to continue our work to make a meaningful impact for patients, their families, and our shareholders. 2025 saw meaningful progress across our pipeline and was a transformative year for the company. In addition to submitting our first New Drug Application, setting the stage for potentially the first ever FDA approval of a PROTAC degrader, we redefined our strategy to maximize the opportunities ahead in each of our core areas of focus. With four ongoing clinical trials across oncology and neurology, including our recently begun first-in-human trial of our polyQ AR degrader, ARV-027, we believe we have the potential to bring truly differentiated treatments to millions of underserved patients. We are entering a pivotal period at Arvinas. As we have been previewing for the past six months, 2026 will be defined by multiple data readouts and clinical advancements. We believe these milestones will validate our strategy of developing only treatments that are highly differentiated from other options. I will summarize clinical data expectations for the year and make a few comments on corporate strategy before turning the call over to the team to walk through recent accomplishments and our forward-looking plans in more detail. Beginning with our LRRK2 degrader, ARV-102, I am pleased to announce today that data from our Phase 1 clinical trial in patients with Parkinson's disease was accepted for an oral presentation at the Alzheimer's and Parkinson's Diseases Conference in March. We will assess the ability of ARV-102 to degrade LRRK2 in the CSF and see how it impacts important pathway biomarkers. Rather than inhibit LRRK2's kinase activity intermittently, ARV-102 degrades the entire LRRK2 protein. An important consideration when thinking about its potentially differentiated profile. Turning to ARV-806, our KRAS G12D PROTAC potently and selectively eliminates both the on and off forms of the protein. Based on faster-than-expected enrollment in this trial, by the 2026 we now expect to make our first data disclosure for the program, and we have already submitted data from that trial for presentation at a medical congress in the coming months. This will be an important look at why we believe ARV-806 has the potential to be a clearly differentiated treatment. So stay tuned for more on our disclosure plans. Next, our PROTAC BCL6 degrader, ARV-393, is continuing to progress well in our Phase 1 dose-escalation trial. And we intend to share data from this trial in the 2026. As announced on our last earnings call, we have already seen responses in early cohorts in patients with both B- and T-cell lymphomas, even at exposures below those predicted to be efficacious. We also observed robust BCL6 degradation and the safety profile of ARV-393 supports continued dose escalation. With respect to vepdegestrant, as you know, we are working with Pfizer to select a third party for its commercialization and potential further development. Our goal remains to make sure that if it is approved, vepdegestrant is launch-ready and available as a potentially best-in-class therapeutic option for patients with ER-positive, HER2-negative, advanced breast cancer in the second-line ESR1-mutant setting. Our discussions to date with potential partners have been productive, and we are working to have an agreement in place before the June 5 PDUFA date. Finally, before I turn the call over to the team, I would like to make two comments on corporate strategy. First, last year, we decided to refocus our resources on our Phase 1 clinical programs, which we now have four of. While we believe vepdegestrant has the potential to be a best-in-class therapy for patients, we think the best way for Arvinas to create shareholder value is to focus on ARV-102, ARV-806, ARV-393, and now ARV-027. Second, we recognize the bar is high for all of our programs. We will not settle for “as good as,” and we hope patients do not have to choose between efficacy, safety, and tolerability. We are determined to only develop treatments that are differentiated and will be highly disciplined in moving programs forward. We believe our pipeline is producing potentially transformative treatments for patients, and we look forward to sharing what we believe will be compelling data for each of these programs as we reach milestones in the future. With that, I will turn the call over to Noah. Noah? Thanks, Randy. And good morning, everyone. I will begin with ARV-102, our LRRK2 degrader. As background, ARV-102— Angela Cacace: Thanks, Noah, and good morning, everyone. I will start by sharing some additional details about ARV-027, our PROTAC degrader designed to target the polyglutamine-expanded androgen receptor, or polyQ AR, in skeletal muscle. We have deep expertise in developing AR degraders. Our first clinical candidate was an AR degrader, and ARV-766, which we out-licensed to Novartis in 2024, is progressing through multiple Phase 2 trials in hormone-sensitive and castrate-resistant prostate cancer. PolyQ AR is the root cause of disease in spinal and bulbar muscular atrophy, or SBMA, also known as Kennedy's disease. SBMA is a rare, genetically driven neuromuscular disease with no approved treatments available, and consequently significant unmet need. For background, SBMA is an X-linked disease caused by a CAG expansion in the AR gene resulting in polyQ AR accumulation. This toxic accumulation impairs contractility and causes atrophy and ultimately weakness and loss of endurance in muscle. The goal for developing a disease-modifying therapy in SBMA is reducing polyQ AR in muscle. We believe ARV-027 has the profile to become the first ever therapy for patients with SBMA that tackles the protein as the genetic root cause of the disease. ARV-027 is a PROTAC that drives degradation of polyQ AR in skeletal muscle. We presented the first ARV-027 preclinical data last year at the World Muscle Society Conference in October, and we will share data again at the Kennedy's Disease Association Conference later this week. These data show with oral ARV-027 induced degradation of muscle polyQ AR, which resulted in clear functional improvement and extended survival in a rapidly progressing SBMA mouse model. We recently initiated our Phase 1 trial of ARV-027 in healthy volunteers and are excited to be developing ARV-027 for thousands of patients with spinal and bulbar muscular atrophy, a disease with no approved disease-modifying therapies. Rounding out programs that we expect will enter the clinic this year, we have our first immuno-oncology-focused PROTAC degrader for solid tumors, ARV-6723, that targets HPK1. HPK1 acts as a central intracellular brake on the immune system, depressing T-cell receptor signaling and broadly dampening both innate and adaptive antitumor responses. Beyond its kinase activity, HPK1 also serves a scaffolding role that reinforces immune suppression, making it an attractive kinase for degradation rather than inhibition. Preclinically, ARV-6723 has shown deep and sustained HPK1 degradation, eliminating both kinase and scaffolding functions, an effect not achieved with kinase inhibition alone. As a single agent, ARV-6723 demonstrated meaningful and durable tumor growth control across multiple syngeneic models, including both high- and low-immunogenic tumors, and outperformed investigational HPK1 inhibitor and anti–PD-1 therapy in several settings. It also demonstrated strong activity in combination with anti–PD-1. Mechanistically, HPK1 degradation induces a distinct proinflammatory tumor microenvironment with increased activated T cells, NK cells, and monocytes. In addition, ARV-6723 was found to reduce immunosuppressive neutrophils while inducing broader proinflammatory pathway activation than inhibition alone. Last week at the AACR Immuno-Oncology Conference, we presented preclinical data demonstrating ARV-6723's robust single-agent activity and outperformance when compared to the clinical HPK1 inhibitor in efficacy studies with several mouse models representing hot and cold immunological settings and demonstrated efficacy in multiple models of anti–PD-1 resistance. Collectively, these data position ARV-6723 as a potentially differentiated oral immuno-oncology approach designed to drive deeper and more durable antitumor responses. ARV-6723 has potential to address significant unmet need across multiple settings where currently available immunotherapy drugs have failed. Pending regulatory feedback, we are planning to begin first-in-human studies for ARV-6723 later this year and based on preclinical findings, we believe ARV-6723 could change the treatment paradigm in the immuno-oncology treatment landscape. Finally, we are making strong progress in our oral pan-KRAS PROTAC program, a preclinical program that complements our clinical KRAS G12D degrader. Angela Cacace: —differentiates from all inhibitors in that our novel oral degrader is designed to target KRAS for elimination. Preclinically, we have demonstrated broad degradation across KRAS alterations, including wild-type amplified KRAS, with selectivity over RAS isoforms and activity in both on and off states. Compared to pan-RAS inhibitors, by degrading and removing the oncoprotein, we have observed stronger antiproliferative and apoptotic effects, greater tumor growth inhibition, and enhanced activity when combined with anti–PD-1 therapy, providing preclinical evidence for a differentiated profile. We will present preclinical data comparing our PROTAC pan-KRAS degrader with pan-RAS inhibitors at the AACR Special Conference on RAS in March, and we will also be presenting data highlighting efficacy in a KRAS syngeneic model and associated immune microenvironment changes at a scientific congress in the first half of this year. With that, I will turn the call over to Andrew to review our quarterly financial information. Jeff Boyle: Andrew? Andrew Saik: Thanks, Angela, and good morning, everyone. I am pleased to provide financial highlights for the fourth quarter and full year ended 12/31/2025. As a reminder, detailed financial results for the fourth quarter and year-end, including a reconciliation of GAAP to non-GAAP financial measures, are included in the press release we issued this morning. As we look forward to our anticipated data readouts later this year, we are in a strong financial position to maintain our guidance of cash into 2028. At the end of the fourth quarter, we had just over $85 million in cash, cash equivalents, and marketable securities on the balance sheet, compared with just over $1 billion at the end of 2024. We believe our strong balance sheet will enable us to advance our programs to meaningful data events, which will help us make important portfolio decisions in the coming months and years. Turning to the fourth quarter and full year 2025 financial highlights, during the quarter, we reported $9.5 million in revenue, compared to $59.2 million in revenue for the same period in 2024. The decrease was primarily due to a decrease of $40.3 million of revenue from the Novartis license agreement. We reported $262.6 million in revenue for the year, compared to $263.4 million for fiscal year 2024. General and administrative expenses were $23 million in the fourth quarter compared to $34.1 million for the same period in 2024. The decrease of $11.1 million was primarily due to a decrease in personnel and infrastructure-related costs of $4.4 million and a decrease in costs related to developing our commercial operations of $3.1 million. G&A expenses were $95.9 million for the year, compared to $165.4 million in the prior year. Fourth quarter non-GAAP G&A expenses were $15.3 million in 2025, compared to $23.7 million in 2024. Research and development expenses were $61.1 million in the fourth quarter compared to $83.3 million in the same period of 2024. The decrease of $22.2 million was primarily driven by a decrease in compensation and related personnel expenses of $14.1 million and a decrease in external expenses of $7.6 million. For the year ended 12/31/2025, R&D expenses were $285.2 million compared to $348.2 million for the prior year. Fourth quarter non-GAAP R&D expenses were $56.5 million in 2025 compared to $74 million in 2024. Total non-GAAP expenses for the fourth quarter and full year were $71.8 million and $323.4 million, respectively. Our reduced spend in Q4 is a direct result of our cost-cutting efforts in 2025, and we will continue to look for efficiencies in our operating model this year. As previously announced, in September, our board authorized the repurchase of up to $100 million of our outstanding common stock. As of year-end, we had bought back approximately 10 million shares at an average price per share of $9.09 for a total of $91.9 million, including commissions and excise tax. This program is now suspended, and we have no further plans to repurchase shares. Details of our stock repurchase program can be found in our 10-Ks, which will be issued later today. As I mentioned, we are maintaining our cash runway guidance into 2028, which allows us to reach important data readouts and continue prioritizing investments in programs that we believe are truly differentiated and that will provide patients with significant benefit. Let me now turn the call back to Randy for closing remarks. Randy? Jeff Boyle: Thanks, Andrew. I will summarize and then open the call for questions. Over 2026, we anticipate sharing new clinical data from our Phase 1 trials of ARV-102, ARV-806, and ARV-393. We expect that our polyQ AR degrader, which just entered human trials, will be joined in the clinic later this year by our HPK1 degrader. And we expect important new trials to begin for both ARV-102 and ARV-393. I believe we are entering a period of meaningful execution and value creation at Arvinas. Very few Phase 1 companies have such a strong pipeline and the potential to reach important milestones. And even fewer have a platform that has already announced positive Phase 3 clinical trial results. This is what makes me so enthusiastic about our upcoming opportunities to make a meaningful impact for patients and shareholders. With that, I will hand the call to Jeff to start Q&A. Jeff? Thanks, Randy. And as a reminder, we are always available to take questions offline if you cannot join the queue. But for now, I will ask the operator to open the line for Q&A. Operator? Unknown Analyst: Actually, this is Randy jumping back in with a quick change of plans. Jeff Boyle: Before we pass back to the operator and open Q&A, we need to do one more section. Especially with the storm coming the past couple of days, we prerecorded the prepared remarks. To ensure we would have no technical difficulties. Obviously, we did, and some of you noticed that Noah's section was almost entirely skipped. So we will have Noah read his section live now and then jump straight to Q&A after that. Noah. Noah Berkowitz: Thanks, Randy. Okay. So we will talk about some of our clinical-stage assets here. As background, ARV-102 is an oral PROTAC LRRK2 degrader intentionally designed to cross the blood-brain barrier and selectively degrade leucine rich repeat kinase 2, or LRRK2. LRRK2 is a multidomain protein with three key functions, of kinase, GTPase, and scaffolding activities. Together, LRRK2's activities regulate endolysosomal trafficking, and when activity is elevated, the lysosome becomes dysfunctional. This leads to obstructions when clearing the aggregated pathological proteins that would typically be degraded through the properly functioning lysosomal pathway. We believe that degrading LRRK2 has the potential to restore endolysosomal homeostasis and to provide therapeutic benefit in disorders characterized by lysosomal dysfunction. Two of those diseases are progressive supranuclear palsy, or PSP, and Parkinson's disease. Several competitors are pursuing LRRK2 as a target in these diseases. Our PROTAC approach is differentiated because we reduce LRRK2 protein while competitors only inhibit LRRK2 kinase function. By degrading the entire LRRK2 protein complex, we disrupt the key functions believed to be linked to neuroinflammation, and 102 offers the potential for deeper and more durable therapeutic benefit versus inhibitors. Our confidence in this program is bolstered by the data we have generated from our Phase 1 clinical trials in healthy volunteers and Parkinson's disease. As previously disclosed, ARV-102 has been well tolerated and demonstrated dose-dependent CSF exposure across both trials, indicating excellent brain penetration. We also reported that ARV-102 reduced LRRK2 in the CSF by more than 50% and reduced downstream proteins driven by LRRK2 variants that are elevated in the CSF of patients with Parkinson's disease and linked to lysosomal stress. Two such proteins, GPNMB and CD68, demonstrate clear and disease-relevant pathway engagement in the central nervous system, even in healthy volunteers where they would not have been expected to be elevated. Altogether, these data provide further evidence that total protein degradation of LRRK2 may have a best-in-class impact on underlying disease compared to inhibition. As Randy mentioned, we were accepted for oral presentation at AD/PD, where we will show pathway biomarker results in patients with Parkinson's disease. We look forward to updating you on these data. Let us turn now to the development plan for ARV-102. As we have previously shared, there is strong evidence that endolysosomal trafficking driven by increased LRRK2 is associated with the clinically meaningful progression, often within one year, of PSP, a progressively debilitating neurodegenerative disease that is typically fatal within five to seven years of diagnosis. We intend to initiate a Phase 1b trial in PSP in the first half of this year, with the potential to initiate a registrational trial in late 2026, pending health authority feedback. If successful, ARV-102 has the potential to become the first and only disease-modifying treatment for this rare, life-threatening neurological disorder that affects approximately 25,000 people every year in the U.S. We expect to provide additional updates on our clinical development plans in the coming months. We can now move to our KRAS G12D degrader, ARV-806, and I will say we completed dose escalation for once-weekly administration in our Phase 1 trial well ahead of plan. We believe that reflects strong clinical investigator interest and high demand for effective KRAS-targeted therapies. ARV-806 targets KRAS G12D for elimination. KRAS G12D is a well-known oncogenic driver associated with poor prognosis and resistance to standard treatments across major tumor types, including pancreatic, colorectal, and non-small cell lung cancer. Importantly, there are no approved targeted therapies on the market for tumors with KRAS G12D mutations. As a reminder, on our last call, we shared preclinical data presented at the Triple Meeting in October that highlighted the clear differentiation of ARV-806 from both KRAS inhibitors and degraders currently in the clinic. These preclinical data show ARV-806 to be more than 25-fold more potent in reducing cancer cell proliferation compared to clinical-stage KRAS G12D inhibitors, the leading clinical-stage—sorry, for seven days, after a single dose with efficacy responses across pancreatic, colorectal, and lung cancer models. We anticipate sharing initial Phase 1 clinical data in the coming months. There is a very high bar for differentiation, and we believe ARV-806 has the potential to transform the field by exceeding that bar. Let us shift to ARV-393, an oral, investigational novel degrader of BCL6 with the potential to become a chemo-free standard of care across non-Hodgkin's lymphoma indications. BCL6 has a rapid resynthesis rate and is known to be difficult to target by inhibitors. ARV-393's iterative, event-driven mechanism of action counters the rapid resynthesis rate of BCL6, resulting in potent, sustained degradation of the protein. As announced on our Q3 earnings call, we have already observed responses in both B- and T-cell lymphomas in the early cohorts of our ongoing Phase 1 monotherapy trial, even at exposures below those predicted to be efficacious. We also observed evidence of robust BCL6 degradation and the safety profile of ARV-393 supports continued dose escalation. In preclinical data presented last year, ARV-393 showed broad, synergistic antitumor activity combined with standard-of-care biologics and investigational small-molecule inhibitors. In December, we presented compelling preclinical data that support ARV-393 in combination with glofitamab, a CD20-directed bispecific antibody, as a chemotherapy-free combination approach in diffuse large B-cell lymphoma, or DLBCL. These data demonstrated tumor growth inhibition of 91% with ARV-393 plus glofitamab dosed sequentially, compared to 36% for glofitamab alone. Additionally, RNA sequencing and biomarker analysis suggested that ARV-393 enhances CD20 expression and genes that promote interferon signaling and antigen presentation but also downregulated proliferation-associated gene sets. Overall, these preclinical data suggest mechanistic synergies between BCL6 degradation with ARV-393 and T-cell engagement. We believe these results bring hope for DLBCL patients left with minimal treatment options when standard-of-care therapies fail. With our encouraging preclinical data in hand, we are on track to initiate our Phase 1 combination trial with glofitamab in the first half of this year. So now I will turn the call over to the operator for Q&A. Operator: Thank you, Noah. We will now begin the question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone. And our first question comes from the line of Jonathan Miller with Evercore. Jonathan, please go ahead. Jonathan Miller: Hey, guys. Thanks so much for taking my question. And congrats on all the progress across multiple interesting-looking programs. One thing that I immediately react to in some of your prepared remarks is your assertion that you are only going to develop programs for which you are going to see differentiated activity. You know, multiple of these programs are in competitive areas as you are well aware. So I wanted to ask across the pipeline, at what point are you going to get the killer data that determines to you whether or not a program is differentiated? And, obviously, that is different for different programs, but could you just go through the pipeline and tell us what you think the key experiment is that will let you know if you have got truly differentiated or not? Randy Thiel: Yeah, Jonathan, thanks very much for the question. And just as we start the Q&A, I apologize again to all the folks on the call for the confusion there. I hope that was clear as we had to redo Noah's section. Jonathan, that is probably a question we could spend a lot of the day on, right? So to your point, for each program, it is going to be different. And certainly, as we think about a plan where we need to be clearly differentiated against competitors, which I think is actually pretty reasonable, it does not necessarily mean that when you first show data in a very early Phase 1 trial that it has to be, you know, beating a competitor that has expansion data, Phase 3 data, and so on. So I will pass to Noah here in a little bit to talk, you know, maybe program by program for some details that we expect to have this year. Probably the right place to focus. But as we look across—maybe I will highlight a couple of things. For LRRK2, for ARV-102, our LRRK2 degrader, the competition there is inhibitors. It will be really important to show that degradation leads to a different result than inhibition for a target that has not been proven to modify disease overall by drugs that the industry has produced. So that is the key risk. For ARV-806, for KRAS G12D, the target is much more validated, but the competitive space is much more intense in terms of other programs that have been out there ahead of it. For BCL6, similarly, it is a relatively new target, but there are competitors out there that have paved the way a little bit, showing that the target has now become somewhat validated. And maybe we will leave 27 to the side for the moment. But I think for each of those, the Phase 1 data will be of some interest, and as we move forward, we will have to compare over time. Noah, anything else you want to add, you know, maybe specifically some of the near-term data updates? Noah Berkowitz: Sure. Thanks, Randy. Yeah, let us take the example of ARV-102 for starters. So in that case, we have signaled pretty significant conviction. We have said we are starting a trial in PSP this year and, regulatory permitting, we may even be able to move towards a registration-quality trial, you know, before the end of the year. We recognize that there are properties of a LRRK2 inhibitor that can be exceeded with LRRK2 degraders. We have shown already in healthy volunteers that we have more than 50—we can achieve more than 50% LRRK2 degradation in the brain. That has been our target. We have been communicating that clearly. Because we know in general, if you want to just simplify in broader strokes, that patients with Parkinson's disease have twice to three times the level of LRRK2 protein expression in the brain compared to their age-matched controls. So our goal was to achieve that, something that cannot be touched by inhibitors. So that is why we have lots of conviction there, plus pathway data, more to come at AD/PD in April. Now if I shift for a moment to 806, it is a very competitive space. We know that there are many other G12D-targeting drugs ahead of us, mostly inhibitors and, let us say, one degrader. But fundamentally that really makes it easier for us because we know where the bar is. We know that—I am going to speak in broad terms. I am not setting the bogey here because this is an imprecise science. But we know that we have to be better than, let us say, 35% response rates in this space to be differentiated. So we are going to have to generate data that gives us confidence that we are better. We will signal as the year moves on about exactly what level of confidence we have, and as we can share data with folks. But that is clear from the numerous drugs that are in the clinic today, that we have to be better than the large majority of them, which, you know, would put us in that range. And then when it comes to 393, we are kind of at the front right now. There is a competitor that has shared data, and we do see that there is activity with their drug. But this is really early days. Like, we are months or maybe—you know, I do not want to give a specific time frame that we are behind. It is hard to know. But we are basically at the leading edge of this right now. So we are going to look at the data that is shared by our competitor, we will look at the data that we generate, we will share that, and we believe that for all three of these drugs, there will be data this year to demonstrate their differentiation that we should, you know, over the course of the year, be able to share with our investors. Operator: Thanks so much. And your next question comes from the line of Edward Tenthoff with Piper Sandler. Ted, please go ahead. Edward Tenthoff: Great. Thank you very much. Randy, congratulations. And the whole team, I really appreciate the energy you guys are bringing. It is really exciting to have this early-stage program advancing in so many really unique shots on goal here. I wanted to pick back up with what Noah was saying about 102. What really should we be expecting from that data at AD/PD? And would there be an incremental PSP update ahead of the registrational trial initiation? I love the speed with what you are moving here. But I want to understand sort of what the bar is to moving into registrational study. Thank you. Randy Thiel: Maybe I will take the second part of that and then pass back for the expectations at AD/PD. Ted, I think the answer to that is no. And just the reason is the timing that we laid out in the prepared remarks just now is that we are anticipating starting a Phase 1b in PSP sooner. And then as we have said, look, all things going our way and pending some further data from AD/PD and regulatory go-ahead, we would hope to start a registrational trial by the end of the year. So I think the data there in between of starting the PSP trial earlier and then getting to a second one later, I think would prevent that. But we think that the data that we will be showing at AD/PD, which are in Parkinson's patients, will be relevant for both moving forward in PD or PSP. Noah, back to you for the AD/PD view. Noah Berkowitz: Sure. So, look, we cannot prerelease results, but I can—we can—I guess I can frame it? We shared data months ago about—or that started last year and culminated in biomarker data some months ago in the healthy volunteer population. So now we will share data in the Parkinson's disease patient population that I think a discerning scientist would be looking for. Are—well, what happens in Parkinson's disease? Is the drug demonstrating continued safety, like was observed in healthy volunteers? Because now patients are older—25 years median age for healthy volunteers, much older for Parkinson's disease patients. There is much more elevated LRRK2 in the CSF at baseline. So it was something that was observed at low levels, now repeated at higher levels, because you have to overcome even more LRRK2 presence in the brain. Obviously, deep portions in the brain, is represented by the CSF levels. And then the biomarker story. Right? The biomarkers that were seen in healthy volunteers—is that like a once—a finding that cannot be replicated, or is it something where the pattern continues or it intensifies when you look at Parkinson's disease patients? That would be the kind of set of questions that I would look at, and we hope that we can answer those questions at the meeting. That is great. Really helpful, and I am looking forward to all the other data and updates in progress this year. Thanks. Operator: And our next question comes from the line of Tyler Van Buren with TD Cowen. Tyler, please go ahead. Frances (TD Cowen): Hi. This is Frances on for Tyler. Just one quick question on our end. Can you elaborate more on the pan-KRAS presentation at AACR and what we should expect to see from it? As well as what competitors you are using? Randy Thiel: Sure. Maybe I will pass to Angela in a moment to talk a bit about that. And as you pointed out, we have a pan-KRAS program that, as we talked about, is moving ahead preclinically behind the KRAS G12D degrader that will have data at some point this year. But Angela, a bit more on the AACR data for pan-RAS? Angela Cacace: Sure. Thank you for the question. We will be sharing data, comparing to the inhibitors. So, you know, our goal in the pan-KRAS story is, of course, to remove the oncoprotein. So we differentiate from the on and the off inhibitors in that we are removing the oncoprotein. First and foremost, what is observed as a regulatory mechanism when you treat with an inhibitor is compensatory upregulation of KRAS. So this is something that is seen with the ON inhibitors. And so we will share KRAS-amplified data, so we will be sharing how we compare to the KRAS ON inhibitor in that setting. And then we will also share some of the mutant data as well in terms of the activity that we see on the antitumor activity. So expect to see those data as well. I hope that helps. Thanks so much. And then we will also share some syngeneic model data in the presence of an intact immune system. So I think that is also important with respect to the pan-RAS inhibitors, with respect to our pan-KRAS molecule that is selective for KRAS versus pan-RAS. So we are not hitting NRAS and HRAS. Yep. That affects T-cell activity. Operator: And our next question comes from the line of Akash Tewari with Jefferies. Akash, please go ahead. Manoj (Jefferies): Hey. This is Manoj on for Akash. Thanks for taking our question. Just one on ARV-393. What are your early observations around the plasma exposure dynamics when ARV-393 is used in combo with glofitamab? Do you expect the need of any specific dose modifications on either 393 or glofitamab when used in combo in clinic? And, also, just one more. Do you see any increased interest for vepdegestrant after the recent Roche data, especially in the earlier settings? Thanks. Randy Thiel: You know, maybe I will try to rephrase. I think the first question around 393 was do we, in broad strokes, expect the need to do any dose modification for 393 with glofitamab? And maybe I will let Noah comment on that in a moment, as we have had some data there late last year. And maybe I can take the second one. Look, we think that the Roche data from late last year validate the hypothesis that an ER therapy will work where ER is driving disease, which is what we have always believed. And so really, no, I do not see a concern there. It certainly validates what we thought would be the case. And we hope that as we are out with our partners at Pfizer looking for a new partner to commercialize, and preferably continue to develop that, it gives somebody the enthusiasm to do that. So no, I do not see that as an issue. But, Noah, back to you on the march and potential for requiring dose modifications based on the data we have shown to date. Noah Berkowitz: We do not really anticipate that we will require dose modifications, although obviously, you know, in an abundance of caution, we will have some dose escalation to evaluate the combination. There is non-overlapping tox, which is to say that the principal tox for glofitamab is going to be things like CRS, and also, there may be some accumulated hematopoietic toxicity for patients from glofitamab. But we, on the other hand, are not really seeing toxicity in those categories at all. So, you know, we will be advancing it cautiously, but do not anticipate dose modifications. Yes. Thank you. Yeah. Operator: And your next question comes from the line of Yigal Nochomovitz with Citi. Yigal, please go ahead. Caroline (Citi): Hi. This is Caroline on for Yigal. Thanks for taking our question. Digging in more on LRRK2 and the biomarker data to be presented at AD/PD, can you tell us how this data will support the therapeutic hypothesis in PSP? And, relatedly, what percent of PSP patients have elevated LRRK2, and are the same biomarker pathways relevant as in Parkinson's? Got it. Thank you. And, separately, is there any update on selecting a third party for vepdegestrant? Randy Thiel: Thanks. Yeah, I am going to pass that one pretty quickly over to Angela. I had a few comments on the biomarkers, but Angela, please dig in. Angela Cacace: Sure. So in PSP, there have been some recent publications showing that you see the same pathways increased. So you see elevated endolysosomal pathway engagement uniformly in progressive supranuclear palsy, and LRRK2 elevation in that population. And so, you know, we expect within that population that we will see efficacy there. So within that population, when you subset that population and look specifically at LRRK2 elevation, you do see accelerated progression and clinically meaningful progression. If you do look specifically at the elevated population, you do see acceleration by a year and it is, you know, clinically meaningful, upwards around 20 to 30 points of the rating scale. So Ed Jabari and his colleagues at University College London have shown that. So those data point to within that genetically defined population that that is the case. So, you know, anytime you see an increase in elevated expression, you know, for a PROTAC, that is the place you want to go. So PSP is a place where we can prove a concept within a year. So we are encouraged by that and remain very committed to this therapeutic hypothesis in PSP. Randy Thiel: Not further than what we put in the remarks this morning. On track. We feel good about that process that we are pursuing alongside Pfizer, but all is on track and we hope to have a partner in place by the PDUFA date in early June. Operator: And your next question comes from the line of Derek Archila with Wells Fargo. Derek, please go ahead. Jacob (Wells Fargo): Good morning. This is Jacob on for Derek. Thanks for taking our question. Just one on LRRK2 from us. How should we be thinking about safety in the upcoming AD/PD readout? I know it is a relatively short study, but given the lung biology associated with LRRK2, do you think there is anything that would emerge we will be looking for at this time point to give you more confidence in a longer duration study? And on a related point, does dose selection read through directly from Parkinson's to PSP, you think? Randy Thiel: Yeah. That will certainly be an important part of the readout, although as you have talked about, it is still a relatively short duration. Noah, any other comments to make on safety? Noah Berkowitz: Sure. So, overall, with the Parkinson's disease patient study that we will be sharing, patients have had 28 days of treatment. We should keep it—so, you know, we are doing standard observations of patients to assure safety and assure that there are no findings. I am not going to provide the data here on the call, but that is something to look at at the meeting. I think it is important to recognize that there is an on-target activity that you have identified in the lung of patients that requires tracking, and that is why anyone in this space will do things like PFTs, pulmonary function tests, and they could be following that up with high-resolution CT scans of the lung if there is anything suspicious. And the goal will be to demonstrate in the end that you have the right benefit-risk for a drug, and we anticipate that that should be fine. I will point out that—it is so standard—that there is something called the LIGHT initiative, which is a recommendation from experts about anyone who is dealing with LRRK2-targeting agents should be thinking about pulmonary function monitoring. So it is something we have incorporated into our study, and we will provide updates at an appropriate time. Noah Berkowitz: So we think it is very related. Let us look at what both diseases share here. They both have a toxic gain-of-function mutation that is associated with the disease or disease severity. Right? And we understand how there is a pathway that is activated—for, you know, and this is the endolysosomal trafficking pathway of which LRRK2 plays a central role. So our goal, as was stated earlier, is to degrade LRRK2 to at least 50%. We know that that could be achieved in both of these diseases. You know, we have reason to believe that that can direct benefit. We have done, and we have shared earlier on different calls, or publications that we have, that we have been able to do seeding experiments in PSP, that show that LRRK2 degradation can interfere with the propagation of—or tau polymerization. And overall, we are going into this disease where no doubt LRRK2's central role—for tau is the pathological tau species that is almost pathognomonic for the disease, right? I mean, it is found in all patients with PSP on autopsy, and we know that we should be able to degrade this tau or and prevent its accumulation. Operator: And your next question comes from the line of Li Wang Watsek with Cantor. Li, please go ahead. Tanya Brondra (Cantor): Hey, this is Tanya Brondra on for Li. Thanks for taking our question. We were wondering if you could shed a little bit of light on the ARV-393 data that you are planning to share in the second half of this year. You have already said that there are early evidence of efficacy. What gives you confidence in your data and the molecule itself that it is, you know, worth pursuing and what kind of data, what type of end should we be expecting in your presentation? Randy Thiel: Yeah. I will let Noah comment, but you are right to rehighlight that late last year we said that even at doses that were below what we would have expected to prove some efficacious range of exposure, we did see some responses in patients with both B- or T-cell lymphomas. And had seen good degradation of BCL6. But for the data later in the year, Noah? Noah Berkowitz: I do not think that we could guide specifically to those findings other than to say that if you are in the business of drug development, and you have a new mechanism of action, and you see a drug that can achieve a complete metabolic response in patients that otherwise have a deadly disease, you remain very committed and enthusiastic about the future for that product. Operator: And your next question comes from the line of Srikripa Devarakonda with Truist Securities. Kripa, please go ahead. Anna (Truist): Hi. Good morning. This is Anna on for Kripa. Jumping to the polyQ AR degrader, just given that SBMA is kind of a progressive disease, and an untapped market, I know it is still an early program, but I was wondering if there is any—you can—any guidance you can give in terms of the strategy here. And if there is anything you will be testing soon that can kind of support any early signs of efficacy. And additionally, for 806, wondering if there is any early indications of any interest within pancreatic, colorectal, or lung cancer. Thank you. Randy Thiel: Okay. Yeah. We will do 027—let Noah and Angela—and then come back. Noah Berkowitz: Yes. I am going to start, like, almost at the end and then turn it back to Angela because it will have to do with clinical strategies. Which is to say it is really early, so I cannot answer the question in great detail there. But I will give you a range of possibilities. Right? We already know that patients with SBMA show a pattern of muscle atrophy and fat infiltration that can be picked up clearly with the right sequencing on MRI. So that is a setup for a surrogate marker for the disease. But surrogacy requires significant engagement with health authorities and a review of the data that is out there existing and possibly new, and negotiations. So we are at the very beginning of a process, but knowing that that is potentially something that we could look at in the future. Beyond that, we know that if you are not going to rely on surrogacy, you are going to look at things like a six-minute walk test or other functional measures of patients' strength and their ability to not deteriorate, right? Because ultimately, these patients become bedbound, they develop bulbar symptoms, it does happen over the course of many years, but it is progressive, and it is trackable. So that is the strategy. I think those are things we are looking at in that range. And I will turn it to Angela. Angela Cacace: Great. Sure. Okay. So, you know, preclinically, we have—degrading the root cause of spinal and bulbar muscular atrophy, which is the polyglutamine repeat–expanded androgen receptor in muscle is the goal of the program. And so we have been able to do that with 27. And in the preclinical models, we see very robust reduction in muscle and this leads to, you know, improvement in muscle atrophy. We see increased grip strength. We see improved endurance. And all of these things lead to improved muscle energetics, and we can measure these things in terms of muscle biopsy. Right? So the goal of the preclinical program and turning into a translational program is to measure the reductions that we see in our healthy volunteer, and then ultimately in the Phase 1 trial, is to include SBMA patients also and measure muscle biopsy for reduction of AR and then polyQ AR. And then, ultimately, as Noah was saying, relate that to measures of, you know, muscle atrophy, which can be then measured as muscle integrity measures, which are muscle MRI. So fat infiltration, muscle fat volume, things like muscle volume, etcetera. And then function. Randy Thiel: Then maybe I will rewind one more clip before we get back to the KRAS question. But just as a reminder for everybody, this is the third AR degrader we have put in clinic. So vepdegestrant was our first years ago, one of the first PROTACs we put into the clinic, which had some solid signals of efficacy and good tolerability early on. The next-generation AR degrader, ARV-766, which we out-licensed to Novartis about two years ago for upwards of a billion dollars in upfront and milestones. So I just wanted to make sure that is clear. AR is an area where we have deep expertise that we will take advantage of. Now back to your second question which was around KRAS—could you please remind me what the question was? I think it was about moving into PDAC, but what was the question, please? Tanya Brondra (Cantor): Yeah. Just any early indications within PDAC, colorectal, or lung. Randy Thiel: Any indications? Yeah. You mean in terms of development direction? Tanya Brondra (Cantor): Early indications of interest. Yeah. Noah Berkowitz: So clinical trial—I do not think we are going to share where the program is, but we—other than to say that it has moved faster than expected, which I think we just mentioned on the call. And beyond that, that we have already submitted for a conference. So we will see how this plays out. Randy Thiel: So lots of things—interest. Operator: Thank you so much. And your next question comes from the line of Jeet Mukherjee with BTIG. Jeet, please go ahead. Blake (BTIG): Hey. This is Blake on for Jeet. You started getting into this earlier, but how do you think about the pan-KRAS program coexisting with 806, and specifically, is pan-KRAS designed to cover other variants besides G12D, or could it, with a clean therapeutic window, eventually replace 806 entirely? Thank you. Randy Thiel: Yeah, it is a good question, right? So G12D very specifically targets G12D whereas the pan-KRAS is intended to target all the mutants for sure. In terms of how they can coexist, you know, maybe I will make a high-level comment and then pass to Noah. But in general, we have seen them as independent programs. Right? There is certainly argument to say that a specific G12D degrader could have a profile that better allows for combination with other therapies. That is theoretical for sure. A pan-KRAS degrader that had a great tolerability profile could be quite combinable as well. So we have seen them as independent programs. Noah, anything else you would like to add on how they could move forward? Noah Berkowitz: Yeah. I think that that is the key point. We have highlighted before that one of the key mechanisms that differentiates degraders from inhibitors is our ability to continue to degrade in the presence of amplification or overexpression. So that is something that—the 35%, 40% of pancreatic cancer patients have G12D. But that leaves the other 55% or 60% of patients that have other variants. Just in pancreatic cancer alone, there is a larger opportunity for a pan-KRAS than a G12D. Differentiation—you know, we like the idea potentially of using them together, and we like the idea of being able to really overcome resistance pathways. So that is it. And that same pattern, though to smaller percentages, is true in non-small cell lung cancer, in colorectal cancer, and in other—potentially in other GI tumors as well. Operator: And your next question comes from the line of Terence Flynn with Morgan Stanley. Terence, please go ahead. Terence Flynn: Great. Thanks for taking the question. Randy, you talked a lot about the opportunity set this year from a lot of the early-stage programs in terms of data. How are you thinking about potential partnerships for these programs? I know historically you have kept some, you have partnered others. So how are you thinking about partnering versus retaining rights on each of these? Thank you. Randy Thiel: Yeah, it is a great question, Terence. Thanks. And I think, you know, stepping up a little bit, right? What we have done here is we have got a platform and a team that has produced some really high-quality clinical candidates that we think could be differentiated. You know, we have got—we was about to say three in the clinic but as we announced this morning four now just very recently with 027 going in, and 6723 for HPK1 entering the clinic later in the year. So that is five. Right? That is a lot for a small biotech to take on. And so that is helping the strategy shift from talking about this fantastic platform that we have to adding on the need for each program to be, you know, independently valued and differentiated from its competition. And I think that as we move those programs forward this year and beyond—not necessarily this year, right, but going forward—we may reach places where we decide that it makes sense for us to resource programs and where it might make sense for others to. You alluded to our history. Right? We did a deal with Pfizer for vepdegestrant back in 2021. I mentioned the ARV-766 deal from Novartis in 2024. And so partnering certainly has been an important part of our strategy in the past and will be going forward in the future. You know, as far as program by program, you know, we try to make sure that pharma companies are apprised of our progress across the pipeline so that we know if and when it comes time for us to look for a partner, we know who that might be. So I will probably save any more specific comments for the future, but it is certainly on our mind to think about how we can best move forward each program. Operator: And your next question comes from the line of Paul Choi with Goldman Sachs. Paul, please go ahead. Daniel (Goldman Sachs): Hi, this is Daniel on for Paul. So two questions for us on the spinal bulbar muscular atrophy program. So could you guide us on what is the expected timeline for the next planned data cut and what type of data should we expect from the healthy volunteer study that could help de-risk the program, including could there be muscle biopsy for measuring intracellular AR concentrations? Thank you very much. Randy Thiel: Sure. Why do I not take the first one because it is easy and I will pass to the team for the second one. With respect to the timeline, we have said we just started in clinic just now. So a bit early to guide on when we will see our first data, so I would not expect that in the very near future. But as that study gets up and running, we will look to provide some guidance on that. We have spoken a bit about the data coming from 027, but—Noah, please jump in on what we associate from the healthy volunteers. Noah Berkowitz: Healthy volunteer study, but it has a component that we will follow up in the end with some SBMA patients. So think of it as your initial—establishing the dose range, right, in a dose-escalating single-ascending dose treatment of patients that drives then to multiple-ascending dose cohorts. We will be looking at PK. There is a PD component here that is very strong that we do not have in many other studies. The PD here is we are targeting AR degradation in muscle, and we can biopsy those muscles, and we will. And that will help us choose the right dose range to move forward into later trials. We are not guiding yet to—and by the way, so that is both for the healthy volunteers in the SAD and MAD, but then in, like, this confirmatory small cohort of SBMA patients at the end, we will also be doing those biopsies. We just are—I do not think we can guide right now to when we will have those results, but we will, since we just recently dosed our first patients, keep you updated. Operator: And your next question comes from the line of Michael Schmidt with Guggenheim Securities. Michael, please go ahead. Sarah (Guggenheim): Hey. This is Sarah on for Michael. Thanks so much for taking my question. I wanted to circle back to the pan-KRAS degrader. So you have spoken a lot about the preclinical data that you have seen, but wanted to ask when you might expect it to be IND-ready. And then as well, what your current view on the opportunity is in pan-KRAS, given that, I believe, we have recently seen, you know, first clinical data from another pan-KRAS agent. Thank you. Randy Thiel: Yeah, we have not talked yet about the exact timing for the clinic for pan-KRAS. So I will not give that guidance quite yet. But although, as you can see, we are continuing to put out data at multiple conferences there. So it is moving ahead well. In terms of the opportunity for pan-KRAS, you are right that there are other programs in this space for sure. Going back to the questions from—especially from Jonathan at the start, it is a place where we are certainly going to have to be differentiated. But we think that space is one where having multiple programs across G12D and pan will be helpful. Combinations with those and other agents will be important as we move forward. Anything else, Noah, that you would like to add? I think we have said what we can on the pan-KRAS opportunity for now. Got it. Thank you. Operator: And your next question comes from the line of Sudan Loganathan with Stephens Inc. Sudan, please go ahead. Sudan Loganathan: Hi. Thank you. First, wanted to say congrats to Randy for his continuing on Arvinas, but with this new role. Looking forward to working with you and the team as Arvinas kinda takes on this plethora of exciting new projects. My first question is, you know, as you move towards initiating the Phase 1b in PSP, what specific regulatory feedback are you seeking from the agency? Separately, is there any risk that regulatory feedback in PSP alters the development strategy or timeline for the PD program? And then finally, can you outline how you are thinking about the trial design evolution in both PSP and PD—endpoints, enrichment strategy, duration, and what constitutes registrational or credible data set in each indication. Randy Thiel: Right. Okay. Thanks for the multiple questions there, and thanks for the comments. Look, to get the Phase 1b started, it is your fairly typical moving it through the regulatory authorities. With our guidance of starting that in the first half of the year, you can presume we are moving forward there, and all is on track. With respect to, you know, data for PD versus PSP, Noah, I will ask you to comment there in terms of, you know, the development could affect each program. Noah Berkowitz: Right. So—in terms of the question was—there are two questions there, right? What is the—how can the regulatory feedback impact both programs? And then there were questions about enrichment strategy and things like that. So there is no—we are just outside of the U.S., filing the IND. Right? So even though we did all this work, we have not interacted with the FDA. And so there is an opportunity here, and I think it is more opportunity rather than risk, right, to speak to the FDA about these plans. So think of our IND as mapping out what we expect to do with our development, you know, with the first trial, and opening up this dialogue because the FDA knows a lot about PSP and PD, and we are hoping to get really good feedback. There are—the risk-benefit of drugs developed in PSP and Parkinson's disease are different. So we are going to start off with PSP. You know, the intent is to eventually have a conversation about Parkinson's disease also. I do not think that we are going to go into details on a call here about the Parkinson's development strategy, because we have only guided towards what we are doing in PSP today. But suffice it to say, once we clear these discussions with PSP, then the idea would be to start moving into conversation around Parkinson's disease. You raised the question about what could enrichment strategy look like. So in PSP, it is not going to be a biomarker or a biomarker enrichment, but there is going to be a patient focus. So we will be looking at patients that have PSPRS, you know, the more severe and symptomatic form, and aggressive form of the disease—I do not remember exactly, but I think they probably represent about 40% of patients with PSP. That would be our focus for enrollment in this study. And we are going to develop a strategy, and we will guide eventually towards how this gets expanded into the broader population or even if that is not necessary. In terms of Parkinson's disease, I think what folks can start anticipating is that we are doing a lot of work trying to understand what are the biomarkers that predict outcome in Parkinson's disease using existing sources that have had major investments and a lot of publications, such as the PPMI—so the Michael J. Fox Foundation–funded Parkinson's Progression Markers Initiative. And we are using that to help identify markers. Think of it—we can start now tying that in to the biomarker changes that we see in our healthy volunteer study and that we are seeing in our Parkinson's disease study. So we are at a unique competitive advantage, having the only degrader being developed in this space, and having already shared, at least in healthy volunteers, that we have biomarker movement that we could start correlating to prognosis in Parkinson's disease. And think of this as moving ahead into—you know, we will do that with our Parkinson's disease patients. And eventually this may lead to some patient selection strategies or analyses we can do in our studies. So cannot offer more guidance than that, but gives you a sense of where we could be headed. Operator: And our final question comes from the line of Tazeen Ahmad with Barclays. Esther, please go ahead. Luke (Barclays): Hi. This is Luke on for Esther. Thanks for taking my question. For 102 in PSP, since PSP, like, does not really have any disease-modifying therapies, everything just treats symptoms, what kind of clinical endpoints, even early ones, are you going to be looking for, and what are regulators looking for to really support that move into a registrational trial later this year? And for vepdegestrant, I guess, in trying to look at worst-case scenario, if you do not have a collaboration lined up by the PDUFA, do you have a backup commercial plan? Randy Thiel: Maybe I will take the second one on vepdegestrant and then pass back to Noah for PSP. Look, as I have said, we are moving ahead well on the partnership plans alongside our partners at Pfizer. And if that becomes an issue, certainly, we are well situated with Pfizer to address that question. As the process is moving along, it is less of a concern, but certainly something we have on the radar if needed. Noah, back to you on the PSP questions. Noah Berkowitz: Yeah. I think the gold standard in PSP where there have been attempts to develop symptom-modifying drugs but not necessarily disease-modifying drugs, is the PSP Rating Scale. So we would intend to use that in our regulatory—I am sorry, our, you know, submission-quality study down the road. It is obviously going to be used in the Phase 1b, which is not going to be powered to evaluate that fully, but look for—can identify trends between what is going on with biomarkers and that tool. And something else we include in all of our studies in these neurodegenerative diseases—we did it in our Parkinson's disease, and we will be doing similar type of work in the PSP studies, even the Phase 1b—is looking at things like eye movements or other type of, you know, indicators or surrogacy for function. Right? It is a rapidly evolving space where there are some markers—you know, markers of activity, of movement in the eyes, or of muscle movement—that may be predictive of clinical outcomes. These are not accepted as registration-quality tools yet. But they are things that we are incorporating into our studies because we think they could be very revealing. Operator: I think that concludes our question and answer session. I will now turn the call back over to Randy Thiel for closing remarks. Randy? Randy Thiel: Thank you very much, operator, and thanks to all on the call for all the good questions. I will close by just saying that now that we have positioned ourselves as a Phase 1 company, the priorities are clearly to move the trials along, produce some good data, and make decisions. Right? So as we do that over the coming months, we will look forward to keeping you all updated. Thank you all very much for joining the call. Operator: That concludes today's call. You may now disconnect.

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CIFR 2025 Q4 财报电话会议

Operator: Good day, and welcome to the Fourth Quarter and Full Year 2025 Business Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question, please press 11. As a reminder, this call may be recorded. I would now like to turn the call over to Courtney Knight, Head of Investor Relations. Please go ahead. Good morning, and thank you for joining us on this conference call to address Courtney Knight: Cipher Mining Inc.'s business update for the fourth quarter and full year 2025. Joining me on the call today are Tyler Page, Chief Executive Officer, and Greg Mumford, Chief Financial Officer. Please note that our press release and presentation can be found on the Investor Relations section of the company's website where this conference call will also be simultaneously webcast. Please also note that this conference call is the property of Cipher Mining Inc., and any taping or other reproduction is expressly prohibited without prior consent. Before we start, I would like to remind you that the following discussion as well as our press release and presentation contain forward-looking statements. These statements include, but are not limited to, Cipher Mining Inc.'s financial outlook, business plans and objectives, and other future events and developments, including statements about the market potential of our business operations, potential competition, and our goals and strategies. Forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today. Cipher Mining Inc. assumes no obligation to update or revise them whether as a result of new developments or otherwise, except as required by law. Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the most directly comparable GAAP measures; you are encouraged to examine those reconciliations which are filed at the end of our earnings release issued earlier this morning. I will now turn the call over to our CEO, Tyler Page. Tyler Page: Thanks, Courtney. Morning, everyone, and thank you for joining us today. I am Tyler Page, CEO of Cipher Mining Inc., and I am pleased to welcome you to our fourth quarter and full year 2025 business update call. 2025 was a defining year for Cipher. Over the past twelve months, we completed a deliberate and disciplined transformation of the company from a Bitcoin miner with sourcing and development expertise into a digital infrastructure company purpose-built to deliver hyperscale compute. During the year, we secured long-term leases with world-class scalers, executed large-scale project financings, and advanced the development and construction of multiple data center projects. We also took decisive steps to simplify the business and focus our capital, our team, and our future squarely on high performance computing. Today’s call reflects that evolution. We are proud to announce today that we are formally rebranding the company as Cipher Mining Inc. This rebrand reflects what the business has become. This is not an aspirational shift, but a recognition of the work already done and the work we will continue to do. This rebrand represents far more than a new name or visual identity. It marks a complete transition to a business centered on stable, long-duration cash flows and long-term leases with best-in-class hyperscalers. Today’s Cipher is a developer of next-generation digital infrastructure, purpose-built to deliver power-dense, large-scale facilities to exacting hyperscaler specifications. While Bitcoin mining played a foundational role in building our power expertise and development capabilities, our identity today is centered on powering next-generation compute at scale. Therefore, we are taking steps to simplify the company and reallocate capital away from non-core activities, which I will discuss in further depth later on the call. In addition, we are deepening our bench across construction, engineering, operations, and corporate leadership to ensure our organization is fully aligned with this next chapter. The Cipher Mining Inc. brand captures who we are today, a company focused on disciplined execution, precision at pace, and performance proven through delivery. Importantly, this evolution is not a reinvention. It is a natural extension of what we already do exceptionally well: large-scale, energy-intensive infrastructure delivered with speed to market, disciplined capital allocation, and operational rigor. The same capabilities that built our platform are precisely what hyperscalers require today. So when we say we are built for hyperscale, we mean more than just building for hyperscalers. We mean that looking forward, Cipher Mining Inc. itself is built for hyperscale. We have built a spectacular foundation for growth at speed in our evolving world. This strategic evolution is the direct result of our team’s disciplined execution over the past six months. Slide five shows just how manic the pace of leasing and financing has been over the last six months. Each sequential step on our path has strengthened our relationships, enhanced our credibility, and positioned us for what comes next. We believed and have now proven that our first lease at Barber Lake was just the beginning, and have since signed a second lease at Black Pearl and a Barber Lake lease upsize. Success on the leasing side has been, as important as our equally valuable has been our transformational capital raising. Most recently, we completed a pioneering and highly successful bond for $2,000,000,000. This offering was met with exceptional investor demand, which allowed us to price it at a yield one full percent lower than our previous bond offering at 6.125%, a clear validation of our strategy and a vote of confidence from conservative bond investors in our ability to execute. This issuance secured all the remaining CapEx needed for the build out of Black Pearl, and it included a reimbursement of approximately $233,000,000 to Cipher Mining Inc. for our prior equity contributions to the site. Greg will elaborate on all of our financings in his remarks, and provide more detail on how we think about financing our growth going forward. While we build data centers, sign new leases and complete financings, our outstanding origination team still keeps coming to work every day. In addition to all of our other activity this quarter, we acquired Ulysses, a 200 megawatt site in Ohio with all necessary interconnection approvals to participate in the PJM market. The site is expected to energize in 2027, marks Cipher’s first acquisition in PJM, and is well suited for HPC applications. The Ulysses campus takes its name from Ohio native Ulysses S. Grant, a leader defined by operational discipline, moving the right resources to the right place on time through any conditions. That is the mindset behind our hopes for the future of this site and others in our pipeline. Power-forward data center campuses engineered for reliability today and adaptability tomorrow with modular designs that can absorb multiple upgrade cycles as compute technology evolves. As I discussed earlier and as demonstrated by our incredible quarter of momentum, Cipher’s rebrand reflects more than a change in name. It marks a fundamental evolution in our business model. We are now squarely focused on securing durable, long-term cash flows through contracted leases with the world’s leading hyperscalers. This model prioritizes visibility, stability, and scale. To date, we have executed two data center campus leases representing 600 megawatts of gross capacity, and approximately $9,300,000,000 in contracted revenue. These agreements carry initial terms of ten to fifteen years, with multiple extension options and translate to approximately $669,000,000 of average annualized NOI over the next ten years. Our 3.4 gigawatt pipeline combined with a best-in-class team positions us to continue to execute on this new business model by securing additional leases across sites. Cipher’s future trajectory on slide seven speaks for itself. Beginning this year, our initial leases commence with rent payments. And from there, you can see a clear and steady ramp in cash flow as additional capacity comes online. Our leases create visible, nonvolatile contractual growth over the balance of the decade. Based solely on the contracts currently executed, we expect our leases to generate $669,000,000 average annualized net operating income from October 2026 to September 2036. By 2035, we project approximately $754,000,000 in annual net operating income. What is important here is not just the magnitude of growth, but the predictability. These are contracted revenues tied to mission-critical infrastructure, with multiyear lease terms and extension options. That level of visibility fundamentally changes the profile of this company. Demand for power-dense hyperscale infrastructure continues to outpace supply, and we are confident in our ability to execute additional leases for our pipeline sites, positioning us to extend this trajectory much further. We are proud of the foundation we built in Bitcoin mining which shaped our capabilities. But as we look ahead, our direction is clear. We are building a business defined by durable, stable, long-term contracted cash flows. Therefore, we are taking steps to reposition the company away from Bitcoin mining as we continue to transition towards a pure-play digital infrastructure platform. With that focus in mind, last week, we sold our three 40 megawatt joint venture sites, Alborz, Bear and Chief, where we held 49% interests. Our interests in the sites were acquired in an all-stock transaction by Canaan, a highly reputable manufacturer of industry-leading Bitcoin miners. Given our desire for no further capital investment into Bitcoin mining, and given Canaan’s role as the supplier of mining rigs to the JV sites, Canaan is the most natural buyer to acquire our equity interests. In Bitcoin mining, vertical integration of rig manufacturer and site operator is the way of the future. We believe Canaan’s unmatched machine quality, vertical integration, technology leadership, and expanding energy platform make them the right steward for the next phase of growth at the Alborz, Bear and Chief sites. By receiving Canaan equity in this transaction, we retain exposure to the potential upside of Bitcoin mining through a fully vertical integrated platform. We see significant opportunity ahead for Canaan who has consistently delivered the best performing rigs in our fleet. We also know the team well and have strong conviction in their ability to execute, scale the platform and drive sustained growth and improved valuation over time. This transaction allows us to simplify our structure, accelerate our strategic transition, and maintain optimized exposure to the industry in a capital-light way. Given our pivot away from Bitcoin mining going forward, it makes less sense to manage a Bitcoin inventory as part of our corporate strategy. In the fourth quarter, with higher Bitcoin prices, we liquidated a substantial portion of our treasury to reinvest in the growth of the HPC hosting business. Due to recent Bitcoin price action, we have been much less aggressive in our selling, but will continue to manage the sale of the remaining Bitcoin in inventory over the course of the next year. As of February 20, we held approximately 1,166 Bitcoin. We plan to opportunistically reduce that position over time, and reinvest the proceeds into the HPC hosting business, likely exiting entirely by 2026 as we redeploy capital into contracted infrastructure opportunities. All Bitcoin mining rigs from Black Pearl have been sold, marked for sale, or redeployed to our last remaining Bitcoin mining site at Odessa. Following the sale of our JVs, and the retrofitted Black Pearl, our hash rate will be approximately 11.6 exahash per second going forward, driven by our Odessa site. At Odessa, we continue to benefit from our unique fixed price PPA, which has positioned us among the lowest-cost producers of Bitcoin in the industry. We are proud of the site’s performance and expect it to continue generating meaningful cash flow as our data center leases ramp. We maintain the flexibility to continue mining at Odessa through the expiration of the PPA in July 2027 while continuing to evaluate a potential conversion of the site to support HPC workloads. Let us now turn to a review of our current portfolio. Slide 10 provides a high-level transaction overview of our lease at Barber Lake, highlighting contracted megawatts and the key economic terms across our first lease. Now that a lease is signed and we have secured financing for the project, the next phase of value creation at Barber Lake is driven by disciplined construction, on-time delivery, and converting contracted capacity into cash flows. Construction at the site is well underway. Concrete foundations have been poured, structural steel is going vertical, interior mechanical, electrical, and plumbing work has commenced, and utility work continues to progress. All current design milestones have been achieved, and we have received consistently positive tenant feedback, an important validation as we continue toward full build out. We have secured approximately 95% of long lead equipment with delivery schedules aligned to support our completion targets. Additionally, we have secured 100% of the necessary workforce across all critical construction work streams through the duration of the project. On any given workday, there are over 400 personnel on-site driving progress safely and efficiently. Importantly, the project remains on schedule and is tracking to meet both early access and substantial completion milestones under our contractual timelines. This is where our execution culture truly differentiates us, translating signed leases into delivered infrastructure on time and on budget. We will continue to update the market as we hit key milestones but we are very pleased with the progress to date. Slide 12 provides a high-level transaction overview of the key economic terms of our triple-net lease with AWS at Black Pearl. Similar to Barber Lake, now that the lease is signed and financing is completed, we are squarely focused on delivery. At Black Pearl, data center development is on track with engineering, procurement and construction activities underway. The transition of the site is progressing as planned with Bitcoin mining decommissioning being completed this week. Importantly, approximately 85% of the infrastructure currently deployed at Black Pearl is expected to be repurposed for the AWS lease. This reuse of existing infrastructure meaningfully reduces execution risk, improves capital efficiency, and accelerates our path to delivery. Overall, Black Pearl reflects the same disciplined execution framework we are applying across the portfolio, locking in supply chain visibility early and advancing toward on-time, on-budget delivery. Turning to slide 14, Odessa is our last operating Bitcoin mining site. As a reminder, Odessa’s fixed-price power purchase agreement at approximately $0.028 per kilowatt hour continues to position Cipher among the lowest-cost Bitcoin producers in the industry. This structural cost advantage combined with disciplined operations enables us to generate meaningful cash flow moving forward should we elect to continue mining through the expiration of the PPA in July 2027. Today, we are operating 207 megawatts of capacity supporting approximately 11.6 exahash per second of hash rate. Fleet efficiency remains strong at approximately 17.2 joules per terahash. Let us now shift to an update on our development portfolio. Given the recent headlines surrounding ERCOT, we want to take a moment to provide our perspective and address any implications for our development pipeline. We will also highlight several sites where we have the highest degree of confidence in securing interconnection approvals based on our ongoing dialogue with ERCOT and the relevant transmission and distribution service providers. This past quarter, we strengthened our regulatory expertise by hiring Lee Bratcher as Head of Policy and Government Affairs. Lee brings to Cipher extensive industry experience, a deep understanding of the Texas and federal energy regulatory landscape, and strong relationships across ERCOT and the TDSPs. With his extensive understanding of ERCOT’s processes and evolving rulemaking, we have a great degree of confidence in our ability to navigate this environment effectively. As a reminder, Cipher welcomes all legislative efforts to clean up the lengthening interconnect queue, and we have been consistent that any new rules requiring posting of deposits and acceleration of serious developers is a good thing for us. The recent developments represent a positive step forward for the data center industry in Texas. Earlier this month, ERCOT discussed the potential implementation of a batch study process, and that the existing development and stakeholder process is expected to last until June 2026. While the final batch process remains to be determined, we believe we have made enough significant progress at certain development sites to be included in early batches with firm loads. We expect these sites to remain on track for the energizations we have previously communicated. Specifically, the sites on slide 16 are either already interconnection approved or in the final stages of the current approval process. At the top of the slide is Stingray, our 250-acre campus in Andrews, Texas. The site is fully interconnection approved for 100 megawatts and remains on track to energize in the fourth quarter of this year. Substation development is already underway, and with the interconnection secured, the load is firm. Given the site’s approval status, timeline to power, and quality of location, we are increasingly confident in securing a lease in the near term. This confidence stems from having engaged with a broad range of interested tenants and having now identified a preferred partner with whom we are in advanced lease negotiations. As lease pricing continues to move in our favor alongside growing demand, we expect lease economics here to be among the most favorable we have achieved to date. And while the site has 100 megawatts of gross capacity today, we are actively exploring behind-the-meter solutions to expand capacity over time, not only at this location, but across our broader portfolio and pipeline. Reveille in Toutoula, Texas is also fully approved for 70 megawatts and remains on track to energize in 2027. We have already initiated substation development. The project falls below the megawatt threshold that would trigger the batch process, and its interconnection is already approved. Ulysses, our recently acquired 200 megawatts site in Ohio, has all necessary approvals to participate in the PJM market, not ERCOT, and is expected to energize in 2027. We are in advanced discussions with potential tenants regarding an HPC lease at that location. Looking to the rest of the pipeline in ERCOT, the McLean site has all studies approved, deposits have been funded with the TDSP, and the land is secured. The site is undergoing the final interconnection approval processes. Based on this information, we expect the energization timeline and capacity of this site to be unaffected by any new batch processes. For each of McKeska and Colchis, studies have been submitted, all requested deposits have been funded, and the land has been secured. This makes them likely candidates for an early batch as well. We continue to push all remaining workflows forward and fund all the deposits as soon as possible to ensure that the energization timelines are preserved and the loads are firm. This slide provides an overview of our current operating and energized capacity as well as outlines our full future pipeline. We are very pleased with the composition of the portfolio today. We also remain confident in both our regulatory positioning and the strength of our roughly 3.4 gigawatt development pipeline, all being prioritized for HPC. Our development pipeline is the result of years of sourcing, permitting, and infrastructure work, and it positions us well to serve the increasing demand we are seeing. We believe the value of this pipeline lies not only in megawatts, but in the credibility Cipher brings to those megawatts, both in our ability to sign leases with the best tenants in the world and in our ability to construct and operate data centers. Our conviction has only strengthened since last quarter. We believe that Cipher is among the best positioned companies in the world to seize the near-term opportunities emerging from the growing power shortfall. While we have made significant progress to date, we are still in the early innings. We expect our pipeline to expand, additional leases to be executed, and Cipher Mining Inc. to further solidify its position as a global leader in data center development and operations. I will now turn the call over to our CFO, Greg Mumford, who will walk through our financing activities, capital strategy, and the financial results in more detail. Thank you, Tyler, and good morning, everyone. Over the past year, Cipher took significant steps to reshape the financial profile of the company by securing long-duration contracted cash flows in HPC hosting, by expanding relationships with investment-grade counterparties, and by broadening our access to capital. Today, we are building a platform designed to support scalable growth while minimizing dilution and maintaining balance sheet discipline. During the fourth quarter, we upsized our lease with FluidStacks supported by Google, we executed a long-term lease agreement with AWS, and we completed two high-yield bond offerings that fully funded Barber Lake through substantial completion. Subsequent to quarter end, we successfully financed the development at Black Pearl. Importantly, each successive transaction was completed on improved economic terms reflecting a strengthening credit profile and increasing investor confidence in our long-term strategy. Before turning to our financial results, I would like to highlight our project-level financings, which were central to derisking execution across Barber Lake and Black Pearl. Collectively, these transactions secured long-term fixed rate non-recourse financing that fully funds each project through substantial completion. As a result, we have eliminated construction financing uncertainty, isolated project-specific risks, and reduced reliance on near-term capital markets access. This disciplined financing model creates a repeatable framework for scaling development while protecting corporate liquidity. In our first issuance in November, we raised $1,400,000,000 by selling five-year senior secured notes at 7.125% to fund the development of Barber Lake. The transaction was met with strong institutional demand, resulting in a multiple-times oversubscribed order book and broad participation from high-quality credit investors. Following the Barber Lake lease upsizing at improved economic terms, we executed a $333,000,000 tack-on at the same rate, bringing the total debt financing to $1,730,000,000. Together with our previously invested equity, and $477,000,000 of additional equity contributed in connection with the financings, Barber Lake is now fully funded through substantial completion. Earlier this month, we completed another project-level financing, raising $2,000,000,000 by selling five-year senior secured notes at 6.125%. The transaction was significantly oversubscribed by 6.5 times, with approximately $13,000,000,000 in orders and broad institutional participation. We allocated the bonds to over 200 accounts, roughly double the average high-yield transaction. Cipher now has a significant group of institutional credit investors following our story. More importantly, the financing fully funds Black Pearl through substantial completion and included a $233,000,000 CapEx reimbursement of prior equity contributions, further strengthening corporate liquidity. Since issuance, our bonds have traded at yields below original pricing levels, reflecting improved risk perception and continued investor confidence. Across both projects, we have now secured funding certainty through substantial completion using long-term fixed rate nonrecourse debt aligned with contracted lease revenue. As our capital strategy continues to evolve along with our corporate development efforts, we will remain grounded in core principles. Cipher’s approach is built around maintaining a flexible and conservative capital structure, matching contracted cash flows with long-term financing, and protecting the corporate balance sheet. We are currently prioritizing a disciplined approach to consolidated leverage, a preference for nonrecourse project-level financing through construction, and staggered debt maturities as we scale. As additional leases are executed, we expect to continue utilizing project-level nonrecourse financing structures through construction. Our HPC lease structures provide long-term highly predictable cash flows supported by strong counterparties, which we believe support attractive financing terms and a declining cost of capital as the business matures, as evidenced by the sequential improvement in pricing across our recent issuances. Over time, as projects stabilize, we expect opportunities to refinance and recycle capital into future developments, supporting a self-funding growth model. At the corporate level, we ended the quarter with $754,000,000 of cash, cash equivalents, and Bitcoin, providing significant flexibility to fund equity contributions for future projects. We remain disciplined in prioritizing capital sources that limit shareholder dilution. This includes opportunistically monetizing our Bitcoin inventory as we transition the business, as well as exploring short- and long-term financing arrangements. As the business continues to mature, we may evaluate additional sources of non-dilutive capital to bolster corporate liquidity. Let us now turn to a review of our financials for the period ended 12/31/2025. Our financial results reflect the strategic evolution Tyler described, a deliberate repositioning of the company as a leading developer and operator of data centers purpose-built for AI workloads. In the fourth quarter, we earned revenue of $60,000,000, down from Q3, driven by the difficult Bitcoin mining environment and Bitcoin price decline. We expect revenue from Bitcoin mining to further decrease as we finish decommissioning miners at Black Pearl this month. For the quarter, we reported a GAAP net loss of $734,000,000. Importantly, the majority of this reported loss was driven by the change in fair value of certain noncash items and transition-related impacts rather than core operating cash performance. The largest component was the $450,000,000 noncash mark-to-market associated with the embedded derivative liability of the 2031 convertible notes we issued in September. As the price of our convertible notes increased following issuance, the liability was revalued, resulting in a noncash loss. Shortly after issuing the notes, we increased the authorized shares available to the company for issuance which changed the accounting treatment. The conversion feature now qualifies for equity and will no longer be subject to fair value accounting going forward. In addition, we impaired various parts of our legacy Bitcoin mining business as we focus on transitioning the company. As we decommission mining at Black Pearl, we recognized a $90,000,000 write-down that reflects a fair value adjustment on the miners moved from PP&E to assets held for sale. We also recognized a $45,000,000 impairment on the PP&E at the Odessa facility caused by the recent depressed cash price. We recognized an unrealized loss of $39,000,000 on our Bitcoin holdings, and a smaller realized loss on our Bitcoin sales. We will continue to opportunistically monetize our remaining Bitcoin, likely exiting the position entirely by 2026. As we reposition toward contracted HPC infrastructure revenue, we expect volatility from Bitcoin-related items to diminish over time. On the balance sheet, the most notable changes this quarter were increases in restricted cash and long-term debt following the successful financing at Barber Lake. Proceeds are classified as restricted cash as they are dedicated to project construction. As of 12/31/2025, we had $754,000,000 of unrestricted liquidity, including $628,000,000 in cash and $125,000,000 in Bitcoin. Pro forma for our financings, we maintain substantial liquidity, fully funded construction across both projects, and long-term fixed rate project debt. Cipher is well positioned with the financial flexibility needed to execute on our next phase of growth. Before we conclude, let me briefly summarize the strength of our overall financial position. Barber Lake and Black Pearl are both fully funded through substantial completion. We have successfully secured long-term fixed rate nonrecourse project-level debt, reinforcing the durability of our capital structure. At the corporate level, we ended the year with substantial liquidity, which has further improved following the completion of our Black Pearl financing, including the $233,000,000 CapEx reimbursement. And importantly, we do not anticipate the need for additional equity to fund our currently contracted developments. As we transition to long-duration contracted infrastructure cash flows, we believe this disciplined capital structure supports sustainable growth and long-term value creation. Thank you for your continued support. Tyler and I would be happy to take your questions at this time. Operator: Thank you. Please press 11 again. Our first question comes from Michael John Grondahl with Northland. Your line is open. Hey, thanks for all the details. Tyler, it seems like Stingray and Revale are pretty much baked for leases. Michael John Grondahl: Is there anything else to call out there just in terms of demand and then secondly, could you talk a little bit about the other four and just the demand environment you are seeing for a lease, Ulysses, McLennan, Macassa, and Colquist, which, you know, have some power coming on in late 2027 or 2028. Tyler Page: Sure. Thanks, Mike, for the question. Yes, I think it is fair to say, as I mentioned on the call, we are pretty far along with Stingray, and we have a preferred tenant there. We just need to sort, tick and tie the final boxes. I will remind everyone because I get lots of questions around the timing of leases. And as we showed in the deck, the pace of what we have been doing around here has been pretty frantic. I would say that level of demand continues, but I remind everyone if you are talking about a hyperscaler, a company that has hundreds of thousands or even over a million employees, even though they are very large, when you are signing contracts for billions of dollars of payments, the approval of those contracts takes a long time. It goes through a lot of groups. They get signed off on. Sometimes they go all the way to the board to get signed off on, and that process just takes some time. So what I would say is on Stingray, we are well along in that process. You are never done until you are done, but we do have an anticipated tenant there, and I think that will be done reasonably soon if everything stays on track. Reveille, I would say, is a little bit different bucket, actually. There is a lot of interest in Reveille, but given that it is only 70 megawatts as opposed to some of our, like, several 100 megawatt campuses, that is a different range of discussion. I would say for most hyperscalers that would want to use that site directly, that is a little small for them. What is interesting about Reveille is the site continues to advance. There is a lot of desire for Neo Clouds to be successful both from the equipment providers, the hyperscalers themselves, there is a lot of benefit to using a Neo Cloud. They can often move more quickly, more nimbly. And that 70 megawatts, that is a more interesting site for a different crowd. So I would say there is a lot of interest in that site. We are in process on many discussions of levels of interest. And I think what had slowed us down previously was, you know, we have had a relentless focus on the credit quality of our tenants. As the industry continues to move really quickly, there are many interested investment-grade participants in this ecosystem that are willing to think about things like credit wrappers, sort of prepayments, etcetera. And I think, you know, some combination of that gives us a different opportunity set at Reveille. But still very active. I would say that is a little further along in terms of finalizing. That is, it will take a little bit longer to finalize something there. But very busy discussions. I would say Ulysses is the other one I would call out. 200 megawatts in Ohio, PJM. We have significant interest from multiple hyperscalers in that site. We are in the diligence process on the site data rooms and so forth in advanced discussions with people that we know well, new people, etcetera. So I think very good prospects for that site. But, you know, moving quickly, but things take time. The general backdrop for demand still remains high. I think there was a frantic increase in the pace in the fourth quarter and I would say that pace continues. I think it is still a very favorable environment to negotiate economics from our side of the table. So I am very bullish about all these sites eventually having tenants. When you move beyond Stingray, Reveille, and Ulysses, those are the 370 megawatts that are currently being marketed for leases. We are in earlier discussions on McLennan, McKeska, and Colchis. As we discussed on the call, we are very confident about the of those receiving their final interconnects given where they are in the approval process. But we are awaiting that final approval. Given the shifting sand in ERCOT, we are confident we will either get those approvals or they will be in a very early first batch when the batch process is finalized, if that is the case. And that keeps the energization timelines we had expected previously on track. I think we need to get a final interconnect to advance those discussions beyond the early discussions. But fair to say on an early basis, given the size and location, there is hyperscaler interest in all three of those sites. Michael John Grondahl: Very helpful color. Thanks, and good luck in 2026. Tyler Page: Thanks, Mike. Operator: Thank you. Our next question comes from Christopher Charles Brendler with Rosenblatt Securities. Your line is open. Christopher Charles Brendler: Hey, thanks. Good morning, and congratulations on the progress here. We are shifting to away from mining and towards HPC. I think there is a tremendous progress obviously in the in the fourth quarter, I guess we now sort of focus on execution. Can you talk about some of the new hires you have made as you sort of build out the team and shift, you know, the bench more towards HPC and data centers away from Bitcoin mining. You mentioned some higher. I just want to get a little more detail there. Thanks. Tyler Page: Sure. Thanks for the question, Chris. Yeah. I would say we philosophically still take the same approach to hiring, which we always have, which is, if you look at versus most of our competitors, think we operate a little more leanly. We are trying to hire the very best people in the world at what they do and have fewer of them because, generally, we find those people to be much more productive and have a much deeper impact on the success of the company. What we have really been trying to add is depth. There are some spots where we plugged some gaps. For example, we highlighted hiring Lee Bratcher. I think having someone who is probably more plugged in the scene in Texas as far as ERCOT, the TDSPs, the regulatory landscape. That has just been an incredibly helpful hire as we navigate the ongoing sort of the interconnect debates in Texas. So that is something where, you know, rare spot where we have added something we did not have before, of excellence to the team. Beyond that, what we have really been adding is depth. So we have always had a very, very strong construction, engineering, and operations team. But I think as we evolve towards this new model that we want Cipher Mining Inc. to become, we want to be a company where basically, in addition to the very steady cash flows coming in from our already signed leases, we are finding a couple new sites a year, signing a couple new leases a year, and building a couple new data centers per year to continue to stack up on those recurring cash flows. What we are trying to build the workforce for is to accommodate that world really well. So I have 100% faith and confidence in the team we had to execute and build, for example, Barber Lake and Black Pearl on time. What we are trying to build towards is more depth so that we could build four data centers at once. Let us say we sign a Stingray lease and a Ulysses lease, and we are managing all four of those projects at the same time because we signed them in the next two months. We needed to add depth. I think the other aspect is we have excellent people, we get a lot of leverage out of them. But, you know, if you look at a counterparty like AWS, they may have 50 engineers engaged on their project. And it is helpful if we have more than sort of one or two people across the table dealing with all 50. So what we have added is a whole bunch of depth to the construction, engineering, operations bench. Typically, ex-Hyperscaler, we have continued to tap the very rich vein we have always had from Google. That is by far our biggest alumni network we have got at the company. Several new hires from Google. We have hired senior talent from Apple and others. So it is really depth at the senior level across those functions. Christopher Charles Brendler: That is great. Just one quick follow-up. And you mentioned Lee. Congratulations on that hire. It sounds like and it seems like even though the ERCOT process, the new process, the batch process has not really been totally finalized yet, but it really should increase visibility and potentially reduce some of the headaches that we have had recently with the overwhelming request they have had at ERCOT, you know, over the past year or two. Is that a fair way of positioning it that you probably feel a little more confident in your ability to get an approval for the interconnections that you have in the queue? Or are we still in a period of great uncertainty there? Tyler Page: Yes. It is a great question. I think this advancing scene in Texas is a good thing for us. It is a good thing for serious operators and developers because at a high level, what they are trying to put in place and finalize is how to navigate this interconnect queue that is stretched out for, you know, hundreds of gigawatts of requests where everyone in the world knows some of those are duplicative or less serious, etcetera. I think also just from a technical standpoint, they have got to figure out, you know, evolving to a new world where, if so much is coming online, their whole process of conducting studies to understand impact on the grid needs to understand, you know, other large interconnects happening simultaneously. And so bringing order to that is a fantastic thing for us. And that is because we have a great track record of developing things, being serious people, putting down deposits, delivering when we say we are going to deliver, etcetera. We are exactly the type of company they are trying to optimize the process for. So, you know, finalizing the optimization, they had talked about a few weeks ago that is going to, this batch process will take until the summer to line up and get finalized. But given where we are, what we have submitted, what the anticipated requirements are to have a firm load in that early batch, we are very confident in the sites we mentioned on the call. So overall, this is a good thing. Like I mentioned, we are ready to send a deposit as soon as people are ready to accept it to prove that we are serious. And we have got tenants interested to build big data centers. So it is a good thing going on in Texas. It just takes a while to sort of finalize what it is going to exactly look like. Christopher Charles Brendler: Awesome. Thanks, Tyler. Appreciate it. Operator: Thank you. Our next question comes from John Todaro with Needham and Company. Your line is open. John Todaro: Hey, thanks for taking the question and congrats on the progress here. Going to the 207 megawatts at Odessa that is still currently Bitcoin mining, I guess just what would the next steps be in determining suitability for HPC? And then I guess, just more color on the kind of the end plans for Odessa. Tyler Page: Sure. Thanks for the question. So Odessa is a little bit different than Black Pearl. You know, as we mentioned at Black Pearl, that is a site that was half built for Bitcoin mining, but we always built it with an eye towards being able to sort of upgrade or evolve that data center to HPC. And so we are able to reuse 85% plus of what is already there. Happened a little bit quicker than we were anticipating, but, you know, all a wonderful thing. I will contrast that with Odessa, which is a site we built, like, five years ago with an eye towards having a five-year PPA at the site, and so it is a containerized data center. That works fantastically well for Bitcoin mining. We have an amazing low fixed price there, roughly a little bit less than $0.028 per kilowatt hour. And so Bitcoin mining economics are excellent there. That PPA runs out in July 2027. So our options are restrike the relationship we have with our counterparty, Luminant, on the PPA and the site there. We also own additional land around that site, so we do have a lot of optionality there on what we can do. We are very well positioned. We have been anticipating this for a while. And so if we come to an agreement with an interested tenant, there are multiple tenants that are interested in putting an HPC site there, and we come to an agreement with Luminant about how we would recut the PPA and the ground lease there and how that would be set up. We will shift it to HPC as soon as there is a lucrative deal on the table. What I would say is there is not a ton of time pressure for us to do that because the Bitcoin economics there are still really, really strong given the low power price. So if we can herd all those cats and make it happen sooner rather than later, that is great. That also gives us an opportunity to really be picky and choosy about the economics we can get there because we are making great cash flow there with Bitcoin mining. However, as I mentioned, we do not have a desire to put more CapEx into mining. That is not going to happen. And so the kind of outside date for us to do something there would be July 2027. Really. John Todaro: Got it. Understood. That is very helpful. Thank you. And then just as we look about some of the additional HPC customers coming in, is there still interest in diversification and the opportunity to get maybe even sometimes better lease economics with slating and some of the Neo Clouds as you talked about at Reveille. I guess just how are you thinking about different customers? And if you can say, would we be expecting kind of same customers you signed before as kind of the front runners for some of these sites, are they newer customers? Tyler Page: So, I mean, I would say the customers we have now are the customers in the world, and I would take as many leases from possible as possible from them. So I hope we will do more business with them in the future. They are interested in more sites, and so I hope we can connect the dots on that. That said, we are talking to all the other hyperscalers and pretty much all the neo clouds in some way, shape, or form, as well as equipment manufacturers that are interested in the success of those NeoClouds. So I do think we have a lot of options. As I have mentioned in the past, in our first sites, we really prioritized the quality of the counterparties because we wanted to debt finance the build costs. Obviously, that has been an overwhelming success. If you look at where we raised our debt to build those sites and, frankly, where it is traded, you know, both of those bonds have traded up in the market. Every time I see nervousness around execution and the equity market swinging around, I laugh because I assure you bond investors are much more focused on execution risk and our bonds are trading well above par. I think that as we evolve, now that we have got those sites fully financed and we have got the bedrock foundation of our HPC business set, we can afford to think about diversification. I think we would love to work with the other hyperscalers. As I mentioned, we are in discussion with them. I do think a site like Reveille really lends itself to a different category of tenant, again, thinking about how we control whatever risks and exposures we would have there. And so overall, I think that opportunity is there, John, but, you know, listen. Our tenants are awesome. And if we end up doing all our leases with them, that is fine. The other thing is there are some efficiencies working with the same tenants because they tend to have similar design philosophies. And a lot of the hard work that goes into execution is the upfront work that has to be done on the engineering side. Having a kind of consistency and sort of having at that with a particular tenant puts us in a good spot to be efficient on the next build as well. John Todaro: That is great. Thanks for that, and congrats on all the success so far. Thank you. Tyler Page: Thank you. Operator: Thank you. Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Your line is open. Brett Knoblauch: Tyler, just on the ERCOT kind of noise, if you will, over the past few weeks. Is that causing maybe the big hyperscaler tenants to shift their focus from maybe Texas to outside of Texas, or are they still very much demanding Texas assets? And, you know, has it caused any increase or, you know, more hesitation to, you know, committing to a specific site if the energization date might be in flux or just broadly, how would you characterize the impact of what ERCOT is doing on hyperscaler demand in Texas? Tyler Page: So, I mean, it is hard for me to say, you know, on a relative basis within the hyperscalers, like, we now like Texas less versus Ohio or Pennsylvania or Virginia or something like that. What I would say is I have not seen any decrease in interest. There is a ton of interest. I think the thing to keep in mind that we have been very active on, we mentioned briefly on the call, is that all of the hyperscalers are also looking at behind-the-meter solutions now as a way to faster power. I have been saying consistently on these calls that West Texas is going to be the data center capital of the world for over a year now. I read a recent JLL report that came out that they think that might happen, and it might shift from Northern Virginia. So I am excited to see one incumbent bend the knee. I am sure the rest are going to as well over time. A lot of that has to do with the fact that if you look at sites like ours at Stingray and Barber Lake, there is a whole ocean of natural gas under our feet there. And we are the ones that can get to it. So I think, you know, high level, hyperscalers understand the complexity of the interconnection process. They are focusing very much on behind the meter where Texas is uniquely suited to that. And I have not seen any change in how they have interacted and their interest in Texas. Brett Knoblauch: Perfect. And maybe just following up to that. On the collocating generation with the data center. To what extent have you guys looked into or expecting to do that, you know, in the foreseeable future? Tyler Page: We have some of our best resources dedicated to investigating it now. We are speaking about it with our counterparties who are also very interested in it. As I mentioned, we have access that is somewhat unique to natural gas pipeline capacity, etcetera. So there is still a lot of work to do. I think everyone is interested in the timeline potential of that. It is very topical. There remain questions around engineering, financing, etcetera. But we have all the ingredients and our best people working on it. So I am personally very bullish that that will be a major part of our portfolio over time. Just may take time. It is hard for me to give an exact time estimate, but keep in mind, the desire for that springs from a desire to get to markets faster with large quantities. So I am very optimistic on it. Brett Knoblauch: Awesome. Thank you, guys. Operator: Our next question comes from Reggie Smith with JPM. Your line is open. Reggie Smith: Good morning, and congrats on all the progress. Hey, Tyler. I think you categorized Stingray as being in advanced discussions, and I think Ulysses used the same term. I believe you said advanced discussions. And this, I am somewhat surprised given that you just acquired Ulysses in December. Maybe talk about one, do I have that right? And, you know, how do you define advanced and as it relates to Ulysses, are you seeing discussions progress faster than what you have historically seen with new sites that you have acquired. So maybe thinking back to how Barber Lake discussion started, post deal close and compare that to where Ulysses is today. Thank you. Tyler Page: Sure. So fair to say we are furthest along with Stingray. Like I mentioned, we have a counterparty we have identified as our preferred counterparty there. I am optimistic we will get it finalized. As I have caveated in the past, you know, you are never done until you have a signed lease. But, you know, I would not be speaking so confidently about that if I were not so confident in that being done soon. So I feel very good about Stingray. And I think that will be forthcoming before too long. Ulysses is not as advanced as that because, given your point, Reggie, we just acquired it recently. That is a site that some hyperscalers were familiar with. I think I mentioned in the past that that was a site that originally, I think, in their databases had some issues around the land plot. We solved that land plot and found a different spot. I think the fact that it has got near-term energization and it is near Columbus, Ohio, which is a after data center market, as well as the fact that we have ample land there, and it is also one of the last legacy interconnection agreements in PJM without a large deposit. There are reforms coming to that market as well. All make it very attractive. So we are in discussions, but not as advanced as Stingray. We have multiple hyperscalers in data rooms doing their diligence, beginning thinking about engineering discussions that we will have to iterate that then get translated into lease terms. So I am very happy with where it is, and it is further along than other things not named Stingray in the pipeline, but that is where it is right now. Reggie Smith: Got it. And if I could speak to one last follow-up then. Just thinking about the ERCOT proposals, and I am thinking about, you know, there has been, I guess, historically, a pretty speculative market, people buying land in Texas and then trying to flip it to larger companies like yourself. I guess, how do you think this would change that dynamic? Does it slow the pace of deals? Might it make people who are not well capitalized more incentive to do a deal with you guys, like, you know, it is obviously down the road, but, like, how do you think this plays out in the market for sites in Texas? Tyler Page: It is going to be really good for us. I do not know how it will impact other players in the space. I mean, I think if you look at the history of the sites we have acquired, we have often acquired sites from earlier stage folks that were kinda making a bet and could not do things like put down big deposits to demonstrate how serious they were, and sometimes those timelines got away from them. And we managed to get really attractive deals. Again, increasing the hurdles to demonstrate how serious and nonduplicative and well capitalized you are, those are all fantastic things for us because that means the people that would speculate in the past cannot do that as easily, and they are going to have to make those sites available for us. So like I said, these kinds of advances that they are talking about in Texas are very good for Cipher. Probably less good for the wildcat or speculator, you know, grid cowboy. But those guys are also pretty resourceful. I am sure they will find ways to adapt. Reggie Smith: Yeah. No. That makes sense. Congrats again on all the progress. Tyler Page: Thank you. Operator: Thank you. And that is all the time we have for questions today. I would like to turn it back over to Tyler Page, CEO, for closing remarks. Tyler Page: Okay. Thank you very much to everyone for joining our call. The progress is just getting started, and we cannot wait to tell you what is next for Cipher Mining Inc. Thank you for your time today. Operator: Thank you for your participation. You may now disconnect. Everyone, have a great day.

82天前Insight Analytics约5分钟阅读

PLNT 2025 Q4 财报电话会议

Operator: Good morning, and thank you for joining today's Planet Fitness Q4 earnings conference call. After prepared remarks by management, there will be an opportunity to ask questions. Please limit yourself to one question and one follow-up. If you have additional questions, please rejoin the queue. I would now like to hand the call over to Stacey Caravella, Vice President, Investor Relations for opening remarks. Please go ahead. Stacey Caravella: Thank you, operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer, Colleen Keating, and Chief Financial Officer, Jay Stasz. They will be available for questions during the Q&A session following the remarks. Today's call is being webcast live and recorded for replay. Before I turn the call over to Colleen, I would like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. I will now turn the call over to Colleen. Colleen Keating: Thank you, Stacey, and thank you everyone for joining us for the Planet Fitness fourth quarter earnings call. Our strong 2025 performance is a direct result of our discipline and focus on our four strategic imperatives. I want to personally thank our franchisees and our team members. Their passion is what fuels this brand. We ended the year with approximately 20,800,000 members, and a global footprint of nearly 2,900 clubs, reinforcing the quality of our member experience and our compelling value proposition. Anyone can get a great workout at Planet Fitness for an incredible value. Our financial performance was strong across the board for the year as well. Same club sales grew 6.7%, revenue increased 12%, adjusted EBITDA 13%, and we delivered 19% growth in adjusted diluted EPS. Importantly, we opened 181 new clubs and added 1,100,000 net new members in 2025. This growth occurred during the first full year of our new Classic Card membership dues, proving that the value of our brand remains unique in the industry. The progress we made on both our top line and new club growth is evidence of our powerful scale and reach, and the strength of our team. Our scale provides a foundation to introduce our brand to even more people looking to improve their physical and mental health globally. There was no better way to wrap up the strong year than by taking center stage as the presenting sponsor of Dick Clark's New Year's Rockin' Eve, as we have done for the past decade. With 20,000 purple hats blanketing Times Square, we ensured Planet Fitness was the brand millions of people saw as they set their 2026 wellness goals. As we continue to grow our international presence, we see New Year's Rockin' Eve as an opportunity to put the Planet Fitness brand on a global stage. We are seeing momentum as we execute against our four strategic imperatives: redefining our brand promise and communicating it through our marketing, enhancing our member experience, refining our product and optimizing our format, and accelerating new club growth. Let us dive into the specific progress we achieved across these areas during 2025. I will start with redefining our brand promise. A key driver in member growth was our intentional focus on the next generation of fitness enthusiasts. The 2025 High School Summer Pass program yielded our most successful results to date, with more than 3,700,000 teens completing more than 19,000,000 workouts, an all-time high. We believe the strong year-over-year results were enhanced by the marketing emphasis on our expanded product offering, showcasing that our clubs have a strong complement of strength equipment so members can achieve the workouts they desire at Planet Fitness. We also augmented our social media strategy to reach our younger consumer and increased our use of influencers to promote the Summer Pass. Through the end of the year, we converted 8.3% of teen participants to paying members which represents an elevation in conversion over the past two years. Our strong conversion rate reflects how young people prioritize their well-being, and we provide them a judgment free environment to start or continue their fitness journeys. Our success would not have been possible without our club team members, who are instrumental in ensuring the participants' first experience with Planet Fitness was positive, laying the groundwork for them to become members. We continue to lean into our We Are All Strong on This Planet campaign which effectively showcases our best-in-class equipment and supportive atmosphere. This follows our 2025 strategic shift in our messaging approach, leading with the compelling “Why Planet Fitness” message followed by a “Why Planet Fitness now” call to action, to reengage lapsed members and attract new ones. Because this campaign resonated so strongly last year, we extended it into 2026. By maintaining this consistency, we avoided the cost of developing a completely new creative from scratch while updating creative assets focusing on differentiators for our brand. This efficiency allowed us to redirect those savings into high-impact working media to drive even greater reach. The agreement with our franchisees to shift a portion of contribution from the Local Ad Fund to the National Ad Fund for 2026 beginning in the second quarter allows us to move faster in executing on several strategic initiatives. Beyond driving efficiencies by centralizing more of our ad spend, we are accelerating high-impact technology projects including AI-enabled CRM and dynamic content optimization to reach new members more effectively than ever before and invest in an AI-enabled predictive churn model to help us increase member retention. Marking his first year with us this month, Chief Marketing Officer Brian Povinelli has made rapid progress in scaling our marketing capabilities. Key milestones include strategic hires who are driving AI-enabled member experience initiatives, national media buying, and CRM work, a new social media marketing strategy as well as augmenting the team responsible for our perks and partnerships. These moves will help us refine and better personalize our messaging, drive marketing spend efficiencies, and more effectively engage and retain members. We are proud of the progress we have made so far and our strong join volume last year, and we are excited for the impact these new leaders will make on our business moving forward. I enjoy spending time in our clubs, and I particularly like spending time in our clubs in early January to hear from our club managers and get a firsthand look at volume, club traffic, and what pieces of equipment are getting the most usage. Last month, I spent time in several of our corporate clubs that are part of the new Black Card amenities test. I tried a few of the new Black Card Spa modalities we are currently testing, including the dry cold plunge and the red light sauna. I spoke with members who were using the new amenities as well to hear their feedback, and it was resoundingly positive. We see an opportunity to drive both joins and upgrades as well as enhanced retention with these new amenities. It is our opportunity to democratize recovery and wellness just as we did with fitness thirty years ago. Turning now to member experience and format optimization. We are elevating the member experience through a sophisticated data-driven approach, strategically leveraging technology to drive deeper engagement and strengthen member retention. Our mobile app is a prime example. It remains the top download in the health and fitness category, serving as a touch point for our community. We know that the first 100 days of membership influence long-term retention. Our data indicates that early engagement, both digitally and in club, contributes to higher lifetime value and the emotional connection to unlock our next wave of growth. Looking ahead, we are piloting AI-driven tools to augment our in-club trainers, providing members with personalized coaching and workout support. We are also leaning into the evolving health landscape, specifically regarding GLP-1. As these treatments can lead to a loss of muscle mass, it is essential that users incorporate strength training to maintain their overall health. Our judgment free environment makes us the natural partner for this growing demographic. A recent survey conducted by one of our franchisees indicated that roughly 50% of people who take a GLP-1 consider a gym membership. We see positive indicators for continued growth and demand for our offering as GLP-1s become more accessible through lower pricing and pill formats. To that end, we are seeing excellent early results from our Perks partnership with Ro. While it is still early days, and too soon to run a victory lap, we can share that this has been our most successful Perks program yet, with high download and conversion. Collaborations like this help to position us at the forefront of a major shift in consumer wellness. Beyond digital perks, we are focused on the physical member experience through format optimization. We believe in giving members the ideal equipment mix designed for them to complete their workout their way. Not only has member response been favorable, the response from our franchisees has been overwhelming. In 2025, 95% of those who opened or remodeled clubs chose an optimized format. We concluded the year with nearly 80% of our entire system featuring some version of a format-optimized layout or equipment offering. And finally, our efforts to accelerate new club growth. Our focus is on leveraging our collective size and scale to defend and expand our industry leadership position in the HVL space. Thanks to an incredible push by our total system, particularly in the last several weeks of the year, we opened 104 clubs during the fourth quarter, an all-time quarterly high, for a total of 181 openings in 2025. Let me say that again, because it bears repeating. This is the highest number of Q4 openings in our history. While the real estate market showed a few signs of easing in 2025, it remains highly competitive. We are navigating this by partnering with franchisees to demonstrate our unique value proposition to landlords, specifically, how Planet Fitness drives foot traffic that benefits the entire retail center. Furthermore, we are leveraging industry relationships to capitalize on prime site opportunities emerging from retail bankruptcies. We are also seeing success with franchisee-led acquisitions where they purchase small portfolios of regional gyms and convert them to Planet Fitness locations—an effective way of expanding our footprint in high-demand tight real estate markets. This can be beneficial from a build cost standpoint, as electrical and plumbing is already in place, and from a financial ramp standpoint as we have seen a solid percentage convert to Planet Fitness, so the club has a member base and cash flows from day one. Our international expansion remains a key growth pillar. We are focused on scaling our presence in existing markets like Mexico, Australia, and Spain, while strategically entering one to two new markets annually. A prime example of this momentum is our recent entry into Northern Mexico, with a new franchisee set to develop Tijuana and Mexicali. We have also partnered with a bank to lead the Spain marketing process and have a number of interested investors as we look to convert that territory to a franchise market for accelerated growth. We are disciplined in our approach. We are building sustainable, healthy international market positions. This deliberate strategy is yielding results as we surpass the 1,000,000 member milestone across our international markets last year and have now crested 200 international clubs. Our Chief Development Officer, Chip Olson, recently celebrated his one year anniversary, during which he has strengthened his leadership team with several key appointments. He recently added a franchise sales director to his team with a focus on driving growth domestically to accelerate our outreach and expand our network of franchise partners. Finally, our commitment to member experience continues to earn prestigious third-party recognition. We are especially proud to be named one of USA Today’s Best Customer Service Companies for 2026. Planet Fitness was the highest rated fitness brand on a list of 750 companies across a wide number of industries, a distinction based on millions of reviews measuring friendliness, competence, and reliability. Exceptional service is a business imperative that builds trust and drives the loyalty essential to our long-term retention and top-line growth. I will now turn the call over to Jay. Thanks, Colleen. Jay Stasz: Our financial foundation remains exceptionally strong. I would like to reiterate, we are extremely proud of what we delivered in 2025. Our highly franchised asset-light model continues to generate significant predictable cash flow. This has allowed us to return nearly $800,000,000 to shareholders through buybacks over the last two years while also funding strategic investments for future growth. Now to our fourth quarter results. All of my comments regarding our quarter performance will be comparing 2025 to 2024, unless otherwise noted. We opened 104 new clubs compared to 86. We completed 96 new club placements this quarter compared to 77 last year. We delivered system-wide same club sales growth of 5.7%. Franchisee same club sales increased 5.6%, corporate same club sales increased 6%. Approximately 80% of our fourth quarter comp increase was driven by rate growth, with the balance being net membership growth. Black Card penetration was 66.5% at the end of the quarter, an all-time high and an increase of 260 basis points from the prior year. Our ending fourth quarter member count of approximately 20,800,000 was in line with our expectations. For the fourth quarter, total revenue was $376,300,000 compared to $340,500,000. The increase was driven by revenue growth across all three segments, including a 9.6% increase in the franchise segment, a 7.4% increase in the corporate-owned club segment, and a 15.3% increase in the equipment segment. The increase in our equipment segment revenue is driven by higher revenue from sales to franchisee-owned clubs. For the quarter, replacement equipment accounted for approximately 60% of total equipment revenue compared to 58%. For the fourth quarter, the average royalty rate was 6.7%, flat to the prior year. Our cost of revenue, related to the cost of equipment sales to franchisee-owned clubs, was $90,200,000, an increase of 12.1% compared to $80,500,000. Club operations expense increased 7.1% to $79,600,000 from $74,400,000. SG&A for the quarter was $37,300,000 compared to $35,700,000. Adjusted SG&A was $36,800,000 or 9.8% of total revenue compared to $34,400,000 or 10.1% of total revenue. National advertising fund expense was $21,400,000 compared to $19,400,000, an increase of 10.5%. Net income was $60,700,000. Adjusted net income was $69,000,000 and adjusted net income per diluted share was $0.83. Adjusted EBITDA was $146,300,000 and adjusted EBITDA margin was 38.9%, compared to $130,800,000 with adjusted EBITDA margin of 38.4%. For the full year, adjusted EBITDA margin increased to 41.7% compared to 41.3% in the prior year. Now turning to the balance sheet. As of 12/31/2025, we had total cash, cash equivalents, and marketable securities of $607,000,000 compared to $529,500,000 on 12/31/2024, which included $66,300,000 and $56,500,000 of restricted cash respectively, in each period. During the quarter, we refinanced $400,000,000 of our debt that was due next year and upsized the deal to $750,000,000 at a blended coupon of 5.4% and executed a $350,000,000 accelerated share repurchase. Now to our outlook. We knew this year would represent the lowest growth year in the three-year algorithm for two primary reasons. First, the extended replacement cycle for equipment as part of our new growth model we rolled out in 2024. Second, in Q3 of last year, we sold eight corporate-owned clubs in California. Transitioning these clubs from the corporate-owned segment to the franchise segment aligns with our asset-light strategy yet reduces our revenue and profit year-over-year growth in 2026. We have seen strong join demand during the year, a clear signal that our brand value and offerings are resonating. We have also experienced two short-term transitory items quarter to date. Our join trends were impacted by the storms and cold weather in late January across many of our markets. And we experienced a slightly higher cancel rate last month than anticipated. Notably, recent attrition trends are returning in line with our expectations. Now to our guidance for 2026, which incorporates the factors described earlier. We expect system-wide same club sales growth of 4% to 5%. We expect to open 180 to 190 new clubs system-wide. Like last year, we anticipate the cadence of these openings and the related 150 to 160 equipment placements to be weighted to the second half of the year and especially the fourth quarter. We expect re-equipment sales to represent approximately 70% of total segment revenue and we expect an equipment margin rate of approximately 30%. We expect total revenue growth of 9% over 2025. We expect adjusted EBITDA to grow approximately 10% over 2025. We project adjusted net income growth in the 4% to 5% range. On a per share basis, we expect adjusted diluted EPS to increase between 9% to 10%. This is based on approximately 80,000,000 adjusted diluted weighted average shares outstanding which includes the impact from our ASR entered into at the end of last year, and our plan to repurchase approximately $150,000,000 worth of shares in 2026. We anticipate 2026 net interest expense of approximately $114,000,000 reflecting the annualized impact of our 2025 refinancing. Lastly, we expect capital expenditures to be up between 10% to 15% and D&A to be up approximately 10%. We reiterate our three-year growth algorithm we outlined at last year's Investor Day. The strategic imperatives and growth initiatives we outlined continue to build momentum, positioning us well to deliver against our long-term objectives. The fundamentals of our business are strong, the model is resilient, and we continue to generate significant cash flow that enables us to return value to shareholders. I will now turn the call back to the operator to open it up for Q&A. Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Randy Konik with Jefferies. Your line is open. Please go ahead. Randy Konik: Yeah. Thanks a lot, and good morning. I guess, Jay, question for you is when you look at the 2026 guide, and you think about—you just reiterated your three-year growth algo that you gave at the Analyst Day. Give us some perspective on what does that mean for the two out years in terms of shaping the revenue growth, unit expansion and EBITDA dollar growth? How are we to think about that as we think, you know, further from 2026 into 2027 and 2028. Thanks. And then you brought it up, can we then follow up with trying to get a little bit more granular about the month of January then? Jay Stasz: Hey, Randy. Good morning, and thanks for the question. As we said, we knew that this year would represent the lowest growth year in the three-year algo because of the re-equip cycle and because of the sale of the California clubs. So those impacts, if we think about that, on the year-over-year growth for this year, is about a 300 basis point impact to top line and about a 200 basis point, slightly north of that, on EBITDA. That was contemplated and known. Also included in our guidance this year are some transitory headwinds related to the weather impact in joins, as well as a slight elevation in attrition versus our expectations that we saw in January, which is now normalized. We have reiterated our commitment to the three-year algorithm, and we expect to get back to those targets that we laid out both for revenue and EBITDA over the three-year period. There is a bit of a step up in the out years. We did not indicate that the algo was going to be an annual growth rate. The strategic imperatives are building, and once we continue to drive revenue and net member growth, there is significant flow-through to the bottom line. So we see increases in both year two and year three of that growth algo to get back to the targets we laid out. In terms of January, from a join standpoint, we saw healthy join trends for the first few weeks of January leading into the storm that started late in January. We had a significant impact across many of our markets—about 2,000 clubs had some form of impact—and we saw a marked difference in relative join volumes during the storm period. Since that time, for the impacted markets, we have seen a nice rebound and very healthy join rates related to promotions we have run in February. These impacts are temporary in nature. With the subscription model, a join earlier in the year is more economically beneficial than one later in the year, and we have reflected that in guidance, though the impact is much less than the other impacts discussed. From an attrition standpoint, there was a slight elevation in January. This was the first year of a high-volume period with the ability to manage your membership with our messaging around cancel anytime, so maybe it was more top of mind. We made tweaks to our digital messaging, and attrition has come in line in February with our expectations. Operator: Your next question comes from the line of Simeon Siegel with Guggenheim Securities. Your line is open. Please go ahead. Simeon Siegel: Thanks. Hey, everyone. Good morning. So, Jay, just for the guidance, how are you thinking about Black Card penetration and then price versus member growth embedded within those revenues? And then just because we are talking about January, I guess, Colleen, we have been talking about smoothing out the seasonality of your joins, so how do you think about the significance of a challenging weather January now for Planet Fitness versus maybe how we would have thought about it historically? Thanks, guys. Jay Stasz: From a join standpoint, historically about 60% of joins came in the first quarter, and in the past couple years it has been higher. We have consistently talked about achieving net member growth across several quarters, and we have levers to drive joins with traction on our strategic imperatives. On Black Card penetration, we reached a record 66.5% in Q4. That benefits rate. For the guide and the comp, we expect about a 75/25 split—75% from rate, 25% from volume or membership growth. Colleen Keating: On January joins and seasonality, we have been successfully running promotions and delivering net member growth outside Q1. In 2025, we had net member growth in Q4, and in the prior year we had net member growth in the back half. You will continue to see us deploy marketing outside of the first quarter. We added 1,100,000 net new members in 2025, a 10% increase versus 2024, during our first full year of elevated Classic Card pricing and with nationwide online member management in place. We were seeing strong join trends coming through January prior to the storm impact, which, along with our track record of multi-quarter joins, gives us confidence in momentum. Operator: Your next question comes from the line of Max Rakhlenko with TD Cowen. Your line is open. Please go ahead. Max Rakhlenko: Great. Thanks a lot. So first, just on the lower EBITDA and the EPS guide for 2026. Can you maybe talk about the shape of the year and how we should think about both for 1H versus 2H? And a quick follow-up on margins—how should we think about first half versus second half progression given the puts and takes you mentioned? And lastly, Colleen, what is the latest thinking around the timing of the Black Card price increase, how it changes the comp build and Black Card mix, and is it embedded in the guide? Jay Stasz: On the comp guide of 4% to 5%, we will be lapping the nationwide rollout of member management in Q2, so expect lower comps in the first half and higher in the back half. Equipment revenue is back-loaded; last year 57% of openings were in Q4; this year likely around that or a few points higher, closer to 60%. We will also see an increase in NAF revenue. Otherwise, model consistently. On EBITDA margins, ex-NAF we expect significant margin leverage. Including NAF, we expect margins to be pretty consistent year over year. We have set our expense structure appropriately and see leverage particularly in SG&A. Colleen Keating: We indicated we would roll out the Black Card price increase after our peak join season. For competitive reasons we are not being overly specific, but where we took the Classic Card price increase two years ago is a directional indication—Q3 is our lower join quarter, which should guide expectations. We have seen organic rate lift from increased Black Card penetration and expect continued rate impact from the Black Card price increase. Directionally, our comp assumes about 75% from rate and 25% from volume. The Black Card price lift is embedded in the guide, taken after the peak season. Operator: Your next question comes from the line of Joe Altobello with Raymond James. Your line is open. Please go ahead. Joe Altobello: First question on attrition rates. You mentioned them a couple times this morning. Back when you implemented click to cancel, are they back to where you thought they would be in February? And then on interest expense, I was not expecting a $29,000,000 increase year over year. Can you bridge that? Jay Stasz: From an expectation standpoint, attrition is back in line in February. While there was an elevation after click to cancel last year, rates have remained within historical norms, and for the full year we expect attrition to be within historical norms. We anniversary the national rollout in Q2. Strategically, this is the right approach for member experience and de-risking. We are seeing a 6% increase in conversion in the digital join flow with the ability to manage your membership in the flow. On interest expense, the increase is largely the coupon change—we gave up a coupon in the threes, and the new tranche is about 5.4%. It includes the $400,000,000 refinanced plus the $350,000,000 incremental used for the ASR. There is also an interest income component; that should get you close. Colleen Keating: For the full year 2025, attrition was well within historical norms on an annualized basis—we have shared it as a three-handle average attrition rate, and that is where we landed in 2025. We also continue to see mid-30% of our joins as rejoins, demonstrating that empowering members to manage their membership builds goodwill and drives return behavior. And as Jay noted, we have seen about a 6% increase in conversion in the join flow since noting the ability to manage your membership. Operator: Your next question comes from the line of Christopher O’Cull with Stifel. Your line is open. Please go ahead. Christopher O’Cull: Thanks. Good morning. Colleen, I am trying to understand the 4% to 5% comp guide. You should have the coming benefit of the Black Card pricing, a 25% increase in media impressions from additional ad dollars, and residual benefit of the Classic Card pricing. Q4 comp was almost 6%. Why guide lower—is this conservatism or higher cancellation rate? And a follow-up on the Ro partnership—plans to jointly market and is the Perks discount ongoing or one-time? Jay Stasz: A couple things. New stores enter the comp base after the thirteenth month. The 150 clubs opened in 2024 largely impact 2026, and 2024 was a lower opening year versus the 181 we just opened, which will impact 2027. Also, with a large installed base that generates significant cash flow, it takes a lot to move the comp needle even with rate lifts. Embedded in the comp guide is the modestly higher attrition post national click-to-cancel rollout, which we expect to moderate as we lap in Q2. Colleen Keating: Our openings were very back-end loaded in 2025—over 100 in Q4—so those will enter the comp base much later this year. In 2024, openings were also back-end loaded and lower in total, so the comp contribution dynamics differ. We are also coming up on the second anniversary of the June 2024 Classic Card price lift; the most pronounced impact has been realized. The Black Card price lift is modeled, but we will take it after peak join season, so it will be impactful but less so than if taken during peak. On Ro, we launched late Q4. The intent is mutually beneficial: Ro gains exposure to 20,800,000 fitness-minded members; our members receive discounts and a complementary health solution. Early click-through and conversion are high, but it is early days. We see compelling indicators—studies suggest 50% of GLP-1 users consider a gym membership. We and Ro are pleased with early results; we will not detail go-forward plans for competitive reasons. Operator: Your next question comes from the line of Rahul Krotthapalli with JPMorgan. Please go ahead. Rahul Krotthapalli: I want to revisit the comps waterfall and member join waterfall for clubs, especially those opened in the last two years and entering the comp base. And as a follow-up, do you expect tailwinds if the rest of the industry is forced to adopt click to cancel? Jay Stasz: For new clubs, year one in comp typically runs 40%+, year two low to mid-teens, year three mid single digits, and beyond that low to mid single digits. On click to cancel, strategically this is the right thing for member experience and de-risking. We are seeing lift in digital conversions with cancel anytime messaging, which sets us up well. If others are required to adopt, the playing field evens, but we believe our early move and brand positioning are advantages. Colleen Keating: More municipalities are focusing on enabling consumers to manage subscriptions. We believe we did the right thing by getting ahead of that and de-risking our business. With a mid-30% rejoin rate, empowering members strengthens relationships. Top cancellation reasons remain moving or lack of time—not experience—so many return to Planet Fitness. Operator: Your next question comes from the line of Jonathan Komp with Baird. Your line is open. Please go ahead. Jonathan Komp: Hi. Could you share more on join trends and whether you can still add close to the number of members you added in 2025? And Jay, on EBITDA—guided to 10% growth. You explained 200 bps of the delta versus the mid-teens three-year average. Can you bridge the rest? Colleen Keating: We saw very strong join trends late 2025 into early 2026 prior to weather impacts, reinforcing secular tailwinds. We are confident in driving strong member growth through the year. In 2025, net member growth rose 10% despite online member management and the Classic Card price lift. The broader market remains large—50 to 60 million active adults likely to pay—so we see ample runway. Jay Stasz: We knew this would be the lowest growth year in the three-year algo; the intent was not an annual rate each year. Strategic imperatives are gaining traction—the first 100 days engagement, Black Card Spa amenities, app improvements in training—supporting joins and retention. Our expense structure is set appropriately. As the flywheel compounds, we expect greater flow-through and step-ups in years two and three. Colleen Keating: Momentum with younger consumers adds to lifetime value potential. High School Summer Pass participation rose from just shy of 3,000,000 to 3,700,000 with higher conversion. Unit openings in 2025 were up over 20% versus 2024, fueling future growth. Operator: Your next question comes from the line of Sharon Zackfia with William Blair. Your line is open. Please go ahead. Sharon Zackfia: One wildcard this year was the increase to the NAF. How do you think about that in terms of more shots on goal for member growth through the rest of the year? And how do we think about your use of $1 down, especially after the Black Card price increase? Colleen Keating: The 1% shift from LAF to NAF begins impacting in Q2. We asked franchisees to keep LAF spend whole for Q1, so the most impact is in Q2–Q4. The shift funds capabilities like dynamic content optimization, enhanced AI-enabled CRM, and a predictive churn model moving into pilot. DCO will allow more tailored messaging based on consumer behavior; AI-enabled CRM will sharpen insights and targeting, especially for likely-to-pay consumers using other brands or modalities. On offers, our approach balances brand-building “Why Planet Fitness” with a compelling “Why Planet Fitness now” call to action, which may include financial inducements like $1 down. We will continue to use a balanced approach to drive conversions within specific timelines. Operator: Your next question comes from the line of Jean Tzu with BNP Paribas. Your line is open. Please go ahead. Jean Tzu: Thanks. On the mid-30% rejoin rate, can you talk about time away from the system—are lapsed members returning faster? And any early reads on GLP-1 members joining via the Ro partnership or otherwise? Colleen Keating: We market consistently to former members and are testing narrower lapsed windows for rejoin offers versus waiting longer, along with different offer constructs. The most important thing is the rising rejoin rate—we finished Q4 at 34.8%, solidly mid-thirties. While we do not track GLP-1 usage specifically, our member base should mirror national utilization, roughly 13%. GLP-1 users often are first-time gym-goers and may experience gymtimidation; Planet Fitness is well positioned with our judgment free environment and focus on strength to combat muscle loss. We see this as an opportunity to expand our reach, and early Ro partnership metrics show high click-through and conversion. Operator: Your next question comes from the line of Stephen Grambling with Morgan Stanley. Your line is open. Please go ahead. Stephen Grambling: On cash and CapEx, you expect 10% to 15% growth again this year. Is that front-loaded or consistent, and any thoughts on selling additional corporate-owned clubs? Jay Stasz: Last year CapEx growth was closer to ~6%. We may be conservative, but drivers this year include corporate-owned clubs, new clubs, and a fair amount of relocations and remodels. From a modeling standpoint, we have continued Spain development on our balance sheet this year, even as we work to recycle that capital with a franchise partner. That growth range is a reasonable way to think about it going forward. We will continue to build cash and invest in buybacks. On corporate-owned clubs, we will evaluate opportunities case-by-case. The 90/10 franchise/corporate mix is a good balance given strong four-wall profitability. Colleen Keating: We have engaged a banker and are in market for Spain. We would like to bring in a strong franchise partner to accelerate growth—clubs there are performing well with ramps akin to domestic new clubs. The California sale was a geographic efficiency move, placing an outlier market with a well-capitalized West Coast franchisee while most of our corporate clubs are East/Northeast/Southeast. Operator: There are no further questions at this time. I would now like to turn the call back to Colleen Keating, CEO, for closing remarks. Go ahead. Colleen Keating: Thank you, and thank you for all the thoughtful questions. In closing, I will just reiterate our performance in 2025 demonstrates the immense power of our model. We remain laser focused on our four strategic imperatives which serve as the foundation for our next chapter of growth and our unwavering commitment to delivering long-term shareholder value. Thank you. Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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ELAN 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Elanco Animal Health Fourth Quarter 2025 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. If you would like to withdraw your question, press 1. Thank you. I would now like to hand the call over to Tiffany Kanaga, Vice President of Investor Relations. You may begin. Good morning. Tiffany Kanaga: Thank you for joining us for Elanco Animal Health's fourth quarter 2025 earnings call. I'm Tiffany Kanaga, Vice President of Investor Relations and ESG. Joining me on today's call are Jeffrey Simmons, our President and Chief Executive Officer, Robert M. VanHimbergen, our Chief Financial Officer, and Linda Bolduc from Investor Relations. The slides referenced during this call are available on the investor relations section of elanco.com. Today's discussion will include forward-looking statements. These statements are based on our current assumptions and expectations, and are subject to risks and uncertainties that could cause actual results to differ materially from our forecast. For more information, see the risk factors discussed in today's earnings press release, as well as in our latest Form 10-K and 10-Q filed with the SEC. We do not undertake any duty to update any forward-looking statement. Our remarks today will focus on our non-GAAP financial measures. Reconciliations of these non-GAAP measures are included in the appendix of today's slides and in the earnings press release. References to organic performance exclude the estimated impact of the Aqua business, which was divested 07/09/2024, and certain royalty and milestone rights that were sold to a third party in May 2025. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Jeffrey Simmons. Jeffrey N. Simmons: Thanks, Tiffany. Good morning, everyone. 2025 was the year of significant delivery for Elanco Animal Health Incorporated. Across all three of our priorities, growth, innovation, and cash. As highlighted on slide 4, Elanco delivered a strong fourth quarter, with 9% organic constant currency revenue growth. We outperformed the high end of guidance for revenue, adjusted EBITDA, and adjusted EPS. Growth was led by US farm animal up 17% and US pet health up 10%. This now marks 10 consecutive quarters of underlying total growth. Revenue from innovation exceeded expectations in 2025 at $892 million for the year, as the fourth quarter was our largest quarter for innovation to date. We are raising our 2026 outlook for innovation to $1,150 million reflecting contributions across a broad set of geographies, species, and products. Our continued focus on cash, combined with strong results, improved our net leverage ratio faster than plan, to 3.6 times at year end. We now expect to finish 2026 at 3.1 to 3.3 times. With our consistent execution, we are well positioned to introduce 2026 guidance in line with our longer term algorithm. We expect full-year organic constant currency revenue growth of 4% to 6%, adjusted EBITDA of $955 to $985 million, representing growth of 8% at the midpoint, and adjusted EPS of $1.00 to $1.06, representing growth of 10% at the midpoint. This guidance continues our prudent balanced approach in a dynamic macro environment. On slide 5, let me ground today's discussion in accountability and transparency by sharing a checklist for the year in review. Elanco delivered across our full set of 2025 commitments to our customers and our shareholders. We have entered our new era of growth with a record of consistent execution. Innovation revenue cleared a bar that was raised each quarter in 2025. We brought the entire Big Six across the finish line with Bifrenna’s December approval. This is a real testament to the optimized innovation engine that Ellen’s team has built over the past few years. Organic constant currency revenue growth reached 7% for the full year, with balanced contributions across species and geographies as well as between volume and price. 2025 revenue, adjusted EBITDA, and adjusted EPS all exceeded last February's expectations with steady outperformance throughout the year. And we delevered about a half a turn faster than expected while also refinancing our Term Loan B ahead of schedule. Team Elanco, I want to extend my gratitude for an incredible year. Your level of engagement and execution has never been higher, while your unwavering dedication to transforming animal care has truly shown. Looking more closely at the fourth quarter revenue performance on slide 6, we break down the 9% underlying organic constant currency revenue growth. This chart demonstrates strength across our global business, with all four quadrants growing nicely. US pet health had a robust quarter, up 10%. Credelio Quattro and ZENRELIA led solid growth in the vet clinic, and also drove broader portfolio benefits with positive trends for Galliprant. Dispensing trends were healthy across our OTC parasiticides. Retail likewise grew in Q4, including Seresto and the Advantage family. Importantly, our strong end of the year for US pet health led us to gain share in every major category for the full year 2025: prescription parasiticides, osteoarthritis pain, dermatology, and vaccines. Moving to international pet health, we achieved 8% organic constant currency revenue growth driven by ZENRELIA, Credelio, and AdTab. ZENRELIA is exceeding expectations in the $700 million plus international market, with double-digit share in several key markets, and strong early traction in Europe, the UK, and Australia. US farm animal delivered an excellent quarter, up 17% on top of 6% last year, building on our market leadership. Cattle led the way with strong growth for Experior and Pradalex, with positive contributions from poultry as well. And finally, international farm animal was up 4% in organic constant currency with growth coming from ruminants, swine, and poultry. Looking at slide 7. We delivered $892 million of innovation revenue in 2025, outperforming across a diverse basket led by Credelio Quattro, Experior, ZENRELIA, and AdTab. We are now committing to at least another $250 million of growth in 2026, to $1,150 million. This target is led by our Big Six gaining traction in the global marketplace with our no-regrets launch approach. We are driving sustainable growth as we expect the Big Six to double in revenue from 2025 to 2028, on top of a stabilizing base. And we've refilled the pipeline to deliver a consistent flow of high-impact innovation. Let's further discuss the progress of our Big Six major innovation products on slide 8. Starting with Credelio Quattro. This groundbreaking parasiticide, the first FDA-approved product with four active ingredients, is the fastest blockbuster in our history, and we believe has the potential to become our biggest product class ever. We see Quattro as best medicine with its four dimensions of differentiation, fueling a growth trajectory more like a first-to-market product. In the fourth quarter, Quattro continued to gain dollar share of US broad spectrum sales, was the only one to gain share in the quarter in vet clinics, demonstrating continued strong momentum almost a year after its launch. Credelio Quattro enters 2026 with the most momentum in the $1,400 million US broad spectrum parasiticide market. We have significant runway ahead, with approximately one-third of clinics penetrated today and plenty of room to grow share within those clinics. A good leading indicator is Kinetics Puppy Index, where Quattro ranked highest in Q4 versus other broad spectrum endectocides and grew versus Q3. Quattro is gaining share and also expanding what is the fastest growing animal health market today: the US broad spectrum endectocide market, up 30% year over year. We expect Quattro to lead that growth through its profitability for the clinic and its differentiated offering for the pet owner, aided by our DTC investments, expanded sales teams, and distribution partners. Importantly, Quattro has boosted our broader Elanco portfolio in clinics. Its momentum and portfolio benefits drove Elanco to be the only major animal health player to see share gains for the total parasiticide prescription portfolio in US vet clinics in 2025. Looking beyond the US, Quattro's global rollout begins now with approval in Australia last week. With this approval, we are kicking off our expansion into the $700 million international market, which is growing double digits. Next, we couldn't be more pleased with ZENRELIA's performance in the $2,000 million derm market. Every quarter, ZENRELIA's efficacy profile becomes more recognized, and its success is becoming more global. We have a special product in ZENRELIA. The ZENRELIA momentum is building. December was our best month yet. Importantly, we exited the month with double-digit share of the US JAK market. This strength is continuing into January. We are now in about half of the clinics in the US, and the reorder rate is over 80%. Trends accelerated after the label update in September, adding 2,500 new purchasers. We remain committed to making the US label consistent with the other 40 countries where it's already approved without restrictions. ZENRELIA's Q4 international results were exceptional. In our first cohort of launches—Brazil, Canada, and Japan—we've already achieved year three or year four analog share in just the first year. ZENRELIA's JAK market share in Brazil has reached 40%, and Japan is over 30%. The rapid success and overwhelmingly positive customer feedback are driven by ZENRELIA's strong efficacy, and support our long-term belief in the product with a clean label. We're also encouraged by the early traction in Europe, the UK, and Australia. ZENRELIA is outperforming the new competitive entrant in the key EU. Local sellout data confirms double-digit JAK market share in France, Italy, and Spain. We've already contracted with all major EU corporate accounts, helping to drive growth ahead of our expectations. We've also achieved more than 10% share in the UK. Our EU head-to-head study results are coming to life in the field, and we are the only player providing that competitive data. Again, efficacy is the differentiator across Europe and around the world, with over a million dogs treated with ZENRELIA globally. Its efficacy is resonating strongly with vets and pet owners alike. ZENRELIA works and it works really well. Moving now to Bifrenna, our second monoclonal antibody and our second derm product. We gained USDA approval on December 31, fulfilling our year-end commitment. We expect a launch in 2026 as we progress through the anticipated manufacturing ramp up. A phased launch is very typical for monoclonal antibody, or mAb, product as we scale our bioreactors. Our expanded facilities in Elwood, Kansas are ready. Our manufacturing plans are right on track, and we feel good about our overall mAb capabilities for Bifrenna and beyond. Bifrenna offers positive differentiation on convenience, value, and efficacy. It is recommended at a dosing interval of six to eight weeks post treatment versus four to eight weeks for the current market competitor. And when we showed a close proxy of the label to approximately 350 veterinarians, 83% responded they are likely to use Bifrenna, especially in seasonal cases. Finally, our OTC parasiticide AdTab has continued its robust growth trajectory with sales up more than 50%. AdTab is the fastest-growing brand in the $600 million OTC ecto market in Europe, achieving more than 50% oral OTC share to become number one in less than two years on the market. Moving to farm animal. Experior continues to grow nicely, up 35% in Q4 against a tougher compare. We are benefiting from the historically small US cattle herd size, while noting that heifer retention recently turned positive for the first time since January 2017. Experior crossed the $200 million mark in 2025, up nearly 80% for the full year, with significant runway still ahead for this blockbuster and its portfolio benefits. We see strong opportunity in an estimated potential market of over $350 million in the US and Canada through extending the days of use, continued adoption, and price, with geo expansion as another longer-term growth driver. Lastly, regarding Bovaer, we continue to see demand from CPG companies that support sustained interest and consistent count numbers, with farmer retention remaining over 90%. We will continue to invest in Bovaer to achieve its expected potential by enhancing the product's strategic optionality and demonstrating an increased value proposition for farmers and CPG companies. Long term, we continue to view Bovaer as a blockbuster, with near-term growth at a measured pace in a dynamic market backdrop. Moving to slide 9, we offer some recent highlights across the three parts of our IPP strategy, innovation, portfolio, and productivity. Ellen and her team have built a science-based engine and organizational capability to maximize throughput. With the Big Six now each approved in the US, without attrition, we are focused on the next wave with five to six blockbuster potential approvals expected through 2031. Elanco's R&D engine is humming, with depth and expertise and a laser focus on the next milestones, all with a vision of creating a consistent flow of high-impact innovation. At the same time, we are optimizing our diverse portfolio to drive near-term growth and to gain share. We experienced broad-based organic constant currency top-line growth in 2025 across our top five product franchises and in nine of our top 10 countries. And very importantly, our launch excellence is enabling share gains with accelerating pricing. As Robert will detail, we achieved 2% price growth in 2025, in line with our expectations, and we anticipate acceleration in 2026, including our largest increase in five years to US vet clinics. Our pricing strategy reflects our latest innovation and the value of our total portfolio to customers. We've also signed an agreement to acquire AHV International, a Dutch-based farm animal health innovator focused on a portfolio of products for cattle that improves animal health and optimizes efficiency while reducing the need for antibiotics. The deal accelerates Elanco's efforts to expand our leadership in the dairy industry, particularly in North America and Europe, growing both our share of voice and enhancing our portfolio with exciting solutions that support transition cow health, one of the greatest needs in the dairy industry. We are excited about the potential of this opportunity to bring needed solutions to producers and one of the fastest growing proteins, and we believe one of the greatest market opportunities in animal health. At the same time, we continue to rapidly pay down debt and strengthen our balance sheet. We improved our net leverage ratio by two turns in just two years, with the under three times landmark expected in 2027. And as Robert will also describe momentarily, our company-wide productivity initiative, Elanco Ascend, is off to a good start to drive meaningful efficiencies and margin enhancement starting in 2026. I will now turn the call over to Robert M. VanHimbergen for the financial results. Robert M. VanHimbergen: Thank you, Jeff, and good morning, everyone. I will focus my comments on our adjusted measures, so please refer to today's earnings press release for a detailed description of the year-over-year changes in our reported results. Starting on slide 11, we delivered $1,140 million of revenue in the fourth quarter, representing an increase of 12% on a reported basis. Organic constant currency growth was 9%, primarily driven by an increase in volume with price contributing. Slide 12 provides revenue by the four quadrants of our business. Globally, pet health revenue grew 9% in constant currency during the fourth quarter. US performance delivered 10% growth, driven by demand for our key innovation products, Credelio Quattro and ZENRELIA. Outside the US, the pet health business grew 8% in constant currency, led by ZENRELIA. On a global basis, our farm animal business achieved 10% organic constant currency growth. The US farm animal business grew 17% driven by the strength of Experior, Pradalex, and poultry vaccines. Outside the US, our farm animal business contributed 4% in organic constant currency, driven by broad geographic and species growth led by ruminants in Europe and Latin America, poultry in Europe and the US, and swine in the APAC region. Continuing down the income statement on slide 13, adjusted gross margin increased 30 basis points to 51.2%, primarily driven by price, increased sales volumes, and mix benefits, partially offset by the flow through of higher inventory costs. Year-over-year expansion was also impacted by the outperformance of our US farm animal business, which carries lower gross margins but more comparable EBITDA margins to the pet health business. Our operating expenses grew by 10% in constant currency. This planned increase supports our strategic investment in our global pet health product launches and our R&D pipeline development. As expected, interest expense totaled $47 million in the quarter, a 2% increase compared to the same period last year. As a reminder, we had the expiration of our favorable interest rate swap amortization benefit in 2025, which originated from a 2022 interest rate swap restructuring. On slide 14, we include a bridge for fourth quarter results compared to the prior year. Adjusted EBITDA was $189 million, an increase of $12 million or 7%. Adjusted EPS was $0.13 in the quarter, a 7% decrease year over year driven by an anticipated higher tax rate primarily due to timing of one-time benefits. On slide 15, we provide the full-year income statement highlights. We generated $4,715 million in reported revenue, representing 6% growth. Revenue breakdowns by key affiliates and products are available on slides 29 and 30. Continuing down the P&L, full-year adjusted gross margin of 54.9% was flat compared to 2024. The favorable impacts from price, increased sales volumes, and mix benefits were offset by inflationary pressures and higher manufacturing costs. These factors combined with an increased investment in our strategic growth initiatives resulted in adjusted EBITDA of $901 million for the full year. As shown on slide 16, full-year adjusted EPS came in at $0.94 compared to $0.91 in 2024. The effective tax rate for 2025 was 21.8%, a year-over-year increase of 370 basis points primarily due to the recognition of nonrecurring tax credits in 2024. On slide 17, we provide an update on our balance sheet. Cash generated from operations was $108 million in the quarter, compared to $177 million in the prior year. The year-over-year reduction reflects expected cash tax payments related to the 2024 Aqua divestiture, partially offset by continued momentum in working capital improvement. We ended the quarter with net debt of approximately $3,200 million and a net leverage ratio of 3.6 times. Looking ahead, we remain disciplined in our capital allocation strategy, prioritizing debt pay down alongside making high-value strategic investments, like AHV. The acquisition is not factored into our guidance. Given its size and additive bolt-on nature, and expected second quarter close, we anticipate AHV to provide a modest contribution to revenue and adjusted EBITDA in 2026, with greater benefit in 2027, and it will not impact our deleveraging timeline. We expect to reduce leverage to 3.1 to 3.3 times in 2026 regardless of AHV, and a long-term target range of 2.0 to 2.5 times with a path to sub three times leverage in 2027, as previously stated in our December Investor Day. Let's move to our guidance starting on slide 19. Our 2026 full-year outlook is consistent with the framework provided at Investor Day. We expect organic constant currency growth of 4% to 6% which translates to revenue between $4,950 and $5,020 million. This guidance incorporates an accelerating contribution from price versus 2025, reflecting the enhanced value that our latest innovation and our comprehensive portfolio bring to our customers. For adjusted EBITDA, we are forecasting $955 to $985 million, which represents 8% growth at the midpoint. We expect Elanco Ascend to enable adjusted EBITDA margin expansion, while at the same time, we will continue our strategic investment in the global launches of our innovation portfolio and advancement of our R&D pipeline. Gross margin is expected to be up approximately 40 basis points and OpEx up 7%. Finally, adjusted EPS is expected at $1.00 to $1.06, up 10% at the midpoint. Slide 31 in the appendix provides a number of additional assumptions to help support your modeling efforts. Our first quarter guidance, presented on slide 20, includes organic constant currency revenue growth of 4% to 6%, led by our farm animal business, and good growth anticipated in pet health, which translates to $1,280 to $1,305 million in revenue. Adjusted gross margin is expected to decline year over year with the timing of inflation and the flow through of higher inventory costs, particularly in the first half of the year. We are continuing to invest in our launches, with OpEx up 7% or 4% in constant currency. Adding it all up, we anticipate adjusted EBITDA of $290 to $310 million, representing 9% growth at the midpoint, and adjusted EPS of $0.33 to $0.36. Turning to slide 21. We summarize 2026 headwinds and tailwinds integrated into our guidance. Our outlook anticipates sustainable competitive revenue growth as our innovation portfolio scales globally, on top of a stabilizing base. This innovation, combined with strategic pricing, helps insulate us from broader macro pressures. In pet health, we expect to gain incremental share by leveraging our comprehensive portfolio and OTC retail leadership. We are now shipping product to three major new retailers. We also acknowledge that these tailwinds are balanced against competitive pressures, including generics within the market. On the farm animal side, despite tough US comparisons, we see a clear runway for growth driven by new cattle products, favorable producer economics, and accelerating animal protein consumption. We expect to further strengthen our leadership position in both ruminants and poultry. On the margin front, Elanco Ascend is our company-wide productivity program, focused on general and administrative cost savings as well as manufacturing efficiencies. I am pleased with the progress we have achieved so far in 2026. The recently communicated restructuring is on track to generate $25 million in savings this year. These savings are expected to directly contribute to our profitability, reflecting our commitment to operational efficiency and prudent cost management. Additionally, our teams are actively advancing key AI, operational, and procurement initiatives, which are expected to result in both P&L and cash flow benefits. Now, I'll hand it back to Jeff for closing comments. Jeffrey N. Simmons: Thanks, Bob. Before we move to Q&A, I want to reiterate my deep confidence in Elanco's trajectory. We are not just a company delivering results with significant momentum, we are also a dedicated team building a durable long-term foundation for the future of animal health. On slide 22, you will see that this is more than a story about Elanco's compelling growth proposition. It is about the accelerating opportunity across the broader animal health industry and our ability to lead it. It is about having the best of pharma with science-based innovation, disciplined regulation, and high barriers to entry. This, combined with strong customer relationships built on trusted brands, and a cash market that responds to growing value propositions from winning portfolios. It is about generational shifts in both pet health and farm animal, where pets and protein are increasingly central to culture, care, and global demand. And together, it is about the animal health industry at an inflection point, projected to add $20,000 million in value as we enter the next decade, with Elanco uniquely positioned to convert momentum across both pet and farm into sustainable consistent growth. Simply, we will grow from both expanded market share and a growing industry. Let's take a closer look in pet health on slide 23. We are seeing a fundamental shift in pet care as owners take a more active role, choosing not only what products to use, but how and where they access care. While vet visit volumes remain a metric to track, the more powerful shift is in the global consumer behavior where access, convenience, and willingness to spend are becoming more and more meaningful. Today, subscription sales account for 40% of pet care dollars, with omnichannel consumers spending 30% more annually than single-channel shoppers. The pet owner's behavior is changing. Our strategy is built around meeting the modern pet owners where, when, and how they choose to engage. This unique omnichannel approach is core to our pet health strategy and is driving our industry-leading growth. Over on the farm animal side, on slide 24, we are capitalizing on the accelerating global animal protein consumption, which is projected now to grow at 5% annually in the US alone. There are several key factors driving the real food movement, fueled by consumer focus on health and wellness. First, 70% of US consumers are actively increasing protein intake. Second, updated dietary guidelines now recommend nearly doubling current average protein use. Also, by 2035, 21% of Americans are projected to use GLP-1 therapies who will consume 40% to 50% more protein. And this trend is now globalizing. Increasing protein intake is a key also for muscle retention, with an aging population. The number of people 60 is expected to expand by more than 25% globally by 2030. And finally, taste still drives two-thirds of protein choices, making animal protein the most accessible, cost-effective preference. Strong demand for high-quality protein presents significant opportunities for Elanco and our customers both in the near and long term. To close, on slide 25, our strategic focus on growth, innovation, and cash is clearly paying off, demonstrated by our strong performance in 2025 and the robust outlook for 2026 and beyond. Elanco is a different company today: more agile, more innovative, more capable than ever before. We are building on our 70-year legacy of delivering for our customers, and we come into 2026 entering our new era of growth, well positioned to continue transforming animal care and to create long-term value for our shareholders. Thank you. With that, I am going to turn it over to Tiffany to moderate the Q&A. Tiffany Kanaga: Thanks, Jeff. We would like to take questions from as many callers as possible, so we ask that you limit yourself to one question and one follow-up. Operator, please provide the instructions for the Q&A session, then we will take the first caller. Operator: Thank you. We will now begin the question and answer session. Your first question today comes from the line of Jonathan David Block from Stifel. Your line is open. Jonathan David Block: Great. Thanks, guys. Good morning. Switching to ZENRELIA from the incumbent because you just really cannot get that level of share that quickly in this market dynamic without switchers. So maybe, Jeff, just to kick things off, can you elaborate on the ramping international ZENRELIA share gains? And then what that may mean for the US if the label is altered positively down the road? And then I will ask my follow-up. Thanks. Jeffrey N. Simmons: Yeah. Thank you, Jon. Thanks for opening with maybe one of the most exciting things in the quarter. ZENRELIA is all about efficacy. As I said in my comments, every quarter, Jon, ZENRELIA's efficacy is more and more recognized, and that is happening in the international market. So, I was in Japan three weeks ago. It is the buzz in the marketplace. We have exceeded 30% share there, acting very much like a differentiated best medicine product. Brazil is, you know, very mature market compared to what people think, and we are 40% share. So yes, I would tell you that efficacy and in derm, it is all about stopping the dog's itch. And we are seeing that really resonate. In Europe, even with the new competitive entrant, we continue to climb and be the leading market share gainer in Europe, as I noted in some of the major markets. And, again, it is coming back to clean labels, high efficacy profile, and we do see this product with, you know, greater expectations. And it has far exceeded our expectations in international. So more to come. And as I step back, I think to your linkage to the label, I think it is really important to understand that, hey. We now have a million dogs on. We have got, we picked up 2,500 new clinics in the US, we are nearly 50% in the US, a year and a half of usage, 40 countries with clean labels with good pharmacovigilance data, and we are the only company out there using head-to-head efficacy studies, which I think also is significant. So we are optimistic, and we could talk more about the label. We are optimistic that with our submission into the FDA that we look forward to hearing a good from the FDA soon. Robert M. VanHimbergen: Yeah. And, Jon, maybe just to add on. Our guidance assumes the label as is right now. Jonathan David Block: Okay. That is helpful, Bob. Thanks for that clarification. And, you know, maybe I will zoom out with the second question. You know, Jeff, you are the first industry leader to maybe be teed up for an earnings call post some of the news on the distributor side. So we would love your thoughts on the Covetrus and MWI merger and what that may mean for manufacturers, and, you know, more specifically, Elanco, as I believe you guys have a solid, broad relationship with Covetrus, but it is certainly, you know, a lot of share going into the hands of one. So any thoughts would be great. Jeffrey N. Simmons: Yeah. Thanks for the question. You know, I have to start with the 2025 momentum and 2026 early fast start. We have a great relationship with distributors. We are adding them a lot of value, and they are adding us a lot of value right now. The major distributors, you know, they are very good at launching new products. And we are the only one today. We have competitive advantage, I believe, strongly, and you probably picked this up at VMX Western last week. You know, there is a lot of momentum in those distributors with the Credelio Quattro, the ZENRELIA. We are the only company that really has our total comprehensive portfolio with them in a buy-sell agreement, where others have actually retracted. So we are focused right now on the current state. Of course, as the structure evolves, we will continue to focus on value and the value they can provide, and that is the lens that we are going to look through. But Bob and team, I think, have done an amazing job. And you step back and look at US pet health, we gained share in every category this year, from derm to para, to pain, vaccines. And I attribute some of that to the distributors. Jonathan David Block: Thanks, guys. Appreciate the time. Jeffrey N. Simmons: Thank you, Jon. Your next question comes from the line of Michael Leonidovich Ryskin from Bank of America. Your line is open. Michael Leonidovich Ryskin: Great. Thanks for taking the question, guys, and congrats on the results. I want to ask first on price. You guys called out accelerating price a number of times looking forward to 2026. I was wondering if you could quantify that a little bit more specifically. It is just more broadly. You know, in 2025, we would call it introductory pricing or sort of initial go-to-market pricing for some of your products. For 2026, is this just a matter of that being lifted and going more to a normal price? Are you taking price more aggressively? Maybe you could just comment on how much of that is coming from the Big Six or the new products versus the rest of the portfolio. Then I have got a follow-up. Thanks. Robert M. VanHimbergen: Hey. Sure, Michael. Good morning. Thanks for the question. So a couple points. One, I will point you to Investor Day, where we did highlight we expect mid-single digit growth, which does include price. As we think about 2026, we do expect price to accelerate from where we were in 2025. 2025, as a reminder, was at that 2%. And, really, that is reflecting the enhanced value that we are bringing with innovation and our comprehensive portfolio that we are bringing to customers. Jeff highlighted in his prepared remarks that, in our US pet health business here in the US, we took the highest price increase to vets in the last five years. So we will continue to price based on the value we are bringing to customers. The last thing I would highlight is you think about pricing in 2025, we had a lot of launches and those launches were not a contributor to price. We will start lapping those in 2026, and so the ZENRELIAs and Quattros will have a pricing component in it in this 2026 year compared to 2025. So I would walk away with expecting price to accelerate from where we were in the last 12 months. Michael Leonidovich Ryskin: Thanks. And, you had some really interesting comments when you were talking Quattro in terms of not just the strong results you have seen with that product itself, but sort of the uplift to the rest of the portfolio, the ability to use that to gain share for other products as you bring a more complete portfolio to your customers. Wondering how you think about that continuing 2026 as ZENRELIA ramps, as you have got Bifrenna coming on. Maybe kind of tying that back to Jon Block's earlier question on distributors. Is it enabling you to become a better competitor as you go in for the big contract renewals, either with distributors or individual vet clinics? Just talk about the broader uplift you are getting from those. Thanks. Jeffrey N. Simmons: Yeah. Thank you, Michael. Great question. Yeah. Quattro had a great quarter. Definitely acting like best medicine, only major animal health company gaining US Rx para share, which I think is a real representation. Our share continues to climb as we not only come through the fourth quarter, but even here in the beginning of the year. And we are still seeing more than 75% being new starts. But, you know, I would point to a couple things. Specific number, we have got, if you think about, we are near at a third of the clinics, so, you know, 10,000 plus clinics, and we have got 2,600 that have actually, by purchasing Quattro, are now adding on additional products. So we are seeing that additive portfolio effect, I think, is definitely obvious. And we are seeing that confidence with the Puppy Index as I mentioned, it is climbing. It is the highest of all the major products. And it grew from Q3, and we are in the number one position on that Puppy Index. So we see that. I would also point to corporates. As I mentioned, it is on the slide, but I did not get into it in my commentary. We actually saw corporates really move in on this portfolio effect. So 90% of our corporates, which grew significantly in number, all of them grew. Only 13% grew in 2024. And the European team has done a masterful job. We have got all the corporates on the ZENRELIA product as well. So we are seeing it with portfolio. We are seeing it with corporates. We are seeing the confidence from the corporates even in the Puppy Index. So, yes, we do expect this to be beneficial. And then when we come with two derm products, right now, then we can say, not only do we have as equal of a portfolio, we have got best medicine. We have got best medicine with ZENRELIA, Quattro, and we believe Bifrenna has got, again, differentiation. So I think you are on to a very important point. Michael Leonidovich Ryskin: Alright. Thanks. Appreciate it. Operator: Your next question comes from the line of Erin Wright from Morgan Stanley. Erin Wright: So can you speak to any stocking, destocking dynamics in the quarter or as we head into some of the seasonal purchasing from some of the distributors that typically happens in the first quarter? And, you know, one of your competitors, a very significant player in parasiticides historically, is further deemphasizing distribution in 2026. I guess, how much does that help your positioning in parasiticides, especially just continuing the conversion to combination parasiticides? Thanks. Jeffrey N. Simmons: Thanks, Erin. Yeah. And I know you have been engaged in some of the major shows. I will just take the second question first, and that is that we see our relationship as good as it has ever been with distribution. They are adding a lot of value. And all the way down to the field force. They are working very much in collaboration with the largest sales force we have ever had in US pet health ourselves. So our share of voice has never been stronger in Elanco, with our team and with distribution as well, and then the investment we are making in the media. Look. On stocking, it is real clear to us. No change. We have got distributors ordering multiple times per quarter. There is a strong dispensing, and you can see it. It is dispensing demand coming out of the clinics. Multiple orders going in. We do not see stocking having really any effect at all as we head into this spring. Erin Wright: And then can you give us an update on the timeline for the label update for ZENRELIA in the US? I think before, maybe at VMX, you mentioned five, six months from now we should hear on that front. Is that still the case? And then just where are you matching up—and I think you also alluded to this earlier—but where are you matching up to the existing competitor versus the new entrant in Europe specifically? So we do not have head-to-head data for new mAb, but where are you seeing the vets actually use the different JAKs in Europe? Thanks. Jeffrey N. Simmons: Yeah. Thank you. Look. First of all, on the label, I just want to say, you know, we are in a constructive dialogue with the FDA. They have made one adjustment to the labels. We mentioned we picked up 2,500 new users since then. I step back, Erin, as I just mentioned earlier, you have got a million dogs, year and a half of use, 40 countries with clean labels, strong pharmacovigilance data. We have submitted the PCR data before to get the first label change. And then this was a request from the CVM at the FDA on the booster data and the package that we submitted in the fall. We have not given a date, but we are confident with everything that I just mentioned that, you know, we believe with this data, it allows us to get a label that looks a lot more aligned with the other 40 countries, and we do look forward to an FDA response. We will update you when that happens. Look, I think that the story in Europe is, it actually probably has profiled ZENRELIA's efficacy in a more differentiated way than any market that we have been in. And, you know, not only the head-to-head study, but the head-to-head study is being seen by the KOLs in Europe in a very significant way. We are off to a much faster start than the other market entrant and double digit in the first, you know, months, is something that does not look like an analog of a second- or third-to-market product. So, where is it being used? I mean, it is being used in first line in a lot of these big countries like I mentioned, like France and Italy and Spain. And, you know, off to a good start. And look. It is a small world too. There is a lot of buzz from the Canada, Japan, and Brazil markets as well. So, more to come, we are coming into derm season, we get into that spring and summer, and that sets up well for ZENRELIA. Operator: Your next question comes from the line of Brandon Vazquez from William Blair. Brandon Vazquez: Congrats on a strong end of the year here. I wanted to start first on the guidance, maybe just push a little bit, just to understand if there is conservatism baked in here, if there is something we are missing because if I think of a price of two points in 2025, and a volume of five points, that gets you 7% growth in 2025. We are talking about meaningfully more price coming through in 2026, and do not think there is any reason that volume should meaningfully decelerate. So that algorithm already puts you above your initial 2026 guidance, the high end of that range. So again, like, question is, one, are we simply baking in some conservatism here? I want to make sure that we are not missing any big moving pieces that would meaningfully change that algorithm in 2026 guide. Robert M. VanHimbergen: Yeah. So thanks for the question, Brandon. Good morning. Hey. So listen. We feel great about the momentum that we have seen exiting 2025. And listen, our guidance is right in line with the framework we gave at Investor Day, so mid-single digit top-line growth, high single-digit EBITDA growth, and low double-digit EPS growth. And again, we are going to be focusing on deleveraging and getting to that low threes by the end of the year. But listen. We feel great about the basket of innovation. We feel great about Elanco Ascend coming in. But listen. We are also in an environment where we see higher than normal inflation. We are being responsive and cognizant of competitive response. And, you know, as we mentioned in Investor Day, we are going to take a wide range of potential headwinds and tailwinds and be transparent on that. But listen. We feel good about the 2026 guide we gave; it is also the long-term algorithm we gave as well. The last thing I would maybe just highlight, when you are looking at just growth trends, keep in mind, we are lapping some significant growth within that basket of innovation. Our basket of innovation grew $400 million in 2025, and we are growing that $250 million here with the recent uplift, that additional $50 million that Jeff highlighted. Brandon Vazquez: Okay. Great. And then one maybe follow-up is a little bit of a bigger picture question on the commercial side. I think in the past, we have talked about trying to more meaningfully get into the corporate accounts. You need a broader portfolio of innovation. You have had a lot of good products coming out. You have more coming. Where are you guys today? In terms of maybe what inning are you in in getting into those big corporate accounts to draw some of that big volume? If there are any kind of, like, portfolio gaps left that you need—think in the past, we have maybe talked about vaccines as being one of those areas. What is left that you may need to do for the corporates and what timelines to start making moving that forward a little more? Thanks, guys. Jeffrey N. Simmons: Yeah. Thank you, Brandon. So, yeah, a great finish to the year, our best corporate year in, I know, more than five years. We have got a dedicated team. We brought in some additional expertise from industry competitors, and it has been a very big focus point for Bob and the team and Chris. And, so a real credit to them. Probably some of the best metrics as we look at lead indicators. So we are seeing growth. We are in most all the clinics here in the US. Bifrenna will be a big addition because you start to now, hey, we have got everything that everyone else has, and we believe they are differentiated. When you look at a Bifrenna having efficacy, value, and convenience differentiation, it has lasted a minimum of six weeks. All of that is going to resonate really well. But I think our offering and our portfolio show that. And again, we see that in the results. Europe has been tremendous. I mean, to see, I am really surprised by how quickly we got ZENRELIA into all corporates already. So that has been beneficial. But, yeah, if I had to point to what is next, I think the international pet vaccines will be important. And that is going to take some time. We know that. Vaccines continue to be a focus point for us. But as a whole, look for corporates' impact to be a really nice growth driver for us in 2026. And it really comes from the teams working really hard on building best-in-industry teams. Your next question comes from the line of Daniel Clark from Leerink Partners. Your line is open. Daniel Clark: Great. Thanks so much. Good morning, everyone. Just wanted to, I guess, first start with Quattro. The further gains via the Kinetic Index that you saw in the quarter, was that sort of in line with your expectations from a couple of months ago? Or was incremental upside? Jeffrey N. Simmons: Well, I think it is as we said, to see the jump we had in third quarter and then exceeded again in the fourth quarter, and being a leader in the Puppy Index. I always have looked, with my many years in this industry, the Puppy Index is definitely where people are leaning in and saying, hey. This is the opportunity. And if I am going to put you on a product, I would like you to start on the best that is available today, and I think that is a real statement about Quattro. Four active ingredients, four dimensions of differentiation. We have added palatability, which has really come out as, we think, the fourth now dimension of differentiation. As I mentioned in my trends earlier, Daniel, I think the comment around 70% of new puppies are in international markets. Getting the Australia approval last week and starting the global approvals of Quattro will also be advantageous. So yeah, good trends and a nice opportunity here with Quattro. And, hey. This space grew 30% last year. Daniel Clark: Great. Thanks. Just a follow-up. I wanted to ask, you know, on your no-regrets policy and sort of leaning into launches that are going well. I mean, a lot of your launches are going well at this point. So as we think about the ongoing duration of investing against those, you know, how should we think about that kind of going forward here? Should we think continued launch support throughout 2026 and into 2027 to keep this momentum up? Or, like, what are the different puts and takes you are thinking about on that front? Robert M. VanHimbergen: Yeah, Daniel. Hey. So I would consider us applying the same no-regrets approach in 2026 that we had in 2025. And that is not only Bifrenna, but also the launches we had in 2025. Right? We are using data to determine, hey. Are we getting the ROI on those investments? And so you do see OpEx—we did guide 7% OpEx growth in 2026, and that is particularly associated with the no-regrets approach to launches as well as funding R&D for the longer-term benefit of the company. But, again, Elanco Ascend is extremely important. This is where Elanco Ascend is coming in and ensuring that we are operationally excellent across our entire P&L that allows us to get to that high single-digit EBITDA commitment we have made while also funding R&D as well as the no-regrets approach that we are taking with our products. Operator: Your next question comes from the line of Umer Raffat from Evercore ISI. Your line is open. Umer Raffat: Good morning, guys. Thanks for taking my question. I have two, if I may. Perhaps first, on gross margin, I thought I should dig into it a little more because if I step back and think about the $400 million plus in innovation growth in 2025, I would have thought there would be a gross margin expansion. And the fact that it was flat almost suggests that the underlying business outside innovation deteriorated in gross margin. How do you think about that, especially because your guidance for 2026 assumes about flattish on gross margin, best I can tell, even though the top line is akin to your first half 2025 annualized, and we know first half 2025 was almost 200 plus bps higher on gross margin. Robert M. VanHimbergen: Yeah. Umer, hey. Thanks for the question. So as we think about just Q4, I will pivot into 2026 as well. So in Q4, we did see 30 basis points of improvement in margins, and that was driven from price as well as sales volumes and mix benefits. But that is partially offset by inflationary that we are seeing as well as the flow through of higher cost of inventory that we have built up throughout the year. And so you will see that—saw some of that—come out in Q4, and you will see that come out in 2026. As I look at 2026, first off, we are going to make the right decisions for the long-term success of the business, but we do expect gross margin expansion of 40 basis points year over year. Price is going to be a component of that. And again, we expect that price to accelerate from 2025. The basket of innovation, as you have highlighted, we do expect that to grow $250 million. That does carry higher margins than our corporate average. And then Elanco Ascend, we are seeing good benefits coming through just the progress that the global team is making on that. Now the one thing—the one or two things—I would look at is, one, we do have inflation that is above historical levels. And two, as I mentioned, we have this higher cost inventory flushing through in the first half of the year. And so you will see our margins enhancing and accelerating throughout 2026. So the second half will be stronger than the first half. But long term, we feel confident in improving margins with the basket of innovation, the volume leverage, and then, again, Elanco Ascend proactively enhancing margins over the next three to five years. Umer Raffat: Got it. And then also on the innovation guidance of about $250 million plus growth in 2026, considering Credelio franchise alone grew almost $137 million in 2025. Is it reasonable to assume that half of 2026 growth is Credelio franchise alone? Jeffrey N. Simmons: I think you are definitely seeing that that was a major contributor, and I know some of the way you are thinking about Credelio Quattro. I would build on, Umer, and say, you know, we definitely are seeing that kind of a trajectory. We are not going to get into guiding by product, but no question, Quattro ends 2025 with more momentum than we expected. International ZENRELIA, and if we get this label change, there is a lot of opportunity here with ZENRELIA. And Bifrenna comes in differentiated. So all of that, I think we step back and say, hey. There is opportunity. I also think the competitive front has changed some. I do not think the long-acting injectable parasiticides are maybe what were anticipated a year ago. I think that is actually contributing to bigger growth in the broad spectrum endecto market, Umer. So I think the competitive set is different, and that is an advantage as well. So we like it. We are lapping $400 million, that we mentioned, but we do see really what is different about the Elanco story is we have got a basket of best medicine in major markets that are growing double digit. Thank you very much. Operator: Your next question comes from the line of Navann Ty Dietschi from BNP Paribas. Your line is open. Navann Ty Dietschi: Hi. Thanks for taking my question. Maybe first, if you could discuss your assumptions behind a stabilizing base business in 2026? And my second question is on the livestock business that also drove the Q4 beat. Can you discuss your outlook by species? And in particular, how long do you expect the favorable cattle producer economics to last? Thank you. Robert M. VanHimbergen: Yeah. So on the base business, Navann, really right in line with what we committed back at Investor Day. So we are seeing low single digit to high single digit trend. Really, since the last three quarters, we expect that as we move forward. It will pivot a bit quarter by quarter, but the basket of innovation is working and bringing in some of our base products. So, you know, we see this as a stable base as we look in 2026 as well as beyond that time frame. Jeffrey N. Simmons: And, Navann, just real quick. I mean, great protein markets, as I mentioned, I think you are seeing, you know, US projection 5%. These protein trends are real. Farm animal is going to be a big contributor, I think, to the animal health growth we see in the next decade. If I break it down, cattle and beef, you know, the low supply, high demand, profitable markets. There is starting to make that turn on the rebuilding of the herd, but it is going to take some time. But that is advantageous for our portfolio. And then I would just call out dairy. Dairy ended at 4.2% growth as an industry in Q4. We are excited about this AHV acquisition leaning in, going to expand our portfolio and our share of voice. Dairy is the protein to watch. And poultry has had three years at 3% growth, and they are projecting the same for the fourth year in a row. Operator: Your next question comes from the line of Chris Schott from JPMorgan. Your line is open. Chris Schott: Great. Thanks so much for the questions. I just want to come back to the derm market, maybe particularly on the international side. Just elaborate a little bit more on what you are seeing on market growth prior to your entry in the market. I am just trying to get my hands around are we seeing new competition accelerating the overall derm market beyond the share gains? Or is this really, again, more about share? So just any directional color there would be helpful. And then just my second question was on the 4% to 6% guide for 2026. Just, is that—should we think about that kind of evenly balanced between pet and farm, or is it skewed one way or the other? I am just trying to get any directional color there. Thank you. Jeffrey N. Simmons: Yeah. Chris, at a high level, yes. We saw coming into the—what we are seeing in Europe, where there is just a lot more promotion. The data for fourth quarter is not in yet, but double-digit growth, new starts continue to be anywhere in the, you know, 10% to 20%. So, and then you have got, you know, in the international markets, as I just mentioned, 70% of the new puppies, globally, are in international. So I see a lot of trends and all this increased noise about, hey, solutions to an itching dog. It is a great market backdrop, and it is great for us as well as we come with ZENRELIA globally. Robert M. VanHimbergen: Yeah. And then on your second one, Chris, you know, generally speaking, would assume it is balanced across the four quarters and generally balanced across pet and farm throughout 2026. And, you know, again, at Investor Day, we highlighted that farm business is generally mid-single digit growth, and then the pet is probably a mid-single digit plus. Operator: And we have reached the end of our question and answer session. I will now turn the call back over to Jeffrey Simmons for closing remarks. Jeffrey N. Simmons: Yeah. Thank you, everybody, for your interest in Elanco. Historical year in 2025, but I want everyone to be assured that at Elanco the engagement and the execution have never been higher in the company. We take a balanced and prudent and very disciplined approach serving our customers as we head into 2026, and we are excited to engage with you going forward. Our priorities remain the same, and that is growth, innovation, and cash, and we will be assured that the continued delivery is our top priority for you as shareholders. Thank you for your interest in Elanco and your investment in Elanco. Look forward to working with you throughout 2026. Have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

82天前Insight Analytics约5分钟阅读

BLZE 2025 Q4 财报电话会议

Operator: Good day, everyone. Welcome to the Backblaze Fourth Quarter and Full Year 2025 Earnings Call. Just a reminder, this call is being recorded. I would now like to hand the call over to Ms. Mimi Kong. Please go ahead. Mimi Kong: Thank you. Good morning, and welcome to Backblaze's Fourth Quarter and Full Year 2025 Earnings Call. On the call with me today are Gleb Budman Co-Founder, CEO and Chairperson of the Board; and Marc Suidan, Chief Financial Officer. Today, Backblaze will discuss the financial results that were distributed earlier. Statements on this call include forward-looking statements about our future financial results, the impact of our go-to-market transformation, sales and marketing initiatives, cost savings initiatives, results from new features, the impact of price changes, our ability to compete effectively and manage our growth and our strategy to acquire new customers, retain and expand our business with existing customers. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those described in our risk factors that are included in our quarterly report on Form 10-Q and our other financial filings. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them, except as required by law. Our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for our GAAP results. Reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC. You can also find a slide presentation related to our comments in the webcast, which will also be posted to our Investor Relations page after the call. Please also see our press release or presentation for definitions of additional metrics such as NRR, gross customer retention rate and adjusted free cash flows. And finally, we will be participating in the Citizens Technology Conference on March 2 in San Francisco. Thank you for joining us, and I would now like to turn the call over to Gleb. Gleb Budman: Thank you, Mimi, and welcome, everyone, to the call. We finished 2025 with solid fourth quarter results. Revenue came in line with guidance and adjusted EBITDA margin reached 28%, doubling over the prior year. We also delivered adjusted free cash flow profitability for the first time as a public company, a major milestone demonstrating the inherent operating leverage in our business model. For the full year, total company revenue grew 14% year-over-year with B2 Cloud Storage growing 26%. Today, I want to focus on 3 things: first, the strength and durability of our core business; second, an update on the meaningful progress of our go-to-market transformation; and third, how we're positioning Backblaze to take advantage of the AI opportunity. Let me start with the core of our business. As data creation accelerates exponentially, Backblaze addresses a large and growing market where long-term demand for scalable, cost-effective storage compounds over time. Our business compounds within that market as we add new customers and retain them for an average of 9 years. B2 net revenue retention of 111% reflects consistent expansion within our installed base, reinforcing durable, long-term growth. We've proven our ability to grow in that market, delivering an annualized growth rate of 21% since IPO, being a cash generating business is an important financial milestone. Year-over-year, we meaningfully improved profitability, demonstrating how we are building a sustainably durable company, one that can invest in growth while maintaining financial strength. Now let me talk about our investment in growth and the progress on our go-to-market transformation. While we didn't achieve our budgeted Q4 B2 growth rate, we made meaningful progress and have positioned ourselves for success. More importantly, the underlying fundamentals of the business remain stable and the investments we've made position us for durable growth going forward. Excluding the highly variable growth of the large AI customer we previously mentioned, we stabilized on a baseline of around 20% B2 revenue growth in each of the last 5 quarters. Now we've shared our goal of moving up market. We ended the year with 168 customers generating more than $50,000 in ARR each, up 35% year-on-year. The ARR of this cohort increased 73% year-on-year to $26 million of ARR. We're very proud of this upmarket progress. We've also launched 3 key initiatives: number one, increasing awareness. We launched Flamethrower, our start-up program designed to engage high-growth companies early and establish Backblaze as their long-term storage infrastructure partner; number two, driving greater pipeline consistency. We're upgrading our top-of-funnel systems and scaling demand generation programs to drive higher velocity sales motion; number three, expanding revenue within our installed base. We are implementing processes to proactively identify and capture additional share of wallet across our more than 119,000 B2 customers. People are the cornerstone of our success, and we continue to strengthen our leadership bench to support these initiatives. We have already hired the co-founder of an edge compute company to drive our Flamethrower program, a business systems leader for our systems work and a head of customer success to build out that expansion effort. We will keep up-leveling our leadership and talent. For instance, we are also in the final stages of hiring a sales development leader to drive pipeline and a revenue operations leader to drive tighter coordination and accountability across the entire go-to-market organization. Scaling into this next phase requires even greater execution discipline. To support that, Elias Mendoza joined us as strategic transformation leader. He previously served as partner and COO at private equity firm, Sirius Capital and held leadership roles at IBM and Morgan Stanley. In these roles, he has helped companies drive strong strategy to execution. Under his leadership, we also established a go-to-market advisory committee of operators who have scaled enterprise and platform businesses to a billing and revenue and beyond at companies such as Okta, Snowflake, ZoomInfo and Carta. Their role is to bring pattern recognition, pressure test key decisions and provide external perspective as we scale. We have made meaningful progress in our go-to-market transformation, and I'm excited about the team we're putting in place to drive it forward. Now let's talk about how we're positioning Backblaze to take advantage of the massive AI opportunity ahead. We all understand there's a lot happening in AI today, but sometimes the scale is still hard to fully comprehend. I saw a report recently that capital spending on AI as a percent of GDP by just the hyperscalers in 2026 is forecast to be 5x larger than the entire spend to create the U.S. interstate system, 10x larger than the Apollo Space Program. AI CapEx spending accounted for 92% of all U.S. GDP growth. It's hard to hyperbolize AI. With AI, a big focus is who's disrupting and who's getting disrupted. We believe Backblaze is one of the disruptors, participating in this infrastructure replatforming as a storage backbone for the next wave of cloud infrastructure. So while like any major new innovation, there will be market volatility. We are firm believers in the long-term growth opportunity and are leaning into it. We're doing that with 2 growth vectors. Number one, on the supply side of AI, neoclouds and other AI tooling companies are building the platforms for AI workflows. Our opportunity is to be the storage backbone of those platforms. And number two, on the demand side of AI, companies are using AI to build everything from anomaly detection to zonal forecasting. These companies are using and generating large data sets. Our opportunity is to be the storage of choice for their developers and use cases. And we are uniquely positioned to be the glue between these, creating a virtuous cycle. Developing a platform that can deliver massive performance with large-scale data sets while providing that cost efficiently is a significant technical challenge. Backblaze has done that, and AI is driving an increasing need for this technology. On the supply side, roughly 200 neoclouds have sprung up, and industry estimates project that market to reach $237 billion within the next 5 years. These companies provide GPUs as a Service. And most will need cloud storage to fully serve with their customers. We've already signed multiple of these multibillion-dollar neoclouds with not only 6- and 7-figure deals but our company's first 8-figure TCV deal, an over $15 million deal. And we believe all of these have material upside potential, and we're in discussion with half a dozen others. By our estimates, neocloud storage for our solution alone represents a $14 billion opportunity by 2030. To further pursue our neocloud opportunity, this morning, we launched B2 Neo, a high-performance white label storage offering specifically designed for neoclouds. Developed in collaboration with our neocloud customers, B2 Neo allows neoclouds to offer a top-tier storage solution without the massive capital costs or years of engineering required to build a storage back end from scratch. On the demand side, the growth in AI developers is exponential. GitHub disclosed they were adding, on average, a new developer every second. Hundreds of AI companies and countless individual AI developers already use B2. For example, one of our customers uses AI to generate audio. They just launched a year ago and already have multiple petabytes with us signing a 6-figure annual deal with us. As they add new users and those users generate more audio, that data grows exponentially. Our self-serve platform, where we added 12,000 customers this year alone is a great enabler for this class of AI developers who just want to get going. We launched our start-up program called Flamethrower and a developer relations initiative to ensure developers are building with Backblaze. To drive our road map forward for the AI opportunity ahead, we strengthened our product and engineering leadership. Dan Spraggins joined as SVP of Engineering, and Rhett Dillingham as SVP of Product, bringing deep experience in AI and high-performance cloud infrastructure. We also added Russ Artzt, Co-Founder and former Head of R&D at Computer Associates, as an adviser. Together, this team strengthens our ability to scale the platform for larger, more complex AI-driven deployments. We entered 2026 with a strong and growing business, a rapidly improving go-to-market motion and a tremendous AI opportunity with a targeted B2 Neo offering and a strong product team. AI is reshaping how data is created and scaled and storage sits at the center of that transformation. Across neocloud platforms and AI native developers, we are building the foundation for the next generation of data infrastructure. Durable growth and massive AI potential are the hallmarks of our opportunity. With that, I'll turn the call over to Marc. Marc? Marc Suidan: Thank you, Gleb, and good afternoon, everyone. We grew revenue while achieving adjusted free cash flow profitability in Q4. This is a significant milestone and an important step forward in our profitability journey. This progress was not driven by short-term cost actions but by the inherent leverage in our operating model as revenue scales. For the quarter, total revenue was in line with guidance at $37.8 million and adjusted EBITDA exceeded the high end of our guidance by approximately 600 basis points. In the fourth quarter, B2 revenue grew 24% year-over-year, up from 22% in the prior year. This is modestly below the range that we outlined last quarter. We delivered record bookings this quarter. As Gleb noted, we closed our largest contract in the company's history with over $15 million in total contract value. We're excited about this 8-figure deal. This deal validates the product market fit at scale. We don't expect to see meaningful revenue in 2026 as we complete certain development work. In 2027, we expect this customer to contribute over 300 basis points to B2 revenue growth. This customer helped drive our RPO, up 60% year-over-year to $66 million. In-quarter B2 NRR was 111% compared to 116% in the prior quarter. The sequential decline reflects variability from the large customer that we mentioned in our past 2 earnings calls. Factoring out that one customer, the underlying retention and expansion trends remain stable. Moving to the income statement. Q4 gross margin was 62%, flat sequentially and up from 55% in the same period last year. Adjusted gross margin was 80% compared to 78% last year. Margins remained stable despite higher data center costs, reflecting continued efficiency in our infrastructure and disciplined management of our operating model. Looking ahead, we anticipate some pressure on gross margins driven by increased costs. In response, we are proactively launching a gross margin optimization initiative focused on structural improvements across pricing, packaging and infrastructure. Our Q4 adjusted EBITDA margin was 28%, doubling year-over-year. The adjusted EBITDA outperformance was primarily driven by nonrecurring items, including variable compensation alignment and office restructuring savings. Excluding those onetime items, adjusted EBITDA would still have been above the 22% high end of our guidance. Adjusted free cash flow was positive $4 million in the quarter, representing a margin of 11%, exceeding our outlook of being adjusted free cash flow neutral. We ended the quarter with $51 million in cash and marketable securities. Based on our current operating plan, we expect to fund our growth through operating cash flows and capital leases. We do not anticipate a need to raise additional capital. We will continue to evaluate opportunities to optimize our capital structure over time in a disciplined manner. To improve accountability and further align management incentives with shareholders, we are shifting part of the compensation to performance-based stock units. These awards are tied to clearly defined performance objectives. Turning to our guidance for the year. Our objective is to provide a clear incredible baseline that reflects the most predictable portions of our business. While pipeline activity remains healthy, larger customer wins in usage-driven workloads can introduce variability in timing and revenue recognition. To maintain forecast discipline, we have derisked our outlook by excluding large swing deals and anchoring guidance on opportunities with more predictable demand characteristics. For our customers with high variable usage patterns, our assumptions reflect contractual minimum commitments rather than potential upside consumption. Our outlook is, therefore, based on continued expansion within our existing customer base and steady adoption of B2 across core use cases consistent with recent operating trends. We believe this approach provides a prudent and reliable foundation for the year, while preserving upside as deployment timing and usage visibility improve. For the first quarter of 2026, we expect revenue to be in the range of $37.6 million to $38 million, with adjusted EBITDA margins in the range of 18% to 20%. For the full year, we expect revenue to be in the range of $156.5 million to $158.5 million. Full year adjusted EBITDA margins are expected to be 19% to 21%. We expect adjusted free cash flows to be roughly neutral for the year with normal quarterly variability. Due to the difficult comp from last year's large variable customer, we expect B2 year-over-year growth in Q2 and Q3 to be in the range of 12% to 19% and approximately 20% for the full year. To wrap up, over the past year, we made meaningful progress towards becoming a Rule of 40 company, with our combined B2 revenue growth and free cash flow margin improving from 9% to 35%. As we look toward 2027 and beyond, we believe Backblaze is well positioned to grow efficiently. Our platform is already built. Our infrastructure scales with discipline and incremental revenue increasingly translates into profitability and cash generation. This capital-efficient model allows us to pursue the massive AI-driven opportunity ahead while maintaining financial discipline, expanding margins over time and building a durable self-funding business. With that, operator, let's open it up for questions. Operator: [Operator Instructions] We'll take the first question from Ittai Kidron from Oppenheimer. Ittai Kidron: Solid numbers, and thank you very much for derisking the outlook for the year. It's hopefully a very smart move. Gleb, I wanted to dig of course, into the neoclouds and the large deal. First of all, just from a big picture standpoint, are demand patterns any different? Can you explain how Neo -- your B2 Neo cloud solution, how is it different than B2? And what way are the demands different, the pricing different, the margin different? And if you could elaborate also why this deal is going to take a year before we started seeing revenue, I would appreciate that. Gleb Budman: Yes. Thanks, Ittai. All good questions. So one thing I'll say, first of all, is our pursuit of the neoclouds is one part of the business pursuit. There are about 200 of these neoclouds. We do think it's a large and important opportunity for us, right? The -- just our part of the neocloud opportunity, we view as about $14 billion, so it's important. And we are really well suited for it. The hyperscalers are not key competitors here because they are competing with the neoclouds as opposed to being vendors for them, the way that we are. So it's a good opportunity, which we're well positioned for. In terms of what B2 Neo is, it is a white label offering. So B2 is generally sold directly to the end customer. B2 Neo is a white label offering that they can build in directly into their service. It is -- it provides a lot of the same functionality that B2 provides. It's high performance. It's low cost. It's durable. It's scalable. But it also provides them the ability to manage that storage on behalf of their customers through APIs, with API integration, single sign-on, et cetera. So it's really leveraging all of the technology that we've built over the last 17 or so years for the company and then layering on top of that technology to make it simpler for them to integrate natively and make it easy for them to manage and offer that storage [ upmarket ]. So that's what B2 Neo is. Now in terms of why it's going to take a year for this one neocloud provider to start seeing the benefits of it, it's a combination of work we need to do and work they need to do. So they have an existing storage offering that they're going to be switching to use B2 Neo instead. And so it's, basically, we have some work to do to make it so that it's even easier and more robust to automate and natively integrate for them. One thing I'd like to make clear is all the work that we're doing for them is useful for other neocloud providers and also other companies but not required for most. So we have multiple new clouds that have already signed up that don't need this work, and we think that there's a large number of them that won't need any of this work. But the work that we're doing is broadly useful for others as well. Ittai Kidron: Okay. Appreciate it. And then, I guess, first of all, the TCV, $50 million, that's great. But can you tell us the duration of the contract? And is the margin profile of this business -- as you ramp up the neocloud, Gleb, is there potential upfront costs hit to you as they ramp before margin normalizes on these businesses? Marc Suidan: Yes, I mean, Ittai, this is Marc. I can take that question. We do have to accelerate some capital expenditures. That would impact that and other things happening in the market would impact our gross margin by a few hundred basis points to help us prepare for this because it's obviously a large deal. You need to have the capacity in place. Ittai Kidron: Okay. And then lastly, on computer backup, Marc, can you comment on the expectation? I mean this business is -- the number of customers is now declining here. I guess help me think about the framework for this business for '26. How do I -- how should I think about the quarterly cadence and the annual cadence of this business? Is there a different long-term outlook for this? Marc Suidan: Yes. I mean, I'll start off by the coming year, Ittai. We see this business declining 5% year-over-year. Currently, in Q1, that's more like a minus 3%. That builds up throughout the year and makes an -- averages out for the end of the year at a minus 5%. Ittai Kidron: Okay. And longer term, is there any -- should we just continue to expect this business to slowly decline? Gleb Budman: What I would say you, Ittai, on that one is we have programs that we've put in place and are putting in place to stabilize the business. We would like to get it to a place where it is flat and possibly even slowly growing. We don't think this is a fast-growth business, as you know, but it would be good for it to not be a declining business. But it's a little too early for us to have confidence in those programs getting to that place. So for this point, we're estimating it at that shrinking rate, but we are putting effort into getting that to be flat to slightly growing. Operator: The next question will come from Jeff Van Rhee from Craig-Hallum Capital Group. Jeff Van Rhee: Congrats on the free cash flow. Great to see it. A couple for me. Maybe if you could just start in terms of B2 coming into Q4, came in a bit below expectations. Just expand a bit more on what missed there. And then as you're looking at the annual number, I didn't catch what you had guided it for in Q1, so if you could just fill in the gap. I think we can back into it, but maybe you could just share it. So what happened in Q4? And what do you think in Q1? Marc Suidan: Yes, Jeff, good to hear from you. This is Marc. So on the Q4 '25, we were expecting, when we set our guide, quite a few deals to close in November. They came in very late in the quarter, so they didn't benefit Q4. That's why we've adjusted our guidance philosophy going forward, where we said, going forward, we're going to factor out the swing deals because they're less predictable in timing of closing. So that feeds into the guide going forward. And we said for B2 year-over-year, it will be 20% in 2026. The ranges that we provided of 12% to 19%, a lot of that has to do with the comps of that high variable customer in 2025, so Q2 would be the low end of that range, and Q3 would be about the higher end of that range. And overall, the year would average out to 20%. Does that answer your question? Jeff Van Rhee: Yes, I think it does. And so the growth is, if I do the quick math, maybe in Q1 looks like it's 9%, if I have it right, on year-over-year and you're decelerating to 8% for the overall year. So it actually looks like maybe you're assuming some deceleration in the year. I'm sure there's a little bit of lumpiness from the large customer, but generally speaking, you had some pretty good momentum in sort of Phase 1 of the sales build and build out. And it sounded like you felt like you had some early good signs on Phase 2, but the numbers are painting a picture of deceleration. So just help me reconcile the 2. Marc Suidan: Yes. I mean the deceleration that you're seeing is largely driven by that one monthly customer. If you go to Slide 21 of our earnings deck and you factor out that one customer, you could see that pretty much we've been stable around the low 20s. So if you recall, factoring out any price increase, B2 growth rate has always been growing but decelerating for 5 years. We've managed to stabilize it in the low 20s. So now with this new guidance philosophy, we're seeing 20% year-over-year, and that includes the lumpiness that I described in Q2 and Q3. But -- then with all the Phase 2 changes we're doing, Gleb could elaborate on that. That will then afterwards come drive benefits. Gleb Budman: I think also, Jeff, I think you were talking about the whole company, not just B2, right? And so part of what's driving that is that computer backup was growing, in part, due to price increase before and it's -- as Marc said, we expect it to shrink about 3%. So it's putting some downward pressure on the overall company in Q1. But on the GTM transformation, I think some of the things that we look at is, in terms of progress, there is progress that we're making in terms of actions, things like we've hired the VP of Revenue Operations. We've made material progress in moving the systems forward and expect that work to be largely completed at the end of this quarter. We've gotten pretty far down the path with some sales development leaders to bring in. We've made a number of kind of improvements. And then you can also see some of the outcomes like the 73% growth in ARR from customers over $50,000 and this 8-figure deals. So I think we've made progress on the GTM side. Obviously, we all want more work to be done there. Jeff Van Rhee: Great. Maybe just one last one if I could. On the large neocloud win, can you just expand a bit on what the competitive landscape looked like there, maybe the finalists, the kind of 2 or 3 that it came down to at the end of the day and if there were specific features, capabilities that were the deciding factors for your win there? Gleb Budman: Yes, it's actually -- it's interesting because this neocloud, they have their own storage. They started realizing from their customers that the source that they had wasn't going to provide what they needed for this next phase of evolution. And so they started thinking about how to handle that. A number of their internal engineering and business leaders were actually familiar with Backblaze from prior roles in other places, and they knew that Backblaze had a really strong reputation for providing a great storage platform, that it was trusted. Basically, we built a moat around this idea of high performance but predictable economics and low-cost storage. And so we were at the top of their list for consideration. Now when they went and evaluated, they wanted to make sure -- because they were going to be basically placing their brand on the line for saying they're going to use us for this underlying platform for all of their customers, so they wanted to make sure it absolutely worked. They did pretty detailed technical due diligence and then chose us. So the why, I think, came in part because we had established a lot of credibility over many years that we are a great storage platform, and then we met their technical requirements for both performance, scale, affordability and openness. Operator: Your next question today comes from Mike Cikos from Needham. Michael Cikos: If I could just come back to the gross margin comment, this expected headwind that we're up against, I guess it's a bit of a two-parter here. But when I think about the headwind we're facing this year, is that really tied to customer success initiatives or deployment in advance of recognizing revenue from this large neocloud agreement that we're talking to today? Or is there potentially an ongoing presence or multiyear factor we need to consider when evaluating corporate gross margins on a go-forward basis? Marc Suidan: Yes. Mike, it's Marc. There's a few factors in there, right? First of all, data center cost and equipment have gone up. That, combined with us needing to accelerate some CapEx, does reduce our gross margin this coming year by a few hundred basis points. That's why we said we're doing that gross margin optimization initiative to look for opportunities to offset that. Now in terms of business model, when you go after a white label, large-scale solution like that, generally speaking, the gross margin will be a bit lower and the OpEx will be lower as well because you have to spend less on sales and marketing. So it nets out to the same economic model for us, but that's the P&L benefit if that makes sense. Michael Cikos: It does. It does. And then I just wanted to come back again to this derisk guide that we're talking to here. And appreciate the commentary in the prepared remarks. But just to better understand, these swing factor deals or the idea that we're only going to underwrite minimum contract commitments from customers, is that really tied to the neoclouds when thinking about those swing factor deals? Or is it maybe the move upmarket? Anything else you can provide that's creating that dynamic? And then second -- go ahead. Go ahead. And I just have a follow-up. Marc Suidan: Look -- okay. I'll answer this one and then you could ask your next question if you want. So moving upmarket -- I mean there's different sides of upmarkets. But when you look at the average deal size of those 168 customers, it has grown quite a bit. But I think the even larger ones, and let's call larger ones $500,000 in ARR and greater, they do take longer to close. So there's less predictability for us to factor that into our guide. So that's why we factored them out. Doesn't mean they won't happen. It's just harder for us to guide on them. So I think it's less around the neocloud. I mean the neoclouds are big deals, too, and they have similar attributes, right, where you got to take longer to do the technical feasibility and make sure you went over the POCs. So that's what's driving that side of it. Michael Cikos: And then, I guess, the final follow-up on my side, but for those, let's say, $0.5 million plus deals that you're signing, can we start bifurcating the extent to which those sales cycles are longer versus a more typical run rate business? And then final piece, but for the calendar '26 guide, is there any way you can give us some pointers as far as the NRR that you're thinking about when we look at this calendar '26 guide? And that's all on my side. Gleb Budman: Mike, in terms of the bifurcating the size of the deals and the length of time, when we look at those, they certainly are longer sales cycle ones, but it's interesting because they're not dramatically longer. So some deals like the 8-figure deal that we talked about, that did take the better part of a year, in part, because they had to look through their own systems. They had to understand what it would take to switch out to a different system, what integration that would require, et cetera. A number of the other neoclouds didn't take anywhere near that long, and many of the other larger customers, especially ones that are $50,000, $100,000, $200,000 actually moved quite quickly. But certainly some of the largest of those deals, they did take, call it -- so some of them took 6 months or so to close, whereas we've seen a lot of the deals close in sub-90 days. Marc Suidan: Yes. And then I could jump in and discuss the NRR outlook. Due to the lumpiness of that large customer in '25, we factored out any usage above their minimum commitment level and our guide for '26. So assuming that that's what materializes, the NRR, just like the revenue growth rate for B2 and just like the overall growth rate at the company will be lower in Q2 and Q3. NRR could go down to closer to 100% for 1 or 2 quarters. But our overall growth rate of 20%, which is where we should be finishing the year and year-over-year overall should equate to an NRR that's closer to 110%, so pretty much where we are now, plus or minus 200, 300 basis points. Gleb Budman: Mike, one thing actually, I'll mention also on NRR that I think I find quite exciting. The -- we have a broad base of customers, but we're leaning in heavier to the overall AI customer type, not just the neoclouds. And we have hundreds of those customers that are using us for AI workflows specifically. We've seen a growth rate of 75% in the number of those AI customers. But one of the things that I find even more exciting is that the growth rate of those customers is about 3x faster than the growth rate of our average customer. So as we sign up more of these AI customers, we see the opportunity for NRR to go up over time as well because they are generating data at a faster rate than your average customer. Operator: Up next, we'll go to Jason Ader from William Blair. Jason Ader: Wanted to first ask about your comment, Gleb, that most neoclouds don't have storage. I think that's what you said. I just wanted to understand why that might be. And then also your comment that the 8-figure win was with the neocloud that did have storage, but the storage wasn't going to handle what they needed, maybe just if you could elaborate on why it wouldn't be able to handle what other customers needed. Gleb Budman: Yes. Thanks, Jason. Both good questions. So with these 200 neoclouds that are -- that have come up, they almost all started with GPUs, right? So the need that happened was for these AI use cases, they needed the GPUs first. The second thing that they need is they need a place to keep the data to feed these GPUs. So initially, they set up data centers. A lot of them set up data centers that were more specifically designed for GPUs, which are very power hungry. Oftentimes, they want liquid-cooled environment. They don't need nearly the square footage in the data centers that they need. They need more power in the space, et cetera. So they built these providers focused on the GPU opportunity. What they realized then is customers who want to use the GPUs need a place to keep the data. They needed the place to keep their data to build the models. And then they needed the place to keep the data when they're doing inferencing for the outputs. And so what some of them have done -- many of them have not done anything on that front yet. They've just stood up the GPU side of things. But what some of them have done is said, okay, well, we can do something, and they -- some of them have used open source projects for -- to stand up their own infrastructure, where some of them have set up a storage infrastructure using flash systems. The problem is what they found is the flash systems are incredibly expensive to operate. And so for large-scale data sets that becomes very quickly unaffordable. The open source tooling is difficult to manage. You have to have experts ongoingly working to tune it, operate it, et cetera, and they're really not designed to scale to exabyte scale. Most of those open source projects were designed for potentially handling a single enterprise's scale. And so once they started seeing some movements and success, they start reaching the limitations of those projects. So the opportunity for us is that there are these 200 providers. They've built up the GPUs. They're starting to realize that they need storage. They're not going to get that from the hyperscalers for the most part because those are their direct competitors and the solutions that they have are either really expensive, really complicated or don't scale. Jason Ader: Got you. Okay. And then the neocloud that you announced or that you talked about, the 8-figure one, can you say if that is a publicly traded company? Gleb Budman: They are a publicly traded company, yes. Jason Ader: They are. Okay. Great. And then last one for me. Just, Gleb, what's your confidence level that you could win additional deals like the one that you announced on the call today? Gleb Budman: I mean, I'm very confident that we can do additional deals. The timing is obviously always uncertain, but this is -- it's not like this neocloud is the only neocloud that we have won. We've got others that are 6 figures and 7 figures already. Those that we have already signed at 6- and 7-figure deals, I think they themselves have the opportunity to become 8-figure deals because, as they roll this out to more of their customers and more scale, they're big enough that they could become 8-figure deals for us themselves. And we're currently in discussions with about half a dozen other neocloud providers that are somewhere in this same scale of size of organizational opportunity. So timing is obviously a question for us, but our ability to be a good fit for these kind of customers and the discussions we're in give me a lot of confidence. Jason Ader: And I may have missed it, but did you say how the duration of that 8-figure win was? Gleb Budman: That one's a 3-year deal. Jason Ader: Three-year deal. Okay. Operator: Eric Martinuzzi from Lake Street Capital Partners has the next question. Eric Martinuzzi: Yes. You mentioned the revenue impact from the 8-figure transaction really doesn't start to hit until 2027. Is that -- based on your answer about the 3-year duration and over $50 million, is that to say then that we're a small amount, maybe the end of 2026 and the bulk of it split between '27 and '28? Marc Suidan: Yes, that's correct, Eric. And for now, honestly, we're not factoring anything into 2026 for that. Gleb Budman: By the way, Eric, you said -- I just want to make sure that -- it sounds like you said $50 million, it's $15-plus million, 1-5. Eric Martinuzzi: Got you. Gleb Budman: I look forward to a $50 million deal in the future, but we're not there just yet. Eric Martinuzzi: The other thing I wanted to ask about was your comment regarding the adjusted free cash flow. You talked about it being neutral for the year. And I'm just wondering, given the investments you're making to have the infrastructure in place here, it seems like it's sort of front-half loaded. Is that to suggest then that the adjusted free cash flow positive, we're Q4 for sure and potentially Q3? Is that the right way to think about it quarter-by-quarter? Marc Suidan: Yes, Eric. I mean, generally speaking, the first half of the year is our cost base increases. It starts kicking into Q1. And our OpEx lines honestly should not be really increasing that much other than maybe around 500 basis points, not as a percent of revenue, just off the dollar baseline from last year on a non-GAAP basis as it relates to just basic inflation, salary raises and so on. Other than that, we're keeping our OpEx model pretty tight. I spoke about the gross margin being set back by a few hundred basis points. So when you combine all those factors and accelerating some of the expenditures to prepare for these customers, that's why we're free cash flow neutral for 2026. It is lumpy during the year. Usually, Q2 is also where we have the least of our computer backup renewals. So Q2 is usually the worst set, and the second half of the year is in better shape. And that would be a nice improvement from the minus $5 million for 2025 as a year and the minus $20 million in 2024. So I think we're pretty well set on exiting the phase of cash burn, and our aim is to stay here and get better. Operator: [Operator Instructions] Up next is Zach Cummins from B. Riley Securities. Ethan Widell: Ethan Widell calling in for Zach Cummins. I guess start with neocloud and with there being a high portion of leverage there to AI and HPC. How would you define, I guess, the incremental revenue opportunity or overlap, whether it be like customer base or function or revenue opportunity versus B2 Overdrive? Gleb Budman: Yes. Thanks, Ethan. It's a good question. So B2 Overdrive was initially actually developed because we heard from customers saying they wanted to use high-performance storage, high throughput storage that would enable them to send their data to the neoclouds when they needed them or to other hyperscalers, for example. So B2 Overdrive is not a white label offering. It's designed for end customers to actually use themselves. B2 Neo is specifically designed as a white label offering for the neoclouds to them themselves offer storage to customers. So they're largely serving different sides of the market but both serving the needs of AI and HPC type use cases. Ethan Widell: Understood. That's helpful. And then the large TCV deal, can you clarify whether that was from an existing customer? And generally, is the revenue upside from existing customers there based on increasing usage? Gleb Budman: So the $15 million-plus TCV deal is a new customer, completely new to us. However, what I would say is if you look across the $1 million-plus deals that we've had over the last year-ish, it's roughly half-half. Half of them are net new customers to us that came in, evaluated, considered, tested and then signed a 7-figure deal with us. And the other half are customers that started off small. Some of them started off self-serve. Some of them came in as just smaller sales deals, got familiar with the platform, liked the platform and then expanded into 7-figure deals. Marc Suidan: Yes. And Ethan, this is Marc. What I would add, if you look at Slide 17 of the earnings deck, it breaks down the new versus expansion from the existing, and it's certainly half and half. So it's pretty well distributed because the self-serve product-led growth is about half of that as well. And then the larger direct sales customers half. And each one is -- kind of breaks out into a half by itself of what is expansion versus new logo. So it's basically that's why if you look at the stacked bar, it's like 4 quarters, it's pretty well diversified in terms of how it comes through. Ethan Widell: Got it. Well, I appreciate the color. Gleb Budman: Yes. Maybe one other piece of color just to add in terms of -- so one of the things we look at is -- as a forward-leading indicator is pipeline. And in 2024, we generated about $15 million of pipeline, and in 2025, we roughly doubled pipeline to about $30 million. Our aim with our continued GTM transformation is to get to a run rate of about double of that. So with our industry-leading win rates, pipeline transfers into ARR quite efficiently. And so we're not there yet, but that's -- we made, I think, meaningful progress in '25 and aim to make more meaningful progress on that in 2026. Operator: The next question is from Rustam Kanga from Citizens. Rustam Kanga: Marc and Gleb, congrats on the RPO acceleration. Just building on another question that you answered, Marc -- Gleb, where you kind of mentioned that B2 Overdrive versus B2 Neo are serving 2 different sides of the market. And as we sort of think about the build-out of the pipeline for B2 Neo, is it fair to say that these opportunities are going to be anchored towards larger deals, albeit maybe not as large as this one that you've just put it up in the quarter, but is it fair to say that this is kind of the larger opportunity? And is that likely to sort of lead to higher ASP engagements as you look towards this opportunity? Gleb Budman: Yes. It's a good question, Russ. So one of the ways I would look at it is the market for the neoclouds, if you take just the hard drive-based storage opportunity inside of those 200 providers, that market is estimated at about $14 billion in the next 5 years. So with 200 players representing $14 billion of opportunity, every single 1 of those deals on average is going to be a large deal. So the short answer to your question is, yes, the B2 Neo deals, we see as large opportunity deals. The ones that we've signed so far are 6- and 7- and now 8-figure opportunities on those. Some of those, I imagine, they start smaller just as they start getting familiar with it, but I think all of them have the opportunity to get quite large. Rustam Kanga: Great. That's helpful. And then just kind of thinking about the investment cycle for next year, is there any sort of relative color that you can share with us in terms of the level of CapEx investment that you guys are thinking about for '26? Marc Suidan: Yes, Russ, this is Marc. Good to hear from you. Our CapEx will be higher next year. As a percent of revenue, when you look at our PP&E at the end of the year, it should be in the high 20s percentage of revenue. We typically finance our CapEx through capital leases, and we're fully set up to do that. And that would be the principal lease payments on a statement of cash flows, which is around mid-teens of revenue, right, because you're buying today but financing over 5 years over a growing revenue base. That mid-teens, I mean, over the past few years, has actually improved from our side as we continue to optimize our cost of capital. Operator: And everyone, at this time, there are no further questions. I would like to hand the conference back to Gleb for any additional or closing remarks. Gleb Budman: Thank you. We have a strong and durable core business, made meaningful progress in our go-to-market transformation and have a tremendous opportunity in AI. We drove growth while becoming adjusted free cash flow positive. We launched B2 Neo and signed multiple neoclouds, including this $15 million-plus deal. We also launched Flamethrower, our program for high-performance start-ups. In just the last few days since the launch, it's exceeded expectations, growing faster than the kickoffs at other leading companies that are a leader for that has driven. We had about a dozen start-ups that have applied, been evaluated, accepted and given credits, including ones from Andreessen Horowitz and Y Combinator, and we've bolstered our team overall to take advantage of this tremendous opportunity. I'm really excited about the year that we have upcoming together. I want to thank our employees, our customers and our investors for taking this journey with us, and we look forward to chatting with you next quarter. Thank you. Operator: Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.

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VIR 2025 Q4 财报电话会议

Operator: Good afternoon, and welcome to Vir Biotechnology's conference call to discuss the company's VIR-5500 Strategic Collaboration with Astellas and Positive Phase I Data, and 2025 financial results. As a reminder, this conference call is being recorded. [Operator Instructions] I will now turn the call over to Kiki Patel, Head of Investor Relations. You may begin, Kiki. Kiki Patel: Thank you, operator, and welcome, everyone. Earlier today, we issued 3 press releases, including a joint release with Astellas, announcing a strategic collaboration with our PSMA-targeted T-cell engager, VIR-5500, a second release reporting the Phase I VIR-5500 data that will be presented at ASCO-GU, and a third release reporting our fourth quarter and year-end earnings. Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under applicable securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, collaboration outcomes, future results, performance or achievements to differ significantly from those expressed or implied in such forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the potential benefits of our collaboration with Astellas, that the closing of the Astellas collaboration is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the therapeutic potential of VIR-5500, our PRO-XTEN platform, our development plans and time lines, financial terms and milestone payments, and our cash runway and capital allocation priorities. These risks and uncertainties associated with our business are described in the company's reports filed with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K. Joining me on today's call from Vir Biotechnology are Dr. Marianne De Backer, our Chief Executive Officer; Dr. Mark Eisner, our Chief Medical Officer; and Jason O'Byrne, our Chief Financial Officer. Additionally, Dr. Johann de Bono from the Institute of Cancer Research in the U.K. is joining us for our prepared remarks to provide a clinical and investigator perspective. Let me briefly outline today's agenda. Marianne will start by sharing the high-level overview of the strategic collaboration with Astellas and discuss how VIR-5500 has the potential to be a best-in-class T cell engager to address the significant unmet need in metastatic castration-resistant prostate cancer or mCRPC. Mark will then review the Phase I clinical data for VIR-5500, and he'll invite Dr. de Bono to walk through illustrative case examples. Mark will then summarize the broader data set and outline next steps for the program. Jason will cover the financial terms of the collaboration and provide an update on our 2025 financial results. And finally, Marianne will close the call, and we'll open the line for Q&A. With that, I'll now turn the call over to Marianne. Marianne De Backer: Thank you, Kiki. Good afternoon, everyone. Today marks a pivotal moment for Vir Biotechnology as we announced a landmark strategic collaboration with Astellas to advance the global development and commercialization of VIR-5500, our PRO-XTEN, dual masked PSMA-targeting T cell engager for prostate cancer. VIR-5500 is our most advanced immuno-oncology asset. And today, we are sharing new Phase I data that will be further presented by Dr. de Bono at ASCO-GU this Thursday, February 26. Together, we believe these milestones position VIR-5500 for rapid advancement and allow us to move forward with both urgency and discipline. The collaboration we've announced with Astellas combines their deep global experience in prostate cancer with our differentiated T cell engager powered by the PRO-XTEN masking technology. Structurally, the collaboration is designed to accelerate the development of VIR-5500 across both earlier and later lines of prostate cancer, unlocking a significant market opportunity while meaningfully derisking our pipeline of cancer immunotherapies more broadly. Importantly, the new Phase I data that we are sharing today show a compelling emerging safety and efficacy profile. While still early, these data increase our confidence that VIR-5500 has the potential to be a best-in-class T cell engager for the treatment of prostate cancer. And finally, today's update is also an important validation for the broader PRO-XTEN platform approach, which we believe can unlock opportunities to develop next-generation T-cell engagers in solid tumors. To understand the significance of this opportunity, it's important to consider the current landscape in prostate cancer. Prostate cancer remains a significant global health burden, representing the most common diagnosed cancer among men with 1 in 8 men being diagnosed in their lifetime. Despite significant progress in treatment, the 5-year survival for patients with mCRPC is only 30% with an estimated 100,000 mCRPC patients in the U.S. and Europe. Across the prostate cancer continuum, there is a substantial and growing unmet need for novel solutions, capable of improving long-term disease control as well as quality of life. T-cell engagers, which activate the human body's own immune cells in situ to fight cancer have transformed outcomes in several hematologic malignancies, and there are multiple products on the market today. In solid tumors, however, use has been limited by toxicity challenges, including of tumor activation and cytokine release syndrome. We believe VIR-5500 powered by the PRO-XTEN technology has the potential to address these challenges. The PRO-XTEN platform leverages a universal dual masking approach, which consists of a T-cell engager that simultaneously targets both the tumor antigen, shown here in blue, and CD3 on T cells shown here in orange, and the PRO-XTEN masks in gray, which shield the T-cell engager through a unique steric hindrance mechanism. As you can see on the left side of the slide, the large hydrophilic polypeptide XTEN masks surround and sterically hinder the CD3 and tumor-associated antigen binding sites. Upon reaching the tumor microenvironment, proteases cleave the linkers, here shown in pink, unmasking the active molecule precisely where it's needed. And once unmasked, the molecule combined both tumor cells and T cells, promoting targeted cancer cell killing. In healthy tissue, the XTEN mask remain intact, dramatically reducing interactions with normal cells and minimizing systemic T-cell activation and subsequent cytokine release. The dual masking approach is designed to reduce toxicity, enabling higher dosing and a wider therapeutic window. Additionally, the XTEN mask themselves provide an extended half-life of the molecule supporting optimization of dosing schedules for patients. And as you'll see later in this call, this hypothesis is translated directly into our VIR-5500 Phase I clinical study results. In the trial, VIR-5500 affirmed early signals of a favorable safety and efficacy profile. Treatment with VIR-5500 also showed a dose-dependent antitumor activity as measured by PSA declines, radiographic RECIST responses as well as PSMA-PET responses. Now let me turn to the collaboration with Astellas and why we believe they are the partner of choice for VIR-5500. First, Astellas is the market leader in prostate cancer. XTANDI remains the #1 therapy globally in this space, having treated more than 1.5 million men worldwide. This commercial success demonstrates the deep experience in bringing important prostate cancer therapies to patients at scale. Second, Astellas has repeatedly proven its abilities to successfully co-develop blockbuster medicines with biotech partners. The examples on this slide highlight Astellas' ability to work collaboratively and successfully to translate innovation into market-leading therapies. Third, Astellas brings strong internal global clinical development and life cycle management capabilities, operating across roughly 70 countries. XTANDI has benefited from robust life cycle management, enabling multiple label expansions into earlier lines of prostate cancer. This ability to continually generate data, expand indications and maximize long-term asset value is a key differentiator and an important capability as we think about the future development opportunities. Here is a snapshot of the deal terms that we announced with Astellas today, whereby Vir Bio and Astellas will co-develop and co-commercialize VIR-5500 for the treatment of prostate cancer. The financial impact of these terms is substantial. The total potential in combined upfront and milestone payments is $1.7 billion. In addition, in the U.S., commercial profits will be split 50-50 between the parties with Vir Bio having the option to co-promote alongside Astellas. And outside of the U.S., Astellas obtains exclusive commercial rights for VIR-5500, while Vir Bio is entitled to receive sales milestones and tiered double-digit royalties on ex-U.S. net sales. Global development costs will be shared between the parties with Vir Bio contributing 40% and Astellas 60%. Overall, this deal provides immediate capital and significantly reduces our near-term development spend while preserving substantial long-term economic upside. The collaboration can maximize the potential of VIR-5500 through accelerated clinical development and global reach, thereby creating value and benefiting more patients. I'll now turn to Mark to walk you through the compelling VIR-5500 Phase I data that forms the foundation of this collaboration. Mark Eisner: Thank you, Marianne, and good afternoon, everyone. I'm pleased to walk you through the latest Phase I data for VIR-5500, which have been accepted for an oral presentation at the ASCO-GU conference taking place later this week. This is the only dual mask T-cell engager under evaluation in prostate cancer, and the emerging signals we are seeing reflect the potential of the PRO-XTEN masking platform to unlock the promise of TCEs for the treatment of solid tumors. As of the January 9, 2026, cutoff, we enrolled 58 patients with advanced metastatic castration-resistant prostate cancer in weekly and every 3-week monotherapy dosing regimens. Importantly, all dose escalation cohorts have cleared the dose-limiting toxicity period. Our dose escalation strategy leveraged insights from our broader TCE platform, enabling us to advance efficiently from very low initial flat doses to step-up dosing with the highest Q3 week maintenance dose of 4,000 micrograms per kilogram. Throughout this escalation, prophylactic steroids or IL-6 blockade were not required and was only explored in 3 patients at the highest 4,000-microgram cohort. Based on the emerging data for VIR-5500, our development focus is now centered on doses at or above 3,000 micrograms per kilogram given once every 3 weeks. These dose levels are where we are seeing the clearest clinical signals. Here, we see the baseline characteristics for patients enrolled in the study. Participants were heavily pretreated with a median of 4 prior lines of therapy and some receiving up to 7. 95% had received prior taxane chemotherapy. These are patients with extensive disease burden, 93% presented with bone metastases, 45% of visceral involvement and 18% of liver metastases. Liver metastases are associated with rapid disease progression and poor response to existing treatment modalities. Approximately half of the study population was RECIST evaluable at baseline, enabling assessment of radiographic responses alongside PSA and biomarker responses. This slide summarizes the emerging compelling efficacy and safety signals across the study. Overall, the VIR-5500 data show a favorable safety and tolerability profile with no observed dose-limiting toxicities. Cytokine release syndrome events were limited and predominantly low grade, representing fever only. Importantly, we did not observe Grade 3 CRS events at the dose levels of 3,000 micrograms per kilogram and above, reinforcing the potential of the PRO-XTEN dual masking platform to widen the therapeutic index of our T-cell engagers. We observed a clear dose response relationship for efficacy. At Q3 week doses at or above 3,000 micrograms per kilogram, the data showed deep and consistent PSA declines. In 11 RECIST evaluable patients at these dose levels, 5 experienced objective responses, 4 of these responders achieved confirmed responses with 1 pending follow-up confirmation. We're also seeing emerging evidence of durability with several patients maintaining PSA and radiographic responses with continued therapy up to 27 weeks, though many in the higher dose cohorts remain early in their treatment course. Finally, the depth of PSA declines is particularly encouraging. 82% of patients achieved PSA50, more than half achieved PSA90, and nearly 1/3 reached PSA99. These are meaningful results for late-line metastatic castration-resistant prostate cancer patients, especially patients with visceral disease and liver metastases who represent the poorest prognosis population. To bring these data to life at the individual patient level, I'd now like to invite Dr. Johann de Bono to share his clinical perspective and discuss the real-world implications that illustrate the depth of responses we're seeing. Dr. de Bono is a world-leading physician in prostate cancer research with fundamentally changed how the disease is treated. It supported development of many breakthrough therapies, including abiraterone, cabazitaxel, enzalutamide, and olaparib. Dr. de Bono? Johann de Bono: Thank you, Mark. The 5 case studies I'm going to share with you, many of whom are my patients, demonstrate multiple, impressive, biochemical and radiology responses to this dual masked T cell engager, VIR-5500 in sufferers from metastatic and heavily pretreated prostate cancer. I serve these men in my clinics and have witnessed their experiences and symptomatic improvements on this agent. In advanced metastatic prostate cancer, many subjects experienced significant pain, especially bone pain. VIR-5500 resulted in pain disappearing following treatment in many patients as their disease regressed. Reduction in such pain is incredibly important to these men that we serve. Critically, I believe that the data from this trial show that the dual masking approach works at minimizing cytokine release syndrome, also known as CRS. We are reporting multiple amazing responses with little clinically significant CRS. In fact, circulating interleukin-6 levels remain low and relatively unchanged following treatment with VIR-5500 across these patients, with usually only grade 1 fever being observed, which is really quite remarkable and different to many other T-cell engagers we have studied that have resulted in cytokine release syndrome with hemodynamic instability requiring patient admission, vasopressors and treatment with oxygen, et cetera, for respiratory compromise. In addition to this absence of requirement for prophylactic steroids or tocilizumab in this trial, very few subjects have required treatment with steroids after receiving this drug, VIR-5500. And this is really quite important since steroids are immunosuppressive and can limit immunotherapy with T cell engagers antitumor activity. So this dual masking by limiting CRS has major advantages. Now let's go through these 5 cases in turn. Case study 1 demonstrates complete resolution of multiple, approximately 14, liver metastasis after 9 weeks of therapy with a 99% PSA fall, really very impressive. This was a 63-year-old man who had received most standards of care treatments, including taxanes, olaparib, the PARP inhibitor and abiraterone. This man had a substantial disease burden, many liver metastasis, diffuse bone disease, poor prognosis disease seen on the PSMA PETs imaging as shown on the left side of the slide. This gentleman received VIR-5500 at 800, 1,500 and 3,000 micrograms per kilogram, step dosing regimen dosed every 3 weeks. And he had a stunning response with complete resolution of all the liver lesions and near complete resolution of the bone disease, as you can see in these images. The patient achieved a partial radiographic response with a 62% reduction in the sum of the longest diameters and the 99%, as I said, PSA decline and importantly, marked improvement in his tumor pain. Now what's really noteworthy here is that liver metastasis are often resistant to therapy associated with poor prognosis, including resistant to hormonal therapies and often other therapies, too. And in my practice, these patients are very hard to treat and seeing such remarkable responses in late-stage heavily treated prostate cancer is really quite amazing, really, unprecedented maybe even. In the next slide, case study 2, we see here another significant RECIST response in multiple large liver metastasis again in a 75-year-old man with large bulky disease in the liver. As seen on the CT imaging on the left, with 3 course of treatment with VIR-5500 monotherapy, resulting in major shrinkage of liver lesions by 50% measurements being shown here on the slide. This patient had a 94% PSA fall as well as partial response radiologically and remain on treatment after 10 courses. Again, such responses in liver lesions is particularly impressive with a single-agent T cell engager and underscores the broad potential of this agent monotherapy to really impact outcome from this challenging disease. Let's move now to the next case, case study 3. This 70-year-old man had a durable RECIST, PSMA PET and PSA90 response lasting more than 8 months. He had peritoneal and abdominal wall lesions, as can be seen on the scan and essentially had complete resolution of these lesions on PSMA PET scan with a complete metabolic response. And as I said, a PSA fall of more than 90%, maintaining an excellent quality of life while on therapy. Let's now turn to the fourth case. This is a gentleman who is a farmer, who have been off work because of his symptoms. What's been amazing is that he had resolution of his pain and he was able to go back to work. That's very powerful. The 63-year-old man with diffuse lesions in the bone and lymph nodes with prior exposure to multiple prior lines of therapy, including an actinium-based PSMA radiopharmaceutical, had a complete radiographic response by week 9, accompanied by a 99% PSA fall, as you can see on the right in the slide here, with PSA resolution to nearly undetectable levels, as you can see down to 0.05 ng/mL. Now let's turn to the matched tumor biopsy data from the same patient on the left, which we believe is compelling evidence for VIR-5500's mechanism of action and potential. The Duplex PSMA/CD3 IHC for these biopsies at baseline on the left and post treatment on the right show what this drug induces. You see on the left extremely dense PSMA-positive tumor architecture and no meaningful T cell infiltration. At week 5, you now start seeing a major increase in T cell abundance and a significant eradication of PSMA-positive tumor cells. This overall illustrates the ability of PRO-XTEN masked T cell engagers to engage the immune system to drive an antitumor immune response. Let's now turn to the last subject. Here we see a complete response with 3 weekly 1,000 microgram per kilogram with approximately 12 months of durability in response. This is a 77-year-old man with more than 20 bone lesions and lymph node involvement, who actually received a lower dose of VIR-5500 with step dosing of 300, 600 and 1,000 micrograms per kilogram, given every 3 weeks after the step dosing. This patient, as I said, had a complete radiographic response by week 9 with resolution, as you can see on the scans of his bone lesions and his PSA becoming undetectable. He experienced clinical benefit with diminished pain and actually, in fact, is regularly going to the gym while on drug. And here, we start seeing durability really even with lower doses of drug. So overall, I've shown you 5 very impressive case studies from the trial overall, showing the potential for impressive and durable disease control in many patients with this dual masked T cell engager. I will now pass back to Mark to review the results of the trial overall. Thank you so much for your attention. Mark Eisner: Thank you, Dr. de Bono. Your clinical perspective on these patients treated with VIR-5500 is invaluable as we continue to advance this program. Turning back to the full study population. The safety profile of VIR-5500 remains favorable. The table on the left displays treatment-emergent adverse events for all patients treated with weekly and every Q3-week dosing. The emerging safety profile supports a wide therapeutic index. We've seen no dose-limiting toxicities to date with grade 3 or higher treatment-related adverse events in only 12% of patients. Most of these are laboratory abnormalities. We had only 2 patients discontinue treatment due to an adverse event. The first patient experienced spinal cord compression that was due to his underlying disease and not attributable to VIR-5500, and the second patient due to treatment-related blurred vision. The bottom half of the table on the left displays treatment-related adverse events at the highest doses of more than 3,000 micrograms per kilogram Q3 week. As you can see, the AEs were mostly grade 1 and 2. The grade 3 and higher events are listed at the bottom, but primarily consist of neutropenia and tumor flare, which are indicative of immune-mediated engagement. We observed 2 events of treatment-related blurred vision with unclear pathophysiology and nonspecific MRI findings that improved toward baseline visual acuity. Overall, limited CRS was observed in high-dose cohorts of 3,000 microgram per kilogram and higher. The bar graph on the right shows cases of CRS by dosing cohort. As you can see, all cases were low grade, either Grade 1 or 2 with no Grade 3 CRS. The Grade 1 events were only fever, treatable with antipyretics. We did not require prophylactic steroids or anti-IL-6 therapy overall. In the highest dose cohort of 4,000 microgram per kilogram, we did evaluate pre-dose steroids in cycle 1. This slide highlights the strength of the dose response relationship across the doses tested. The waterfall plot illustrates all patients who had an evaluable PSA. Each bar represents an individual patient with the dose cohorts indicated at the bottom and CRS shown by the green and white colored markers. Across the entire dose range, increasing doses generated deeper and more consistent PSA declines. At doses of 3,000 micrograms per kilogram and above, PSA responses were rapid, pronounced and durable with responses confirming at subsequent time points. CRS severity remained low grade at the higher doses with no Grade 3 CRS observed. This slide presents PSA data for patients treated at or above 3,000 micrograms per kilogram in the Q3-weekly regimen. Responses were observed early with some patients demonstrating deep declines as rapidly as cycle 1, day 8. What's striking here is the depth and consistency of the PSA responses displayed in the table on the right. Additionally, radiographic RECIST responses were concordant with PSA responses in evaluable patients. In other words, patients with the deepest PSA responses, PSA90 and PSA99 often had confirmed RECIST responses, supporting clinically relevant antitumor activity. This is an exploratory analysis evaluating the concordance of PSMA PET total tumor volume as assessed by RECIP criteria with PSA declines and RECIST responses. RECIP is an imaging-based response framework developed specifically for PSMA PET scans in prostate cancer. RECIP can detect treatment effects earlier because it tracks PSMA-avid tumor volume, not just anatomical size changes. This is especially useful in prostate cancer where PSMA levels reflect tumor activity. Higher doses of VIR-5500 significantly reduced PSMA-avid tumor volume. These reductions correlated with both PSA responses and RECIST responses, providing further evidence of the drug's targeted activity against PSMA expressing tumors. This slide presents radiographic response data for the 11 RECIST evaluable patients treated at our highest Q3 week dose cohorts of 3,000 micrograms per kilogram or above, showing best changes from baseline in some of longest diameters. We're seeing a 45% objective response rate or ORR, which includes 4 patients with confirmed responses and 1 patient who is awaiting a confirmatory scan. We are seeing a 64% disease control rate. Patients with partial RECIST responses are also showing deep PSA declines with PSA90s. It's worth noting that we're seeing these deep RECIST responses in patients with challenging disease characteristics, including those with liver metastasis. What you're looking at on this slide is a spider plot illustrating the change of RECIST SLD or sum of the longest diameters over time at the 3,000 microgram per kilogram or higher Q3 week dosing level. We're starting to observe RECIST responses that persist over time and are concordant with deep and sustained PSA responses. The higher dose cohorts are continuing to mature. This swimmer plot gives us a longitudinal view of durability. Here, we're also looking at patients treated at 3,000 micrograms per kilogram or higher Q3 week. In this graphic, you'll see markers indicating PSA50 and PSA90 responders, RECIST responses and grade 1 or 2 CRS events. Each bar represents 1 individual patient. And importantly, we have multiple patients staying on treatment for at least 6 months. Patients achieving deeper responses, both PSA and RECIST are also the ones remaining on therapy longer. As shown, CRS is largely limited to Grade 1 and 2 early cycles, after which it falls off, allowing patients to continue on therapy with good tolerability. This slide presents VIR-5500's early clinical profile with other clinical stage T cell engagers currently in development for the treatment of prostate cancer. While cross-trial comparisons have inherent limitations and are not head-to-head studies, in the table, we compared VIR-5500 against each program's recommended or go-forward dose. Based on the early numbers, VIR-5500 is exhibiting a highly active profile with deep PSA responses and markedly lower rates of high-grade CRS and treatment-related AEs despite the majority of patients not receiving prophylactic steroids. Importantly, our every 3-week dosing schedule for VIR-5500 may enable administration in the outpatient setting, representing a potential advantage in treatment convenience and broader clinical adoption. Overall, the combination of potent antitumor activity and favorable safety profile underscores VIR-5500's potential as a best-in-class T cell engager for the treatment of prostate cancer. The totality of the data we've shown you today has enabled us to select a preliminary dose to take forward in the late-line mCRPC expansion cohorts. Importantly, we do not plan to use prophylactic steroids or anti-IL-6 agents with this dose. With Q-week and Q3-week dose escalation complete, our program is now positioned to transition into expansion cohorts. Our initial focus areas include late-line mCRPC monotherapy, first-line mCRPC in combination and metastatic hormone-sensitive prostate cancer in combination. We expect to initiate these dose expansion cohorts in the second quarter of 2026. We plan to continue dose optimization in parallel to address the goals set out by the FDA Oncology Center of Excellence's Project Optimus and support advancement into Phase III development in 2027. These next steps reflect our confidence in VIR-5500's clinical profile and the strength of the collaboration with Astellas, which enables broad and accelerated development across all disease stages. Now I will turn the call over to Jason. Jason O’Byrne: Thank you, Mark. Let me first summarize the economic structure of the Astellas collaboration. In the U.S., we will co-develop and co-commercialize VIR-5500 under a 50-50 profit sharing arrangement with Vir Bio retaining the option to co-promote alongside Astellas. Outside the U.S., Astellas will hold exclusive commercial rights and Vir Bio will receive milestones and tiered double-digit royalties on net sales. Global clinical development costs are shared 40% by Vir Bio and 60% by Astellas. Expenses related to U.S. specific studies will be shared by Vir Bio and Astellas 50-50, while Astellas will cover 100% of any expenses related to ex U.S. specific studies. We will receive combined upfront and near-term payments of $335 million, excluding certain payments to Sanofi. That amount includes a $315 million upfront, comprised of $240 million in cash and $75 million as equity investment. The $75 million equity investment is priced at $10.36 per share, a 50% premium to Vir Bio's 30-day volume weighted average price as of February 17, 2026. Further, we are entitled to a $20 million manufacturing tech transfer milestone expected by mid-2027. The collaboration includes up to an additional $1.37 billion in development, regulatory and ex-U.S. commercial milestones. The total potential in combined upfront and milestone payments, excluding certain payments due to third parties, is $1.7 billion. Closing of the Astellas collaboration is subject to the expiration or termination of the applicable Hart-Scott-Rodino Act waiting period. We are pleased with the terms of the agreement and see Astellas as the partner of choice in prostate cancer. The agreement offers a capital-efficient structure that derisks our development spend while potentially expanding the number of patients who may have access to VIR-5500. Moving now to our year-end results. We are pleased to report that our multiyear focus on financial discipline and prioritization has led to continued improvements in performance. Let me highlight a few key financial metrics for 2025 compared to 2024. R&D expenses for 2025 were $456 million compared to $507 million in 2024, a $51 million or 10% reduction. SG&A expenses decreased to $92 million in 2025 from $119 million in the prior year. This represents a 23% decrease in SG&A spend compared to 2024. This net reduction was primarily achieved through previously announced cost-saving initiatives. Our net loss for 2025 was $438 million compared to $522 million in 2024. Turning to cash. Our 2025 net change in cash and investments was approximately $314 million. This amount includes a $64.3 million initial cost reimbursement payment received from Norgine in December. We're starting 2026 with a strong financial position of approximately $782 million in cash, cash equivalents and investments, not including the upfront cash and equity we will receive through the Astellas collaboration. Based on our current operating plan and including the net effects of the Norgine and Astellas agreements, we anticipate cash runway extending into the second quarter of 2028, enabling multiple value-creating milestones across our pipeline. I will now turn the call back to Marianne to provide the closing remarks. Marianne De Backer: Thank you, Jason. Today's announcements mark major progress towards our goal of building a world-class cancer immunotherapy program, the vision we set out for our company just 18 months ago. We believe the data we have shared today for VIR-5500 validates the potential of the PRO-XTEN platform, enabling more rapid advancement of our pipeline of differentiated T cell engagers, and positioning Vir Bio to be a leader in immuno-oncology. We have a lot to look forward to across our pipeline. Our HER2 and EGFR programs use the same dual masking architecture and benefit from shared learnings. We plan to share Phase I dose escalation data from our HER2 program in the second half of this year. The PRO-XTEN's platform plug-and-play design also lets us rapidly engineer new masked T-cell engagers for high-value solid tumor targets, creating a sustainable pipeline of differentiated therapies. We have thus far developed 7 preclinical programs and will progress to development candidate selection by early 2027. As we conclude today's presentation, I want to return to what fuels everything we do at Vir Bio, transforming patients' lives, especially people living with devastating diseases who are vastly underserved by current treatment options. The partnership with Astellas will not only allow for swift advancement of VIR-5500, but also positions us well for more rapid pipeline expansion. All this gives us further flexibility to consider how we develop our pipeline assets and continue to unlock earlier value for patients and our shareholders alike. And importantly, by combining Vir Bio's potential best-in-class T cell engager with Astellas' global capabilities, we will bring complementary strengths to one of the biggest unmet needs in oncology. Together, we can move faster and maximize the potential impact of VIR-5500 for people living with prostate cancer. I would like to close by sincerely thanking the patients, their families and the investigators who have supported the development of this program. With that, I'll turn the call back over to Kiki to begin the Q&A session. Kiki Patel: Thank you, Marianne. This concludes our prepared remarks, and we will now start the Q&A section. Joining me for the Q&A are Marianne, Mark and Jason. Please limit questions to 2 per person so we can get through all of our covering analysts. I'll now turn it over to you, operator. Operator: [Operator Instructions] Your first question comes from the line of Paul Choi with Goldman Sachs. Kyuwon Choi: Congratulations on the data as well as the deal. Two questions for us, please. First, either for Marianne or Mark. Can you maybe comment on the range of PSA responses you've seen by prior line of therapies, particularly with regard to prior radiotherapy. Any details there would be helpful, both on the PSA50s and PSA90s. And my second question is, how do you think your data today potentially reflects on the probability of success for your other T-cell engager programs? And just what is your level of confidence that we can make a reasonable inference of higher probabilities of success for your other programs? Marianne De Backer: Thank you, Paul. Really appreciate it. I'll start with answering your second question and then turn it over to Mark. So we really believe that the data we have showed you today validates our dual masking steric hindrance approach, so really the PRO-XTEN masking. You've seen that the lower systemic immune activation is reflected in limited CRS toxicity, very low incidence of high-grade treatment-related AEs and very limited number of PSMA target-related AEs, again, all very low grade. Also, you saw that we can reach now a wider therapeutic window. So we are able because of the mask to dose higher and less frequently. So we have actually selected a preference for every 3-week dosing. And then thirdly, you have seen that there's great concordance between PSA responses, RECIST responses, PSMA PET responses, which all show great on-tumor engagement. So we think this all bodes really well for our other programs. Of course, every program is unique, but we have, I think, really here shown a validation for the technology. As to your question of range of PSA responses, especially with patients that have been exposed to prior radioligand therapy, Mark, can you... Mark Eisner: Sure. Yes. Very good question, Paul. So first of all, we have a very heavily pretreated population with a median of 4 prior lines of therapy. The vast majority of patients have received taxanes. So we -- and we do think we have very strong PSA responses, particularly as we get into the 3,000 microgram per kilogram doses and above. I'd direct you to Case # 4, the one that was presented by Dr. de Bono. This patient had received radioligand treatment, an actinium conjugated agent, PSMA-targeted agent. That patient had a PSA99 response and a complete response in the target lesions. And that patient also had evidence of -- in the lymph node of PSMA decline in terms of expression and T cell abundance in the lymph node 5 weeks after treatment. So we don't have a lot of data yet in the post-RLT setting. We are continuing to look at those patients, of course. But at least in this one patient post-RLT, very, very promising results in this individual. In terms of other prior lines of therapy, it's difficult to say because the patients were just generally very heavily pretreated. So we haven't been able to disambiguate any specific effects of prior line of treatment on PSA responses, but they do appear to be strong across the board, particularly when we get to the higher doses. Marianne De Backer: Yes. I mean the only thing I would add is we have 2 patients that were exposed prior to the steep TCE, so we have annotated those on the slides, if you would want to go and have a look. Operator: Your next question comes from the line of Cory Kasimov with Evercore ISI. Mario Joshua Chazaro Cortes: This is Josh Chazaro on for Cory. Congrats on all the progress. And clearly, you guys have been busy executing here. And question here is, can you give us a little bit more color on what the next steps are before you and Astellas move to Phase III? And are there plans for you and Astellas to explore additional dosing schemes beyond the Q3 week? Marianne De Backer: Yes. Thank you for that question. Is it Josh? Yes, Josh, thank you for the question. Mark, do you want to take that? Mark Eisner: Absolutely. So yes, we're very excited about the partnership with Astellas, and we're also very excited about the next steps of the program. So we do plan to get into -- we've selected a go-forward dose. We plan to get into expansion cohorts in Q2, very shortly in this year. We will be having late-line mCRPC, which is the population here as a monotherapy. We'll have a combination with enzalutamide in the early line taxane-naive setting. And we also will be doing some dose optimization in parallel to satisfy the goals of the Project Optimus to satisfy the FDA's requirements there. So we will be working with Astellas. And I should also mention the combination of metastatic hormone-sensitive prostate cancer and expansion cohort. So taken together with the expansion cohorts, with the dose optimization work, we expect to get into Phase III in 2027 and to be well positioned now. Marianne De Backer: Yes. This was exactly why we were so excited about entering into the partnership with Astellas. It allows us to accelerate the clinical development and also really broaden the potential and expanding the trials to reach more patients. Operator: Your next question comes from the line of Roanna Ruiz with Leerink Partners. Roanna Clarissa Ruiz: So 2 questions from me. On the Astellas collaboration, I'm just curious, how are you thinking about unlocking resources for investing into the broader PRO-XTEN platform and thinking about other solid tumor indications? And what sort of calculus will you do in terms of thinking about prioritizing certain programs over accelerating others? And my second question with the larger cohort of patients evaluated on VIR-5500, how does this evolve your thinking about where VIR-5500 could be positioned within the sort of treatment paradigm in terms of line of therapy, combination versus monotherapy and thinking of the future? Marianne De Backer: Yes. Thank you, Roanna. Yes, as it relates to resourcing, obviously, teaming up with a world-class player in the prostate cancer field and Astellas has entirely internal development capabilities, that will help us tremendously in again, accelerating the VIR-5500 program. From a finance perspective, also it allows us to divert certain expenses to other programs and potentially accelerate those as well. So we think that the collaboration certainly has a lot of benefits beyond just for VIR-5500 alone. As to where to position VIR-5500, do you want to... Mark Eisner: Sure, absolutely. So yes, so we are very excited about the progress we've made so far and the data that we've presented to you today. And we plan to really be able to address a broad range of patients with metastatic prostate cancer, including late-line mCRPC and a monotherapy. And these are the data we presented you today, a more early line mCRPC in combination. And as you recall, we've been dose escalating in combination with enzalutamide in the frontline taxane-naive setting already, and that's going well. And then in addition, in metastatic hormone-sensitive prostate cancer in combination. So we really are very excited to continue to progress the program. And these are certainly 3 high unmet need populations within the metastatic prostate cancer setting that we think we can address. Operator: Your next question comes from the line of Mike Ulz with Morgan Stanley. Michael Ulz: Congratulations on the data and the deal as well. Maybe just one on VIR-5500 and durability. I guess, maybe just talk about your level of confidence there that some of this very strong early data that you're seeing can be sustained over a longer term. Mark Eisner: Yes, absolutely. So we are very encouraged by the RECIST responses that we've seen, particularly those that have occurred up to 27 weeks and the fact that we're able to confirm RECIST responses in patients. We're also seeing a concordance of RECIST responses with PSMA PET responses and deep PSA responses, which we also think is further evidence of the efficacy we can achieve. Also the case studies that Dr. de Bono presented to illustrate patients with up to 1 year of durability, which represents the potential, I think, of VIR-5500. So taken together, we're really pleased with the emerging evidence of durability in the program. Michael Ulz: Yes. Makes sense. And maybe just one more question for me. Obviously, you're presenting the data at ASCO-GU later this week. Just curious if the data you shared with us today is the same that will be presented at the meeting? Or are there any additional updates or data points we should be looking out for? Marianne De Backer: Yes. The oral presentation at ASCO-GU this Thursday by Dr. de Bono, I mean, these oral presentations are rather short. So there won't be additional data, but it will be a subset of this data. Operator: Your next question comes from the line of Phil Nadeau with TD Cowen. Philip Nadeau: Congratulations on the data and the Astellas collaboration. Two from us. First, in terms of the go-forward dose, could you give us more information on what that dose is? And I guess, in particular, was there a dose response in those doses above 3,000 microgram per kilogram Q3W? Or how did you identify that go-forward dose? And then second, just a clarifying question. It sounds like there's no Grade 3 CRS in doses above 3,000. Was there any below? It didn't seem to be from one of the slides, but we just want to make sure we saw that correctly. Mark Eisner: Thanks for the question. So in terms of the go-forward dose, we've done a lot of work on that, integrating safety, the efficacy, PSA, PSMA PET, RECIST responses and so forth. And we have selected a go-forward dose. As you can appreciate, we have now a partner Astellas, which we're thrilled to have on board. And so we're not going to be communicating the exact dose today because that's something that involves both of us in the partnership. But I can tell you, we'll be in the 3,000, 3,500 maintenance dose range. In terms of dose response above -- at or above 3,000, I mean, you can see clearly, we showed you all the data for all the doses tested for PSA responses. I think you can see there's a compelling dose response across all of those doses. Once we get above 3,000, there still is some dose response, but primarily, we're in a range where we're seeing very, very strong efficacy and a very strong therapeutic index. So we feel confident that we've identified a go-forward dose that really optimizes the therapeutic index moving forward. In terms of Grade 3 CRS above 3,000 mg per kilo in the go-forward dose range, we've seen no Grade 3 CRS. We did observe one Grade 3 CRS in an earlier dose cohort in a low-dose patient who had intra-patient dose escalation and had one episode of Grade 3 CRS that recovered rapidly and the patient did very well. Operator: Your next question comes from the line of Etzer Darout with Barclays. Etzer Darout: Congrats on this data set. Really nice to see. Just one question I had on the go-forward dose. Just wondering if in the combination study that you've initiated if new patients would be enrolled at these effective doses of greater than 300 micrograms per kilogram. And then also, is there an opportunity with this data in hand to maybe convert to a flat dose versus a weight-based dose in these patients and whether you see this as a potential opportunity moving forward for the molecule? Mark Eisner: Yes. Thanks. Good question. So in terms of the go-forward dose in combination with enzalutamide, I mean, we anticipate that the dose should be consistent in the 2 populations. We are doing a -- we're almost complete with the dose escalation in combo with enzalutamide frontline mCRPC, just to confirm that there's no issues there, but we do anticipate should be very similar or the same. In terms of flat dose, right now, we do not have plans for a flat dose. I mean it would be possible in theory, but we're still using the microgram per kilogram dose. Operator: Your next question comes from the line of Joseph Stringer with Needham & Company. Joseph Stringer: Just a follow-up on the deal with Astellas for VIR-5500. What might this mean for the rest of the oncology pipeline? Is there an opportunity for some of these programs to be stand-alone for Vir? Or do you see the long-term strategy here to seek partners or to partner these programs? And then a question for Dr. de Bono, just based on these updated data, what are the read-throughs in your outlook? And where do you see potential for VIR-5500 in earlier lines of mCRPC therapy? Marianne De Backer: Thank you, Joey. Yes. So the Astellas deal, again, was a very strategic choice based on the fact that first of all, the unmet need in prostate cancer is incredibly high. The landscape is evolving very quickly. We thought that time to market is most important. So we really were looking for a global partner with scale and with aligned incentives that would help us accelerate the program. And also, as I mentioned earlier, really allow us to really grow the pie, so to speak, and see how much value -- how much more value could we bring to a broader subset of patients. And that's everything that Astellas collaboration really delivers while we can retain a significant portion of the value through the 50-50 profit split, the milestones and the ex U.S. royalties and so on. For the rest of our pipeline, we are going to be very strategic and thoughtful in a similar vein. A lot depends again on the competitive landscape on the size of the commercial opportunity and the indications about the financial need to bring these indications forward. So we will be making very thoughtful choices on what to partner, how to partner, what to keep for ourselves 100%. Also just to remind you that we have 7 preclinical masked T cell engagers. And for sure, on the preclinical programs, this is just too much for us to move forward on our own. We will certainly be looking for partners there. And because of the plug-and-play nature of the platform, again, it allows us to move actually pretty quickly in preclinical research. So you will be seeing that we will be looking for partners in some of those areas. Your second question was related to read-through. Okay. Dr. de Bono is not available here during the Q&A. But Mark, do you want to take that? Mark Eisner: Sure. So your question was about the potential in earlier lines of metastatic prostate cancer. So yes, we definitely believe there is potential there. We are planning first-line taxane naive metastatic castration-resistant prostate cancer as an expansion cohort in addition to metastatic hormone-sensitive prostate cancer. So we are really looking across the metastatic prostate cancer landscape to help these patients who really need better treatments. Operator: Your next question comes from the line of Patrick Trucchio with H.C. Wainwright. Patrick Trucchio: Congrats on the data and the deal. I guess just a follow-up on the Astellas deal with Vir having an option in the U.S. to co-promote, what would that look like? And at what point in the development process would you be able to exercise that option? Marianne De Backer: Okay. Thank you, Patrick. Yes, so we have an option to co-promote alongside Astellas in the U.S. And up to a year before the start of our pivotal trials, we will be able to make that decision. Patrick Trucchio: Great. And then if I could, just a follow-up question for Dr. de Bono. I'm just wondering, just based on the data that you've seen so far, how confident are you that this treatment could potentially move into frontline? And what would you need to see in order to give you that confidence? Marianne De Backer: Thank you, Patrick. So unfortunately, Dr. de Bono is -- [ given time ] so it's not available for this Q&A. He will be at the ASCO-GU this Thursday. But maybe, Mark, do you want to... Mark Eisner: Yes. So yes, I encourage everybody who can to attend this talk or to understand his perspective there. But for sure, we see potential across the metastatic prostate cancer landscape. We have generated, we think, compelling early data in the late-line mCRPC setting. We're currently enrolling patients in dose escalation in the frontline taxane naive mCRPC setting. We would anticipate based on what we've seen to date that we should have an effective drug in that population potentially. They do have lower disease burden overall, and we think our mass TCE approach should work, and we will be generating those data. And as I mentioned before, we are also going to be looking at the metastatic hormone-sensitive prostate cancer setting as well. So that gives you kind of an idea of where we're heading. Operator: Your next question comes from the line of Sean McCutcheon with Raymond James. Sean McCutcheon: Congrats on the strong data. A couple from us. Given the seeming lack of strong dose response on CRS and lack of DLTs, how are you thinking about the limit on the higher end of the range of dose escalation, whether that's saturating on enzymatic activity or otherwise? And second question, how are you guys thinking about the partnership with Astellas and optionality for combining VIR-5500 with other ARPIs beyond enzalutamide? Marianne De Backer: Thank you, Sean. I will take your second question. Obviously, in partnership with Astellas, we will be determining our future combination strategy, which, of course, could be broader than just the ARPIs, but that will be something that we will need to inform you about at a later time point. Your first question -- what's related to the dose... Mark Eisner: Yes. So you're asking about dose response for CRS and efficacy and what's the limit of the dose on the high end. So a couple of points there. I mean our whole goal has been to maximize and optimize the therapeutic window to get the best possible safety with the minimum possible adverse events and CRS. So we've taken a careful look across the data set on all the efficacy parameters and safety parameters, including PSA, including RECIST, PSMA PET, all the safety events, CRS, et cetera. And we think we've gotten to a range in the 3,000 to 3,500 maintenance dose, and we have a specific dose there, which we can communicated in combination with our partner at a later date where we think we really optimize the therapeutic index and can move forward into expansion cohorts in Q2 of this year. Operator: Your next question comes from the line of Alec Stranahan with Bank of America. Alec Stranahan: Congrats on the really clean update here. Maybe first, just following up on an earlier question regarding durability. I'd be interested to hear your thoughts on how we could correlate PSA declines with -- as maybe a leading indicator for what we could expect on PFS with longer follow-up and when you think you might be in the position to update the markets with that data? And then second, in the 6 patients with the evaluable PSA but not RECIST, assuming these will feed into the overall PFS analysis, could you maybe talk about why we weren't -- those weren't available at baseline and what your prediction might have been in terms of response, given many of them have fairly deep PSA declines, maybe on disease control rate or something else? Mark Eisner: So your first question has to do with durability and how do we think PSA declines will track with PFS, right? So in general, I would say that the deeper PSA declines, particularly PSA90s and PSA99s are associated with more durable responses. And we are very encouraged to see that we have some very deep PSA declines, PSA90s and PSA99s. In terms of radiographic PFS, I mean, you're correct, we did not present those data at this update because as you can see, the data, particularly for the high-dose cohorts is still evolving and the patients are still maturing over time. So those data really aren't available yet. And in terms of exactly when we'll present further data, I think that we'll just have to give guidance on that at a subsequent time point. Could you clarify -- I wasn't quite sure I got the second question. Was that why were not some patients not PSA evaluable? Or what was the question? Alec Stranahan: Well, I think there was 6 patients that had a PSA like, out of the 17, 6 were not evaluable for RECIST. I guess, what was sort of the -- you couldn't get the scans at baseline. Was that kind of the driver there? And then I guess, what would you sort of expect in terms of PFS for those patients? Mark Eisner: Yes. No, thanks for clarifying. I appreciate it. So yes, so in the 3,000 or above, we had 22 patients in the cohort. We had 17 patients who were PSA evaluable. Two of those patients are just early at the time of the clinical cutoff. So we will get those subsequent PSA values, they weren't part of the data set. So 2 out of 5 are early, then there's a coming. 3 out of the 5 discontinued early. So we will not have -- they won't be PSA valuable. And that's very typical for prostate cancer trials in the late-line setting. So these patients are quite sick with a very heavy disease burden. We have 11 patients who are RECIST evaluable. And among those, we had 5 responses, 4 were confirmed and 1 is still waiting for the next confirmatory scan between week 9 and week 18. So that one is coming in time. Operator: This concludes the call. Thank you for participating.

82天前Insight Analytics约5分钟阅读

EVER 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. My name is Abbe, and I'll be your conference operator today. At this time, I would like to welcome everyone to the EverQuote Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Thank you and I would now like to turn the conference over to Brinlea Johnson with The Blueshirt Group. You may begin. Brinlea Johnson: Thank you. Good afternoon, and welcome to EverQuote's Fourth Quarter and Full Year 2025 Earnings Call. We'll be discussing the results announced in our press release issued today after the market close. With me on the call this afternoon are Jayme Mendal, EverQuote's Chief Executive Officer; and Joseph Sanborn, EverQuote's Chief Financial Officer and Chief Administrative Officer. During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements considering our financial guidance for the first quarter of 2026. Forward-looking statements may be identified with words and phrases such as expect, believe, intend, anticipate, plan, may, upcoming and similar words and phrases. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements, except as required by law. Forward-looking statements are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q on file with the Securities and Exchange Commission and available on the Investor Relations section of our website. Finally, during the course of today's call, we will refer to certain non-GAAP financial measures, which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today, which is available on the Investor Relations section of our website. And with that, I'll turn it over to Jayme. Jayme Mendal: Thank you, Brinlea, and thank you all for joining us today. 2025 was a phenomenal year for EverQuote, and we're excited about our position entering 2026. We grew revenue by 38% in 2025, making material progress toward our vision of becoming the #1 growth partner to P&C insurance providers. We delivered this growth by scaling our marketplace, launching new products, further integrating AI into our operations and deepening provider relationships, all of which accelerated our evolution to a growth solutions partner to our customers. More impressively, we delivered this growth with increasing operating leverage. We grew adjusted EBITDA by 62% as we continue to generate efficiency throughout our operations through the use of AI and other technologies. Thanks to the team's strong execution, we exited 2025 with record financial performance across all our key financial metrics, a highly capital-efficient operation and a strong balance sheet. We entered 2026 from a position of strength and with a stable and healthy P&C insurance market. Consumer shopping levels remain elevated following rate increases in recent years. Carrier underwriting is profitable and our carrier conversations about 2026 have centered around growth. This backdrop supports a confident outlook for 2026. Since going public in 2018, EverQuote management has established a 7-year track record of delivering against our commitments while navigating an always dynamic set of market conditions. We now reiterate our next commitment, which is to achieve $1 billion of revenue while continuing to expand the cash generation of our marketplace. We will do this amidst continued dynamism in the market, this time brought on by the rapid acceleration of the capabilities of AI. We believe that we are well positioned to lead and benefit from this shift. Applying data and technology to insurance shopping to remove friction for consumers and deliver growth to providers has been deeply ingrained in our DNA since our founding. We have amassed a one-of-a-kind data moat from our hundreds of millions of historical insurance shopping events, each of which contributes proprietary data that can be used in many ways to create enhanced digital and AI native experiences. In recent years, we have applied AI to automate our traffic bidding. We have rolled out products like smart campaigns, our AI provider bidding solution. We have deployed AI voice into our call center operations, and we have begun adopting Gen AI throughout our operations to drive efficiency. All of these advances have contributed to our growing operating leverage, punctuated by last year's 62% growth in adjusted EBITDA and a more than doubling of our revenue since 2023 despite nearly 0 increase in our operating expenses. In 2026, EverQuote will accelerate our evolution towards an AI-first future. Within our operations, we will further accelerate our engineering team's path to more fulsome agentic coding and adoption of AI tools and agents throughout our operations to drive further operating efficiency. For our customers, we will roll out new products and features that combine our unique data with newfound capabilities of generative AI to accelerate their ability to derive value from this technology. We look forward to sharing more about some exciting features we are developing later this year. I want to thank and congratulate the EverQuote team for delivering results in 2025 that exceeded expectations. As we progress into 2026, we will build on this momentum and are taking steps that redefine EverQuote and insurance distribution for the age of AI. I'll now turn the call over to Joseph to discuss our financial results. Joseph Sanborn: Thank you, Jayme, and thank you all for joining. Today, I will be discussing our financial results for the fourth quarter and full year 2025 as well as our guidance for the first quarter of 2026. We delivered strong results in Q4, exceeding our prior guidance across all metrics and closed out a record year, which we achieved total revenue growth of 38% year-over-year to $692.5 million and adjusted EBITDA expansion of 62% year-over-year to $94.6 million. Total revenues in the fourth quarter grew 32% year-over-year to a record $195.3 million. Revenue growth was primarily driven by stronger carrier spend, which was up 39% year-over-year. Revenue from our auto insurance vertical increased to $179.9 million in Q4, up over 32% year-over-year. Full year auto insurance revenue grew 41% year-over-year to $629.8 million. Revenue from our home insurance vertical increased to $15.4 million in Q4, up 37% year-over-year. Full year home insurance revenue grew 20% to $62.7 million. As we mentioned last quarter, our strong revenue growth through the first 9 months of 2025 gave us the opportunity to invest more in existing and new traffic lines during the fourth quarter to support future growth. The strategy worked. And as expected, these investments put temporary pressure on variable marketing dollars or VMD and variable marketing margin or VMM during the period, which in turn impacted our Q4 adjusted EBITDA and associated margin. Fourth quarter VMD was $49.3 million, an increase of 12% from the prior year period, representing a 25.3% VMM. For the full year, VMD grew 24% to $191.9 million, representing a 27.7% VMM. Turning to operating expenses and the bottom line. As we scale and drive top line growth, we continue to expand operating leverage in our business through the use of AI, other technologies and disciplined expense management. While other technology companies are describing their plans to make AI investments to deliver incremental efficiency, we have been on this path at EverQuote for over 2 years. In the fourth quarter, we grew GAAP net income to $57.8 million, up from $12.3 million in the prior year period. GAAP net income this quarter included a one-time non-cash tax benefit of $38.4 million, primarily driven by the release of the valuation allowance against our deferred tax assets. Full year 2025 GAAP net income increased to $99.3 million compared to $32.2 million for 2024. Without the impact of these deferred tax benefits, we would have reported net income in Q4 and full year 2025 of $19.3 million and $60.9 million, representing a year-on-year increase of 57% and 89%, respectively. Q4 adjusted EBITDA increased 32% from the prior year period to $25.1 million, representing a 12.8% adjusted EBITDA margin. Adjusted EBITDA for the full year increased 62% to $94.6 million, representing an adjusted EBITDA margin of 13.7%, an increase of approximately 200 basis points over 2024. Cash operating expenses, which excludes advertising spend and certain non-cash and other one-time charges, were $24.3 million in Q4, down modestly from Q3. For full year 2025, we also continue to drive strong operating leverage in our model with total cash operating expenses of approximately $97 million being effectively flat year-over-year. At the same time, our steadfast commitment to drive increasing efficiencies through automation in our core operations enable us to shift significant additional investment through 2025 into areas that drive future growth, such as AI capabilities, new products and data science. As Jayme mentioned, since 2023, we have more than doubled revenues while keeping operating expenses essentially flat. We delivered strong operating cash flow of $27 million for the fourth quarter and $95.4 million for the full year 2025. We ended the period with no debt and cash and cash equivalents of $171.4 million. As a reminder, we implemented a $50 million share repurchase program last July. To date, we have repurchased approximately $30 million of shares, including approximately $9 million since the start of 2026. We are pleased with our outperformance in the fourth quarter as we benefited from carriers who are well below their targeted combined ratios for the year and accelerated spend, deciding to not delay additional new customer acquisition until 2026. As a result of this dynamic, Q4 revenues were up a record 12% sequentially, meaningfully breaking with our previous seasonal pattern in which revenues declined sequentially on average in mid-single-digit percentage from Q3 to Q4. Turning to 2026. We continue to operate in a favorable industry environment. Our carrier partners are indicating that 2026 will be a growth year in which they will compete more aggressively for profitable policy growth after a 2-plus year focus on rate restoration and underwriting margin recovery. We expect this growth to be measured. Following carriers' record level of investment in new customer acquisition in Q4, we are seeing carriers take a more disciplined approach to Q1 marketing spend as they begin a new budget year and seek to position themselves to have greater flexibility as the year unfolds. This contrasts with our historical seasonal patterns which we would have customarily see a sequential step-up into Q1 as carriers will look to aggressively start a new year by quickly deploying budget and then consider tapering spend as they progress through the year based on their underwriting profitability. Now turning to guidance for the first quarter of 2026. We expect revenue to be between $175 million and $185 million. We expect VND to be between $49 million and $52 million, and we expect adjusted EBITDA to be between $23.5 million and $26.5 million. Entering 2026, we believe that we are well positioned to operate in a dynamic environment fueled by a rapidly evolving AI landscape. From our experience in serving insurance providers over the past few years, our battle-hardened team has honed its ability to quickly adapt our operations to changes in the environment with a clear-eyed view towards identifying opportunities that will both enable us to better serve our customers and drive strong financial performance. As Jayme shared in his remarks, we have recognized and embraced AI capabilities that allow us to more aggressively adapt our operations and investment approach to create opportunities for EverQuote to deliver long-term sustainable growth. We look forward to sharing more with you on our achievements over the course of the year. In summary, our record 2025 performance reflects our steadfast commitment to strong execution and a clear growth strategy. As we look at the remainder of this year and beyond, we are focused on our goal of creating a $1 billion revenue business over the next 2 to 3 years by being the leading growth partner for P&C insurance providers and doing so in a manner that will generate expanding levels of profitability and free cash flow. Jayme and I will now take your questions. Operator: [Operator Instructions] And our first question comes from the line of Maria Ripps with Canaccord Genuity. Maria Ripps: I know you're not providing full year guidance at this time, but maybe any directional color you could share in terms of the growth trajectory throughout the year based on conversations sort of with your carrier partners? I guess how should investors think about sort of growth normalizing from this projected Q1 levels? Jayme Mendal: Sure. Thanks, Maria, for the question. Just want to make sure everyone can hear us okay. You're broken up a bit, Maria. Operator can hear us okay, excellent. Maria Ripps: Can I repeat my question? Jayme Mendal: I think the question, Maria, just to make sure I had it was, outlook for full year 2026 based on the Q1 guide, can we give some insight on the rest of the year, even though we're not giving annual guidance, correct? Perfect. So thank you, Maria. I'll start with our carrier partners are indicating that 2026 will be a growth year for them broadly. And their focus in this growth year is really about competing for profitable policy growth. This is after sort of a 2-plus year period where they were focused on getting rate adequacy and getting underwriting margins to be sustainable. As we think about how they're looking at this period, we're seeing it as a disciplined approach to starting Q1 in part reflecting a really strong Q4. We had this very strong Q4 dynamic where we -- we were up sequentially 12% a record level. So coming into Q1, they're coming in with a view we're going to grow. And as we progress through the rest of the year, I can touch more in Q1 questions if you have them. But for the rest of the year, I would refer you to what we talked about in our November call, which is our path to $1 billion in revenues. It remains unchanged in our approach. We'll be a $1 billion company in revenues in 2 to 3 years. And as we think about what that implies for growth rates, if we did that in 3 years, that would say it'd be a 13% top line growth. If we did that in 2 years, it'd be 20%, 21% top line growth. So I think that would be the first data point I'd point to you. Obviously, some years will be higher, some years will be lower in terms of revenue growth. Then when you think about EBITDA going down further down in the P&L, we've said in our November call that EBITDA margins and our path to $1 billion will go between 100 and 150 basis points. We're reiterating that view there'll be between 100 and 150 basis points. And consistent with what we said in the November call for 2026, we think they'll be closer to 100 basis points, reflecting that in 2025, we had 200 basis points of improvement. Probably the last insight I'd give you on this year is if you think about that top line growth and that -- what that implies for EBITDA dollar growth, it implies at least 20% EBITDA dollar growth for 2026. And I think you'll see that on our path to $1 billion along the way each year. Maria Ripps: Got it. That's very helpful. And then can you maybe share a little bit more color around your traffic investments in Q4 and particularly anything you can share about AI-related search and the quality of that traffic? And clearly, these investments benefited Q4, but do you anticipate any of those benefits spilling over into Q1 and 2026? Jayme Mendal: Yes. I'm sorry, Maria, you're coming in a little choppy for us, but I think was the question about expectations for traffic coming from AI search going in 2026? Maria Ripps: Yes. Can you hear me now? Can you hear me okay? Jayme Mendal: Yes. I hear you better now. Maria Ripps: I was just wondering if you could talk about your traffic investments in Q4 more broadly. And then specifically as it relates to AI-related search, sort of, is there anything you can share about the sort of quality of that traffic? And then as we think about sort of Q1 and going forward, do you anticipate any benefits from these investments in Q4 to sort of flow through into Q1 and into 2026? Jayme Mendal: Yes. Okay. So broadly, we mentioned in the previous call that we are making investments and expanding into or underpenetrated traffic channels, particularly sort of higher funnel traffic channels. And we're investing in some of these new traffic programs kind of going from late last year into early this year. What we have experienced is more or less what we expected, which is we were able to drive some significant scale through some of these channels in Q4. As Joseph referenced, it came -- any time we're standing up a new traffic program or channel, it does -- you have to kind of burn it in. And so it takes some time to get to the steady-state margin profile. And now in Q1, you're starting to see the margins sort of normalize back to more of a steady-state level. But this will be a process as we step into more channels over the course of the year. So our goal is to continue growing quote request volume and traffic to meet our customers' demand. And one of the key vectors to do that is to launch and scale up incremental channels of traffic and incremental programs. So that's going to plan. Then I think you asked to sort of double-click specifically into any insight around some of the AI search traffic. And what I can share there is we are -- we're actively talking to and building into a big LLM chatbot platforms, and we do expect to start to see traffic grow from those platforms in 2026. There's a number of different ways that you can sort of integrate or start to receive traffic from them. One is through content, getting picked up in their training runs through kind of new version of SEO. Two is through like technical integrations with them or building apps in those platforms. And third, now we're starting to see them open up to testing paid advertising. So we are positioning to begin to access traffic across all 3 of those. We have, on the content front, the benefit of not having had an SEO program, a legacy program in the past. So all of that, we're approaching with a clean sheet from first principles, and we're going to start to build into that content program in a way that is tailored to and customized for the way that these LLMs want to absorb information. Number two, as I mentioned, we're beginning to sort of talk to and build into some of the LLM chatbots where I think the user experience will be more important, and we'll be able to rely on some of our proprietary data and distribution relationships to create some really cool and differentiated user experiences. And then the third piece is programmatic advertising, right? So there are a few companies out there who are more effective at programmatic advertising for insurance. And certainly, as these platforms open up to paid advertising, we'll be first in line to participate. So I hope that answered your question. Operator: And our next question comes from the line of Cory Carpenter with JPMorgan. Cory Carpenter: Jayme, maybe one for you and one for Joseph. Hoping for you, Jayme, just an update. In the last few quarters, you've talked a lot more about these new products and becoming a holistic suite. So maybe an update on where you're at and the progress you've made with the AI bidding and some of the smart campaign and subscription products that are in earlier initiative stage for you guys. And Joseph, for you, I think the question people are trying to square this afternoon is, I think hear loud and clear the confidence of the $1 billion over 2 to 3 years and kind of those 13% to 21% guardrails. The 1Q guide implies, if I'm doing my math right, 8% growth. So I guess the question is, what's giving you confidence in that growth reaccelerating over the next year or 2? Jayme Mendal: Sure. Thanks, Cory. So as it relates to broadening the suite and evolving from a lead gen provider to more of a growth solutions provider to customers, we made significant progress last year. You referenced Smart Campaigns, which is one of the products that has gotten the most attention. And that really expanded to the bulk of our carrier customers over the course of the last couple of years. And this year is the year where we're going to start to roll it out to local agents. So we've got a different version for agents. We're also going to begin to cut it across different referral types and vertical markets. So for our calls product and for our home vertical. So we'll see continued development as it relates to Smart Campaigns. And then we're investing in improving the performance, so the models themselves by adding new features like auction competitiveness and beginning to introduce more reinforcement learning into the model. So Smart Campaigns has been sort of a big step forward for the way that providers bid into our auctions and get performance from us. And by the end of this year, I think we'll have many agents on it, too. We also have really widespread adoption across our distribution. And then where we're focused on extending the product offering beyond that most acutely is with the local agents, right? The vision with the local agents is to evolve from a lead vendor to the one-stop growth partner for them by developing and rolling out value-added features and products on and around our core lead offering. And in doing so, accessing more of their growth budget and really starting to expand the ways that we help agents grow. So that's come a long way, too. I think we've stepped up once again from the last time we reported this number. We've now got 40% of agents using more than one of our products across leads, calls, telephony and digital solutions. So that strategy is more or less going as planned, and we're continuing to make significant inroads both with carriers and with the local agents. Joseph Sanborn: So I'll take the second part of your question, Cory. So -- and thank you. I guess in terms of the path to $1 billion, maybe I'd take some high-level points, and then I'll go into a little bit of sort of dynamics around what's going on in Q1 versus Q4 and in the context for the year. So our path to the $1 billion remains the same as we've articulated before. It comes across 3 areas principally. One is on the distribution side, the idea that we're going to get more carrier budget and pricing as we improve performance. And that's principally being driven by our AI products. As Jayme talked about SmartCampaigns, key part of why our carrier is coming to us, we're helping them drive better performance. Today, SmartCampaigns is used by a majority of our carriers. We think you will see more and more budget coming through SmartCampaigns over time. The second is we get more agents to get more share of their marketing budgets more broadly. We've talked about in the past how we're moving from a sort of being a one-product company, agents now being a multiproduct strategy with agents. At this point, we're at sort of 1.4 products per agent relative to where we were 18 months ago, it was much closer to 1. So we'll continue to make progress there. Third is traffic expanding into new -- more traffic channels. We made some investments in Q4. We feel good about how those are progressing. Jayme talked a little bit about how AI search will change our landscape, and we feel that will also benefit us as well, and we're well positioned to take advantage of that. And then lastly, I look at verticals. Today, as you look at our marketplace, we're roughly 90% auto, 10% home. If you think about the insurance landscape for P&C, home is roughly 50% of the size of auto. So we see a real opportunity between 10% and 50% to grow this over time at a faster rate. And we think in the medium-term horizon, you'll actually see home growing at a faster rate than auto. And just to remind you on the home piece, home was a vertical that had some of the same dynamics of auto coming out of COVID was further behind the recovery. We saw some nice growth last year at 20% growth year-on-year. And again, we feel bullish about that. So those are, I guess, the path to the $1 billion that we continue to feel bullish about. I guess the comments in terms of what's going on in Q1, maybe I could double-click on that and give you a little context on the seasonal pattern. I think one of the dynamics we have emerging in the business is potentially a new seasonal pattern. We've had -- based in the past 2 quarters. We had a Q4 dynamic where we had a record sequential increase from Q3 to Q4 of 12%. To put that in context, our seasonal pattern on average from Q3 to Q4 is usually down low single digits. So we're up 12% on record. I think some carriers took Q4 as an opportunity when they were -- had very favorable combined ratios to sort of invest in growth last year and they pulled some of the Q1 into Q4. Then you look at the start of this year, we see growth coming across where carriers are clearly indicating to us they want to grow. And we've had -- broadly out there having carriers tell us that. I think what they are also telling us is they're going to do it in a measured way throughout the year to make sure they maintain flexibility as the year unfolds. When you put those dynamics together, different dynamic in Q4, different dynamic in Q1, we are actually encouraged by how carriers will be unfolding. We could see a change from what we used to see, which was carriers would start out of the gates really hot in Q1, then you have tapering throughout the year and some volatility. We think it could be a more sustained view from carriers as we look into 2026. Probably the last data point I'd give you in terms of the seasonal pattern, we're not giving guidance for the year. But as I look at Q1, typically, Q1 would be down to Q2. What we would suggest is probably a reasonable place to think about Q2 is sort of flattish -- and sort of flattish levels of revenues, VMD adjusted EBITDA versus Q1. So that would imply a much higher growth in Q2 than Q1, north of the -- taking 3 years to get to a path to $1 billion. I think it will be a 15%, 16% growth. Operator: And our next question comes from the line of Ralph Schackart with William Blair. Ralph Schackart: First one for Jayme. There's obviously a lot of concern in the market at least currently on how AI agents can disrupt some models. But just kind of curious how you see AI agents sort of progressing within sort of your platform and maybe more broadly within the P&C market? And then maybe on the VMD for Joseph, it seems like the margin has sort of bounced back or at least guided to in Q1. How should we think about that margin as it progresses through the year? Jayme Mendal: Thanks, Ralph. Yes. So on the agentic AI piece, I think I would start here. I think there is some broad-based probably misunderstanding about how exposed our business is and whether we're more likely to benefit or be challenged by the development of AI agent capabilities. Yes, I think I'd start by pointing out that we're not a software business, right? We're a data-powered 2-sided marketplace. And so the software layer of our stack is, say, 20% of the value. So much more of the value is in our proprietary data, our traffic engine, our distribution relationships, which, by the way, with regulated entities and how we integrate all these things into a complex system whose sole purpose is to be the dominant industry-specific performance marketing platform. So that is not something that we believe can be replicated by LLMs or AI agents without a lot of human involvement. Now I will acknowledge, of course, that shopping for everything will evolve. And in insurance specifically, there are some factors, which will cause it to evolve differently than other categories. First and foremost, it's very opaque. So rates for many of the best insurance products are not readily available or accessible through public APIs. And in fact, carriers go to great lengths, as you know, to prevent their rates from being accessed anywhere outside of their own quoting funnel. So can LLMs or agents help at the top of the funnel? Yes. But I would say what we've seen so far and what we've been able to kind of do ourselves so far is a far cry from a transformative experience. I think what's out there in the market today, basically taking a web experience and applying a very lightweight conversational front end to it before spinning the consumer back into a fairly common web-based quoting or binding experience. So there's not much depth to it just yet. Now over time, I do think that these agents will enable more transformative change. So I want to be clear about that. And I also think it's likely that EverQuote will be in the driver's seat of bringing that to fruition. We've got the distribution relationships to access rates. We have the data to make consumer experiences more seamless. And we've got the technology chops to build the app or experience of the future, and we will, right? So these are things that we're actively working on and sort of building with. So for right now, like today, can these AI agents make our -- can it help us by making our marketplace operations and performance more efficient? Absolutely, and they are. And can they start to improve how customers compare insurance options in a way that's more user-friendly? Yes, they can. And so this is all underway, but it's precisely what we're focused on this year is really harnessing the power of agentic AI to drive better results for our customers and for the business. Joseph Sanborn: And then to turn to your question on the VMM margin sort of context for the year. So just in context, we were over 25% in Q4, very much in line with what we said in our last call, which is we had a really strong start to the year in 2025, the first 3 quarters. So we consciously made a choice to invest in new channels in Q4, brought us down to around 25% as expected. The strategy worked. As we look to Q1, you're sort of seeing us coming back to a guide that shows -- probably in the high 20s, with 28% is at the midpoint, again, very much in line with what we expect and what we said would happen. If you look at where we were last year and the overall year, we were just under 28%. So when I think about the rest of this year, I'd say high 20s is where we expect to be. It will bounce around certainly quarter-to-quarter. Why will it bounce around? Two reasons. One is we do not run the business on a day-to-day basis to drive VMM margin. We run the business on a day-to-day basis to drive VMD. That's first. Second is the -- what do we control and not control in determining our VMD and VMM. We do not control advertising costs. What we do control is the efficiency with how we acquire advertising. So on advertising costs, Certainly, quarter-to-quarter, month-to-month, there can be pressures on advertising costs that drives those up or down, and we take advantage of those where we can. But we obviously are buying that as our sort of a raw material for our business. The last thing I'd say about our efficiency and how we buy things, reference point I've given actually we did our roadshow in December, Ralph, I remember was helpful, was if you looked at our business back in 2023, where our business was $260 million auto insurance business, $270 million auto insurance business. That had a VMM in the high 20s. Today, the business is almost 3x that size. We have a VMM still in the high 20s. Certainly, the advertising environment has gotten significantly more competitive in that time period. There's no question about that. I think we have been able to maintain it because the investments we've made in our technology, our AI traffic platforms to take advantage of our data, the efficiency with how we acquire that advertising is the thing we do control and we do that well. Operator: And our next question comes from the line of Mayank Tandon with Needham. Mayank Tandon: I was just curious in terms of the potential upside case to 1Q. And then if we assume the base case for 2026, even though Joseph, you're not giving guidance is, say, low teens growth based on your $1 billion revenue target in 3 years. What is the potential bull case to that? What I'm curious is California, a potential positive catalyst that could drive upside? I think last quarter, Jayme, you had mentioned that 20 of the top 25 carriers were still below peak spending levels. Is that something that could also be a potential upside case? So just curious in terms of what the catalyst might be that could drive faster growth than what you're currently maybe modeling or at least indicating to TheStreet? Joseph Sanborn: Sure. Thanks, Mayank. So again, the range I would say is what we said in the November call, still a path to $1 billion in 2 to 3 years. That remains our goal for top line growth. Mathematically, that implies if it takes 2 years, it's 20%. To do it in 3 years, it's 13%, just to give you the context of the numbers. What could drive it to the higher in the year versus lower in the year? Probably a couple of things I'd point to. So first is you have one large national carrier who's really coming back online with us this year. That was a carrier that was a top 3 carrier for us prior to the downturn. We think that carrier could be certainly an important dynamic in our marketplace to be beneficial. How exactly that plays out, how quickly, how slowly, a lot remains to be seen, but I think that certainly is one key dynamic. If you look at the state footprint, we have states coming back broadly. California is one we saw some progress in 2025. There is some room for incremental progress in 2025, certainly -- excuse me in 2026. But we had some progress in '25. But I think some more there I referenced. The other dynamic I'd mention is when you look at where is auto -- where is insurance going online relative to other industries. Insurance remains a laggard going online. With everything that has happened through the past few years, can't lose sight of the key tailwind for our businesses. Insurance remains an area that has gone online much more slowly than other areas. Lots of different stats you can look out there. But one of the ones I like to look at is relative to financial services, about 1/3 fewer folks get insurance today online than versus broader financial services. So there's opportunity for insurance to grow. How fast that may grow and catch up with others, that also could bring it higher or lower within a given year. Those are probably the 3 key ones I'd point to. Mayank Tandon: Very helpful. And then, Joseph, I think you like this question, so I'll ask you in terms of capital allocation, you're flushed with cash, a good problem to have. So you talked about the buyback program, but does this also potentially open up maybe more appetite for M&A? Or how else would you be able to leverage the cash on hand? Joseph Sanborn: Sure. So thank you, Mayank. I appreciate the question. So I guess I'd start with just we expect to continue to generate meaningful cash flow from operations, and we have a high cash conversion from adjusted EBITDA to operating cash flow, subject to normal working capital in the quarter. But in Q4, cash conversion was around 100% -- and as we ended Q4 with almost $171 million in cash, up from $146 million in Q3, the difference being the same as our EBITDA for the quarter. When we think about cash, we think about 3 things. So first, we think about having a strong balance sheet. We think a strong balance sheet is critical. We have no debt. We have access to up to $85 million, but we have no debt today. We have a fortress balance sheet, and we want to make sure we continue to have that. The second is the share buyback program. We announced our inaugural share buyback program last summer. It has a 1-year duration. It was a $50 million program. We used $30 million of that to date has been purchased, including $9 million since the start of this year. And we'll continue to be opportunistic in using the rest of that $20 million between now and that program's expiration in the summer, and we'll continue to evaluate options to extend that program in future periods. And then third, we'll continue to look at selectively at acquisitions. As we've talked about, we do not believe we need M&A on our path to $1 billion. Our path to $1 billion in revenue can be achieved entirely through organic growth. However, we do think there's an opportunity to potentially accelerate organic growth and importantly, accelerate our strategy to be the leading growth provider to P&C carriers and agents and M&A could play a part in that. And so as we talked about last year, we're spending more time thinking about that this year and being more thoughtful about it, and that could be a third use of cash as well. Operator: And our next question comes from the line of Zach Cummins with B. Riley Securities. Zach Cummins: So I'll do one for Jayme and then one for Joseph. So Jayme, I think you touched on this a little bit earlier with your commentary, but can you give us a sense if you've seen any meaningful changes in the traffic that's coming on to your platform since we've seen more of an emergence with these large LLM platforms? Any sort of shift in terms of channels or where you're focusing your attention from a traffic standpoint? And the second one, maybe for Joseph. As you think about just the early conversations you're having with carriers, I mean, as you set baseline expectations for this year, are you anticipating kind of a broadening of contribution that you see from your carrier base this year? Or what's the right way to think about kind of contribution across the key carrier partners? Jayme Mendal: Sure. So I'll start. I'd say we felt no material impact -- direct impact or mix shift as a result of the growth of some of the AI search platforms. In fact, overall volume has remained at historically high levels, and that was true throughout the course of last year. And even search volume remains at historically high levels. So we haven't been impacted there. Recall, we have -- I think the primary point of impact has been in organic traffic or SEO originated traffic, which was really never part of our mix. So in that regard, we've not really experienced any direct kind of effects from it. So that being said, we do see it as a growth opportunity moving forward, as I sort of mentioned and kind of spoke to in detail answering Maria's question. So I think we'll start to originate a meaningful amount of traffic from these platforms in 2026 through a combination of content, technical integrations and paid advertising. And it will become a channel of substance for us in 2026. At the same time, we're continuing to expand the traffic portfolio in other ways, primarily through some of these higher funnel channels. These are things like social video and so on and so forth. For those, we've been kind of working on an evolved digital experience that's more compatible with these channels, and that continues to be an area of investment going into this year. Joseph Sanborn: Maybe answer -- address your question with regards to how we think about the carrier base and the broadening of it. Maybe I'll give you a few data points that may help you as we think about this year. As we look at Q4, 75% of our top 25 carriers in Q4 were below their peak quarterly spend on the platform. So I'll give you that one stat. That shows to us there's ample room to grow for carriers. Obviously, not all carriers spend at the same quarter every time. So you'd expect that to ebb and flow. But again, 75% were not at peak quarterly spend in Q4. So that's one data point I'd give you in terms of composition. The other one to give you in terms of composition is in Q4, you had our top 4 carriers in Q4 were also our top 4 carriers in Q3. They had some movements in their relative share percentage in the quarters, but that fact did hold true from Q3 to Q4. And then what you saw in Q4 is that the -- from 4, sort of 5 through 10, you had some movement around as you had competition within those carriers more meaningfully. As we look into Q1, I think there's a potential for some carriers to have more competition movement around. Why do we think that? We think that because what is driving carriers right now. It's all about profitable policy growth. That contrasts what we saw over the past few years where carriers were focused on getting rate adequacy and underwriting profitability. They were less focused on maintaining share. As you see this sort of soft market cycle evolve, you see them increasingly focused on how can we competitively grow, how can we more aggressively grow policies in force and do it in a profitable way. We think that plays really well to digital channels. We also think it creates a dynamic where there could be more competition between the carriers and some movement around in those positions within our marketplace. And related to that also, we have another national carrier coming on who was not involved in the marketplace last year. We think that will also create a competitive dynamic as well, which I think will result in some movement around as we progress through the period of Q1 and into the rest of the year. And again, we think that's good for the marketplace, creates a more dynamic and healthy marketplace. We have more carriers competing for profitable policy growth and digital channels like we provide are, we do that very effectively. Operator: And our next question comes from the line of Jed Kelly with Oppenheimer. Jed Kelly: I guess just these LLMs, they're commanding a ton of the market's attention. I guess, historically, we've always seen the carriers not want to put their quotes on third-party sites. And that would imply to me that, I guess, aggregators like yourself should benefit into these new LLMs if the carriers aren't going to want to put their rates on LLM. Is that the right way to think about it? And then I have a follow-up. Jayme Mendal: Yes, Jed, we share that perspective. And so -- I think I referenced that earlier. The carriers are very protective of their rates. They have gone to great lengths over the years to resist any kind of traditional rate comparison experience in the U.S. insurance market. And that position has not changed. You can't find examples of rate comparisons out there, but those experiences typically only show rates for maybe 30%, 40% of the available product, and you're missing some of the best product, Progressive Direct or so on and so forth. And so that dynamic is not likely to be any different in the -- just with the technology shift, which continues to -- which creates an opportunity for players like us who have unique access to carrier distribution, whether that's in the form of a rate or in the form of connecting someone with a local agent or with -- in the form of bridging them over to directly land on a quoting experience with the carrier. It is this complexity and kind of this like different and really dynamic distribution landscape that someone like us can organize on behalf of any given LLM that wants to connect their consumers with insurance distribution. So we think there is a role to play, and there's an opportunity to really carve out a material role in that. And we feel really well positioned, right? Like you've got to remember, like our whole company was built on the ability to kind of marry our data with technology to connect consumers with insurance distribution. And now 15 years on, we've built this data asset from hundreds of millions of historical insurance shopping events, each of which gives us some proprietary data that we can use to streamline, optimize and innovate digital and AI native experiences. So we feel like we're in a really good position to go on offense here, and we're looking forward to this next chapter. Jed Kelly: And then I guess just as a follow-up to that, if AI -- if the carriers implement AI and that makes them more profitable, assuming the profitability it costs them to underwrite a policy goes up, won't that make them want to lean more into channels that can drive them traffic? Jayme Mendal: Yes. I think that's likely. And I mean, look, it's going to happen. It's just a question of when. I mean we've been deploying AI throughout our business over the last couple of years through our traffic bidding, through SmartCampaigns, through our operations, most notably in like engineering where AI coding tools have really become like a productivity multiplier. Call center operations, right? We're seeing AI voice in real time, take on more and more customer interactions in an insurance funnel. So I think it's an inevitability that these insurance carriers will find material cost savings, which will improve their combined ratios, which will give them more capacity to spend in marketing. And again, this is an area where I think our strength is we are a trusted partner to these carriers. So not only could we be the beneficiary on the marketing side, but we think there's a broader opportunity to step into helping these carriers get leverage from AI faster and more effectively than they might be able to do on their own, whether that's through productizing some of the things that we can do like we've done with SmartCampaigns or otherwise embedding teams with the carriers to help them sort out their own AI strategy. But we feel lucky to have access to the carriers, to the talent. Our Chairman, Dave Blundin, he's like a prominent figure on the leading edge of AI. He's been very involved in helping us shape our AI strategy and access some top AI talent. So we see this as like a really interesting space, where the carriers are going to need help, and we are -- we're the trusted partner to help them. Operator: And our next question comes from the line of Mitchell Rubin from Raymond James. Mitchell Rubin: Congratulations on the quarter and the year. In the prepared remarks, you mentioned carriers taking a more disciplined approach in the first quarter of '26 from the record levels observed in the fourth quarter. Is the pullback broad-based across carriers or concentrated among specific relationships? Joseph Sanborn: Sure. Yes, I would say when I think about carriers across Q1, there are multiple carriers who we have this dynamic with. I think some have -- I think the idea of discipline is a theme we're seeing across carriers. I think why is it, right? We're seeing carriers who are pivoting from a period of getting rate adequacy restoring rates and getting underwriting profitability to getting into a period now where they are -- want to aggressively compete for profitable policy growth. They're also recognizing at least what we're seeing and hearing in our discussion, which is the dynamic is changing. The normal pattern seems to be changing for them. And that, I think, reflects as they think ahead for the year, they want to have flexibility. So as opposed to the old pattern of start the year, new budget, let's go crazy and then we'll sort of see how the year progresses. They're being very thoughtful at how they do things throughout the year. And so we're seeing that with multiple carriers. Some more so than others, but again, multiple carriers, I think, would be what we're seeing. Mitchell Rubin: Thank you for the additional detail there. Could you provide some more color on the tax -- the deferred tax benefit recorded in the quarter? And what criterias met that led to the valuation allowance release? Joseph Sanborn: Sure. So with regards to the tax valuation release, this is mentioned in our -- my prepared remarks. The full year and Q4 tax benefit were the same, approximately $38 million. The benefit was primarily driven by the release of our valuation allowance against our deferred tax assets. And think about it very similar as we had NOLs that we -- now that we're becoming a profitable company, we have the ability to use those NOLs and requires a change in recognition. It effectively view this as this was a noncash charge. And so it's important to note, it's a noncash and onetime charge. But it does reflect this dynamic of now that we have sustained profitability, they're now on our balance sheet, and we're we able to use them as we're making more money. And what I would say on these as well is we are not the first to have this experience. You may have had other companies in our space have had the same issue as well. So it's a common issue across our space. Operator: That concludes our question-and-answer session. I will now turn the conference back over to management for closing remarks. Jayme Mendal: Thank you, and thanks all for joining. Just to recap, we had a phenomenal year in 2025 with records across all our key financial metrics, and we're carrying that momentum into 2026 with a healthy insurance market that's hungry for growth. As a team with a long-standing track record of using our proprietary data and technology to drive profitable growth, we see the recent acceleration in AI capabilities as a huge opportunity for EverQuote moving forward. We feel very well positioned going into 2026, and we're going to become the company that leads insurance distribution into a more AI-native future. Look forward to updating everyone as the year progresses. Operator: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

82天前Insight Analytics约5分钟阅读

SCBFY 2025 Q4 财报电话会议

William Winters: Good morning and good afternoon, everyone, and welcome to our full year 2025 results call. I'm joined here in London by Pete Burrill, our Interim Group CFO; and Manus Costello, our Global Head of Investor Relations. We'll take you through our results and outlook before opening up for questions. Now 2025 was an extraordinary year by any measure. It tested the resilience of the global system and the relevance of institutions operating within it. It was a year shaped by heightened geopolitical tension, tariff announcements and periods of significant financial market volatility across multiple asset classes. But it was also a year that demonstrated something fundamental, that global trade, capital flows and economic connectivity endure and even thrive and that institutions built to support them responsibly and at scale matter more than ever. Now when I spoke to you at our first quarter results in the immediate aftermath of the tariff announcements, I said that we were entering that period of global volatility from a position of strength. Our results for 2025 demonstrate exactly what that strength looks like in practice. Our underlying return on tangible equity for the year was 14.7%. This is not just a financial outcome. It's evidence of a strategy that's working and a franchise that's delivering with consistency. We delivered record annual income of $20.9 billion, up 8% year-on-year. That growth was very broad-based. Global Markets and Global Banking both achieved double-digit growth for the year. Our Wealth business grew by 24%, supported by record net new money of $52 billion. Importantly, this growth was delivered despite interest rate headwinds and a softer fourth quarter for episodic income in markets. It speaks to the depth of our client relationships, the relevance of our capabilities and our ability to deploy them precisely where our clients need us most. And whilst it's early days, we're encouraged by the start of 2026 across the engines of non-NII growth, even against what was the strong first quarter last year. Our strong capital position allows us to grow while continuing to deliver attractive returns to shareholders. Today, we're announcing a further share buyback of $1.5 billion, which will start imminently. We're also proposing a full year dividend per share up 65% year-on-year. And as you'd expect, we're stepping up our shareholder distributions while maintaining a full investment program intended to build on the strong momentum in our business. The outcomes we delivered in 2025 mean that across income growth, return on tangible equity and shareholder distributions, we've achieved the objectives of our 3-year plan, and we've done so a year earlier than initially guided. Our 2025 underlying return on tangible equity was well above the target we set ourselves for 2026 and income met our 2026 guidance a year early. And we did this while achieving strong underlying positive income to cost jaws in both 2024 and 2025. We've returned significant value to our shareholders by announcing distributions exceeding the $8 billion target since February 2024. These results highlight our strong financial performance and the success of our strategy. As we have exceeded our 2024 to 2026 group targets already, we're introducing new guidance for 2026, which we'll set out later. Additionally, going forward, we'll be presenting our results on a reported basis, shifting away from underlying financials. This move has been in the pipeline for some time. We intend for this to provide ever more focus on a single set of financial outcomes. We believe it will provide a clearer and more consistent framework for both our financial disclosures and future guidance. Our performance is the result of sustained execution over a long period of time. It reflects long-term strategic choices, disciplined focus and an increasingly high performance culture that prioritizes collaboration and delivery across markets, products and sectors. But this plan was only ever a milestone for us. Reaching it sooner is significant because it encourages us to pursue our ambitions with even greater determination. I want to thank our clients for the trust they place in us. I want to thank our partners for working with us in increasingly integrated ways. And I want to thank our colleagues across the group for their professionalism, resilience and commitment. These results are a direct reflection of their efforts. 2025 marks our fifth consecutive year of improvement in both underlying and statutory return on tangible equity. We've taken advantage of a generally supported business environment with shifts in trade and investment flows working in our favor and growth remaining strong in most of our key markets. But we've amplified these long-term trends by growing our franchise in a focused, disciplined and responsible way, by managing costs and capital rigorously and by communicating clearly and transparently with all of our stakeholders. I am committed to maintaining that focus so that we continue to deliver sustainably higher shareholder value over the long term. At our event in May, I and our team will set out our strategy and associated medium-term targets in more detail. We'll explain how we see the evolution of the global economy and trading systems, as I set out in the annual report. We'll discuss how these themes affect us and how we intend to build on the momentum that we have created, how Standard Chartered is playing an increasingly distinctive and valuable role in the global financial system, and we are doing so profitably. We'll discuss how our footprint and connectivity, our expertise and our differentiated capabilities position us well, not just to perform, but to lead in the environment ahead. Pete will now take you through the 2025 performance in more detail and the outlook for 2026. I'll then return to discuss how we continue to support our clients across our business segments, after which, Pete, Manus and I will be happy to take your questions. Pete, over to you. Peter Burrill: Thanks, Bill. Good morning and good afternoon, everyone. I will now take you through our 2025 4th quarter and full year results. In my remarks, I will be comparing underlying performance year-on-year at constant currency, unless otherwise stated. Our full year 2025 income was $20.9 billion, up 6% or 8% excluding notable items. The performance was primarily attributable to our growth drivers of Wealth Solutions, Global Markets and Global Banking. These areas delivered strong results, underlying our ability to capture opportunities in our targeted business segments. Q4 income was broadly flat due to weaker Global Markets, which I will talk about in more detail on the CIB slide. On a full year basis, costs were up 4%, and we delivered 4% positive income-to-cost jaws. Profit before tax for the year was up 18% to $7.9 billion, and our underlying return on tangible equity was 14.7%, including around 70 basis points of FVOCI gains from Ventures. Our reported profit before tax was up 18% to $7 billion in 2025 with a statutory return on tangible equity of 11.9%. Our earnings per share increase of 37% reflects the strong underlying performance and ongoing reduction in share count. Now let's look at the performance components in detail. Fourth quarter NII came in slightly higher than expected and was up around $200 million quarter-on-quarter. This is primarily due to the movement in HIBOR during the quarter, where we benefited from both improved CASA pass-through rates and treasury-related timing differences. As a result, our full year NII was $11.2 billion, up 1% with a negative impact from rates and WRB portfolio actions, offset by volume growth and mix improvement. In 2026, we expect NII to be broadly flat year-on-year based on several factors. First, as mentioned, NII in Q4 was higher than anticipated due to HIBOR increases. This has already reversed in Q1. Second, we outperformed on pass-through rates during 2025, but we expect these to normalize over time. Third, our currency weighted average rate outlook indicates a 44 basis point reduction in 2026 and, consequently, we anticipate a continued headwind due to movements in interest rates throughout the year. Lastly, the impact from WRB portfolio actions is expected to be around a 2% headwind to NII this year. These impacts will be mitigated by volume growth, but the pace and extent of volume growth remains uncertain. Moving on to non-NII. In 2025, our non-NII increased 13% year-on-year or 17% excluding notable items. This robust growth was primarily driven by the strong performance in Wealth Solutions, Global Markets and Global Banking. In addition, the year's performance benefited from gains realized on the SOLV transaction. I'll talk to the products performance in more detail when I come to the business segments. Now turning to expenses. Q4 operating expenses were higher quarter-on-quarter, driven by a number of factors. First, we continue to invest in our people and businesses. Second, we took some regulatory charges related to a pension code change in India and a PRA rule allowing accelerated vesting of shares. Lastly, during the quarter, we had an increase due to the rise in our share price and the associated impact on deferred compensation costs. In some of our markets, regulatory restrictions such as exchange controls prevent us from settling deferred compensation in the form of shares. In such instances, we settle those awards in cash, and therefore, the material increase in the share price witnessed in 2025 and especially in the last 2 months of the year impacted deferred compensation costs. As a result, full year 2025 operating expenses were up 4% with the increase from business growth and inflation partly offset by Fit for Growth savings. We delivered 4% positive income-to-cost jaws excluding notable items, and our underlying cost/income ratio improved 80 basis points to 59%. Our Fit for Growth program continued to progress with over 300 initiatives driving simplification, standardization and digitization. We have spent close to $700 million in cost to achieve, or CTA, since its inception and have achieved over $700 million in run rate savings. As we have been explicit in the past, we have remained disciplined on how we spend the CTA, ensuring that we deliver one-for-one return on investment in FFG and finish the program in 2026. As we enter the final year of the FFG program and we reflect on the broader investment opportunities across our business, some of which were not visible at the outset of the program, we have revised our estimates of both CTA and savings from FFG. We now expect FFG savings and total CTA to be around $1.3 billion rather than our initial expectation of $1.5 billion. As a reminder, from 2026, all financial results and guidance will be based on reported figures. However, to clarify how our costs will evolve this year, we have shown on this page that our 2026 underlying costs would have been $12.6 billion at constant currency compared to the $12.3 billion in the previous plan. Two things drive the increase. Our business has demonstrated strong performance, consistently exceeding our established targets, including significantly positive income-to-cost jaws. That gives us confidence to invest into initiatives which will deliver both productivity and growth benefits in the years ahead, such as data infrastructure and AI enablement. This represents the majority of the difference. The remainder is due to higher performance rated costs, for example, the need to pay our relationship managers for exceptional performance in affluent. As we move toward a reported basis this year, we are now targeting costs to be broadly flat in 2026 at constant currency, which would mean around $13.3 billion. Credit impairment for 2025 was $676 million, up around $100 million as 2024 included significant net recoveries in CIB. The level of impairment in WRB improved year-on-year, reflecting the impact of portfolio optimization actions, while CIB impairment remained benign at $4 million. Our overall loan loss rate of 19 basis points was broadly flat year-on-year. We expect this to normalize towards the historical through-the-cycle 30 to 35 basis points over time. Asset quality remains resilient in the face of a volatile environment and our high-risk assets were down $1 billion quarter-on-quarter. The $1.5 billion reduction in early alerts was due to a combination of client upgrades, repayments and a sovereign downgrade from early alerts into stage 3. We continue to monitor our credit portfolio closely, and we are not seeing any significant signs of new stress emerging across the group. Moving on to the balance sheet. Underlying customer deposits were up 12% in the year with growth in CASA and term deposits across WRB and CIB. Turning now to capital. Risk-weighted assets were $258 billion, up 4% in 2025. As previously guided, we took the annual increase in operational risk RWA in the fourth quarter, which we would usually have taken in the first quarter of the following year. This has resulted in 2 increases in operational risk RWA in 2025. Going forward, this will be taken every fourth quarter. We closed the year with a CET1 ratio of 14.1%. And as Bill mentioned, we are announcing a new $1.5 billion share buyback, which will take our pro forma CET1 ratio to 13.5%. Since the beginning of 2024, we have announced $9.1 billion of shareholder distributions, including the buyback and dividends announced today. This exceeds our 3-year target of at least $8 billion ahead of schedule. On a per share basis, we have increased our full year dividend and tangible book value by 65% and 12%, respectively. Now let's take a look at our business segments. CIB income for the year was $12.4 billion, up 4%. Global Banking was up 15% driven by strong growth in both origination and distribution. The 7% decline in Transaction Services was a result of lower rates. Global Markets was up 12% as we delivered consistent growth in flow income above our long-term trajectory. Episodic income was a small negative in Q4 and down significantly from last year. This was due to the timing of large client deals and broad-based market movements across a range of asset classes, which impacted inventory held for client activity towards the end of the year. As we've noted in the past, episodic income is less predictable and can be volatile from quarter-to-quarter. But on a 12-month rolling basis, it continues to be within its historical range and remains a meaningful contributor to our Global Markets income. Moving to WRB. 2025 income of $8.5 billion was up 6% driven by consistent strong growth in Wealth Solutions, up 24%. During Q4, we generated $10 billion in affluent net new money. This contributed to a cumulative total of $52 billion net new money for 2025, equivalent to 14% growth in affluent AUM, reflecting excellent momentum in the affluent segment. We onboarded 275,000 new-to-bank affluent clients in the year and up-tiered over 300,000 individual clients across the continuum. As I mentioned earlier, we will be making some changes to our financial disclosures effective from the first quarter of 2026. We will be moving away from presenting our financials on an underlying basis by allocating restructuring and other items from below the line to above the line. We are also going to report our Digital Banks within WRB and SC Ventures will be reported within the Central & other segment. We will publish a data pack showing the representation of financial data on this basis prior to our Q1 results. So to conclude, we expect 2026 year-on-year income growth to be around bottom end of our historical 5% to 7% range at constant currency with adjusted NII expected to be broadly flat. Our reported costs for 2026 are expected to be broadly flat at constant currency. We will no longer provide underlying cost disclosures. And we are now targeting a statutory return on tangible equity of greater than 12% in 2026. Our medium-term financial framework will be provided at our investor event in May. With that, I will hand back to Bill to give you an update on our strategic progress. Over to you, Bill. William Winters: Thank you, Pete. First, let me talk about CIB. At Q1, we told you that our network business, which represents around 60% of our CIB income, is highly diversified, resilient and agile. And that has continued to be the case. Our strength in providing network services in and around China, payments, FX, financing, et cetera, has been a key part of our outperformance as Chinese and international corporates diversify manufacturing and ship their supply chains. We often play a central role in those shifts as demonstrated in our China corridors to markets across Asia and South Asia, the Middle East and Africa. Trade and investment flows are also picking up pace as regions seek elements of self-sufficiency, in search for more resilient middle power status. Regional and bilateral trade pacts in South Asia, the Middle East, Africa, and ASEAN will support growth in trade and investments across our footprint markets, playing to our core cross-border strengths. Now as you can see, our network income remains diversified by product. It's not just trade. And despite interest rate headwinds in Transaction Banking, our network business has continued to grow. We also have continued to see growth in income from financial institution clients, and we've made further progress towards our 60% medium-term target. The financial institutions client segment, which generally delivers a higher return on risk-weighted assets, remains an attractive area for Standard Chartered. We stand out in serving financial institution clients due to our differentiated products, extensive local market and global networks and specialized capabilities in areas like security services, financial markets and financing. These trends enable us to meet the diverse needs of a wide range of clients, including banks and broker-dealers, investors, sponsors, insurers and sovereign wealth funds. Meanwhile, we've remained disciplined in managing resources within CIB to make sure that we were focusing on serving our top tier clients and doing so more effectively. These are the ones where we can provide more value. In 2024, we spoke about how we were planning to exit around 3,000 clients by the end of 2025, and I can confirm that we have hit this target with minimal loss to income. Our focus on optimization does not end here, and we continue to manage our RWAs in order to maximize the returns for shareholders and invest to serve our client needs. Now if I can shift to our wealth and retail business. We announced just over a year ago that we were targeting $200 billion of net new money over 5 years. In the first year, we've been ahead of that pace, delivering $52 billion, which is equivalent to 14% growth of AUM and makes us the fastest-growing wealth manager in Asia. We also now rank as the #3 wealth manager overall across Asia with affluent AUM of $447 billion. Our Wealth Solutions income continues to grow strongly across asset classes. Our product innovation and advisory capabilities, including initiatives in AI, put us in a great position to capture market opportunities and cater to changing client preferences. The growth in Wealth Solutions, combined with the decisions we made to exit single product relationships and the entirety of our retail operations in certain markets, have helped us drive affluent to 70% of WRB income. This is great progress towards our 75% medium-term target. Turning to Ventures. We have made strong progress across the digital banks. In 2025, Mox continued its strong growth trajectory, achieving a 15% year-on-year increase in customer base and reaching around 750,000 customers. Trust Bank also continued its momentum with customer numbers up 15% year-on-year, reaching over 1 million customers and taking its share of the adult population of Singapore beyond 20%. Within our SC Ventures portfolio, we're building ecosystems in areas of the future of finance, including digital assets, tokenization and blockchain settlements as well as data and technology capabilities that will serve our bank and our clients well in future years. We actively manage the portfolio, building ongoing momentum across a number of fronts. You'll recall that we had a successful merger of SOLV India into Jumbotail in the first half of 2025. We've also seen unrealized gains, particularly from our stakes in Ripple and Toss, which have contributed around 70 basis points to our underlying RoTE in 2025. Now as Pete mentioned earlier, this is the final quarter that we're reporting the Ventures segment separately. We'll be reporting Digital Banks as a product within WRB, reflecting how they're managed within the group and the increasing synergy we see between the Digital Banks and the rest of our WRB business. Given the maturity of the portfolio of investments, SC Ventures will be reported as part of Central & other going forward, but we'll continue to call out key investments, gains and disposals as and when they occur. Now if you only listen to the noise in the markets, you might think that sustainable and transition finance was going the way of the dodo. This could not be further from the truth. Our clients are sticking with their commitments and our capabilities continue to improve. We've exceeded our income target of at least $1 billion in 2025 and see further growth from here. With $157 billion mobilized in sustainable finance since the beginning of 2021, we're over halfway towards our commitment to mobilize $300 billion by 2030. Highlights in the year include our EUR 1 billion inaugural green senior bond, and we're proud to be ranked first in the Global Bank Climate Adaptation Assessment 2025, ranking the world's 50 largest commercial banks on their adaptation maturity. Bottom line, we're committed to our sustainable finance agenda, seeking to do the right thing and earn good returns doing that. So to conclude, 2025 including Q4 was very strong for us, and we're delighted with the outcome even with some noise in the fourth quarter. We completed our 3-year plan in just 2 years, which speaks to our disciplined execution and momentum. We started the first quarter of 2026 strongly, particularly across our growth engines in CIB and WRB, where we see continued client activity and opportunity. We're announcing a new $1.5 billion share buyback and a 65% increase in full year dividend per share. This is a clear signal of confidence in our performance today and in the strength of our outlook. We're targeting a statutory RoTE of over 12% in 2026. Before we move to questions, I want to lift the lens and look ahead a bit. As mentioned earlier and in the annual report, we see a number of major structural trends, long-term shifts that are reshaping global trade, capital flows and growth. These are not short cycle opportunities. They're powerful forces that will play out over many years and will play directly to our strengths. We've already positioned against those trends. And importantly, we continue to invest in and sharpen our focus on our critical and relevant competitive advantages. Our ambition is clear: to create an ever more distinctive, exciting and high-performing Standard Chartered, one that delivers growth across every dimension that matters for our clients, for our communities, for our top line, our bottom line and, of course, for our shareholders. We'll go into this in much greater detail in May. But the direction of travel is clear. The momentum is real, and we're building a business that is set up for sustained high-quality growth. And with that, I'm going to hand you over to the operator, and Pete, Manus and I can take your questions. Operator: [Operator Instructions] And we're going to take the first question on audio line. And it comes to line of Joseph Dickerson from Jefferies. Joseph Dickerson: Two questions, if I may. The first, on the investments that you're making in the business, I guess, is the 60,000 per quarter of accounts that you opened in Wealth, is that capacity constrained? And if so, are some of the investments that you intend to make or are making designed to remove processing constraints and effectively increase account opening capacity on the Wealth side? And then secondly, if I can invite you to comment further on the start to the year on Wealth. Is this coming from the deposit side of the equation? Or the investment side of the equation or both? And I guess do you have an outlook for this year on the deposit side given there's a fair amount of maturities on the Mainland that will be happening this year that could send further flow your direction in Hong Kong? William Winters: Great. Thanks for the question, Joe. I'm going to start it off, I'm going to pass to Manus for some color. And first of all, it's a pleasure for me to be sitting here with Manus and Pete, just to call that out, because it's not the same as last time. So first on the investment in the business. So of course, we're delivering the 60,000 of clients with the current capacity. So it's not something that we're experiencing any particular constraints. We're significantly adding both tech and RMs. That's the $1.5 billion program that we announced last year that we're well on the way to deploying, and I think we will continue to make those investments, which should not so much increased capacity, it will, of course, but remove bottlenecks along the way. We still have a largely RM-driven business model, and we're increasingly supporting those RMs with technologies and AI and otherwise, which is going really well for us. But we see the RMs as a critical part of the future and as they are an essential part of the present. And any capacity constraints that we've got our bottlenecks, we are going to remove. Anyway, it's not a constraint today. The start of the year in Wealth has been broad-based as we've seen a reasonably predictable now migration from deposit products into wealth products. And we're seeing that continue into the first part of this year. I won't get too much more detail because, obviously, we're just 7 weeks in or something like that. But the start of the year is both substantial in quantity but also quality. Manus? Manus James Costello: Thanks, Bill, and thanks, Joe, for the question. I'll note that in the fourth quarter, we actually delivered 72,000 new clients into WRB, into the affluent segment. So it was actually a very good end of the year. And that momentum has continued into Q1, as Bill said. I think if we look forward, you'll see that in the fourth quarter, we actually delivered a slightly higher mix of wealth versus deposits than we did in the fourth quarter of last year. And we have said that, over time, we do think that we will continue to grow that Wealth business as quickly as possible and likely ahead of the deposit piece. So we're continuing that momentum. It will change quarter-by-quarter, obviously, but we're confident in how we ended last year and how we started this year. Operator: The question comes from the line of Jason Napier from UBS. Jason Napier: Bill, Pete and Manus, the first one, just on episodic income. Quite clearly, I think the fourth quarter print, disappointing relative to the bank's expectations sort of as shared earlier in the fourth quarter. I wonder whether you can just provide additional color on what happened there and whether it actually means anything for the business model or for the approach going forward, what it says about the business as it's being conducted? And then secondly, somewhat inevitably, and I'm sorry, it's regretful, but the move to stated costs in '26 has prompted some questions from investors as to whether this gives you room to spend more in '27, if you, in consensus, have restructuring expenses going from $800 million to $200 million in '27 whether you are actually going to deliver an absolute decline in costs in '27. So without putting too fine a point on it, I wonder whether you could just talk about without Fit for Growth continuing, whether it would be our expectation, the cost could be flat or perhaps slightly down in '27 in line with existing consensus? William Winters: Great. Thanks very much, Jason. I'll take the FM question and move to Pete for the cost question. So as we said a few times as we set up here, we do break out our income between episodic and flow. The flow, it tends to be transactions that are ordinary course coming from our clients, frequently but not exclusively, coming from our transaction banking franchise broadly. But they tend to be operating flows. That flow income has been growing at a pretty steady 10%, plus or minus just a little bit, as was the case in the fourth quarter as well and as we are starting off well in Q1 of 2026. The episodic is really comprised of two things. First is large customer transactions, so the kind of things that we called out are deal contingent forwards, where there's a possibility for higher profitability, higher returns. There's also the possibility that you can lose money in some cases. The fourth quarter for us in client, these large client transactions was weak. The first 3 quarters of the year were strong. The first half in particular was very strong. So overall, the episodic income for the year is good. The second component, though, of episodic is gain or losses on risk position. So we play a very important role in the markets in which we operate, in particular in the emerging markets with less developed underlying currency and hedging instruments. And when we get delivered customer transactions, we warehouse that risk until we can work it out over a period of time. And while we had no large losses in Q4, we had no gains either. And small losses, some small gains, it netted out to approximately 0. So you had minus $16 million. Change in business model? Absolutely not. I mean, we're super happy with the growth of our FM business. Good strong growth year-on-year. Yes, fourth quarter was weak. But this is not a quarter-to-quarter business. We've been building a franchise for the very long term. We have delivered that substantial increase both in profitability levels, both income and bottom line returns. And it comes from being able to warehouse risk in these markets on behalf of our clients. That's what we're doing. We do it well. 2025 was a good year. 2026 is starting off very well both in flow income and episodic. Absolutely no discomfort with the business model. I can tell you, we have an A team. The financial markets team that we are running today is as good as any I've seen, and I've been doing this stuff one way or another for 3 decades. It is an excellent, excellent team, very differentiated positions in our market. It doesn't mean to get it right on every trade in every market. But overall, we're super happy with '25. Pete, do you want to take the cost question? Peter Burrill: Thanks, Bill. Thanks, Jason, for the question. Thinking about costs, maybe a couple of thoughts here. First, zooming back on the change from underlying to reported. And I know in the way you phrased your question, you're asking if it gives us more room. We're doing this because this is what shareholders have been asking for. We think it's a positive. The benefit of being able to focus on one set of numbers both internally and externally, we think, is a big benefit. What we tried to do is, on Slide 11, give you the component parts, as you've pointed out, on how to think about costs. So we provide kind of a onetime bridge on an old underlying basis. And you can see the moving pieces that we've got there. To your point, in '27, while I'm not going to comment on specific direction of travel, you should think that, yes, we will continue to invest in business growth as we see the opportunities in front of us that Bill's already spoken about. The FFG CTA will go away. There's usually some level of other restructuring, which, obviously, we'll only call out if and when it's material. But I do want to leave two thoughts. We maintain focus on positive jaws, we maintain focus on improving our cost-to-income ratio, and we maintain focus on productivity. So don't read too much into the move to statutory. We think it's just an overall benefit and something our investors have been asking for. And we've tried to give you as much transparency as we can about how we think about costs. But any guidance beyond 2026, you're going to have to wait for our discussions in May. William Winters: I just want to give a little color on the accounting change, the presentation change. We're going to find it really useful to have a single set of numbers that our team focuses on. And the idea that there was the above the line, below the line, the suggestion which was never the where we operated, but nevertheless you wonder, is somebody thinking that below the line doesn't count or I get a freebie or it's not going to affect my bonus pool. It wasn't in my LTIP. So in theory, I was incentivized to jam stuff below the line as was the previous CFO. The new CFO will not be incentivized that way because we've just got a single measure. It is above the line. Everything is above the line. I just think we're going to get focused. And of course, that's what you, shareholders and analysts, have been encouraging us to do as well. So I'm glad that we got there. And on Fit for Growth as well, I want to say, that program was a success. I mean, we've deployed $1.3 billion of capital in an accelerated way. Extremely rigorous at the outset in terms of defining the benefit cases and extremely rigorous in terms of tracking whether those benefits are coming through. Two years into the program, I think we all looked at that and said, yes, first of all, we constrained ourselves in terms of the productivity investments that we're making around a particular set of program guidelines. We don't need to have those guardrails in place anymore. We do need to internalize completely that discipline in terms of the way that we both measure and then track our investments. And I think that we can safely say that, that is now BAU for us. So as Pete said, the productivity gains that we've generated through the Fit for Growth program, we would expect to generate in an accelerating way with future investments into our business. With that, we will go back to the operator for the next question. Operator: We're going to take our next question, and it comes from the line Andrew Coombs from Citi. Andrew Coombs: If I just start with net interest income. You talked about timing benefit in Treasury income and how also the move in HIBOR temporarily improved your pass-through metrics. Perhaps you can just elaborate there on the magnitude of the temporary benefit across those factors. And linked to that, are you kind of alluding to the fact that Q4 is not an appropriate jumping off point from which we should extrapolate? We should be more thinking Q3 rather than Q4? And then the second question is a more specific one. I was slightly surprised that you called out Ripple and Toss as being a 70 basis point benefit. I think previously, you talked about $72 million unrealized gain on that in the first half. So can you just help us how you get to the 70 basis points? William Winters: Great, Andy, I'm going to turn to Manus for both of those. Just a couple of headline comments for me. First is we're really quite happy. The combination of a sort of pass-through rate management and volume growth has allowed us to keep our NII in the zone of flats, including '26 guidance despite some obvious headwinds. We consider that to be a good outcome. And second, of course, the 70 basis point RoTE benefit of Ripple and Toss is part of the 14.7% RoTE outturn, which is a really good number as far as we're concerned. But yes, I mean, we want to call out anything that's specific. And as we get into -- I know this wasn't your question, but as we get into the separation of the Ventures segment into WRB for the Digital Banks, Mox and Trust, and the Central & other for the rest of SC Ventures, we will continue to call out these kinds of things so that you get the same color that you're getting now while it's separately reported. But Manus, please. Manus James Costello: Thanks, Bill. Yes, on the NII move and the impact of HIBOR, you should have seen that the majority of the increase quarter-on-quarter was the result of that HIBOR move. It was split between treasury, as you point out, where there were some timing differences between repricing of liabilities and assets. And some of it came through in retail within our deposit and mortgages line as we delivered strong PTRs in that quarter. As you think about where we go to '26, we're using 2025 as a full year as the base because there were a number of different moves in HIBOR during the course of 2025 in different directions. So taking any given quarter as a jump-off point, certainly the fourth quarter, would not be the right approach, which is why when you think about how to roll forward NII using our guidance that we provided for you, you should really take the full year '25 and then apply the different metrics that we've given you there. So hopefully, that gives you a bit more color, Andy. William Winters: Do you want to comment on the 70 basis points from Ripple and Toss? Manus James Costello: It's included within the way that we report the underlying RoTE, as we've stated before in the past. It's not included in the statutory RoTE in the way that we talk about it. And clearly, we will continue to call out any gains that we have in the future, but it's not included in the measure of statutory RoTE that we put in for '25 or that we're guiding to in '26. William Winters: Maybe it's worth noting that while Ripple has observable market prices, we're not fully marched to the last transaction. We form a judgment based on a combination of broker quotes, actual traded volumes in that company, and we have positioned historically conservatively against whatever the last price is. Obviously, cryptocurrencies and XRP in particular, have dropped quite a bit since the last valuation. We still think we're appropriately valued at this point. Toss is a private company, Toss Bank, in which we helped create that bank in Korea. It's an outstanding bank. It does have a peer that's public, just Kakao Bank. And Toss Bank is performing extremely well. And again, very little observable volume in terms of share transactions. So these are both judgment calls. I think you've come to understand that we're quite conservative in terms of the way that we assess these things where there's judgement required. Operator: And the question comes line of Perlie Mong from Bank of America. . Pui Mong: I'm just trying to understand the guidance a little bit better. So the income guidance is bottom end of the 5% to 7% range. I suppose, firstly, what will make it higher versus lower. And then within that, because NII is relatively flat in the year '26. And that would imply that noninterest income, it's probably double digit and obviously with the SOLV India in '25. So if you strip that out, it's probably going closer to 14%, 15%. And I would just love to hear about how you're thinking about the different business lines. So episodic, a bit weaker in Q4, but flow income is up 15%. So would you expect something similar? Is it 15% across the majority of the main business lines? Or are you expecting something closer to, say, 20% for Wealth, given your comments on how strong the front-end flows are and maybe a little bit more conservative on banking and markets just because of the natural volatility in those lines. So that's number one. And then number two, just quickly on distribution. Dividend is one of big [indiscernible] of today and it's now looking at about 30% payout ratio to reported EPS. Is that roughly right? So would you expect that to be something that you would continue doing and do more dividends versus buyback? William Winters: Great. Perlie, thanks for the question. For some reason, your audio quality was quite poor. So I'm not sure we got everything correct that. I'll try to repeat some of the questions because I'm not sure that others on the line could hear either. I think your first question was on guidance. I'm going to turn it to Manus in a moment. We're at the lower end of the 5% to 7% range. You note with NII roughly flat, that must mean double-digit growth in the non-NII. That is mathematically correct. And of course, that's what we've been doing for some time, is really strong double-digit growth in non-NII. And maybe to one of your subsequent questions, yes, the early part of the year also supports -- the early part of 2026 supports that trend, and we're extremely happy with that progress. I'll go to Manus, just quickly running through the questions, your second was around episodic, which was weaker in Q4. For sure. I commented on that earlier. I'm not sure I mentioned I've repeated what we said in the past, which is that the episodic will tend to vary between 0% of income, where we came out in Q4, and 50%, was up by $16 million at the bottom end, it was 0 because we obviously lost a little bit of money. Maybe we'll be off up by $16 million in some future quarter, I don't know, at the top end. But it is volatile. But it's a decreasing percentage of our overall FM income. And you can see from Page 29 in the deck, the steady progression, this sort of 10% compound rate in flow income, not quite a straight line, but pretty close, with the episodic on a rolling 12-month basis being more volatile, a shrinking percentage, but still a meaningful contributor to our business and extremely important for facilitating customer flows. So we're very happy with the overall mix. And then... Pui Mong: I'm sorry about that. Can you hear me better now? I don't know what happened with my headset. William Winters: We can hear you better now. Pui Mong: No, I was just going to say, with implied noninterest income looking to be up maybe 15% if you exclude SOLV India, where is that going to come from? Is it more wealth versus more markets and banking? Episodic was a bit weaker, but obviously flows are very strong, still about plus 15% year-on-year. So are we thinking about maybe 15% across markets as well as wealth? Or are we going to see a bit more from wealth, maybe closer to 20% and maybe a little bit less on markets given the natural volatility in that business? William Winters: Well, I'm going to let Manus take the details of the question. I think you're right in terms of the sources of growth. I mean, the good news is in 2025, wealth banking, financial markets and key elements of transaction banking, especially when you strip out the interest rate impact, we're all firing. And in fact, our bank is firing on all strategic cylinders. And while we had a weak fourth quarter in episodic income, flow is firing across the board and financial markets year-on-year for the full year is very strong. And that has continued into '26. Manus, fill in the gaps? Manus James Costello: Yes. To carry on from where you left off, Bill, I mean, we had a very strong year in 2025. Wealth was up 24%. Markets was up 12%. Banking was up 15%. As you know, the majority of those businesses is noninterest income, and we're saying that we started the year well. What we're really trying to say is across all of those 3 engines, as Bill said, they're all firing. They're all doing well, and we're comfortable with broad-based growth across all of them. What you should not take away is that there's anything hidden or any kind of individual element which is driving that guidance to 2026. It just speaks really to our confidence in how we ended last year and how we're coming into this year and how we're set up for the business going forward. Pui Mong: Understood. And my second question was just on distribution because dividend was a lot higher than expected. It will be about 30% payout ratio. Is that something that you would expect to continue? And given the share price has done very well in the last 12, 18 months, would you expect to do more dividends versus buyback? Or how are you thinking about distribution? William Winters: Thanks again for that. I'll start on this and let Manus finish up. Obviously, we've got quite a healthy buyback as well. $1.5 billion, I think it's a little bit higher than what the market was probably expecting with a substantial increase in the dividend. And we think we're getting to something like a 30% payout ratio in this environment makes sense. And we have every intention of continuing to grow our earnings and continuing to grow our dividend. We'll give a little bit more color on the way we're thinking about capital allocation in the capital markets event in May. But clearly, we've had a substantial increase in dividends, which I think positions us well in a number of regards, together with a big potential share buyback after completing a very robust aggregate investment program in our business. So the organic investments have been at record levels for our banks. So we're really not scrimping on anything at the moment. But Manus, anything to add? Manus James Costello: Just as you say, we'll talk about it in more detail in May, obviously, about our capital allocation priority, Perlie. I think you should just see the increase that we have delivered so far in total distributions, both dividends and buybacks, as evidence of our confidence in our ability to generate capital and as evidence of our discipline in distributing that capital when we're not using it. We're a business that can deliver strong top line growth and distribute plenty of capital at the same time, and we'll update you more on that in May. Operator: Now we're going to take our next question, and the question comes from the line of Aman Rakkar from Barclays. Aman Rakkar: Hopefully, you can hear me fine. I had 2.5 questions, I'm going to try. On net interest income, could you just help us with -- you've referenced this deposit be to catch-up or kind of normalization of pass-through rates for a number of quarters now, primarily on the CIB, but now presumably in the retail business as well. Could you help us kind of put numbers on this? I know you've given us sensitivities before about 1% shifted pass-through assuming 100 bp cut. Can you just kind of quantify the range of potential outcomes here on this deposit beta catch up, please? Because it just feels like a big source of uncertainty that's very hard to quantify. The related question on the interest income, the deposit growth, 12% deposit growth, we actually completely glossed over it in the presentation. It's a standout number. And I'm struggling to work out what to do with this data point because it doesn't really seem to be informing any confidence around the NII outlook. And I'm not really sure why. I mean, it's presumably because you're investing in markets and some of it's going to go into wealth. But can you help us kind of think about quantifying the forward look on this deposit base? How sustainable is that as a growth rate going forward? And what's the benefit to your P&L from deposits. It is major driver of net interest income, and I'm struggling to work out what to do with that. There was a question on costs around Fit for Growth. I was just kind of reviewing the 2023 full year results update when Diego kind of announced the Fit for Growth plan. And there's a lot of talk around needing to address the inherent complexity and inefficiency in the business. So it is kind of curious that there was an investment envelope that we're not actually putting fully to work. And just taking a step back from the numbers, I'm just kind of I'm interested in your take around what is it you're telling us about how efficient Standard Chartered is from here that actually we tried to spend this money, but we can't because we're actually -- we're very efficient or whatever? It'd be good to kind of hear about the kind of approach and philosophy to the kind of the operational makeup of the business. And my half question was just on Ventures, the $200 million of cumulative losses. I think you've basically done something like $170 million to date. So does that mean there's not much coming from here on in? Or it's going to be very hard for us to kind of assess that going forward? So if you could just kind of update us on that would be great. William Winters: Super. I'll just give a couple of editorial comments upfront. I may come back with some color at the end. I think your 2.5 questions was actually 3.5, but that's okay. And you use terms like feeling uncertain, lacking confidence. I'm going to say, what feels uncertain to you just feels good to us. And the lacking confidence, we hope, is a track record that can be evidenced through time so that you can feel very confident about the quality of the business that we're generating, in particular on the deposit side. But I'm going to turn to Manus on the NII, Pete on the cost, and then maybe I'll add some color on the NII, and I can comment on Fit for Growth as well if they don't cover it. Manus? Manus James Costello: Thanks. So on the NII on the PTRs, the deposit beta as you call it Aman, first of all, it's primarily in the CIB segment that we're talking about this. And you're right that we've said that we are above the ranges that we've guided to in the past for CIB of 60% to 75%, and we expect that to normalize again through 2026. The truth is market is quite conducive. It's been conducive for a while for us to maintain those PTRs at very disciplined levels. We obviously hope that could continue, but we think it's conservative and prudent for us to assume that we come back within the longer-term ranges that we've seen in the past. I'm not going to quantify it exactly. If you go through the maths of the guidance we've given, you can kind of work out where you think the gap will be that PTRs would fill. But of course, there's give and take about different parts of that guidance. And what I would say on that as well, over time, longer term, and this links to your second question actually, is that we continue to improve the quality of our liabilities, both in CIB, where we're focusing on operating accounts, and across the bank as a whole, where our deposit growth, to segue into that, as you pointed out, was 12% for the year. And the majority of that or a lot of that was driven actually in the WRB business. I don't think that, that necessarily speaks to directly a correlation with NII into the course of 2026. A lot of that deposit growth in wealth is obviously driven as future wealth flows. A lot of money comes into the bank through deposits, which is then converted into wealth. But I do think it speaks about the improving liability mix of the bank overall that we're continuing to attract these deposits, and there could be benefits from a mix perspective going forward. But all of these, you have to place against the backdrop, of course, of the fact that we do have headwinds within NII from the rate environment, as we've called out, that 44 basis points. And we do also have a couple of percentage points of headwind from the actions we're taking in WRB. So it all goes into the mix but with an underlying story of a longer-term improvement in liability, Aman. Peter Burrill: And to pick up on your questions on FFG in costs, I guess, a few things. FFG was always intended to simplify, standardize and digitize the bank. And we're really happy with the progress that we've made to date. You can see we've got over 300 initiatives in flight, delivering a broad range of benefits. And that's really been the focus that we've had. When it comes to the spending, we wanted to ensure that we kept to a kind of -- we were focused on productive spending and that we could keep the 1:1 ratio spend to save. And we also didn't want it to be an everlasting program. So it was important to us that FFG as a program and as a series of programs comes to a conclusion in 2026. We will continue to invest in productivity initiatives to simplify the bank from an ongoing basis. And again, made some really good progress. We've got some of our mortgage platforms. The turnaround times have gone from 14 days to 5 days in some of our largest markets. We've significantly reduced the number of applications that we have within the bank. We've taken third-party risk systems from 10 systems to 1 system. So a lot of really productive investments. We're happy with where it is. I wouldn't take it that we couldn't spend it. I think it was just about discipline and looking beyond 2026 as far as future opportunities. William Winters: Yes. We're very happy with Fit for Growth, the progress that we've made. And while that program is going to stop at $1.3 billion, and we have some big execution still to do in 2026, we've got plenty of other programs for creating productivity in the bank, including things that are much longer term in duration, so outside of the scope of Fit for Growth. We also, since the time that we announced this program or started conceiving it 2.5 years ago or so, we have had plenty of new information about the things that we should be deploying our shareholder dollars into. And whether that's into some other longer-term productivity opportunities, whether it's related to AI or other things, where we've got some super interesting and exciting projects underway that will produce productivity type returns that match anything that we could be doing otherwise within a more constrained, heavily guardrailed Fit for Growth project. We just said this is the right time to complete the first phase of this productivity agenda, bringing all of that into our business as usual for continuous improvement and then obviously shift some of our resources on the margin to these other longer-term or other projects that will make us much more productive through time. So no big story here. But I think you would expect us to reflect and adjust our business approach as circumstances change. This one is a success. And we're on to the next one. The last question you asked, the last half question was on SC Ventures, the $200 million of losses. Obviously, the bulk of the Venture segment has been the Digital Banks. That's been the biggest single component. And those have always been managed by the WRB management chain, so up into Judy Hsu. We're increasingly looking at and acting on the opportunities between the Digital Banks and the main bank. So the distinction became a little bit more artificial than has been the case. And those banks are mature. They're doing very well, and we will continue to evolve those. And you'll see them in terms of the breakout within the WRB presentations. The rest of SC Ventures is a collection of things, including stakes and, as we mentioned earlier, companies like Toss and Ripple, including ventures that we built, like SOLV, which we've merged in Jumbotail but continue to have a stake in the resulting company. And our digital assets businesses, Zodia Markets, Zodia Custody, Libeara, et cetera. And as we reposition that into Central & other, of course, we'll continue to call out anything that's of any note. But you would want us and expect us to invest in things that are leveraging the key strengths that we've got. And you would want us and you would expect us to manage that portfolio actively. So cutting out either things that aren't working out, which we do regularly. I mean, we've had thousands of ideas that have been killed at different points of gestation, hundreds that we put more than $20,000 into that we've killed and, of course, the ones that have succeeded we've run with. So the constraints -- I mean the $200 million is fine. We'll be within that level by almost any measure. But the value of calling that out as a specific metric is just not so relevant anymore. Operator: [Operator Instructions] And now we're going to take our next question on the audio line. And it comes from the line of Ed Firth from KBW. Edward Hugo Firth: I have two questions on costs actually. I mean the first one was in Q4. I just wondered what the costs were related to episodic income because you pulled that out on the revenue line, but it doesn't seem to be any mention in the cost line. I would have thought it would have a highly variable cost base related to that. So I just wondered why that's not the case? Or could you give us some quantum of the sort of costs that go with that revenue and whether or not it is variable? That would be my first question. And then the second question is back to Jason's question at the beginning. If I look at Slide 10 and looking at your Fit for Growth, it looks to me -- I know you're going to want to talk about this more in May, but I guess we have to fill in numbers before then. You've broadly got about $600 million of CTA cost dropping away and about $300 million of savings next year. So am I right that when I look at my '27 cost base to start with, the sort of lumpiness should take just short of $1 billion out of the cost base. And that other than that, it should just be there's no other lumpiness that we should know about or think about when we look at '27 costs and beyond? But that is the sort of right base level, somewhere around $1 billion below the $13.3 billion, I think you said for this year. William Winters: Well, again, I'll make a couple of comments upfront and hand to Pete for both questions. On the cost associated with episodic, it's not really the way we run the business. I think what you might have in mind is that traders get paid bonuses that are a function of results. And if they don't make money in trading, their bonuses will go down. That's true. That is a truism, in fact. But cost base -- the cost -- the resources supporting the episodic income are the cost of the financial markets. So we don't allocate the cost between what's flow and what's episodic in any macro way. Pete, you can offer some more color on that if you have it. And then on the Fit for Growth, I mean, we're running a business here. And while the productivity investments and then associated savings coming in current in the later periods are material associated with Fit for Growth, we will continue to be investing in productivity-related initiatives, which will continue to produce savings and expense and also produce income in terms of revenue. So I'm definitely not guiding to $1 billion out of the cost base. But Pete? Peter Burrill: Thanks, Bill. Bill covered most of this when it comes to any cost related to episodic. And when we do look at markets, we look at it on a whole year basis rather than a particular quarter-on-quarter, and markets had a very strong year in 2025. So I wouldn't read anything into quarterly volatility in that number and no direct read across to the cost base. When it comes to your question on how to think about 2027 costs, you noted all the downs, and I noticed you kind of somewhat skipped the ups on Slide 11. So there's two areas to think about, right, which is we've called out -- you called out the FFG CTA going away and the ongoing savings. We will invest and continue to invest in business growth. We see great opportunities and we're going to make sure that we invest into those and lean into those, not least of which in our affluent and wealth space. And secondly, what we've termed other restructuring in there is kind of our historical run rate of other stuff we don't have below the line anymore. So that will be above the line. But I just want to make sure you're thinking about all the various components rather than just the FFG-specific CTA and savings in 2027. So I hope that helps. William Winters: Unless anybody think -- I was just going to say unless anybody think otherwise, we're still very focused on generating positive jaws. Operator: Now we're going to take our next question, and the question comes from line of Alastair Warr from Autonomous Research. Alastair Warr: Just a couple of detailed questions really. Could you just say, sticking with this cost point, was there anything you actually pulled the plug on in the Fit for Growth program, programs you've been working on, lots of granular stuff you flagged before in the last year or 2. Is there anything that dropped off the list? And then just a couple of things on asset quality. Could you add any color or anything on the outlook in relation to that sovereign downgrade, anything we should be extrapolating or be concerned about or just one lump? And finally, a couple of your peers in Singapore, Bank of East Asia saw some movement on Hong Kong property, something you have called out a little bit before but not at this time. Is that just nothing to report here as a topic? William Winters: That's great. Thanks, Al. I'm going to turn to Pete for all of those. Certainly, the headline on the second set of questions, there's nothing to call out. We're just in good shape all around. The sovereign downgrade is what it is. It's a sovereign downgrade you've seen not associated with any material ECL that you can fill in the blanks there. Pete? Peter Burrill: Thanks. So focusing on the first one on FFG, yes, of course. I mean, it was a dynamic portfolio. I think important, if you look at the types of areas that we've laid out on Slide 10, those are broadly the similar proportion as what we laid out originally that we thought we had a hypothesis. But of course, you test and learn and you try some. They don't work out and you stop them. So yes, it was a very dynamic portfolio. 343 initiatives currently in the pipeline that we're focused on executing in 2026. But yes, there were some that came in and out of that portfolio over time. On asset quality, I mean, Bill gave the headlines. We've provided a bit more detail in some of our slides with regards to Hong Kong and China CRE, where the overall view is things have gotten slightly better. It's not a major issue. We've still got overlays. So we feel quite comfortable with that. When it comes to the sovereign downgrade, as Bill mentioned, no significant ECL in Q4 as a result of that downgrade. So it moves the numbers as far as the what we call high-risk accounts. But we feel quite comfortable and confident and no significant areas to point out that we're concerned about heading into 2026. Thanks for the question. Operator: And the next question comes from the line of Amit Goel from Mediobanca. Amit Goel: So 2 kind of follow-ups from me. But firstly, just on the income guidance for '26 to be around the bottom end of the kind of 5% to 7% growth range. Just want to double check, is 5% kind of like the floor? So you would expect to be 5% or better? Or are you thinking that the income depending on obviously external variables, it could actually be a touch below the 5% as well as being potentially above the 5%? And then secondly, again, just following up on the costs. So obviously, a large part of the delta was the investment into initiatives in terms of cost of '26 underlying. Would you mind just giving me a little bit more color in terms of what those investments initiatives were and how that will help productivity and growth in the future? So what's the kind of payoff or what exactly have you invested in there? William Winters: Great. I'll turn to Manus on the guidance question and Pete on cost. But let me say, I'm pretty sure that our bankers, RMs, traders don't pay a lot of attention to the guidance that we're discussing on this call. They don't shoot for 5.0% and then take the rest of the day off. These guys are, all of them, ladies and gentlemen, are very focused on generating growth. Super excited about the growth that we've generated so far, which has been well ahead of the guidance that we set out. And I can tell you, every undertaking will be to continue to do the same. Then we get into levels of precision that are probably not so meaningful given what's going on in the rest of the world. Manus? Manus James Costello: Yes. No, I'm not going to add those levels of precision either. I would just say the guidance is around 5%. It's neither a floor nor a ceiling. It's how we see things at the moment. We'll obviously update you during the course of the year on how that progresses. But that you shouldn't take it as either a floor or a ceiling specifically, Amit. William Winters: And Pete, do you want to talk about the change in investments? Peter Burrill: Yes. Thanks for the question. When looking at '26 and the business investments, it's a variety of things, as you pointed out, both productivity and growth oriented. So on the growth side, we've been talking about our investments into wealth management and affluent. And those, we want to continue. And so those are a key component of that. On the productivity and growth side, you've got enabling technologies as well as data infrastructure and AI initiatives to really take advantage both to grow as well as to become more efficient. So that's a few types of examples of the things that we're leaning into in 2026 with the confidence that we've got in the business momentum. Operator: And now we're going to take our final question for today, and it comes the line of Chen Li from China Securities. Unknown Analyst: This is Chen Li from China Securities. The first question about the credit cost. Although through the cycle, credit costs are 30 to 35 bps, but it has remained at around 20 bps in the past few years. So what is your outlook for the credit cost trend in 2026? And the second question is about Global Markets. Since Global Markets revenue tends to fluctuate significantly with market conditions, so what about the trend of the net interest comp about the Global Markets in 2026? William Winters: Great. Thanks for the question, Chen Li. I'm going to turn to Pete on the credit question, but I'll just again give a little bit of a high level first pass. The 30 to 35 basis points is what we estimate are through the cycle credit cost to be. Of course, we've not been operating at that level for some time. And we see nothing in the portfolio today that gives us any particular cause for concern. We've also substantially improved the credit quality of the portfolio over the past, call it, 10 years, but I think continuing over the past, call it, the post-COVID environment, with over 70% of our portfolio being investment grade, et cetera, with much lower concentrations than we've had at times in the past. So none of this is to say that our guidance of 30 to 35 basis points is inaccurate. It's just we haven't been tested in a down credit cycle with our current portfolio. I guess kind of it's a truism. But I will say that I think we've managed our capital allocation quite carefully. So I would hope that we can demonstrate an outperformance relative to the guidance that we've given. But we can't prudently suggest anything other than what our data analysis would suggest we should be prudently guiding towards. And I think we covered it before on the financial markets. The flow income is not that volatile. It's actually quite steady. It's been growing 10% year after year after year after year after year, including 2025 and into the start of 2026. That's 70% pushing to 75% or, possibly over some period of time, 80% of financial markets income. The remainder is volatile. But it's tended to be volatile above 0. And you can give us a big old knock for being $16 million negative in the fourth quarter of 2025, still a good overall episodic year for the full year 2025. Volatile but positive and with the underlying core of the business being very stable and growing quite nicely. Pete, do you want to add anything on either of those? Peter Burrill: I think you covered the Global Markets. On the credit cost, just a couple of data points. If you look at our CIB portfolio, we actually had only $4 million of credit cost this year and a net recovery last year. We don't see anything concerning on the radar screen. But we're just cautious that expecting net recoveries or virtually 0, we want to be aware that situations can change. But read into that along through the cycle rather than anything specific looking at 2026. So feel comfortable with where we are there. William Winters: Good. Well, I think we've exhausted the questions for this morning. And thank you enormously for the time that you spent with us. I know it's been a long earnings season, and no doubt, you've got a lot to do for the rest of the week. But I really appreciate the focus and attention. Just a couple of parting thoughts for me just in case you didn't pick it up from our earlier answer or the presentation. We feel super good about the franchise right now. It is firing on all cylinders. Really anything that matters strategically, we're doing well. We're investing in the things that are producing those kinds of results. We have an excellent team, of course, starting with the gentlemen on either side of me. But the rest of the management team, as I've said, is as good as any -- I'll say better, than any team I've ever worked with. And that's the team that's generated these results. So we are full speed ahead. I personally am full speed ahead. I may not look like it, but I definitely am. And I look forward to future outings where we can continue to talk about the great progress that we're making on our cross-border and affluent strategy. Thanks.

82天前Insight Analytics约5分钟阅读

WDS 2025 Q4 财报电话会议

Operator: Thank you for standing by, and welcome to the Woodside Energy Group Limited Full Year 2025 results. [Operator Instructions]. I would now like to hand the conference over to Liz Westcott, Acting Chief Executive Officer. Please go ahead. Elizabeth Westcott: Good morning, and welcome to Woodside's 2025 Full Year Results Presentation. We are presenting from Sydney, and I would like to begin by acknowledging the traditional custodians of this land, the Gadigal people of the Eora nation, and pay my respects to their elders past and present. Today, I'm joined on the call by our Chief Financial Officer, Graham Tiver. Together, we will provide an overview of our full year 2025 performance before opening up to Q&A. Please take time to read the disclaimers, assumptions and other important information. And I'd like to remind you that all dollar figures in today's presentation are in U.S. dollars, unless otherwise indicated. I am very pleased to present an outstanding set of full year results today, which highlight the disciplined execution of our strategy throughout 2025. We delivered on our commitments, leveraging our track record of operational excellence, world-class project execution and financial discipline to reward our shareholders today while positioning Woodside for future value and growth. In 2025, we achieved record annual production of 198.8 million barrels of oil equivalent, exceeding our full year guidance range. This was driven by the exceptional performance at Sangomar and world-class reliability across our operating portfolio. We progressed major cash-generative growth projects to budget and schedule, including excellent progress on our Scarborough Energy project, which was 94% complete at year-end and remains on track for first LNG cargo in the fourth quarter of 2026. We recorded strong underlying net profit after tax of $2.6 billion, where record production offset lower realized prices when compared to full year 2024 underlying net profit after tax. Based on this, I'm pleased to report our Board has determined a final dividend of $0.59 per share. This brings our total fully franked full year dividend to $1.12 per share. This represents a payout ratio of 80% of underlying NPAT, which is once again at the top end of our range. Additionally, in a testament to the strength of our underlying business during a period of increased capital expenditure and softer prices, we generated free cash flow of $1.9 billion. We achieved this while continuing to invest in the next phase of value accretive growth. We demonstrated strong sustainability performance, achieving our 2025 target of a 15% reduction in net equity Scope 1 and 2 greenhouse gas emissions below our starting base. Turning to Slide 6. As outlined at our Capital Markets Day in November, we are delivering our strategy to thrive through the energy transition. Our strategy and our approach remains unchanged. Our priorities are clear and we remain firmly focused on disciplined execution to deliver long-term value. We are doing this by maximizing performance from our base business, delivering cash-generative projects and creating future opportunities for value. In 2025, we delivered across each of these areas. We combined record production with increased efficiency, reducing our unit production costs to $7.80 per barrel of oil equivalent. We achieved first production at Beaumont New Ammonia and achieved significant milestones in the delivery of our Scarborough and Trion projects. We took a final investment decision to develop the three-train, 16.5 million tonne per annum Louisiana LNG project. This game-changing investment positions Woodside as a global LNG powerhouse with greater capacity to meet growing energy demand. We also welcomed high-quality strategic partners to Louisiana LNG with Woodside's expected share of total capital expenditure now less than 60%. One of these partners, Stonepeak, is funding 75% of 2025 and 2026 project capital expenditure. We continue to actively refine our portfolio, including divestment of our Greater Angostura assets, receiving $259 million in cash. And all of this was achieved while maintaining a strong balance sheet and liquidity position with gearing within our target range. Keeping our people safe remains our top priority. During a year of increased activity, we delivered strong safety performance with no high consequence injuries recorded. We marked significant safety milestones across our global portfolio with no recordable injuries at our Sangomar project in its first 18 months of operations and construction of our Scarborough floating production unit marking 3 years of work without a single lost time incident. These achievements set the required standard for Woodside as we embed a focus on safety, drive safety field leadership and a culture of continuous learning across our global business. To Slide 8. In 2025, we once again showcased Woodside's world-class operational capabilities by delivering reliable energy to customers while driving continuous improvement through cost discipline and efficiency. We have increased production from our growing global portfolio and maintaining operated LNG reliability of approximately 98% over the past 5 years, which compares exceptionally well against our global peers. This year, we've delivered a 4% reduction in unit production costs through disciplined cost management across the business, while continuing to maximize value from our assets through brownfield developments, portfolio optimization and leveraging our marketing expertise to capture additional value. In 2026, we will execute major turnarounds to maximize longevity at existing assets and support ramp-up of new production, including at Pluto LNG in preparation for Scarborough start-up. We will also undertake dry dock maintenance for some of our Australian oil assets. Let's now turn to Sangomar on Slide 9. During 2025, operational performance continued to be exceptional with nameplate production of 100,000 barrels per day for most of the year at almost 99% reliability. This has contributed $2.6 billion to Woodside's EBITDA since startup, demonstrating Sangomar's value to our business. Based on strong early performance, we will be assessing options for a potential Phase 2, which would leverage the existing FPSO and the subsea infrastructure to unlock additional value. In December 2025, our Beaumont New Ammonia project commenced production of first ammonia. We expect full handover of the project by OCI in the first half of 2026. The production of lower carbon ammonia, which will be made possible by the supply of carbon abated hydrogen and ExxonMobil's CCS facility becoming operational, is currently targeted for the second half of 2026. Pleasingly, we have seen strong early customer uptake from Beaumont, securing offtake agreements with leading global customers to supply conventional ammonia from the facility. These contracts reflect prevailing market prices, and we are now advancing additional agreements to align with expected future output, including for lower carbon ammonia. In 2025, we continue to make excellent progress at our Scarborough Energy project, which was 94% complete at year-end and on track for first LNG cargo in the fourth quarter of this year. Major milestones included the assembly and, subsequent to the period, safe arrival of the floating production unit at the Scarborough field. The drilling campaign for all 8 development wells was successfully completed in line with pre-drill expectations. During the period, we completed the tie-in to the Pluto domestic gas export line as construction activities at Pluto Train 2 continued. We also commissioned the Integrated Remote Operations Centre at our Perth headquarters, enabling Pluto and Scarborough to be operated remotely from more than 1,500 kilometers away. Moving to Trion on Slide 12. We are targeting first oil in 2028 with the project 50% complete at year-end. During the year, we advanced construction of both the floating production unit and floating storage and offloading unit with major field activity set to start in 2026. The image shown on the slide taken this month is the lifting of the first of 3 modules onto the hull of the FPU. Preparations for the drilling and completion campaign also progressed with the deepwater drillship expected to commence drilling in early 2026. Following FID in April, we have maintained strong momentum on our Louisiana LNG project. As outlined on Slide 13, the project was 22% complete at year-end and is targeting first LNG in 2029. Key ongoing activities in 2025 included the construction of LNG tanks, soil excavation, pile installation for the main marine berth, and the establishment of material offloading facilities. We have now secured foundational transportation capacity, a key milestone in providing access to diverse and abundant supply sources. In support of feed gas supply, we also entered into a long-term agreement with BP for the supply of up to 640 billion cubic feet of natural gas to the project starting in 2029. We will continue to layer in agreements like this, ensuring access to multiple supply sources. The project's value proposition was reinforced during the year as we brought in high-quality partners. This included the 40% sell-down of Louisiana LNG infrastructure to Stonepeak and sale to Williams of a 10% interest in Louisiana LNG LLC and 80% interest and operatorship of Driftwood Pipeline LLC. The project is expected to be the primary supply source for long-term sale and purchase agreements that Woodside signed during the year with European customers, targeting delivery from 2029. We will continue to progress further sell-downs and offtake agreements in 2026 in response to ongoing interest received from potential high-quality partners and customers. Woodside views strong sustainability performance as an essential component of our overall business success and ability to make a positive contribution where we live and work. Our approach enables us to focus on the right areas, manage key risks and impacts, drive responsible decision-making and set plans and targets that add value to our business and meet the expectations of our stakeholders. In 2025, we made positive progress across key sustainability areas. A particular highlight of 2025 was the World Heritage listing of the Murujuga cultural landscape, which Woodside was pleased to support in collaboration with traditional custodians. We continued making significant contributions to local economies and communities, including $9.3 billion spent globally on goods and services. We also achieved our 2025 net equity Scope 1 and 2 greenhouse gas emissions reduction target through a combination of underlying emissions performance at our facilities and the use of carbon credits. Our gross equity Scope 1 and 2 greenhouse gas emissions were fewer than the previous year despite higher oil and gas production. This strong underlying performance allowed us to reduce our use of carbon credits to offset emissions and holds us in good stead as we progress towards our 2030 target. I look forward to providing investors with a more detailed overview of Woodside's sustainability planning and performance at our investor briefing scheduled for next month in Sydney. Let's now turn to the global market landscape. Oil is a core product for Woodside, underpinned by a robust demand outlook. The difficulty of decarbonizing hard-to-abate sectors such as heavy transport and petrochemicals means that oil demand is forecast to remain resilient as the world's energy mix evolves. Customer demand for Sangomar Oil has been strong over its first 18 months of operations, and we are very confident in continued demand for oil, including for our Trion project, which is targeting first oil in 2028. Moving to Slide 16. As countries around the world prioritize energy security and affordability while also pursuing decarbonization, we are confident in ongoing demand for LNG as a reliable and flexible energy source. This underpins our investments in long-life LNG projects like Scarborough and Louisiana LNG, which we expect to drive a step change in future sales volumes and cash flow. While periods of demand-supply imbalance may occur in the near term, we believe these are unlikely to persist. Woodside's experience reinforces this long-term demand outlook as we continue to layer new contracts to support our growing supply portfolio. Over the last year, we have contracted 4.7 million tonnes of new LNG supply to Tier 1 end customers with significant gas and LNG experience. This contracting activity speaks to our credentials as a proven operator and the growing importance placed on reliable access to energy by end users. Approximately 75% of our LNG volumes for 2026 to 2028 are contracted with most oil-linked and some gas hub link exposure. This mixture provides diversification, portfolio resilience and the ability to capture value from market dislocations as well as manage risks as additional supply comes online Some of our new contracts will see Woodside's LNG supplied into Asia and Europe through to the 2040s, further demonstrating ongoing long-term demand. Our achievements in 2025 have further supported Woodside's resilience and ability to deliver enduring value. Our financial discipline and performance underpins Woodside's strength in the near term, allowing us to fund our operations and growth projects while delivering solid shareholder returns even in tighter market conditions. Our operational excellence and balanced portfolio are central to our resilience through the cycle. High reliability and a contracted portfolio helped reduce volatility while preserving upside exposure to favorable market conditions. Our long-term resilience is reinforced by a diverse portfolio of high-quality assets that supports consistent production and creates optionality for future growth and value. I'll now hand over to Graham to provide an overview of our financial strategy and performance. Graham Tiver: Thanks, Liz, and hello, everyone. I am pleased to present a strong set of financial results. In 2025, we maintained a focus on cost control and maximizing returns from our producing assets and driving down unit cost production (sic) [ unit production costs ]. In addition, in exploration and new energy, we delivered over $200 million in cost reductions. For 2026, we will continue to focus on costs, including delivering maintenance campaigns to schedule and budget. This is particularly relevant for our Pluto major turnaround scheduled for the second quarter of 2026, where in addition to maintenance, we will complete important tie-ins for Scarborough. We maintained discipline in our investment decisions, adhering to our clear capital allocation framework. Our divestment of the Greater Angostura assets in Trinidad and Tobago highlight this disciplined investment approach. Attracting strategic partners to our major growth projects brings complementary skills and derisks our investment. This is demonstrated through our partnerships with Stonepeak and Williams on Louisiana LNG. Following the completion of these sell-downs, Woodside's expected total capital expenditure is now $9.9 billion, which is less than 60% of the total project cost announced at FID. Williams also brings complementary capabilities in U.S. natural gas infrastructure and an existing gas sourcing platform to benefit the project. We also maintained a strong balance sheet, supporting our investment-grade credit rating while progressing developments and distributing robust returns to shareholders. We actively manage liquidity and, where appropriate, we expect to hedge a modest portion of our oil volumes to provide cash flow certainty and manage price volatility. Our full year 2025 Brent hedges were in a positive position, and we have progressively hedged 18 million barrels for 2026 at approximately $70. Moving to our capital management framework, which remains unchanged. This framework underpins our disciplined approach with clear targets to ensure the strength of our underlying business and provide certainty for our shareholders. We are disciplined in how we position the balance sheet to achieve our goals and remain committed to an investment-grade credit rating. Our target gearing range is 10% to 20% through the cycle. And as I've stated previously, although we may at times temporarily sit outside this range during capital-intensive periods, we manage it very closely. This approach provides us with flexibility to fund value-accretive growth while delivering solid shareholder returns. Our dividend policy is to pay a minimum of 50% of our underlying net profit after tax, and we target a range of 50% to 80%. We know how important returns are to our shareholders. And over the last decade, we have consistently paid at the top end of this range. In 2025, we continued to deliver outstanding returns from our base business. Ongoing exceptional production performance from Sangomar, disciplined cost control, the divestment of later life assets in Trinidad and Tobago and gains on hedging, predominantly driven by favorable Brent positions contributed to an EBITDA margin of over 70% and an underlying NPAT of $2.6 billion. Furthermore, the strength of our underlying business, coupled with the cash received from Stonepeak and Williams contributed to $1.9 billion of free cash flow. Our gearing of 18.2% has remained within the target range during a period of increased capital expenditure, and we closed the year with a strong liquidity position of $9.3 billion. We maintained credit ratings of BBB+ or equivalent and continue to have access to debt markets, including the U.S. SEC registered bond market. On average, cash breakeven of less than $34 per barrel makes us resilient to less favorable price scenarios. And we are very well positioned to progress our growth projects and create future value-generating opportunities while continuing to deliver solid shareholder distributions. As highlighted on Slide 23, these achievements translated into a fully franked final dividend of $1.1 billion, bringing our total full year dividend to $2.1 billion. Our ongoing business performance means consistent returns for our shareholders, having returned approximately $11 billion in dividends since 2022, while reinvesting in the business and maintaining a strong balance sheet. We have consistently paid at the upper end of our target range for over a decade, demonstrating our commitment to shareholder returns. Thank you, and I'll now hand back to Liz. Elizabeth Westcott: Thanks, Graham. Turning to the final slide. This outlines the priorities for myself and the Woodside executive leadership team. First, we will continue maximizing performance from the base business by operating safely, reliably and efficiently. We will maintain disciplined cost control across our business, including our 2026 maintenance program, which involves a major turnaround at Pluto. We will also continue to optimize our marketing portfolio and layer in Louisiana LNG offtake. Second, we will deliver cash-generative growth, including ramp-up at Beaumont, deliver first LNG from Scarborough and continue progressing Louisiana LNG and Trion to schedule and budget. These are major generators of long-term value for Woodside. Third, we will continue creating future value through disciplined capital management. We will maintain strong liquidity, apply strict capital allocation discipline and actively manage the portfolio to protect long-term value. And underpinning all of this is our continued focus on sustainability and innovation. Our achievements in 2025 demonstrate the underlying strength of our business and execution of our strategic priorities, providing the foundation for long-term shareholder value. Operator: [Operator Instructions] The first question comes from Nik Burns from Jarden, Australia. Nik Burns: First question just on Louisiana LNG. You just offered an update on the HoldCo sell-down progress. It's been 10 months since you sanctioned the project. At the recent Capital Markets Day, Meg said that the initial 10% tranche sale had sent a message to other interested parties that they needed to move quickly if they wanted to participate. Just wondering how comfortable you are where the sell-down process is at. The Stonepeak carry largely runs out at the end of this year. So how confident are you that you will be able to complete your sell-downs in the first half of this year? Elizabeth Westcott: Yes. Thank you. Look, we are very happy with how the process is going on the sell-down for Louisiana LNG. In a short amount of time, as you noted, we've brought in Stonepeak on the infrastructure side, and we've got Williams at the HoldCo level. And we continue to target up to another 20% of HoldCo sell-down. Importantly, these transactions with Stonepeak and Williams have reduced the capital commitment for Woodside to $9.9 billion or 57% of the total CapEx. And it's really solved the infrastructure and pipeline capital spend, which is positioning us well for other partners. As you noted, Stonepeak's contribution is 75% of the capital in 2025 and 2026, and this structure has really allowed us to reduce our capital requirement ahead of full year of revenue from Scarborough in '27. And so there really has been no change in our process or momentum, but we are taking a disciplined approach. We are very committed to getting value over speed with our continued sell-downs. We do have strong interest from counterparties. We are looking for strategic partners that complement the skills and experiences of Woodside and that value long-term relationships. And I'm very pleased with the interest that we continue to have in this. Graham Tiver: I think, Nik -- it's Graham as well. It's probably worthwhile adding as well that where the balance sheet is, gearing well within the range, $9.3 billion in liquidity, we have time to ensure, as Liz said, that we find the right partner for the long term and at the right value, very similar to what we did for Scarborough, but encouraged by progress. Nik Burns: Great. Maybe another one for you, Graham. Just on Slide 23, you titled there delivering consistent reliable returns. Certainly, the payout ratio has been consistent for the last few years, but obviously, the absolute dividend has tracked underlying NPAT lower. I don't know how much you've looked at 2026, where consensus is, but the full year consensus dividend is just $0.55 a share and 80% payout, which is obviously less than the final dividend just announced here. I appreciate what can happen through the year. But I was wondering if you could provide some observations on where consensus sits at the moment. And hypothetically, if we do turn out to be right for a change, are you comfortable with this level of dividend in '26? Or would you see this additional flexibility for the company to potentially top up the dividend, say, if you complete the sell-down of additional equity at Louisiana LNG HoldCo? Graham Tiver: Thanks, Nik. Yes, you will know from our capital management framework that we do have that flexibility through the framework to be able to look at things like special dividends or buybacks. But what I would say, first and foremost, is that 2026 is very much a transition year. We have the major Pluto turnaround, which we do every 3 or 4 years. And then a part of that is doing the tie-ins relating to Scarborough. And then we also have Scarborough coming online in Q4 and delivering the first cargo. So look, I think there's some critical work that has to happen, and we'll see how work progresses through the year, and we can start to narrow that range on production. We'll also have a look at what prices are doing. We'll have a look at how Sangomar and the rest of the business is performing, and then we'll determine where we're at. But certainly, the capital management framework allows for it, but first and foremost is we need to guide through 2026, where it is a big year for us. We have a lot to do, and we'll continue to update you through the quarterlies on that. Operator: Your next question comes from Rob Koh with MS. Robert Koh: May I ask for some color on decommissioning activities this year and, in particular, I guess, Bass Strait platform removal and where that sits in the timing, if it's not this year or where is it over the next few years? Elizabeth Westcott: Yes. Thanks, Rob. Decommissioning activities, it's an important part of our portfolio. In 2025, we achieved some good highlights there. We importantly completed all the drilling and abandonment -- sorry, the production and abandonment of our wells across our closed facilities at Stybarrow, Griffin and Minerva, and we completed the infield program. And so our results include good progress on these legacy closed assets. Moving forward, we've guided that we'll be in that range of $500 million to $800 million of expenditure in 2026. And Bass Strait is going to be the major campaign coming forward with platform removals targeted for 2027. And so work will continue on decommissioning, but it is now part of the everyday business of Woodside in Australia. Robert Koh: Second question, just wondering if you can give us a sense, with your unit production costs, obviously, good performance there in 2025, but the composition of costs changing slightly with Beaumont coming in. Can you give us -- and my understanding is that the processing costs there don't necessarily fall into your unit production costs. Could you perhaps just give us a sense of how you're thinking about the overall cost structure of the business this year? Elizabeth Westcott: Yes. Maybe I'll kick off with that question, Rob, and then pass across to Graham. The operating assets continue to have cost efficiency focuses year-on-year. And as we saw in our results in 2025, we had an outstanding outcome, both in absolute costs and in unit costs. 2026 has the Pluto turnaround. So this will impact not just the production outlook for the year, but it also comes with costs. And so we will see, in 2026, increased costs at the Pluto asset. As we start to bring on Scarborough, we will have a new asset, and so that comes with additional costs. Beaumont New Ammonia will feature in 2026, as that asset continues to come up online. And we have made the distinction between production costs where we have our existing assets running facilities with upstream facilities to the costs associated with either tolling or feedstock at Beaumont New Ammonia. And so these will be separate line items that we'll be guiding you on during the course of the year. Graham Tiver: No, I think Liz captured it well. I think if anything, Rob, we're trying to increase transparency on the costs of the business going forward. As Liz touched on production, that is more about our traditional business -- production costs, more about our traditional business and very much around what we control and getting down to operational cost efficiencies, et cetera. And then as with the new line that we've provided for 2026 guidance on as a part of the Q4 production report, feed gas services and processing costs, that's including Beaumont New Ammonia and some of the tolling and feed gas processing costs. So there will be good transparency in our line items, and you'll be able to see that flow through, and it started with the guidance for FY '26. Operator: Our next question comes from Saul Kavonic with MST. Saul Kavonic: The first question, Liz, could you give us perhaps a steer on your thinking where -- hopefully, we see sell-downs sooner than later. But in the event that sell-downs take a bit longer, do you see our sell-downs being a precondition to sanctioning Trains 4 and 5 at Louisiana? Or would you -- if sell-downs haven't happened yet, would you prefer to go ahead with Train 4 and 5 anyway, because it's more optimal from a cost of development perspective? How do you lean in your thinking between those two options? Elizabeth Westcott: Yes. Thanks, Saul, for the question. Trains 4 and 5 are a great opportunity for Woodside. They would be a highly advantaged development for us, because they're able to take the benefits of the installed infrastructure that Trains 1, 2 and 3 already have. Importantly, the site where we're installing Louisiana LNG has all the permits in place to enable 2 additional trains and FEED was completed. So we have a lot of a head start on Trains 4 and 5. But as you referenced, the important feature for us, particularly in 2026, is getting further sell-down in the HoldCo level for Trains 1, 2 and 3. And the foundation partners of Stonepeak and Williams, they've got opportunity to participate in expansion if that's something that is progressing. But our focus does continue to be on HoldCo sell-down of Trains 1, 2 and 3. I think it's also worth noting that we have a number of opportunities to do additional developments on our assets. We talked to Trains 4 and 5. And in Capital Markets Day, we showed the benefit of expansion in 4 and 5 in terms of our sales volume growth and our cash flow benefit. We also have additional opportunities that we'll be competing with Trains 4 and 5 for capital. So we'll be very disciplined around our assessment of where to invest further. The capital allocation framework remains unchanged, as Graham mentioned, and all our investments will need to be assessed against that. And then they will actually need to compete with each other for capital going forward. Saul Kavonic: Second question on Scarborough. You've got the floater on site now. You're giving, I think, about a 9-plus month window into your first cargo. That's double the length of time, for example, that Santos targeted for Barossa. Can you give us some color as to why that time is so lengthy and what your level of confidence is on Scarborough starting in September versus first cargo out just after Christmas? Elizabeth Westcott: Thank you. Yes, Scarborough Energy project at year-end was 94% complete, as you noted. And we continue to be on track for that fourth quarter cargo, the first cargo. Let me help you understand what's ahead of us, though. Offshore, we need to complete the installation of the floating production unit, and we need to pull in the risers and the umbilical. Then we need to go through a process of dewatering subsea equipment, and then we complete the commissioning of the topsides. And then that allows us to start opening up the wells and flowing hydrocarbons and pressuring the trunk line. And I think importantly, these offshore activities are subject to weather conditions. And so there is variation in the assumptions on how long all of this will take. Onshore, though, we need to complete construction and commissioning activities at Pluto Train 2. And once we have the gas from Scarborough, we then go through a process of start-up activities, working from the front to the back of the train, you go through cooling down of the systems and then achieving steady-state operation. We are absolutely laser-like focused on delivery of this project. And so we are confident in our ability to meet our fourth quarter 2026 delivery. Operator: Your next question comes from Dale Koenders from Barrenjoey. Dale Koenders: I was hoping -- maybe it's a question for Graham, you could help us understand what the contracting status is for Beaumont in terms of gas supply and ammonia, what prices they're exposed to if this is spot? And with the ramp-up of the project, how you think that earnings growth will come through over the next 12 or 18 months? Elizabeth Westcott: Yes. Thanks, Dale. Look, I might kick off and then I'll pass across to Graham. So the Beaumont New Ammonia project, we achieved first ammonia, as we highlighted, in December 2025, and we're in a process of ramping up the full capacity of that facility. OCI continue to be the operator of Beaumont until we reach the performance conditions, and they'll pass that facility across to Woodside targeted for the first half of this year. And then as we move into 2026, we'll be progressively moving to a lower carbon opportunity as we get the facilities from Linde up and running and the CCS project that ExxonMobil is doing will commence operations. Regarding supply, the supply of both nitrogen and hydrogen is done by others supporting the project. Our investment in Ammonia was the ammonia element of the project. And so we are reliant on upstream suppliers meeting their obligations to supply the facility. And so those contracts continue to operate through 2026, and we look forward to ramping up the facility going forward. In terms of offtake, we have seen genuine interest in the ammonia products, both the conventional gray ammonia as well as the lower carbon ammonia. And so we continue to layer contracts and commitments with customers as the facility continues to ramp up its production. Graham Tiver: Yes. And I think all I would add is the approach the marketing team and B&A team are taking is we want that flexibility through ramping up to full production. And I think the way the team are layering in contracts is good. We have a good fair share of the volumes locked away, mostly domestically. And it's worthwhile noting, it could change tomorrow, Dale, but the domestic prices in the U.S. for ammonia at the moment are over $600 a tonne. So we are coming online in a healthy environment at this point in time. Dale Koenders: Yes. I guess the question is, you've previously said that the project would be earnings accretive when you get to the clean ammonia stage. But given that real strength in pricing domestically, it seems like you might actually see earnings contribution sooner. Graham Tiver: Yes. Look, it will come down to the startup, the ramp-up and how it progresses. But yes, I would like to think from a cash cost perspective, we should be in a favorable position. But there's a lot of water to pass under the bridge. There's a lot of work to do as we ultimately take control or operatorship and then start to ramp up. But it's a healthy market. Yes, I'd love to be in a position to report back on these results in a year's time talking about how well it's performing and the cash flow it's generating. But this first year, there's a lot of things we need to work through. Operator: Your next question comes from Tom Allen with UBS. Tom Allen: Sort of big bet on tax today despite the guidance released in January. But looking into '26, we expect a step-up in petroleum resource rent tax with Scarborough coming online. I was hoping you could provide some commentary on how we should be scoping that lift in PRRT into '26 and '27 relative to '25. And if you could clarify some of the key uncertainties that might dictate where PRRT lands? Graham Tiver: Yes. I can take that, Tom. Look, I think before I answer your question, it's worthwhile calling out that, as we mentioned in our results, our all-in effective tax rate globally was 45%. And also for Australia, it was 44%. PRRT is only one component of the taxes we pay from our business in Australia. In 2023, '24, the ATO noted that we were Australia's largest PRRT payer, and we're the eighth largest corporate taxpayer. So look, I just want to give a little bit of context and background to what we do pay. It's more than just PRRT. North West Shelf alone through its royalties and excise has paid $40 billion at 100% since its inception. So it's only one component of a broader basket of taxes that we pay, which brings our all-in effective underlying tax rate in Australia of 44%. So I just wanted to put that first, Tom, so you could hear that loud and clear. In terms of PRRT, it is a broad calculation. It relies a lot on prices. But in theory, with what you're saying, with Scarborough coming online and the changes in the PRRT legislation back in '24, yes, Scarborough will be paying PRRT, and that should increase the overall amount of PRRT we're paying. But as I said, a lot of it relies on the pricing that we're incurring. The higher the prices, the more PRRT we pay. So there's a lot of moving variables. But all up, we pay our fair share of tax in Australia at 44% all in. Tom Allen: Thanks, Graham. That came through loud and clear on the tax contribution. I'm sure the journos heard too. But just to follow that, are you able to provide some sort of guide just on the year-on-year movement in PRRT. It's obviously difficult to forecast, but it becomes an important part of getting our underlying NPAT and dividend outlook right. Any type of quantitative guidance you can share on where that might move over the next couple of years, on your planning assumptions? Graham Tiver: We haven't put anything out on that, Tom. So I prefer not to say at this point in time just on the basis that there's so many moving parts. As we have a greater line of sight on the ramp-up of Scarborough, we'll provide more insight to PRRT. Tom Allen: That's helpful. Last comment for me was just the North West Shelf joint venture continues to be reshaped. We're reading that Shell now, following Chevron over 12 months ago, seeking an exit from that joint venture. Can you comment on the indicative CapEx key activities that Woodside intend to progress around backfill for the joint venture and in particular, Browse over the next couple of years? Elizabeth Westcott: Yes. Thanks, Tom. Yes, as you know, Shell has shared that they're looking to take an offtake for their equity in the North West Shelf. So we say across that. The North West Shelf joint venture, though, continues to be interested in taking third-party gas. It's important to note that it already is doing that, the Karratha Gas Plant. It processes gas through the Pluto interconnector for the Pluto joint venture. It also processes gas from Waitsia. And so it's demonstrated its capability at processing third-party gas. And really, the opportunity is to see where Browse could be processed through the Karratha Gas Plant. The Browse joint venture remains committed with 3 very important activities needed before progression can be seen. We need to ensure that we have an investable project and that the concept continues to be refined to enable that. We need to have commercial agreements in place between the Browse joint venture and the North West Shelf joint venture, which continue to be worked, and we need environmental approvals. And so the Browse project is very committed to progressing each of those work streams, and that will then enable work to progress, and we can see whether the Karratha Gas Plant will be the solution for Browse. Operator: The next question is from Gordon Ramsay with RBC Capital Markets. Gordon Ramsay: I got another question on Beaumont New Ammonia. Just trying to understand how you move forward with Phase 2 in that project and how dependent you are on signing up contracts for clean ammonia sales if there's not legislation globally to encourage that. What are the key factors that will move that project forward? I know, Liz, you mentioned, obviously, the carbon sequestration by ExxonMobil and hydrogen and nitrogen supplies are obviously critical. But assuming they're there, is there a potential for this project to slow down if you aren't going to be able to sell the ammonia at a premium price because it's classified as low carbon or clean ammonia? Elizabeth Westcott: Yes. Thanks, Gordon. As you highlight, look, our focus at the moment is on the Phase 1 of the project and building out not only the production from the facility, but understanding the customer appetite for lower carbon ammonia. We're targeting 3 key regions for our customers. We're looking at the U.S. domestic market. We're looking at Europe and Asia Pacific. And it's fair to say that while there's interest in lower carbon ammonia, the uptake in demand is slower than we had forecast. And so we remain attuned to where customers are at in their desire for lower carbon ammonia. That's going to be an important part in playing into the timing of a Phase 2 development at Beaumont itself. So we have a really great opportunity to be able to expand that facility. It will be able to take advantage of all the installed capital to date. And so it will be advantaged economically as a project, but it absolutely needs to have a customer market for it. And so that's something that we'll continue to keep a watch on. And it will need to meet our capital allocation framework. So we're going to be very disciplined with what we progress. Gordon Ramsay: Okay. And my second question relates to, I think when you were discussing Slide 8, you mentioned there was going to be dry dock maintenance of some of the Australian oil assets. Can you provide a bit more detail on what that involves? Elizabeth Westcott: Yes. So all of our assets undertake periodic turnarounds. And for FPSOs, that often involves a dry dock. And so we do have 2 of our assets going for dry dock this year. It's on a sort of 5-year type cycle that they do. And so that's something that's normal course of business for us, just like it is to have turnarounds at our LNG facilities. And yes, the teams are well progressed for that. And that just features in our production outlook for the year. Gordon Ramsay: Can you mention the assets in the downtime. Is that possible? Elizabeth Westcott: Look, I think we'll get the team maybe to follow up offline with you on details like that, but it's just a normal part of our maintenance program for the year. Operator: Your next question comes from Henry Meyer with Goldman Sachs. Henry Meyer: Firstly, on production, guidance for the year implies quite a steep decline in oil production. I'm guessing that's primarily from Sangomar as it comes off plateau, which is normal. But it's obviously a function of lots of different variables. So hoping you could step through what the annual decline rate you're expecting at Sangomar is for this year and maybe the next few years before it tapers off to 10%, 15%, let's say? Elizabeth Westcott: Yes. Thanks, Henry, for that question. As you noted, there are a lot of different variables that go into the guidance for 2026, and for the liquids production. It's important to note, there isn't a particular target range. We've got a range, sorry, rather than a single point outlook here. And there's a number of little factors. I'll give you a sense of them. We do have natural field decline across both our Australia assets as well as our Gulf of America assets. And so that's built into the outlooks. We also have the Julimar-Brunello transaction occurring, which is built in the FPSO maintenance program that we just spoke about. So they're all built in. The Pluto turnaround is also built in into liquids outlooks. We had the divestment in Angostura and then we have Sangomar. So Sangomar has done fantastically well with sitting on plateau for the bulk of 2025, and it is now commencing decline. And so a variable for us is understanding that decline curve, as you're asking. And so we've made our best assessment, but we'll continue to guide during the course of 2026 as we understand how Sangomar performs. Graham Tiver: And I think as we touched on earlier in the call, Henry, the 3 key drivers for us this year in terms of overall production performance and business performance is the Pluto turnaround, it's Scarborough coming online in that first cargo in the fourth quarter, and then it's the Sangomar reservoir performance. And as Liz touched on, it has come off plateau, but it continues to perform very, very well. But we'll keep you updated through the quarterly production reports on how that's progressing. Henry Meyer: Okay. And maybe a follow-up on the guidance for the services and processing costs for the year, which is good to get that transparency. Could you split that down to a few different components, if possible, particularly how much of that tolling cost should be Scarborough gas going through Pluto that we can expect in the second half and then ramping up in '27 as we hit capacity? Graham Tiver: Yes. So we haven't provided that exact breakdown at this point in time, Henry. As I said, there's a lot of moving variables. But obviously, the core components are your B&A operating costs, including the gas purchases, et cetera. And then it will include the tolls for Scarborough, which is really the fourth quarter. So you can sort of draw a few dots together and a lot of that will relate to Beaumont New Ammonia. But as we have more insight to ramp-up and how Scarborough is progressing as well, we can provide more clarity on that over time. Operator: The next question comes from Tom Wallington with Citi. Tom Wallington: Just on the Marketing division performance, we saw margins soften through second half on higher trading activity, and noting that the segment contributed around 8% of group level EBIT for the year driven by a stronger first half performance, I was hoping that you could perhaps clarify some of the reasons behind this margin compression. And I guess, to what extent this was driven by tighter JKM and Henry Hub spreads, or if there were potentially fewer arbitrage opportunities or any portfolio mix factors to have been considered? Elizabeth Westcott: Yes. Thanks for your question, Tom. As we sort of highlighted in our opening presentation, marketing continues to be a very important part of the value equation for Woodside, and it's consistently contributed around 10% of our earnings before income (sic) [ interest ] and tax for the last 3 years. And that's no change. However, we do see some quarter-to-quarter volatility, and we will see movement in certain line items depending on our optimization strategy. So in third quarter, for example, we had an opportunity with timing of produced equity cargoes where we're able to purchase a third-party cargo at gas hub prices and deliver it into a crude-linked contract. The way this turns out in the accounts can make it harder to see some of these benefits, but we are very committed to understanding the benefit marketing brings to us, and we're very comfortable that we continue to see great uplift from the marketing activities. Tom Wallington: Yes. Great. And I guess just to lead into -- so I'm trying to get a gauge for how we should think about these margins through the cycle, obviously, given the context of Louisiana LNG and Woodside's trading and optimization capabilities as being a key lever that it can pull in terms of getting to that 30% internal rate of return. Is there any further confidence or guide that you can give us that might see sort of some uplift or support from this particular segment? Elizabeth Westcott: Yes. Thanks, Tom. Look, marketing is going to continue to be very important to us. But I think the best guidance we can give you is this contribution of 10% EBIT year-on-year. And our 3-year track record demonstrates that, that's something we achieve. I think where we sit today, that's going to be the best guidance for you. Operator: Your next question comes from Baden Moore with CITIC CLSA. Baden Moore: Just on the hedging component that you talked to, I think it was 16 million barrels (sic) [ 18 million barrels ] in '26. Just wondering what metric you're targeting through that kind of program? Is there a credit metric or -- just struggling to understand why -- what value that's getting you? And whether you -- how do we think about whether you roll that forward -- would you target to roll that forward into '27 is my first question. And then second question, just it's been a bit in the press on the CEO succession, obviously. Just wondering if there's any updates on timing for that process. Graham Tiver: Okay. I'll take the hedging. I'll leave the second one to Liz. But yes, look, it's a good question, Baden. And let's be very clear, we don't hedge to take a crystal ball on where prices will be. We very much hedge from a defensive perspective in the context of a heavy capital period for us. Over the last few years, we've hedged around the 30 million barrels, and that provides a baseload certainty on cash flows for us, and that allows us, in very simple language, to be able to pay our bills. And so we're not trying to second guess or take a position on oil prices. We're just trying to lock in a certain stream or flow of cash flows for the business. Where our business sits, it's unlikely you'll see us hedge on a forward curve below $70. But anything above $70, we will look at that. As I've said, we've got a past history of going up to 30 million barrels, but we'll just wait and see what the forward curve looks like. But it's very much defensive and it's about securing and locking in a certain volume of cash, if you want to call it. Elizabeth Westcott: All right. Moving to your next question, CEO succession. I just want to acknowledge that the appointment of the CEO is a very important activity, and I know everyone is very interested in the outcome. But I want to reinforce that what I'm interested in and what I know is very important, along with the rest of the executive leadership team, is that we continue to execute against our strategy and deliver shareholder value through our disciplined decision-making and our operational excellence. As we outlined in Capital Markets Day, we have a lot of priorities for 2026, and they're very clear. We need to have safe and efficient operations. We have a lot of projects that we will be executing, and our focus continues to be on the strategy that we shared at the end of 2025. So the Chair has made it clear that the Board is assessing a number of internal candidates and external talent and that they intend to make an announcement in the first quarter of 2026. So we'll all wait to see that. Operator: Your next question comes from Sarah Kerr with Argonaut. Sarah Kerr: Just my first question is starting in the U.S. So we start the year with a total war for gas demand between LNG facilities and domestic demand, and we're seeing an ever-increasing demand coming from utilities, especially with more and more data centers being more and more power hungry. I was just wondering how do you see Louisiana LNG in that landscape? And does that give you confidence in the market, I guess, going forward that you can get feedstock at a reasonable price? Elizabeth Westcott: Thank you for the question. Look, the Louisiana LNG project is ideally situated to benefit from the supply in the U.S. We have a very large opportunity with domestic supply in the U.S., notwithstanding the interest from data centers and others in accessing domestic gas, more than 1.1 trillion cubic feet of gas that is available to LNG projects and others to use. We have a lot of transport infrastructure that we've already committed the foundation requirements we need with pipeline options, and we've got a foundational contract with BP for supply. So we're confident that our project will be able to access the gas it needs going forward. And we continue to see opportunity as an LNG producer to be able to access gas. Sarah Kerr: And just a quick question in Australia. So looking at Bass Strait, obviously seeing a renewed exploration phase going through in offshore there. We're seeing some discoveries as well. There's also some fantastic projects that smaller developers have close to Woodside's infrastructure. Just wondering, is Woodside looking at doing more of your own organic backfill or looking to possibly tie in and partner with the small developers? Elizabeth Westcott: Yes. Bass Strait supplies approximately 40% of the East Coast gas demand, and there's been a real backstay of the East Coast gas market over decades, and we'll be taking operatorship from ExxonMobil in the middle of 2026. As part of that decision and as operator, we've identified 4 potential development wells that we believe could be progressed to deliver up to 200 petajoules of sales gas to the market. And so we'll be taking those through the technical development phases as we take over operatorship. And so we continue to be interested in available development for the Bass Strait and look forward to being the operator going forward. Sarah Kerr: Thank you very much. Elizabeth Westcott: Now I might recognize the time here and call the end to questions. Thank you, everybody, for listening in and participating today. Just a reminder, we will be hosting our sustainability investor briefing on the 16th of March, which I invite you all to join. And I look forward to speaking with you at other upcoming events. Thank you.

82天前Insight Analytics约5分钟阅读

LLESY 2026 Q2 财报电话会议

Anthony Lombardo: Good morning, and thank you for joining the Lendlease 2026 Half Year Results Presentation. I'm Tony Lombardo, Group Chief Executive Officer and Managing Director of Lendlease. With me is Simon Dixon, Group Chief Financial Officer. Sitting here at Barangaroo in Sydney, we're on the land of the Gadigal people, and I extend my respects to their elders past and present. Today, I'll provide an overview of our half year 2026 results. Simon will talk through the financials, and I will then cover the outlook and strategy. We'll then open for questions. Starting on Slide 4. FY '26 is a transitional year for Lendlease as the strategy reset announced in May 2024 continues to be executed. There are 3 core components of the strategy that I want to highlight today. The group is being repositioned to focus on our market-leading Australian operations and international investments platform, reported as Investments Development and Construction, or IDC. These businesses have historically delivered double-digit returns on equity through the cycle and continue to show strong operating momentum. The other core element of our strategy was the establishment of the Capital Release Unit, or CRU, to facilitate the recycling of capital from underperforming or non-core parts of the group. At the May 2024 strategy update, we announced that $2.8 billion of CRU assets were on the market alongside a further $1.7 billion of CRU assets identified as being available for sale. We have now announced or completed the exit of $2.8 billion of CRU assets. In addition, we've made strong progress with advancing the remaining asset pool with a further $1.5 billion of assets targeted for the second half. In May 2024, we also announced our intent to launch a securities buyback subject to specified preconditions. The main outstanding condition is achieving a clear contractual visibility to a sustainable underlying gearing level of 15%. In the first half, we've increased that contractual visibility through the signing of the announced TRX transaction and are progressing the satisfaction of conditions precedent for both the joint venture with the Crown Estate and the sale of our TRX interest. The divestment process for Keyton Retirement Living, the U.K. build-to-rent assets and the recapitalization of APPF Retail are all now in exclusivity. Capital recycling initiatives for our Victoria Cross investment and many other assets are also underway. We are targeting the completion of $3 billion in announced and active transactions in the second half of 2026 across both IDC operations and CRU. The 15% gearing threshold is assessed on a forward-looking basis and requires a degree of contractual certainty on the receipt of sale proceeds translating into net debt reduction. As that certainty increases, we should be in a position to commence the buyback. The group maintains a strong financial position with $3.3 billion of liquidity and flexibility provided by the recent hybrid issuances. This position enables us to take a measured approach to capital recycling. Turning now to Slide 5 and our half year financial performance. As anticipated, with limited completions in development and lower transaction earnings in investments, the IDC segment EBITDA of $204 million was down from $341 million with an improved performance from the Construction segment being a highlight. Moving to CRU. As we have stated, the segment's primary purpose is capital recycling with $500 million of further progress made in the period. At the group level, a statutory loss for the half of $318 million was recorded, including $118 million of noncash negative investment property revaluation and impairments, primarily in the U.S., U.K. and Singapore. The group operating loss after tax of $200 million included a positive $87 million contribution from IDC and a loss of $287 million from CRU. The CRU operating loss included a $95 million write-down of community land parcels as previously flagged last calendar year, and that is after tax, $95 million, and a further $44 million provision in relation to tail risks in the exited international construction businesses. Reported statutory gearing was 25.8%, benefiting from the hybrid issuance. The group continues to target underlying gearing of 15% by the end of FY '26 subject to the completion of targeted recycling initiatives across both CRU and IDC. Simon will talk to our balance sheet position and capital management later in the presentation. Our Investment segment earnings highlighted on Slide 7 are derived from funds under management and contributions from our directly held co-investment portfolio. Our team's focus is on performance, liquidity and growth to drive positive outcomes for our investors. Funds under management was stable at $48.7 billion and included $1.5 billion of additions. The group held $2.9 billion of co-investment capital at the half. We continue to actively manage this position to support an appropriate balance between capital alignment and our role as manager of third-party capital. Portfolio movements in the period included increasing our investment in the APPF Industrial Fund and downweighting ownership in LREIT. The co-investment portfolio remains well diversified with a primary weighting to workplace and retail assets. The co-investment yield driven by underlying asset performance remained consistent with a gross yield of 4.4%. Our investments platform continues to grow with more than 80 investors. We have $2.8 billion of capital available to deploy across existing mandates. And we have $4.7 billion of capital being raised for a Japan value-add mandate, a new Australian private credit partnership and existing funds and develop to call product. We remain highly active in the market, completing $4.4 billion of gross property transactions across our investment platform in the period. Turning to development on Slide 8. There were $1.3 billion of development completions this half, including Victoria Cross in North Sydney. Across our residential business, gross apartment presales increased to $3.3 billion with settlements weighted to FY '27, expected to deliver gross cash proceeds to Lendlease of circa $1 billion. We've made strong progress growing the Australian development pipeline with more than $4.7 billion of new projects secured in the half, and we remain well positioned to achieve our $10 billion target for this financial year. Sydney Metro Hunter Street West Over Station development was secured as was the luxury residential project 175 Liverpool Street in Sydney, alongside existing partners, Mitsubishi Estate Asia and Nippon Steel Kowa Real Estate. We are focused on unlocking $12 billion of future development opportunities from balance sheet holdings at the RNA Showgrounds in Brisbane and our Roselle Bay site in Sydney. We currently have 2 residential opportunities that we are pursuing in Melbourne, representing a further $4 billion of project and value. In the half, we secured a role as Master Development Manager for C Capital for the rezoning of land in Victoria for industrial use, leveraging Lendlease's development planning capabilities. Lendlease expects to earn new development management fee streams with rezoning targeted by FY '28. Lendlease has the option to secure all or part of the industrial land post rezoning, which is expected to have an end value of around $4.5 billion. Our origination efforts remain focused in Australia, deploying a capital-light joint venture partnering model. Together with our strong liquidity position, this enables us to remain well capitalized to pursue new development opportunities as we continue to replenish the development pipeline. Moving now to the Construction segment on Slide 9. Revenue growth for the half was strong, up 22%, driven by new project commencements such as the new Melton Hospital and multiple data center projects. Disciplined project execution saw an EBITDA margin of 3.7% recorded for the half. There was $4 billion of new work secured, another very strong result led by the Hunter Street West Over Station development contract following $3.8 billion secured in the prior period. New wins contributed to a strong Australian backlog revenue position of $8 billion, up 36% on FY '25, with an existing social infrastructure and defense backlog. We continue to pursue and win high-quality work with an additional $9 billion of active bids underway, including major transport, social infrastructure and data center projects. This backlog revenue, together with a preferred work book of $6.9 billion places the business in a strong position to increase its future revenues and earnings with circa $15 billion of secured and preferred work. Before I hand over to Simon, I'd like to make a few remarks. Today's financial result will be Simon's last for Lendlease, with Simon finishing in his role as Group Chief Financial Officer at the end of February as he relocates to Asia. I'd like to take this opportunity to thank him for his dedication and contribution to the organization and wish him every success in his future endeavors. I would also like to welcome Andrew Nieland into the role from the 1st of March. I look forward to working with him in his new capacity. I'll now hand over to Simon to talk through the financials. Simon Collier Dixon: Thanks, Tony, for your kind words, and good morning, everyone. I'd like to acknowledge what a privilege it has been to spend the last 4.5 years working at Lendlease. I firmly believe the strategy that we have in place is the right strategy for the benefit of our security holders, customers and our people, and I wish the team every success in continuing to execute it. Starting with the group's financial performance on Slide 11. As Tony mentioned earlier, limited completions in development and lower transaction earnings in investments led to a lower IDC segment EBITDA of $204 million, down from $341 million with an improved performance from construction. In Investments, segment EBITDA of $101 million reflected a stable underlying operating performance with the prior period including transaction earnings associated with the formation of the Vita Partners joint venture of $129 million. In Development, segment EBITDA of $34 million reflected the timing of major completions with the prior period including $118 million from Residences Two, One Sydney Harbour. In Construction, segment EBITDA of $69 million was driven by 22% higher revenues and improved project performance. The CRU segment reported an EBITDA loss of $284 million, down from a prior period gain of $34 million, reflecting previously mentioned noncash write-downs and provisions and the limited completion of capital recycling transactions. Group corporate costs decreased 4% to $55 million, reflecting cost savings from downsizing and productivity improvements, partially offset by elevated costs of finance transformation. Operating EBITDA fell to a loss of $135 million compared with a gain of $318 million in the prior period. Depreciation and amortization reduced materially as IT amortization wound down and tenancies were exited following the simplification of the group. Net finance costs decreased to $85 million, reflecting a lower average cost of debt and lower average net debt levels. The group recorded an OPAT loss of $200 million compared to a gain of $122 million in the prior period. This includes an $87 million positive contribution from IDC operations, representing $0.126 per security. Moving to a summary of segment performance on Slide 12, beginning with the Investment segment. The segment performance was stable across key measures. Total EBITDA of $101 million reflected a stable underlying performance. Management EBITDA from funds management activities reduced modestly to $48 million, reflecting lower fees and margins in Australia, offset by a stronger performance in Asia. Management EBITDA margin of 40.7% reduced from the prior period, although was comparable to FY '25's full year margin of 40.6%. Co-investment EBITDA of $42 million was lower due to a lower level of co-investment as a result of asset divestments and recapitalizations. In the Development segment, a return on invested capital of 3.2% was achieved as there were limited completions in FY '26 to date as anticipated. Capital was also transferred to the segment from CRU in the period in relation to the announced development joint venture with the Crown Estate and the Comcentre project in Singapore, which is a joint venture with Singtel and along with production capital spend during the period resulted in a $1 billion increase in the development capital balance to $2.1 billion. In the Construction segment, revenue increased by 22% on the prior period, reflecting a higher level of project activity, including commencement of the New Melton Hospital and a number of data center projects. EBITDA increased to $69 million. The segment achieved an EBITDA margin of 3.7%, demonstrating continued strong performance from the second half of FY '25. Turning now to Slide 13. The primary role of the Capital Release Unit is to accelerate the release of capital. To date, we've completed or announced $2.8 billion of CRU capital recycling initiatives, including $500 million of new asset sales this half. CRU recorded an EBITDA loss of $284 million, which included the write-down of Communities development land of $136 million pretax, provisions taken in relation to tail risks in the exited international construction businesses of $44 million and the underlying cost base, which includes people costs, IT costs, legal costs, insurance and other overhead. The segment loss for the period compares to first half FY '25 gain of $34 million that included profits on capital recycling and land sales of $160 million that were not repeated this half. The CRU cost base is expected to reduce progressively as capital recycling completes and retained risks are resolved, although it is expected to remain elevated in the second half of FY '26. As we complete the remaining CRU initiatives, the release of capital will be a key enabler for our capital management priorities. This includes further reducing gearing, returning capital to security holders and creating capacity for disciplined reinvestment in accordance with our capital allocation framework. Moving now to Slide 14, which highlights our cost savings achievements. Net overheads reduced $58 million to $197 million, a run rate of below $400 million. This reflects the full run rate benefit of FY '25 cost savings and the early impact from further cost initiatives actioned in FY '26. In the half, we actioned pretax run rate savings of $21 million with further cost savings to be actioned by the end of FY '26. The full benefit of our $50 million in savings target is expected to be realized in FY '27 with a targeted exit run rate for overheads of circa $350 million at the end of FY '26. This will be achieved through the completion of asset divestments and productivity initiatives, including the removal of technology costs. Turning now to net debt on Slide 15. We have provided a walk summarizing key cash flows for the period, rounded to the nearest $100 million and outline the key cash inflows and outflows for each of the IDC segments and CRU segment. Reported net debt, excluding capital from hybrid securities, closed the period at $3.3 billion. Net debt is anticipated to reduce in FY '26 due to $3 billion of CRU and IDC transactions that are announced and underway. These include the targeted completion of announced TRX and The Crown Estate transactions. Transactions under exclusivity for Keyton Retirement Living, U.K. build-to-rent assets and the recapitalization of our APPF retail fund and capital recycling on Victoria Cross Tower. Offsetting these inflows across CRU and IDC are expected net production spend, interest costs, corporate costs and other. Achievement of our group gearing target of 15% by the end of FY '26 is subject to successful completion of these outlined initiatives this year. Turning now to Slide 16, covering group debt and liquidity. Half year '26 reported gearing was 25.8%, including the benefit of hybrid issuance in the half. Excluding this benefit, underlying group gearing was 32.9%. The group maintained strong available liquidity of $3.3 billion, comprising $2.7 billion of committed available undrawn debt and $600 million of cash and cash equivalents, providing balance sheet flexibility as further capital recycling is progressed. Debt maturities are well balanced with an average maturity of 2.5 years. Maintaining our investment-grade credit ratings remains a priority. I'll now hand back to Tony. Anthony Lombardo: Moving now to Slide 18, the FY '26 financial outlook. FY '26 remains a transitional year with IDC earnings guidance maintained at $0.28 to $0.34 per security. The second half of earnings for IDC is expected to be stronger than the first half, supported by a similar underlying performance and anticipated transactional profits. IDC earnings are expected to further recover in FY '27, supported by major development completions, a strong construction pipeline and growth initiatives across investments. As transactions complete, CRU earnings volatility and associated financing costs are expected to reduce progressively, supporting the strengthening of the balance sheet. As such, no guidance has been provided for CRU earnings per security in FY '26 as the segment's focus remains accelerating capital recycling while balancing value realization and speed of execution for security holders. We are well progressed on our capital recycling initiatives and are targeting a total of $2 billion of CRU capital recycling in FY '26. Additionally, the group's strong liquidity position enables us to balance executing our recycling program with realizing value for security holders. Underlying group gearing is targeted to reduce to 15% by the end of FY '26, subject to the completion of our capital recycling initiatives. On costs, we are targeting an exit run rate of $350 million at the end of FY '26, reflecting $50 million of targeted cost-saving initiatives to be actioned throughout FY '26. Our current priorities remain strengthening our balance sheet, returning capital to security holders and importantly, redeploying capital for future growth in earnings in our IDC segment. Moving to Slide 19 and our medium-term growth and earnings profile from FY '27 onwards. In Investments, we expect to see management EBITDA margins above 40% in FY '27 and growing towards 50% by FY '30. We anticipate average FUM growth of 8% to 10% annually through the cycle, delivering scale benefits across the platform. We currently have $2.8 billion of available capital to deploy in the near term. We are raising more than $4.7 billion of further capital, supporting FUM and future earnings growth. Investor demand remains strong in a number of our key markets and sectors, including our core funds and mandates, where we have demonstrated capabilities and a proven track record, allowing Lendlease to deliver differentiated investment products. In Development, we're looking to secure more than $5 billion of development projects in the second half of FY '26 to achieve our $10 billion-plus target. We expect this momentum to continue with $4 billion of origination targeted per annum in FY '27 and beyond. In FY '27, we're on track for $4.5 billion of development completions, expecting to receive cash and profits from the settlement of One Circular Quay in Sydney and the Regatta in Victoria Harbour. We'll also generate new development management fee streams as a capital-light Master Developer on both the joint venture with the Crown Estate and Victorian Northern Freight Project for C Capital. In FY '28, there are $3.9 billion of completions targeted, including Comcentre in Singapore and One Darling Point. Lendlease should earn ongoing development management fees from its joint venture with the Crown Estate once completed. The JV also expects to earn profits from plot sales and will unlock potential development opportunities from its $50 billion development pipeline. This includes more than $20 billion of future investment product. In Construction, annual revenues are expected to reach over $4.5 billion in FY '27, stepping up to over $5 billion by FY '28, supported by strong backlog revenues and preferred work. We also expect to sustainably deliver EBITDA margins within the target range of 3% to 4% while pursuing both a disciplined approach to pricing and risk profile of future work. Additionally, the group will benefit from working capital inflows as the business grows. These key drivers provide confidence in the outlook for the group. Moving to Slide 20. In closing, my management team and I remain committed to delivering on our May 2024 strategy and our stated FY '26 objectives. We continue to build momentum across our investments, development and construction segments. Throughout the half, we continue to execute on strategic initiatives that we announced in May 2024. And we continue to lay the groundwork for FY '27 and beyond and have strong visibility to earnings in coming years. The group's strategic direction remains unchanged with a continued focus on disciplined execution, performance and long-term value creation for our customers, investors and security holders. Finally, I want to thank our hard-working and talented Lendlease people for their ongoing commitment to turning this great company around. Their efforts in delivering on our strategic priorities are vital to the future success of the business. And I'm personally committed to doing my part to ensure we achieve our FY '26 targets and continue building the momentum needed for long-term success. We'll now open up for analyst questions. Operator: The first question will come from David Pobucky with Macquarie Group. David Pobucky: And best of luck to you, Simon, going forward. Just in relation to the guidance range for IDC, the $0.28 to $0.34. If you could just talk to the moving parts between now and the end of the year that kind of drives the top and the bottom end of that range, please? Simon Collier Dixon: Perhaps I'll have first go at that. The -- in the first half, IDC delivered $0.126 per security. To achieve the $0.28 to $0.34 per security range for IDC, mathematically, the second half has to deliver $0.154 to $0.214 per security. So the outcome of that range is primarily dependent on firstly, the continued underlying operational delivery across Investments, Development and Construction, completion timing of TRX and the completion timing of the Crown Estate joint venture. So the bottom of the range assumes more conservative settlement timing whilst the top of the range assumes those major completions occur in FY '26. David Pobucky: And my second one on the provisions and the write-downs announced in the period. Firstly, could you just reiterate how much of that is noncash? And then secondly, in terms of the Communities land parcel, have discussions with the land parcel owner stopped in terms of negotiating an outcome? Anthony Lombardo: So the noncash was $180 million. So it was $136 million for the Communities parcel pretax and $44 million in provisions on the international construction. In terms of the land parcel, we continue to have discussions with the landowner. Simon Collier Dixon: And I would note that the write-down of the Communities parcel is absolutely noncash writing down of the existing balance. The provisioning on the international construction provision whilst there will be a timing difference, that will flow into cash outflows in the future. Operator: Your next question will come from Simon Chan with Morgan Stanley. Simon Chan: There was a lot of detail in the presentation regarding asset sales, et cetera, and you called out a $3 billion number, right, for the second half. But if I were to get you to dumb it down for me guys, and split the $3 billion just into 3 simple buckets. Can you give me an indication as to how much of the $3 billion is locked in and you just need to wait for the cash to come in through the door? How much of the $3 billion is in the final stages of discussions? And how much of the $3 billion is probably closer to the start or the middle of the sale campaign? Anthony Lombardo: So firstly, the joint ventures with Crown Estates and TRX are contracted, and we're working through the CP. So that's some $640-odd million there. We've announced 3 exclusive transactions. So that is Keyton, the U.K. build-to-rent and the recapitalization of APPF, which will deliver over $1 billion. And then we've called out Victoria Cross, which we've now completed around looking to recycle some of our capital in that asset and a number of other investments. So that other group makes up the remainder. All those transactions are underway at the moment. Simon Chan: Okay. That's quite clear. Next question, just on the actual results, there are 2 things I was hoping to get some more details on. One, I think you called out there was an interest expense benefit as a result of the hybrid in the first half. Can I just get an indication as to the P&L impact of that benefit? And part 2 of my question, I saw that there was a $47 million benefit from a reversal of a prior period impairment that came through in the first half. Can you give me some color as to what that is? Simon Collier Dixon: So for the -- Simon, thank you. I'll take the first part. The hybrid benefit in the first half is $9 million. That was kind of relatively late issuances in terms of the -- during the second quarter that we issued. Simon Chan: Okay. That's fine. And $9 million was booked through as a dividend rather than interest. Simon Collier Dixon: That's right. Yes, just like all the other hybrids in the market. Anthony Lombardo: And just on development, as we're progressing a number of unlocking our different development projects, there has been some provisions which have reversed through the period. And as we continue to progress those, we'll keep the market informed. Simon Chan: So did the $47 million increase your NPAT -- I guess, sorry. So your NPAT increased by $47 million in the first half because of that reversal. Is that a fair way of looking at it? Anthony Lombardo: That's the way to look at it. Simon Chan: And just a final one, just a follow-up on the previous guy's question, Simon. I think when you were talking about the outcome for the second half, you talked about continued underlying operational delivery across investments and completion of TRX and Crown Estate, I thought TRX was in Crown. Am I wrong? Anthony Lombardo: No. So CRU, we flagged that once the TRX completes, it will then move across as a funds management product. There was negligible profits as we called out on the asset. It was on the ASX slide. Simon Collier Dixon: That's right. And it's part of it comes down also to timing around capital and the impact that has on interest expense. The Crown Estate JV is now clearly in IDC. You're right, the bulk of TRX sits within CRU, but the residual element of that will transfer into IDC. So in terms of ordering, it would be, firstly, continued underlying operational delivery across IDC; second, completion timing of the Crown Estate JV; third, completion timing of TRX for the kind of the 3 major components. Operator: The next question will come from Ben Brayshaw with Barrenjoey. Benjamin Brayshaw: I just got a question for Simon. Could you clarify the construction provision of the $44 million post tax, what does that relate to? And secondly, is that a net number inclusive of reversals of prior provisions? Simon Collier Dixon: It's not a net number. It's a new provision. It relates to a long-standing project that have previously been delivered where we had ongoing liability. We've been able to assess and quantify that liability sort of late in the period. Benjamin Brayshaw: And secondly, on APPF Retail, there's obviously been a lot of media commentary on the current situation with respect to providing unitholders with liquidity. Could you just give an update on the situation and also comment on whether Lendlease intends to retain its $200 million stake in the fund? Anthony Lombardo: Yes. So we flagged today that the team had been working through liquidity. We're pleased that we have now in exclusivity with the party to recapitalize the APPF fund. And we intend to, as part of that, sell down our stake in that fund as part of the recapitalization, as I noted earlier. Benjamin Brayshaw: And could that come through, just to clarify, in the second half? Or is it just too early to say of transaction timing? Anthony Lombardo: We're anticipating to complete the recapitalization in the next few months. Operator: The next question will come from James Druce with CLSA. James Druce: Simon, best wishes with your new endeavor. I just want to get a sense what's the -- with CRU, what's the underlying expenses per annum if you see that in capital profits that you just need to sort of bear, like it looks like it's sort of over $100 million for the half. How do we think about that if you're not actually -- just literally the expense, if you're not actually delivering any capital profit through the year? Simon Collier Dixon: I think a couple of -- yes, you're right, that's roughly the number if you back out the provisions. About 3/4 of that really is kind of direct expense, which is relates to employees, tenancy-related overhead. There's another sort of allocation, central allocation. Clearly, there's a lot of involvement from the center in managing out CRU. Those balances are required or those costs are required to manage the capital. There's still substantial capital and very large sort of projects being delivered within CRU and risk being managed within CRU. But clearly, we're watching that very closely. And one would expect progressively that will be managed down as capital is recycled. Tony, I'm not sure if there's anything you want to add. Anthony Lombardo: No. Look, I think the key focus there is they are people, as to Simon, people, insurance, legal, technology costs that are making that up. As we round down and aim to complete the CRU divestments over the next coming 6 months, we will be progressively be targeting that cost base. We've already targeted costs to come down overall by another $50 million, and we'll continue to work through that as we progressively execute on CRU. James Druce: Yes. So you provided a pretty helpful sort of medium-term thinking -- or '27, '28 thinking in your prepared remarks, Tony. So for CRU next year, you're talking about an aggressive cost reduction. Is that sort of what we should take away just from your comments then? Anthony Lombardo: Yes. I think, CRU, the purpose of the CRU was intended for capital recycling. So that's its primary purpose. So we're very focused on completing that. We set ourselves a target this year of $2 billion. As we talked about, we've progressed $500 million. We've got $1.5 billion to still complete and so there's the focus. At the same time, we're completing that, we are looking at progressively taking that cost out. And so we are focused as a team to get that cost down to a more manageable base for next year going forward. Simon Collier Dixon: James, this is Simon, we're acutely aware, obviously, of the holding costs associated with CRU and those management costs. We're also acutely aware of our cost of capital, which is why we are looking at any way possible really to accelerate that capital recycling through CRU through FY '26 and FY '27. James Druce: Okay. And my second question is just around sort of management changes at the leadership level. Obviously, it's been publicly announced, Simon and Tony. But you've also had the Head of CEO of Construction move on, I believe, the Chief Risk Officer, the CEO of Development as well. Is there anyone else at that senior leadership that I'm missing there? And I'm just trying to get a sense of the confidence in the turnaround, some of this challenging sort of turnover that you guys have had? Anthony Lombardo: Look, each of the executives that we've announced, there's either been retirement, personal or exploring other opportunities. So we've got a great depth of talent. I would say our new CFO, Andrew, spent over 18 years in the business. He was previously the Controller, and he's currently the CFO of the Investment Management. So he now steps up into the CFO role. Construction, Steph Graham has been in the organization for greater than 20 years. She actually had been running the Australian Construction operations for the last 18 months. Of course, as we've exited all international construction, that was the right time for Steph to now step up to the CLT in that role. Claire Johnson, who was running the CEO of the U.S. and as we finish up those, she was looking to relocate back to Australia. And pleasingly, Claire now steps into the role as our Head of Development for the organization. So there has been a number of moves in terms of leadership, but we've got the right leadership in place to take the business forward for many years to come. Simon will stay on in a capacity as an advisory role. He's going to help chair the CRU, as we called out, just to make sure we continue that focus on executing our capital recycling plan. Operator: Your next question will come from Richard Jones with JPMorgan. Richard Jones: Gearing is, I think, pretty consistently been higher than where you've guided. Can you provide some color as to what production spend and interest and overheads you anticipate in the second half? Simon Collier Dixon: Sure. Thanks, Richard. I'll have a go at that. So we obviously didn't guide so much to kind of the half year until we gave a bit of an update sort of pre-blackout. We've kind of landed pretty much where we said we would in terms of the balance sheet. Clearly, it's very linked to the timing of the capital recycling transactions, many of which will progress, as Tony has alluded to. If we kind of roll forward to -- and again, this sort of is how to sort of think about the confidence levels around on a forward-looking basis of getting down to 15% gearing, excluding the benefit of the hybrids. But clearly, we have the $3 billion of CRU and IDC transactions, which are announced or underway, which we'll benefit from when they settle. On the -- in terms of the outflows, within IDC and CRU, it's pretty -- within IDC, it's a relatively standardized sort of outflow for the second half. In terms of net production spend, it's expected to be approximately $400 million. On the CRU side, we've got net production spend of approximately $200 million going out the door. Those amounts are fully incorporated into our gearing forecast. So there's nothing particularly unusual about those. The key is in terms of that forward-looking gearing is really around capital recycling and making sure that we continue to progress those transactions. Operator: The next question will come from Suraj Nebhani with Citi. Suraj Nebhani: Firstly, a quick one on the impairments, this period. Can you just talk a bit more about that? And also... Anthony Lombardo: Suraj, can you please just repeat because it just broke up. Suraj Nebhani: Sorry, can you hear me now? Anthony Lombardo: Yes. Suraj Nebhani: Yes. Sorry about that. So just the impairments in Amenities and the Construction division, Simon talked about earlier. Looking forward, can you give us a bit more comfort around the non-recurrence of this? And firstly, give us a bit more detail on what drove the Communities impairment, please and whether you sort of sure this is it? Anthony Lombardo: So I will just repeat that question just to make sure because it's come a bit broken up. You've talked about the provisions that we have taken, in particular, the Communities, gross provision of $136 and the Construction -- international construction provision of $44 million. So just in relation to both of those, Suraj. So firstly, Communities, we did flag, we talked about we're in the courts on a parcel on Communities for the land in Gilead. The courts have found adversely against that. And therefore, we had flagged the risk around that $136 million. So we have now taken a provision against that, which is a noncash item. What we are doing is we're still in discussions with the landowner as we are trying to come up with a position to work that forward. So that's the Communities land parcel. On the International construction, we did call out, as Simon mentioned earlier, there was a risk around a project in the sold and exited parts of the business. We've now taken a provision of $44 million against that based on those known risks as of today. So that's the 2 key matters and the provisions we've taken in this period. Suraj Nebhani: And Tony, just looking forward, how do you think about the provision-related risk in the business? Obviously, things can be uncertain, but just keen to get a sense of whether there's any potential businesses where you see some risk maybe something on that? Anthony Lombardo: Look, again, I think it is breaking up a bit, Suraj. But in terms of you're asking of go-forward risk, what I would say is based on the known risk we know today, we've taken the known and appropriate provisions for the organization to cover that risk. What I would say is as we complete out a number of those contracts and different things that are ongoing, I'd say that risk is diminishing. Calling out that we recently completed the Melbourne Metro main part of the project. There is still some works that are ongoing there. But again, that's remained within the provisions that we had provided for as a group. So... Simon Collier Dixon: Similar with the Building Safety Act in the U.K., similar story. Through the passage of time, those risks do diminish. But clearly, we'll continue to monitor and assess any other emerging risks in the balance of the portfolio as we move forward. But through the passage of time, these risks either dissipate or they become real and accessible. Operator: The next question will come from Richard Jones with JPMorgan. Richard Jones: Sorry, just a follow-up. Is 15% gearing target, is that predicated on $2 billion or $3 billion of divestments? Anthony Lombardo: It's predicated on $3 billion, of which $2 billion is in the CRU and $1 billion in our IDC. But as I think there was a question asked is that it's broken into 3 categories: $640 million relating to contracted JVs with the Crown Estate and then the TRX we're completing CP, $1 billion related to the exclusivities of both 3 things that was Retirement Living, Keyton, APPF R recapitalization, U.K. build-to-rent. So that was over $1 billion. And then we are looking to recapitalize Victoria Cross now that's completed and a number of other transactions that make up that $3 billion. Richard Jones: Okay. Can I then just ask on Slide 42, you've got the breakdown on the CRU invested capital. There seems to be limited progress on international land and inventory international JV projects looks like you've invested about $500 million once you adjust for the moving of the Crown Estates and Comcentre to development. And then the team projects and other haven't shown any progress either. Can you just provide some color as to what's happening in each of those buckets and when you might start getting some of that capital back as well? Anthony Lombardo: Yes. I mean there are a number of projects that we called out at the Strategy Day that said we needed some $1 billion of further capital that needed to be invested and they related to things like Habitat, that related to 1 Java, that related to the Italian joint ventures that we've got underway, where we've got various things occurring at MIND in partnership with capital partners and also Elephant Park. So it's not a static balance. So you can't look at it that way, Richard, because there's capital and production capital that's being spent. Simon called out a further $200 million of production capital in the CRU that needs to be spent in the period. So as we've called out previously, in this period alone, there was some $100 million of capital that we recycled from land holdings that sit within the joint ventures. Now as a number of assets do complete like Habitat and Java, we will be looking to work out ways to best recycle some of that capital, same with some of the assets that are under development at MIND. Richard Jones: Okay. Can you maybe give a bit more color just in terms of when the timing on more of that capital is going to get released because it's obviously a big drag on group earnings. Yes, so I don't know whether you can give us any more color... Anthony Lombardo: So Richard, as we previously announced in the guidance, $2 billion of accrued capital that we're aiming to recycle this year, $500 million of that we've already announced in the period, and that was $400 million relating to TRX and $100 million relating to other land sales. So that was the $500 million we've achieved. We're targeting another $1.5 billion in the second half of this year. Operator: There are no further questions at this time. I would like to hand the call back over to Mr. Lombardo for any closing remarks. Please go ahead, sir. Anthony Lombardo: Again, thank you for joining today's half year results call. And again, I just wanted to thank Simon for his support over the last 4.5 years, and I look forward to catching up with our investors and analysts over the coming weeks. So thank you.

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WBRBY 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, welcome to today's conference call of Wienerberger's Full Year 2025 Results. I am Judith, your operator for today. [Operator Instructions]. The conference is being recorded. [Operator Instructions]. We are looking forward to the presentation. And with this, I hand over to Therese Jander. Therese Jander: Good morning, everyone, and a warm welcome to the Wienerberger Full Year 2025 Results Presentation. My name is Therese Jander, and I'm pleased to host this call today from London. And I'm joined by our CEO, Heimo Scheuch; and our CFO, Dagmar Steinert. We will begin with the presentation of our key developments of 2025 and the financials of the year and an update of today's news as well and an outlook for 2026. And afterwards, we will open up for your questions. So with that, I hand over to Mr. Heimo Scheuch. Heimo Scheuch: Thank you very much, and lovely good morning from our side from Wienerberger's team. I'm glad to have you on the call. Let's walk quickly through the results of 2025, here. You have received them actually a week ago, so I just focus on the most essential points. If we look at '25, I think it was again a year that has to be characterized by a lot of volatility, politically speaking, financially speaking and also business-wise. The guidance that we actually delivered to you midyear with the EBITDA number has been fully reached. We have -- considering the circumstances that we operate in, I think, shown a high degree of profitability with an EBITDA margin, which is more or less flat compared to last year, 16.5%. Keep in mind that all of this comes at the market level when we talk a combined market level new build, new residential housing, infrastructure and renovation that even dropped compared to the year before. So we had a drop in the relevant markets from about 70%. You remember that we give indication that '21 is our reference here was 100%, so we dropped to 70% in '24 and to 65% in -- when we talk about '25. And again, here, Wienerberger has shown basically through the very strong cost discipline and the efficiency improvement, this strong margin in the year 2005 (sic) [ 2025 ]. Keep also in mind, and Dagmar will elaborate on that a little bit more, that we had quite a substantial cost inflation also last year, which we could counter with these measures, in order to keep the level of profitability. Profit after tax, very good and strong performance. We more or less doubled it to EUR 168 million. And the free cash flow, this is, I think, a very important step forward to reach nearly EUR 500 million last year, so again, we showed here the discipline in managing cash, managing the capital allocation throughout the business, especially and therefore, being able also to reduce debt further. So let's move on a little bit when we look at the debt structure as such. We came in at net debt level about EUR 1.6 billion. So that's 2.2x, considering what we have achieved with the acquisition of Terreal a year before and digesting it, it shows actually, again, the strength of Wienerberger to self-finance such transactions, to digest them, to integrate them and especially also financially also to be able to handle those. Again, one of the important step next to the cost discipline, next to the efficiency improvements throughout the business, which contributed largely to these strong numbers was the reduction of working capital to 20%. Also, again, a very important step in this volatile time to focus clearly on working capital. So this -- all of this, I consider that has been a very strong approach, very firm approach of Wienerberger on the discipline side when it comes to the financials. I already explained a little bit the market decline. And here, we have obviously the market decline when we talk about new residential housing. Here, again, you see that we have seen further declines in 2005 (sic) [ 2025 ] that have occurred, especially in the second half of the year. And we come obviously already when we look at the current status, with a lower level into '26 compared to the year before, '24 to '25. And again, at this stage, I just want to draw your attention because probably we are the first ones in the sector, but I don't shy away to make frank comments because it's no use to sort of wait and see. We had very harsh winter this year. It's an extremely strong winter, not only in North America, but also all around Europe with not only cold weather, freezing, snow, ice, but also flooding. So all of this has to be digested in the first quarter and will certainly have its effect in the second quarter as well. So all in all, I think when we talk then a little later during the call about the outlook, which is, again, a strong outlook that Wienerberger will provide, but it comes in at the basis of, I call it, a weaker start in the year due to the weather conditions, the harsh one that we have to face this year. Let's move on then a little bit to the different regions where we have seen in West, I think, I call it a stabilization throughout the different businesses. And you see also that, again, Wienerberger from a housing perspective and the new build segment outperformed the market with 2% volume increase. So very disciplined approach on renovation and new build when it comes to this part of the ceramic business, and also the pricing was very much in line with our expectations. Again, also on the piping front, we were able to improve our performance, grabbing some market shares left and right. But again, you see here that the Western Europe has performed considering the market as such, very well. And you see also the share of the business, which is, I think, very important to show that Wienerberger has emerged as a player, not only new resi, but also one in a stronger and even increasing share in infrastructure and in renovation. If we move now a little bit to the East, a little different picture. Obviously, depressed markets when we come to the new resi markets, with about 2% down. But again, here, we have sort of increased our activity and being a little bit more active in the market when it comes to volumes, so a plus 1% here and also from a pricing an okay situation throughout the year '25. I would say on the piping front, the minus 3% in volume effects, yes, that's due to some of the projects get delayed when the European funds don't finance in certain countries where there's political turmoil. So these projects, the bigger ones tend to get delayed. So this has an impact on the volume. And therefore, the minus 3% when it comes to the volume in piping. And here, you see also that we have already from a revenue split, improved our revenues in renovation and infrastructure, but not to the extent that we've done it in other areas. So this is some work in progress, I would say, as far as the share of different activities is concerned in Eastern Europe. Now let's move across the Atlantic to North America. I would say a very -- from our perspective, was a very tough environment that we faced throughout the year, '25, in North America, both in the U.S. and especially in Canada. And in Canada, we had a drop of new resi of more than 30% to digest in the market. So that was rather dramatic, I would say; and also in the U.S., around 9%, 10%, depending on the states that we operated in. So this affected obviously our new residential housing business essentially facing bricks. And you see it also on the revenue split that we are very much exposed to this sector yet or still in North America. The piping operations are doing well. We consider in this context that we only have one pipe factory in North America, but performing very well on the volume side. We extended our presence there due to investments in the production. So we grabbed a little bit of market share again in the Piping segment. And above all, I think we performed even in this market where the margins are coming down from this very high level during the last couple -- 2 years now to a normal one and a very satisfactory trend still in the piping business in North America. So all in all, I think driven by weak markets, North America suffered the most in our portfolio, and this is obviously then to be seen also in the profitability. But still, they have done a good job North American management in managing efficiencies and cost structure. I think when you look to summarize the introduction, before I hand over to Dagmar, you see the strong development, how we have improved, again, our share in the different segments and Wienerberger is now emerging as a strong player when it comes to the piping business in infrastructure, especially in the water management and energy management and in the renovation due to our strong growth in the roofing business. So this is, I think, from my side, this introduction, and I hand over to you, Dagmar. Dagmar Steinert: Thank you, Heimo. Yes, a warm welcome from my side as well, and I will give you a deeper insight into our financials. It's now 12 months I'm with the company, and it's my first conference call for a full year, and I've seen how resilient and strong our business model is, and we delivered a solid set of results and that even in this really tough market. So having a look at our revenues and operating EBITDA, we are delivering. We are delivering our guidance. We've seen a stable profitability with still a remarkable margin of 16.5%, despite quite a high cost inflation. On the revenue side, Heimo already elaborated a bit about the market situation, about the volume overall for the whole group. On average, volumes are flat; as well as prices. But of course, we managed to again increase our revenues with innovative products, which are now standing at 34%. And that, of course, is as well paying in for our profitability. If we now go on further to the bridges, revenue bridge and operating EBITDA bridge. That well, is dominated in 2025 by our growing exposure to our roofing business, especially in Western Europe, which pays into our strategy and shows that we are growing in renovation. On the revenue side, yes, it's a flat development with overall plus 1% and a negative organic growth. So we already explained the volume softness in different markets, especially in North America. We've had some modest headwind from the currency side and the scope, the EUR 120 million scope that reflect our increasing exposure in roofing. On the operating EBITDA, we delivered. We delivered despite these rough markets and again, markets coming down, remarkable earnings, and we managed to absorb the overall cost inflation we faced, and that is a very strong result. So how did we do that? Of course, overall cost inflation was plus 4% in the year 2025, and that accounts for more than EUR 100 million. And that's quite a big chunk we should -- we had to manage. This cost inflation was mainly driven by higher labor and energy costs, as we elaborated during all our conference calls already. We managed to have EUR 30 million overhead savings from ongoing strict cost discipline. That is something which we are doing since years, focusing on a strict cost discipline. And if you have a look at the markets, which are softening year-by-year, it's quite a challenge to really deliver out of that some gains. What did we do? We delivered from structural simplifications, and we had a high focus on tighter spendings. And with that, as already said, we managed somehow to deliver EUR 30 million savings. Additionally, we are focusing on operational excellence. What does that mean? We have a look at production measures and capacity optimization, especially in the ceramic business in Europe. We improved our operational performance through improved shift patterns, improved throughput and of course, one or the other energy savings. That helped quite a lot. And on the other hand, we started our program Fit for Growth in the third quarter 2025. Fit for Growth is about streamlining processes from holding to operations so that we are improving our culture, how we work together, that we become much more agile, that we are faster and that everything is towards the customer in a better optimized structure and way. With that, of course, we will have -- we will see annual savings in the range of EUR 15 million to EUR 20 million once it is in a full swing. We haven't seen EUR 15 million to EUR 20 million in 2025. It was a bit less, but overall, that is sustainable and it will continue. Coming now to our operating segments, starting with Western Europe. Western Europe had a really good performance in 2025 due to roofing and the renovation portion of that business. Renovation accounts for nearly 50% of the business in Western Europe, and it's dominated by our roofing business. On the operating EBITDA on the profitability, of course, we had beside our strict cost control, we took capacity out, and we managed to have a higher utilization. We showed a strong operational excellence and with our well-balanced portfolio in Western Europe, as already mentioned, the roofing business is the main contributor. In Eastern Europe, the picture is a little bit different. Markets are dominated by our new build business, our wall business, and that's a difference compared with Western Europe. Our exposure towards renovation and infrastructure is less. But anyhow, we managed to keep our revenues on previous year's level. And regarding the profitability, we had quite to digest a big jump from inflation, but we managed to have a recent operating EBITDA margin was 18.1%. We focused a lot on cost efficiency and on capacity reductions, where we had one or the other winter still stand as well. Coming now to North America, that is our segment where we have the highest exposure towards new build and Heimo already mentioned that the market is in 2025 in North America and Canada, especially -- well, a disaster. So markets have been down significantly. And on the piping business, which accounts for roughly 20% of our business, we've seen volume increases. But on the pricing side, we faced due to deflation in raw materials, price decreases; therefore, our revenues are significantly down by 12%. Of course, that has a high impact on operating EBITDA, on the profitability, and we came in with EUR 132 million operating EBITDA and a remarkable strong margin of 19.0%. And with that, I would like to go further to our free cash flow. Our free cash flow is the second highest free cash flow in the company history, and it's the second year in a row with a remarkable free cash flow. And I would like to put your attention on the change in working capital. We managed again to have a significant cash inflow from the reduction of our working capital. And that, of course, a high free cash flow is the basis to reduce net debt and to be ready for further growth. With that, I would like to elaborate a little bit about our net debt development. We managed to reduce our net debt by roughly EUR 120 million, and therefore, our leverage by the year-end is 2.2. Beside our really good free cash flow, we had a strong focus on growth CapEx because we focused on high return projects, and that underpins again our future growth, which will be self-funded. We've seen some smaller bolt-on acquisitions where we paid in total EUR 24 million in 2025. And of course, we, as always, have a significant amount, which we pay on dividends and share buybacks to our shareholders. And with all of that, I must say, we have a disciplined CapEx and cash management, and that is ongoing. If we have a look at our balance sheet, don't look at all these numbers. It's just to give you an impression that we have -- that our fundamentals are in a really good shape. We have a robust balance sheet, a solid balance sheet, and we even managed to improve our equity ratio by 1% from 45% to 46%, despite different headwinds we faced. One headwind, of course, the really weak market and the other headwind regarding our equity ratio, the swing in negative currency impact. On the other hand, positive, we reduced our gross debt by 10%. We reduced our net debt by 7%. And that, of course, goes hand-in-hand with the reduction of working capital where we improved the ratio towards revenues to 20%, coming from 24%. So as you can see, our fundamentals are in a really good shape. We have an attractive shareholder return, paying dividends, which are solid, steady and reliable. Our dividend proposal for the year 2025 is EUR 0.95 per share, as we had in the last year. As you can see, if you look at the development of our dividend payout and share buyback, our dividend is stable and is stable or is even growing and never comes down. Our payout ratio is 28% of the free cash flow, and that is in line with our 20% to 40% range. Now I would like to come to our outlook. What are the key assumptions? If we have the macroeconomic view, we expect, again, flat residential markets, no structural recovery. We see flat infrastructure and renovation markets, so there will be no real movement. And as well, we don't see any decline in long-term interest rates. Markets stay difficult, volatile and are not growing. Inflation is expected to be around 2.5%, and we will cover that by price increases up to 2%. What are we doing to manage all these key assumptions? We focus again on optimization and efficiency measures. First, I would like to mention our Fit for Growth program. That is a cultural transformation. Our people are empowered to take on more responsibility and accountability to be more responsive and agile with a view to delivering future growth and profitability. We will see further consolidation of our plant network, and of course, we will see a payback of expanding our industrial footprint with new products. Just to remind you, we are growing year-by-year our share of revenues from our innovative products. But we will have some special topics in 2026. And one I would really like to point out, put your focus on, is our energy inflation because that energy inflation is Wienerberger specific. It will be a burden of EUR 30 million in 2026. We faced highest energy costs of the past 10 years, and we will be not able to compensate these higher energy costs through price increases. It's not homemade, it's externally driven, and I will explain on the next chart why. Here, you can see the development of the market price. Natural gas, which is a most important energy we use and the price we pay in our portfolio. As you can see, the market price came down from 2025 from EUR 37 in '26 to EUR 33 on an average. What we pay or paid for our portfolio in 2025 was an average price of EUR 24, and that goes up to EUR 32, maybe EUR 33, so it goes up to the market price. And out of that, we face this EUR 30 million extra one-off energy inflation, which we are not able to compensate. If you look at the capital expenditure, we expect overall EUR 280 million, EUR 100 million will be growth CapEx for high profitable projects. On the other hand, we will spend roughly EUR 180 million, which is with EUR 160 million maintenance CapEx and additionally EUR 20 million for improving our Secure Zone Action Plan, which is to support the safety of all our plant workers. A little view again on the market. Our assumptions are: we don't see a recovery of the market. 2026 will be flat, not only in new build as well, but as well in renovation and infrastructure. I would like to draw your attention on the development during the year 2026. We start at a very low level in the first quarter and the first quarter due to these really bad weather conditions will be a quite weak quarter. And therefore, we expect the first half 2026 to be below the second half 2026. And of course, the first half 2026 will be below the first half of the previous year. But that's all in line with the development of a flat market. So coming now to the numbers of our outlook for the ongoing business. You can see here a bridge starting at our delivered guidance 2025, the EUR 754 million operating EBITDA. You will see out of organization and profitability measures, EUR 36 million, that includes everything, like our Fit for Growth, our operational excellence, what we do regarding operations, where we are improving our profitability in our processes towards better shifts, better mix and better utilization. Then we would have an operating EBITDA of EUR 790 million. But unfortunately, we have this one-off in 2026 regarding our own energy inflation. And therefore, our guidance for our ongoing business for the year 2026 is with the assumption of flat markets, EUR 760 million operating EBITDA. But of course, that's not all because the future is going on, and we have our next chapter, and that's a growth chapter. And with that, I would like to hand over again to Heimo. Heimo Scheuch: Thank you, Dagmar. And ladies and gentlemen, I think what you have seen in the presentation of Dagmar is very clear. We have performed very well in the light of declining markets, in the light of sluggish, I call it, recession development over the last couple of years. Wienerberger has been very good. And on a personal note, with sadness, I sit here in this call because I remember 4 years ago, this dreadful invasion of the Ukraine by the Russians. And a lot of things have changed in business, not only energy costs, and not only the way how we do business, but we had to adjust in a lot of aspects of the business, and we adjusted very well as Wienerberger. If you look at the performance of North America that Dagmar has shown in detail, I mean, when I compare the housing starts that we had last year in Canada and the U.S. and the performance of EBITDA wise to the ones that we have 5, 6 years ago, how strong we have been able to improve our EBITDA performance, our margins in North America, it's impressive. Impressive how we work on this every day, and our people put a lot of effort in making our business even more performant in the future. Secondly, and that's also, I think, something to really -- before we go into the new chapter to stress is the innovation rate. It's a very strong rate above 30%, actually around 34% that we have in the group. We push through our systems more successfully. Otherwise, actually, if you sell only bricks, pipes, roof tiles, we wouldn't be able to make these margins in such depressed markets. So that's the system approach that helps us to increase margins, and we continuously do so. Thirdly, and most importantly, you see also the strict discipline when we come to M&A. We have delivered over the last 10 years, a lot of deals coming in, very disciplined when it comes to the pricing of the deals and also the payback. And every cent has been paid back, and that's why we have to strong performance. If we look now at the new growth chapter that comes our way, we have the ideal fit for our business to grow and to improve when we talk about the Italcer acquisition. Why? And let me just summarize this in a nutshell. This is -- Italcer is the leading business when it comes to high-end solutions for tiles, for floors, for walls, for facades, for the inside, for the outside and especially in the Renovation segment, which is very highly performing, modern production hubs in Italy and Spain. They are growing, not only in the local market, but especially with respect to exports. It's not a new business for Wienerberger. I call it an adjacent business. Why? Because actually, we use the same raw material. It's clay. We have more or less the same technology. Obviously, these colleagues in the wall and floor tile industry are more specific, highly technology when it comes to the surface treatments, the colors, the structures. So this is a great addition to our facing business that is obviously very strong in North America, Western Europe and also increasingly strong in the renovation. Here, we have an ideal sort of growth space for the future in order to improve our footprint there. Clients are more or less the same in a lot of countries. So we can sort of improve our footprint in the Southern European Hemisphere and also in the Western Hemisphere. And obviously, Italcer is a leading company when it comes to technology, as I said before, in manufacturing; also in capturing CO2 and improving the footprint there. They have the first kiln when it comes to electrified kilns in Spain, high performance. And again, you see it's an ideal fit for Wienerberger on the growth path in the future and gives us a more and even stronger performance and a footprint in the renovation part of the business. So as I said, these are the reasons from our perspective to enter Italcer. We have here the leading company, solid growth, outperforming the markets over the last couple of years, very strong and committed management team that will stay in place and fits culturally and also from a performance very well with ours, so it's an easy integration, if I may say. So we will put the guys also on our platforms and integrate them as we did in the past with others on our back offices and business support centers and then therefore, ensure obviously, the growth in the future. When we look further to this business, the transaction structure that we have put here and Dagmar has stressed this item very carefully and duly when we talk about financing. Again, we focus here on self-financing and support. So this is, again, an acquisition that we realized in this way in order to ensure this financing, buying 50% plus 1 share now. And then we will have the necessary approvals that are for such transactions. They are not the EU application as it's only in Germany and Austria and in other countries. So this will run through rather smoothly. We all expect that and then start the consolidation from Q2 onwards. So again, it's a fully cash transaction funded from our existing liquidity. We have all the facilities in place in order to finance this transaction. When we look at the -- from our perspective, the integration as such, as I said, it's going to be a rather quick one on the back office side, on the front office side because in these markets, Italcer is very strong. We can obviously help them in order to improve the business throughout Europe and also in North America, where they have a strong business also exporting to the U.S. and our strong footprint with our outlets and sales offices throughout the country will help us to improve the performance. On the financial front here, we see about EUR 10 million of synergies rather quickly to be grabbed here on the commercial side and a little bit on the cost side. But more will come in the future, but this is, I think, a good starting point. When we summarize, again, in a nutshell, it's an ideal sort of addition to our portfolio. It's easy to manage, easy to integrate. We understand the business. We can handle it in our product assortment, can use it to improve our footprint in the facade business throughout the world, actually. It will strengthen our footprint also in the renovation segment, which is very strong. It helps us with architects, with planners, with designers in order to have here even a better footprint for Wienerberger when it comes to new build, but especially renovation. We will get quite a substantial amount of synergies in, as I said, very quickly. It's a highly attractive financial profile because from a perspective of EBITDA about multiples, we have here about EUR 82 million EBITDA that Italcer will provide us full year in 2026. We will come to this in a minute, but a strong sort of performance here, which gives us a multiple a little higher than 6, but nothing sort of that we look at comparable transaction in the past. So very attractive for us. We'll bring it down when we look at the EUR 100 million that we think we were able to achieve rather quickly to a multiple in the 5-ish for such an acquisition, I think, a very strong track record, again. So let's move on to the next slide. And here, you see from what has been presented by Dagmar on the outlook of the ongoing Wienerberger business, now the integration of Italcer. Obviously, when you look at the outstanding performance in 2025, all these measures that Dagmar has explained will make us performing in this scenario rather well. Let me say one thing on this. Dagmar and myself used the word flattish, stable markets. Yes, that's an assumption. If the markets gets better and if something happens this year, we are ready. Don't worry about that. We have capacity in place, we have structure in place to satisfy. Only if you see all this volatility, and I think it's wise at this stage of the year to say clearly, let's see what comes our way, but we, as Wienerberger, we don't wait for the cycle. We create our own growth by doing the right things and improving our portfolio, focusing on the cost side, focusing on the organic growth side and therefore, reaching then the EUR 790 million when you talk about performance. The EUR 30 million of one-off effects on the energy front, I think you have understood that. It's a result of our buying-forward strategy. Basically, it helps us in a long time, and then it comes a little bit against us, but I think it's a one-off, we digest it. So the EUR 760 million is a strong guidance for this year operating wise, and we will add the EUR 50 million coming from Italcer on top. That's, as I said earlier, provided that we get the necessary approvals in Q2, and then we will consolidate the EUR 550 million from this date onwards and then at the operating EBITDA guidance of EUR 810 million for the whole year of 2026. If we look at a very important point because some of you will obviously ask these questions anyway. On the financing, Dagmar has clearly explained how we have brought down our debt in '25 to 2.2. The Italcer acquisition will bring in additional debt of about EUR 400 million. So we'll end up a little bit above EUR 2 billion of debt, it's about 2.5. If I then calculate the EUR 810 million as a reference already, and then we bring it down as to -- with very specific measures, as you have seen in '25. We have now already in place, our reduction in working capital. We have also the CapEx adjustments that we will bring in and some real estate transactions where we have nonoperating real estate that we will sell off. All of this brings in about EUR 220 million. So we will reduce towards the year-end 2026, again, our debt level to about EUR 1.8 billion. You see a very disciplined approach and how we can finance such a transaction and expansion of our portfolio rather quickly, fast and very efficiently throughout this year. Again, when we look at the EUR 810 million outlook, it's in the light of persist geopolitical and macroeconomical uncertainty that we face. Guys, all of you that are listening in every day, there are other news on tariffs, on other things. We need to live with this. And this is something I think we have learned to do so, and therefore, we remain very optimistic, very positive and just do our work well and cut costs where we can, focus on margins. And as I said, we assume right now that there's no real big recovery in the new residential housing market. There's somehow flattish infrastructure and renovation market. It might be better than towards the mid of the year. We will see. But as I said, we are prepared. We have a lot of attention to grow fast and react very quickly. But at this moment, the financing environment, the banking, how they react with real estate, I think, remains very restrictive. So there's not the green light that I see here or the tailwind that some of you talk about that is here in the market in order to boost the business. Again, we will outperform, by this guidance, our markets. We'll focus on the debt reduction that we told you. Strong cash generation, obviously, goes by itself and integration of Italcer and therefore, expanding our earnings base. So a strong focus on the business again this year. I think from my side, this is -- summarizes the year 2026. We will obviously have our Capital Markets Day a little later this morning, where we'll elaborate about the strategy in much more detail in the future. But this is, I think, from a perspective of year '25-'26 what we had to tell you today. So I hand over to all of you for further questions. Operator: [Operator Instructions]. The first question comes from the line of Cedar Ekblom from Morgan Stanley. Cedar Ekblom: Can you hear me now? Heimo Scheuch: Yes, we can. Cedar Ekblom: Perfect. That took a while on my side. So I've got a couple of questions, please. Can we just go back to Italcer? I'd like to get some final details around the purchase consideration on a 100% basis and the implied multiples pre and post synergy. I appreciate in the slides, you've got the cash impact of EUR 400 million in 2026. But my understanding is that is only for the initial 50% plus 1 share. And so it would be helpful to get a sort of a fully acquired impact to the gearing and the multiple and the cash impact. Do we multiply EUR 400 million by 2 to get to the sort of 100% EV implications for the business? So that's question one. Question two, also around Italcer. To be honest, I'm not 100% sure on the sort of channel overlap here on the products. Maybe you can talk a little bit more about it. My understanding is that Italcer's products are sort of luxury high-end ceramic products for internal sort of design applications, fancy bathrooms, fancy tiles, et cetera. I don't get that how that overlaps with your external brick roofing product categories. I get that there's a regional overlap, but I don't see the end market overlap there. So a bit more color around how you see the fit would be helpful. So those are the 2 questions on Italcer. And then there's 2 questions just on sort of the outlook or financials. Can you confirm if you had any benefits from carbon credit sales in the 2025 results, any positive impact there? And then just on the energy side of things, you have guided to this EUR 30 million impact, which I understand is around the way you purchase energy. Is there any way that you could soften that impact by doing some contracts, some hedging, et cetera, that you wouldn't normally do in order to try and soften some of that headwind? So quite a lot to unpack there. Those are my 4 questions. Heimo Scheuch: Thank you, Cedar, for the questions. I will hand over and then come in if it's needed on the Italcer financials because Dagmar will take over right now, and then I will answer the rest. Dagmar Steinert: Yes. Well, regarding on the Italcer financials and the additional EUR 400 million debt we will put on our balance sheet. Of course, we buy 50% plus 1 share. And with that, we are going to fully consolidate the whole group. And with that, we are taking debt over. Therefore, in 2027, when we make the second step to acquire the minorities, it will be far, far less than EUR 400 million. We see overall equity value of EUR 560 million. And with that, I'm very confident that we will not only manage to bring our leverage by the year-end '26, again, down to 2.2, but we will see further improvement in the years to come, 2027 and ongoing. Cedar Ekblom: Sorry, Dagmar, just before you go on, apologies. So I just want to be 100% clear here. You're saying EUR 560 million equity value? Heimo Scheuch: No. Enterprise value. Dagmar Steinert: Enterprise value. No, enterprise value. Cedar Ekblom: Enterprise value. Okay. So EUR 560 million. That's helpful. Apologies, carry on. Heimo Scheuch: And as I said, Cedar, it's EUR 82 million full year EBITDA contribution from Italcer in '26, yes? And we will only consolidate EUR 50 million because we have the processes to go through on the approval side from antitrust authorities in Germany and Austria. Understood? Cedar Ekblom: Understood. Heimo Scheuch: Thank you. And let's now go into the 1 -- you had 2 questions, actually. The one was the channel question, distribution; and the other one was obviously the positioning of Italcer. First of all, let me start with the positioning. Yes, they started with the sort of -- I wouldn't call it only luxury but high-end sort of applications, tiles for floors, for walls and in the inside and renovation. Yes, you are right. This is a business which is strong in renovation. There are some special dealers around Europe that sell those products, but they are also big distributors. I will refer to, for example, to a French one that is very well known to you. It's POINT.P, the Saint-Gobain distribution structure in France that sells all of their products. So here, Wienerberger products and Italcer products goes through the same channels. Also in Italy, for example, we have the same. Also in the U.S. So there's a lot of common when we talk about distribution as such. Obviously, we will have a specific sales force as we have for facing bricks or for clay blocks or for also the roof tiles. So we will have the special and continue to have the special sales force for the tiles in Italcer. On top of it, and this is, I think, a very important aspect, I said that strategically, you will see emerging very strongly in the next couple of years. This company is leading when it comes to treatments of services, digital printing, colors, et cetera. So where do we need it? We see that the facing brick business moves towards a thinner product business. That means the bricks get thinner and thinner. We call them thin bricks or slips or whatever throughout the different markets. So here, we have a very ideal addition to our business where we can produce these products and replicate old bricks very easily through the Italcer channel. So there's a lot of manufacturing synergies there and where we can improve the business because there's a lot of renovation work going to be on the outside in Europe of the old housing stock. So replicate those bricks we do today burn in our kilns traditionally, cut them, have some waste and then put it into the market. We can produce it much quicker, much faster through the manufacturing base of Italcer. So this is something -- a growing business already for them. So they have here a business, a good business already, and due to the addition to ours, in Western Europe, especially and, above all, also in North America, this will play out as a very strong growing business for Wienerberger in the future. So I hope I have addressed this part of Italcer for you strategically. Dagmar Steinert: You had some questions about our energy pricing and ask if you are able to fix energy at lower prices with like future contracts. Of course, we do that. We did that in the past, but always like ongoing for the next years to come. And in the face of decreasing energy prices, of course, our level, what we fix is below what we did in the past. And we feel quite comfortable how we manage our risks and what actions we are taking. But 2026 will stay as it is. We will pay energy prices on market level. And the years to come, of course, it highly depends how our energy prices are developing, what is going on with the war and so on. So that's a volatile environment. Heimo Scheuch: But to add something what -- Dagmar, what Cedar has asked, there is no softening possibility of this EUR 30 million. Dagmar Steinert: No. No, that's not. Heimo Scheuch: This is, I think, what she wanted to understand. And here, we have done the utmost in order to bring it down to EUR 30 million. Yes? Dagmar Steinert: Yes. Cedar Ekblom: And could we get some color just on the carbon credit sales? I'm not sure if you disclose these numbers, but it would be helpful to know if you have been selling excess credits in the market in the last couple of years and put some numbers around what those benefits might have been? Dagmar Steinert: Well, we are always selling some carbon credits, which we don't need for our ongoing business. And we have some gains out of that, but that's normal business, nothing unusual. Cedar Ekblom: And what is the quantum there? Are we talking EUR 50 million or... Heimo Scheuch: No, no, no. By no means, such high numbers. No. It's -- as Dagmar said, it's a normal sort of ongoing business thing. So it's not a few million euros. It's a double-digit amount, if I may say so, but nothing in the range of what you were referring to. Operator: We now have a question from the line of Markus Remis from ODDO BHF Securities. Markus Remis: Can you hear me now? Heimo Scheuch: Yes. Markus Remis: Okay. Excellent. I'd also like to start with a question on the '25 financial statement. And I'm trying to better understand the cash conversions because when I look at the receivables, the ratio compared to sales was the lowest since 2010. So can you maybe disclose the level of factoring by year-end to get an understanding to which extent this was operationally driven or how much financial engineering stands behind the receivables reduction? Dagmar Steinert: Well, we have 2 effects on our receivables. First of all, regarding our working capital management, we focused on our trade payables and receivables, and we faced lower -- much lower sales volumes in the months November and December. That, of course, was one aspect of a reduction of receivables. On the other hand, we increased our factoring by roughly EUR 30 million towards year-end, but that's normal operating business as we had our Terreal acquisition integrated in our group and therefore, a bigger portion of that refers to the integration of Terreal into our factoring business. And the focus -- just to add, the focus for the year 2026 for the reduction of working capital is strongly on inventories. Markus Remis: Okay. And so factoring at year-end '25 was then close to EUR 200 million? Dagmar Steinert: Yes. Markus Remis: Okay. That's very helpful. And then if I may follow up on the cost inflation part, you've flagged 2.5% of cost inflation, excluding this energy burden, this EUR 30 million. Can you shed some light on the remaining drivers? How that 2.5% is composed? Some indications here would be helpful. And then on the other hand of the price cost equation, for which parts of the business are you most upbeat to raise prices to get to this 2% on the group level? Heimo Scheuch: Well, I can answer that. For example, we are certainly on the roofing segment, which is a stronger segment in resident than the new residential housing right now. So there, obviously, I think, we will have no problems bringing up the prices. Dagmar Steinert: The 2.5% on an average inflation, it's just a normal inflation you face more or less in every country. In some, it's below. In some, it's even higher. And therefore, it's an average number, 2.5%. You see it on personnel expenses. You see it on -- yes, on everything more or less. So nothing specific, nothing... Heimo Scheuch: Labor is the most important one. Dagmar Steinert: Yes. Markus Remis: All right. And then the last question, again, to get it straight on Italcer. The EBITDA multiple that you mentioned. So it's like just over 6x. I think that was just mentioned, how is that derived? Because if I take the equity value and then assume something like... Dagmar Steinert: Enterprise value. Heimo Scheuch: Enterprise value. Markus Remis: Sorry, enterprise value. The EUR 70 million of current EBITDA, I get to quite a different... Heimo Scheuch: No, no, you take EUR 82 million EBITDA, EUR 82 million. Markus Remis: Okay. So that's the kind of annualized contribution in the current year. Heimo Scheuch: Correct. Correct. Operator: And next in the line is Isaac Ocio from On Field Research. Isaac Ocio: Can you hear me? Heimo Scheuch: Perfectly well. Isaac Ocio: So 2 questions regarding maybe '26 and 2030. So the first one would be, so is the current inability to pass on cost inflation behind us after the EUR 30 million hit in '26? And maybe my second question would be what is the pace of recovery in European residential construction you're expecting since we're seeing kind of some green shoots in Germany and France and maybe give a bit more color regarding that. Heimo Scheuch: Thank you for the 2 questions. Yes, I agree with you that this one-off, as Dagmar has explained it, the EUR 30 million energy is then this one-off that we have to deal with this year. The rest is then a more, call it, stable development when it comes to inflation that we can digest with price increases on a yearly basis, in the years to come. Now from the future and if I may, we will do it, and I will speak about this in the Capital Markets Day presentation in more detail. But I've given you a base case that you will see in the presentation, where basically I say, it's a stable case in the future, where we, Wienerberger, can generate growth and don't wait for green shoes, as you have explained or you have referred to in France and Germany, et cetera. So we say Wienerberger has the capacity to digest and to grow very quickly when it comes to better markets or stronger markets in new residential infrastructure and renovation because we have the capacity there. We have also, if the Ukraine war ends and there's more demand, also the possibility to substantially grow our business quickly, and that will have a huge financial impact. But at this very moment, obviously, these are things that might occur. We don't know when and how and there's a lot of volatility. So we don't want to put our business model only on this. But as I tried to explain on our own strengths and what we can influence and drive, therefore, the growth independently for this. And you will see the numbers that I'll present to you in a minute. Operator: And I am moving on to Julian Radlinger from UBS Limited. Julian Radlinger: So a couple for me. First of all, could you help us with some of the moving parts in the 2026 guidance, please? What should we assume for D&A and net interest costs? I'd love to better understand the implied EPS guidance, either excluding Italcer or preferably including it? And then secondly, so you're alluding to H1 '26 being particularly tough for a lot of reasons that makes sense. Could you elaborate on that a little bit, please? So historically, your adjusted EBITDA seasonality H1 versus H2, something like 48%, 52% of full year EBITDA. Are we thinking something like 45%, 46%? Is that the right kind of ballpark or should we think about it differently? Dagmar Steinert: Well, first of all, I would like to start with our interest costs. Our interest costs in the year 2025 amount to EUR 100 million, and we usually build up during the year working capital. Therefore, we take more debt during the year on our balance sheet to bring it down by the year-end. And so the EUR 100 million, of course, are, first of all, like the basis. And then we will see additional EUR 400 million in the second quarter. And our interest costs on average are between like 3.5% and 4%. So the impact will be digestible. But of course, you have to refinance the net debt of Italcer. Italcer pays a much higher interest rate. Therefore, we will see overall for 2026, of course, higher interest rate. Julian Radlinger: Okay. That's helpful. And the D&A? Dagmar Steinert: The D&A, of course, is increasing as well. But if we look at the P&L of Italcer and the strong margin they are delivering that will be less -- yes, I would say, a little bit less impact than we have on average in our business. Julian Radlinger: So that you're saying they have lower D&A as a percentage of sales than you do? Dagmar Steinert: Slightly. But of course, we have to see regarding the purchase price allocation, what we identify in assets which we have to amortize. So what is like the split between goodwill and like customer lists and know-how and so on. And that work isn't done so far. So therefore, it's still a little bit, of course, of a slightly black box for us. Julian Radlinger: Understood. And then regarding the H1 '26, please? Dagmar Steinert: H1 '26, yes. Heimo Scheuch: Yes, you mean your EBITDA split. I think historically, you're right, you can deduct this from all the information that you have available. But I wouldn't sort of count on this for this year. It's a very different year. We have never seen such a winter for the last 20 years or so. So I think we'll have to cope with it in the sense of how the business will start in March, when it starts, how quickly it takes off and how it develops, we will see. I think I don't want to make too many predictions. As we said, we give you a clear guidance for the year, which is already, I think, a very strong message from ourselves in this volatile market. Operator: Thank you very much. There are no more questions at this time. I would now like to turn the conference back over to Therese Jander for any closing remarks. Therese Jander: Thank you very much, and thank you for joining and your interest in Wienerberger. And we hope you -- we welcome you back again in the first quarter call in May 13. And I hope you will also find a lot of usual information around our Capital Markets Day that you will now receive on our website. So thank you, everyone, and goodbye. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.

82天前Insight Analytics约5分钟阅读

SMMT 2025 Q4 财报电话会议

Operator: Good afternoon, and welcome to Summit Therapeutics Q4 and Year-End 2025 Earnings Call. [Operator Instructions] We do not expect any technical difficulties today. However, in the event that we lose the webcast connection and are unable to provide any updates, please wait up to 10 minutes for resolution. Please refer to the company's website for updates. Please note that today's call is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Dave Gancarz at Summit Therapeutics, Chief Business and Strategy Officer. You may proceed. Dave Gancarz: Good afternoon, and thank you for joining us. On today's call, we will provide an update on our fourth quarter and year-end 2025 financial results and operational progress. This afternoon's press release is available on our website, www.smmttx.com. Our Form 10-K was also filed today and is available on our website and via the SEC's website. Today's call is being simultaneously webcast, and an archived replay will also be made available later today on our website. Joining me on the call today is Bob Duggan, our Chairman of the Board and Co-Chief Executive Officer; Dr. Maky Zanganeh, our President and Co-Chief Executive Officer; Manmeet Soni, our Chief Operating Officer and Chief Financial Officer; and Dr. Allen Yang, Chief of R&D Strategy. I'm Dave Gancarz, the Chief Business and Strategy Officer at Summit. Before we get started with the rest of the call, I would like to note that some statements made by our management team and some responses to questions that we make today may be considered forward-looking statements based on our current expectations. Summit cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Please refer to our SEC filings for information, including the Form 10-K issued today about these risks and uncertainties. Summit undertakes no obligation to update these forward-looking statements, except as required by law. One item to note, this presentation is being webcast with slides, so we'll be referring to the slides being displayed in the webcast link. I'd encourage you to use the webcast link to see the slides being presented this afternoon that will accompany our comments. Following comments from our team, we will take questions. And with that, I'd like to hand it over to Maky. Mahkam Zanganeh: Thank you, Dave. Good afternoon, everyone, and thank you for joining us today. I'm very proud of Team Summit's ongoing accomplishments and the growing positive data sets and support around ivonescimab, a PD-1 VEGF bispecific or lead investigational asset. We are a highly focused, mission-driven patient-first company with a mission to make a significant difference in improving the lives of patients suffering from cancer. Our team is growing rapidly as we expand our clinical development plan and prepare for commercialization in anticipation of a decision from the FDA on our BLA near the end of this year. We have announced a few significant events today, starting with the update related to our HARMONi-3 study. Last quarter, we announced our HARMONi-3 Phase III trial evaluating ivonescimab plus chemo as first-line treatment for patients with squamous and non-squamous non-small cell lung cancer, was amended to have separate analysis by squamous and non-squamous histologies for primary endpoints of PFS and OS for each cohort. The squamous cohort was planned to complete enrollment in the first half of 2026, followed by the non-squamous cohort in the second half of this year. As announced today, we have now completed screening patients for the squamous cohort of the HARMONi-3 study, and the last patient will be randomized in the next couple of weeks. We have amended our statistical plan to now include an interim PFS analysis for our squamous cohort, and we are planning to conduct the interim PFS analysis during the second quarter of 2026. Overall survival will be immature at the time of this analysis. Therefore, we may not have overall survival results to communicate at that time. As you recall, we initially included PFS as a primary endpoint in the study upon the readout of HARMONi-2 comparing ivonescimab to pembro in PD-L positive frontline lung cancer patients, which showed a highly statistical significant and clinically meaningful benefit in PFS with a hazard ratio of 0.51 and a median improvement in PFS of over 5 months. This point was later validated with HARMONi-6, showing that there was a substantial PFS benefit when comparing ivonescimab plus chemo versus a PD-1 inhibitor plus chemo with a hazard ratio of 0.60. Two Phase III studies conducted by Akeso in China in frontline non-small cell lung cancer demonstrated a 40% plus improvement in PFS for the ivonescimab arm, both the HARMONi-2 and HARMONi-6 PFS results were based on the planned interim PFS analysis of each study. By adding an interim PFS analysis, we opened the door to an earlier discussion with the health authorities for our multiregional Phase III study. The final PFS analysis, if applicable, and an interim analysis for OS is planned to be conducted in the second half of this year, consistent with previous guidance. For the non-squamous cohort of HARMONi-3, we continue to expect enrollment to complete in the second half of this year and to reach the prespecified number of events for the final PFS analysis by the first half 2027. There are several meaningful moments upcoming related to these 2 cohorts, each of which are independent from each other, like 2 separate studies in 1 protocol, where 2026 will be pivotal to providing additional clarity to expand the reach of ivo to a broader population of lung cancer patients. Additionally, we announced today the first update to the ivo Phase III clinical trial program, which will continue to expand throughout 2026. ILLUMINE, a new Phase III study in PD-L1 positive frontline head and neck squamous cell carcinoma, will be sponsored by GORTEC, a French cooperative group dedicated to head and neck oncology, with initial enrollment expected to begin early next quarter. The study intends to evaluate both ivonescimab monotherapy and in combination with ligufalimab, Akeso's proprietary anti-CD47 monoclonal antibody, against monotherapy pembro in this 3-arm randomized study. Approximately 780 patients are intended to be enrolled across the 3 arms in multiple countries in Europe and in China. We may consider potentially expanding the study to include U.S. sites as well. Phase II data supporting the potential use of ivonescimab in this patient population was previously presented at ESMO 2024, where ivonescimab in combination with ligufalimab demonstrated an objective response rate of 60% in 20 patients with median PFS of 7.1 months after median follow-up of 4.1 months. At the time of this analysis, no patients receiving ivonescimab plus ligufalimab discontinued treatment due to the treatment-related adverse events. The data generated in Phase II is encouraging in light of existing standard of care, and Akeso is also running a single-region Phase III trial in this population in China. Turning to our clinical collaboration with Revolution Medicines. Today, we announced the first patient has been dosed in the collaboration's initial clinical trial. As a reminder, ivonescimab is being evaluated in combination with 3 RAS(ON) inhibitors, including daraxonrasib, a multi-selective RAS inhibitor, zoldonrasib, a KRAS G12D selective inhibitor and elironrasib, a KRAS G12C selective inhibitor across multiple solid tumor settings with RAS mutations, including pancreatic cancer, colorectal cancer and non-small cell lung cancer. Finally, as we announced last month, we entered into a clinical collaboration with GSK to evaluate ivonescimab in combination with GSK's novel B7-H3 antibody drug conjugate in multiple solid tumors. The initial study under this collaboration is expected to begin dosing patients in mid-2026. Let's now take a step back and look at ivonescimab accomplishments to date. There are many to list. We are just highlighting some of them. Ivonescimab has read out 4 Phase III clinical studies to date, all 4 of which have had positive data, leading to 2 approvals in China so far. At this time, a total of 15 Phase III trials have been announced, currently ongoing or have read out in multiple tumor types. 44 clinical trials have been initiated since 2019 between Summit and Akeso evaluating ivonescimab in a variety of solid tumors. When considering investigator-initiated and collaborative studies, a total of 142 clinical trials are now listed on clinicaltrials.gov. The enthusiasm demonstrated by investigators around the world to generate data and seek positive signals for patients facing high unmet medical needs really speaks to the opportunity and optimism surrounding ivonescimab. Together with our partner, Akeso, we have enrolled over 4,000 patients in either Summit-sponsored or Akeso-sponsored clinical trials across the world. Commercially in China, over 60,000 patients have received ivonescimab based on 2 approved indications by the NMPA in non-small cell lung cancer according to our partners at Akeso. A third indication based on the positive HARMONi-3 study in frontline squamous non-small cell lung cancer is currently under review by the NMPA in China. I wanted to make sure this point is not missed: 4 Phase III trials evaluating ivonescimab have read out to date, and all 4 with positive data readouts. This represents the only Phase III readout that we have seen in the PD-1 VEGF bispecific class to date. These positive trials are supported by the differentiated mechanism of action of ivonescimab. Here is the current ivonescimab development plan across Summit and Akeso. In total, there are 15 randomized Phase III trials, 4 of which are global Summit-sponsored studies in non-small cell lung cancer and colorectal cancer, 1 of which is a multiregional cooperative group study announced today and 10 of which are being enrolled by Akeso in China in a variety of solid tumor types, including lung, breast, head and neck, BTC, pancreatic and colorectal cancers. Additionally, Akeso is also currently enrolling multiple Phase II trials evaluating ivonescimab in other tumor types, ovarian, gastric, HCC and others, including non-metastatic settings. Through our partnership with Akeso, we continuously compile a substantial amount of data, allowing us to make faster, more informed decisions, fueling the rapid expansion of our global development plan. Focusing on our pipeline at Summit, we have 4 global Phase III trials completed or ongoing, HARMONi, which read out positively last year, HARMONi-3, HARMONi-7, HARMONi-GI3, all 3 of which are currently enrolling and progressing nicely. The HARMONi trial evaluated ivonescimab plus chemo against chemo alone as treatment for EGFR mutant non-small cell lung cancer after TKI therapy, a population of significant unmet need with few available treatment options. We submitted a BLA filing last quarter, seeking approval in this proposed indication. And in January, we announced the U.S. FDA's acceptance of the filing and a PDUFA target action date of November 14, 2026. As previously disclosed, the FDA noted that a statistically significant overall survival benefit is necessary to support marketing authorization in this setting. Considering safety and efficacy profile of the current FDA-approved options to patients in this setting, the positive regionally consistent results of this Phase III multiregional study as well as discussions with key opinion leaders and physicians who have administered ivonescimab to patients, we believe that ivonescimab is a potential treatment option with a favorable benefit risk profile. In anticipation of potential approval in Q4 of this year, we continue to ramp up commercial capabilities in preparation for potential launch. HARMONi-3 is evaluating ivonescimab plus chemo against pembro plus chemo in frontline metastatic non-small cell lung cancer. This patient population represents a significant unmet medical need with nearly 100,000 patients in the United States alone as this trial covers frontline non-small cell lung cancer patients without genomic mutations irrespective of histology or PD-L1 status. I spoke a minute ago about the recent changes to this pivotal study. For HARMONi-7, this study is evaluating ivonescimab monotherapy against pembro monotherapy as frontline treatment for patients with non-small cell lung cancer that have high PD-L1 expression levels. HARMONi-7 continues to enroll well, and we look forward to providing additional updates in the future. And finally, last quarter, we initiated and began enrolling patients in HARMONi-GI3 evaluating ivonescimab plus chemo compared to bev plus chemo in first-line therapy in patients with unresectable colorectal cancer. Our decision to expand into colorectal cancer was driven by encouraging Phase II data published at ESMO 2024 and subsequent continuing enrollment in this Phase II study in China and the United States with additional chemotherapy regimen. This data set allowed us to make an informed decision to move forward in CRC, specifically with the FOLFOX chemo combination. We look forward to providing further updates on the Phase II data set later this year as well as the HARMONi-GI3 study as the trial progresses. Looking beyond our own sponsored trials, we are expanding into additional settings with multiple collaborations and other groups. We have the Phase III ILLUMINE study sponsored by GORTEC evaluating ivonescimab in head and neck cancer that I spoke to earlier. With respect to novel, novel combination, we announced that the first patient was dosed this quarter in our collaboration with Revolution Medicines to evaluate ivonescimab in combination with 3 novel RAS inhibitors across multiple solid tumor setting. We are excited to learn about the opportunity and potential to improve patient outcomes with ivonescimab combined with the novel-targeted therapies and promising molecule. This collaboration is intended to evaluate ivonescimab in combination with one or more of RevMed RAS(ON) inhibitors in pancreatic cancer, colorectal cancer and non-small cell lung cancer. This collaboration has an opportunity to be mutually beneficial to both Summit and RevMed by leveraging a combination of potential next-generation assets that individually have promise in each setting, and this may have high promise for patients with RAS-mutant cancers. In our GSK collaboration evaluating ivonescimab in multiple solid tumor settings in combination with their B7-H3 ADC, we expect the trial to initiate in mid-2026. This is another example of promising targets seeking to significantly advance outcomes in settings where both ivo and B7-H3 ADCs have shown promise. We have over 60 ISTs that we intend to support in various stages of development. Of these, 15 are currently enrolling, 5 of these in collaboration with M.D. Anderson, and ivonescimab has now been featured in over 45 publications, presentations and posters. Collectively, these trials enhance and inform our own clinical development activities as we learn more about new settings where neither we nor Akeso have had the opportunity to explore yet. Tremendous interest in ISTs is a testament for the -- to the enthusiasm we have heard from many investigators as they consider the potential opportunity that ivonescimab presents across multiple tumor types. Over the past 18 months, we have seen 4 positive randomized Phase III trials, including the first and only Phase III trials to compare positively against anti-PD-1 therapy. Each of these studies represent a benefit either over a PD-1 inhibitor or in a setting where PD-1 inhibitors have failed to achieve a benefit in either PFS or OS. Akeso's HARMONi-2 PFS results showed ivonescimab monotherapy as superior to KEYTRUDA in frontline non-small cell lung cancer. These results represent the first time any therapy has achieved a clinically meaningful benefit over KEYTRUDA in randomized Phase III trial. In April of 2025, Akeso announced that HARMONi-2 achieved a clinically meaningful overall survival hazard ratio below 0.8 at this early look. Moving to Akeso's HARMONi-6 frontline non-small cell lung cancer study in patients with squamous histology, results were announced at ESMO 2025, demonstrating ivonescimab with chemo was superior to PD-1 plus chemo in PFS. With this result, HARMONi-2 and HARMONi-6 represent the first and only known regimens to achieve a clinically meaningful benefit replacing an anti-PD-1 regimen. In EGFR mutant non-small cell lung cancer, both Akeso's HARMONi-A trial and our own global HARMONi trial achieved positive consistent results. In HARMONi, a positive overall survival trend was observed with hazard ratio of 0.79, barely missing statistically significance. In a subsequent analysis in September 2025 with longer-term follow-up on Western patients, ivonescimab plus chemo showed a favorable trend in overall survival with a hazard ratio of 0.78 and a corresponding nominal p-value of 0.0332. In HARMONi-A, Akeso's final overall survival analysis showed ivonescimab plus chemo achieved a statistically significant hazard ratio of 0.74 with a p-value of 0.019, supporting a treatment profile where OS does not degrade, but rather improves over time in this setting. Turning to our market opportunity. The value proposition is clear, ivonescimab on its own has the potential to be a platform blockbuster drug. Additionally, novel, novel combinations with ivo could bring potential improvements over current standard of care, which could expand market opportunity further. Ivonescimab is well positioned to make a significant impact across the solid tumor treatment landscape. Between checkpoint inhibitors and anti-VEGF therapies, TD Cowen and others estimate the total addressable market to be in excess of USD 100 billion globally. Looking only at the checkpoint inhibitor market for non-small cell lung cancer, market estimates for immunotherapy are expected to exceed USD 20 billion by 2028. And yet, these estimates still do not include the full impact ivonescimab could have as it has already shown promising data in multiple tumor types where checkpoint inhibitors have not been effective, including EGFR mutant non-small cell lung cancer and PD-L1 low triple-negative breast cancer. Ivonescimab's differentiated profile supports its platform potential across multiple indications, many of which could be blockbuster opportunities on their own. We have a very exciting year ahead. Here are some of the upcoming milestones we expect to reach in 2026 and into the first half 2027. Our global clinical studies pipeline will continue to expand, and we will provide further details in 2026 as we begin studies in new settings and indications. This will include additional novel, novel combinations as well as the new Phase III studies that we intend to launch in 2026. The first steps with respect to this expansion came today with the announcement of the cooperative group-led ILLUMINE Phase III clinical study in head and neck cancer. We will continue to expand upon the details of our clinical development plan throughout 2026, including sponsored studies. With today's HARMONi-3 update, we anticipate an interim PFS analysis for the squamous cohort to occur next quarter. Final PFS and interim OS data are expected in the second half of this year. In the HARMONi-3 non-squamous cohort, we expect to complete enrollment this year. We anticipate final progression-free survival data in the first half of 2027. And as already discussed, we are looking forward to a potential first approval for ivonescimab in the U.S. around our November 14 PDUFA date based on our HARMONi BLA filing. Now I will turn the call over to Manmeet to provide a financial and operational update for the quarter. Manmeet? Manmeet Soni: Thank you, Maky, and good afternoon, everyone. On the financials front, let me start with our cash position. We ended the year 2025 with a strong cash position of approximately $713.4 million. And to remind everyone, currently, we have no debt. Turning to operating expenses. I will provide details on both GAAP and non-GAAP numbers. You can refer to our press release issued this afternoon for a reconciliation of GAAP to non-GAAP financial measures. As a reminder, non-GAAP expenses exclude stock-based compensation expenses. Total GAAP operating expenses for the fourth quarter of 2025 were $225 million compared to $234.2 million for the third quarter of 2025. This decrease in GAAP operating expenses was primarily due to the lower stock-based compensation expense of $19.1 million, and this was offset by an increase in our clinical trial-related spend of $8.8 million. Overall, our non-GAAP operating expenses during the fourth quarter of 2025 were $113.3 million compared to $103.4 million for the third quarter of 2025. This increase in non-GAAP operating expenses was primarily related to an increase in R&D expenses related to HARMONi-3 and HARMONi-7 trials. As you will note, we have been very efficient and disciplined in controlling our G&A spend. Our total G&A spend, excluding stock-based compensation expense, has been approximately $43 million for the full year 2025 with a run rate of approximately $10 million to $11 million per quarter in 2025. On the operations front, I'm extremely proud that Team Summit has been able to accelerate the enrollment of 600 squamous patients ahead of our planned time lines, which will allow us to have interim readout by second quarter of 2026. With the acceptance of our BLA with FDA, we have accelerated our commercial readiness activities to prepare for our potential commercial launch of EGFR mutant non-small cell lung cancer post TKI therapy. With respect to manufacturing and drug supply readiness, we have successfully transferred and validated the production process of ivonescimab to a U.S.-based manufacturer. And with that, I will hand it back over to Dave. Dave Gancarz: Thank you, team. And we will now see if there are any questions that our team can help answer. Operator, if you could please open the line for questions. Operator: [Operator Instructions] We'll take our first question from Salveen Richter at Goldman Sachs. Unknown Analyst: This is Mark on for Salveen. Congrats on the quarter. Can you talk about what drove the decision to include the interim PFS analysis for HARMONi-3 for the squamous cohort and also frame expectations for both the initial data in the second quarter and also the potential final PFS analysis in interim OS in the second half? Will we see curves in addition to the top line data? And now given the split, do you expect that OS could reach that statistical significance by that final PFS analysis time? Dave Gancarz: Thanks, Mark. Appreciate the question. This is Dave. So we decided to amend the protocol for the HARMONi-3 study by including an interim analysis for the PFS primary endpoint. If you recall, we previously amended the HARMONi-3 study in order to add PFS as a primary endpoint in addition to overall survival. The reason for the addition of PFS as a primary endpoint was based on the results of HARMONi-2, which showed the large PFS delta that Maky spoke to, a hazard ratio of 0.51, comparing ivo to monotherapy number of lung cancer patients. And then this would allow for -- so this was then seen again in the HARMONi-6 data. So this would allow for an earlier discussion with the agency based on the PFS primary endpoint and now an interim PFS. So it's really about accelerating the time lines with respect to the data based on 2 interim readouts from our partners at Akeso in studies in lung cancer. And so with both studies remaining -- or reading out positively, the overlap in the indication with respect to HARMONi-6, that gives a strong indication in terms of the opportunity that exists here with ivo plus chemo versus a PD-1 plus chemo here. What I would say with respect to your question on survival, and I think Maky emphasized this point a minute ago as well, overall survival will be immature at the time of the interim PFS analysis. In terms of disclosure with respect to when that will take place, that will -- so we plan to run the analysis in the second quarter. And then ultimately, from there, what gets disclosed will be determined based on output results as well as traditional major medical conference guidance depending on how results are read out one way or the other. And then with respect to your final question on final PFS interim OS, that remains no real change in timing. That's the second half of this year, again. We're not really guiding, and we don't really comment historically on our expectations with respect to results. We don't -- we obviously are encouraged by ivonescimab's Phase II data -- the Phase III data that took place in HARMONi-6. And so we really are looking to continue to follow in those trends, but don't necessarily guide specifically with respect to our expectations numerically, if you will. Operator: We'll go next to Yigal Nochomovitz at Citi. Yigal Nochomovitz: Thanks for the comprehensive Maky and team. So just to kind of press further on this question around this interim PFS in the second quarter now. So it sounds like what you're saying is that this is based on the optimism from HARMONi-2 and HARMONi-6. But I just want to check, was there anything specific that you saw in HARMONi-3 with respect to an event rate that's faster or other new piece of information that increased your confidence in doing this interim now in the second quarter? Or is it really just a question of providing this update sooner to accelerate development based on, as you pointed out, what you saw with HARMONi-2 and HARMONi-6? Dave Gancarz: Yes. Thanks, Yigal, for the question. It's really a data-backed decision, as we mentioned, with respect to interim readouts for HARMONi-2 and 6. And then obviously, the significant overlap in a setting with HARMONi-6. I would also reemphasize we are not changing the timing in terms of guiding towards final PFS expectations and then the interim OS. So no change there from event. I'll let Allen provide more commentary as well. Allen Yang: Yes, Yigal, I think what you said, it's the latter. Remember, this study was designed way back in '23, right? And since then, we've had the HARMONi-2 and the HARMONi-6 readout. Our mission is always to bring this very important medicine, which we think is a game changer, to patients as soon as possible, right? And I think the HARMONi-2 and now the HARMONi-6 data gives us growing confidence, granted both of those studies read out on an interim PFS, which was very dramatic. And PFS is a surrogate endpoint. So there'll have to be some regulatory discussion, but we'll need to look at that data before we can make those decisions. But again, I think this is an opportunity to bring patients faster. Yigal Nochomovitz: Okay. And at this point, are you providing any other details with respect to the alpha spend or the number of events that are triggering this interim in the second quarter? Dave Gancarz: No, nothing in terms of a statistical plan at this point has been provided, neither for the interim PFS nor the final. But we have provided approximate sample sizes for both cohorts and then obviously, the primary endpoints of both PFS and OS. Yigal Nochomovitz: Okay. And then a totally separate question. I just want to comment or ask about ILLUMINE. So is there -- you had the data in ESMO in 2024. What do you know about contribution of components with respect to ivo and ligufalimab? Is there evidence to suggest synergy or not? Or is this just an additive effect? If you could just spend a little bit more time explaining the thinking scientifically to put those 2 together? I know the ESMO data was a little bit of time ago back in 2024. Dave Gancarz: Sure, Yigal. Thanks for the question. So if you recall from ESMO 2024, we showed data that was generated from our partners at Akeso, both in monotherapy ivonescimab as well as ivonescimab in combination with ligufalimab that as Maky explained, was Akeso's proprietary CD47 antibody. And that data was encouraging in both cohorts, but it did show an additional uplift that was seen with ivonescimab plus ligufalimab. And so we've seen our partners at Akeso launch a Phase III study with the combination in PD-L1 positive head and neck cancer. And so we've explored and have been encouraged by this data as it continues to -- the Phase II data continues to mature. And part of the study being a 3-arm study, with ivo in 1 arm, ivo plus ligufalimab in the second arm and then the control arm being monotherapy pembro. That will help answer definitively that question with respect to contribution of components. But the 2 cohorts within the Phase II, each were encouraging, and there was encouragement from the cooperative group in GORTEC, and I'd like to obviously thank GORTEC for their enthusiasm in terms of the study. And that's what's led to the progression here. Allen Yang: Yes. I would just add that, as Dave said, Yigal, that the data from ESMO showed that the combination of ligufalimab and ivonescimab was -- had a higher overall response rate than ivonescimab alone. We're excited to work with GORTEC, which is a premier cooperative group in head and neck cancers. And they've designed a very rigid clinically sound, scientifically robust study to demonstrate that. And I think Maky's comments in the script showed that there are going to be ivonescimab as one group and ivonescimab plus ligufalimab. So you can demonstrate the contribution of components against the standard of care pembrolizumab. So I think that's going to be very important. Operator: Next, we'll move to Brad Canino at Guggenheim. Bradley Canino: Congrats on the screening completion. For me, it's not quite clear yet why adding the interim provides a benefit with regulatory discussions because it seems like you'll reach final PFS before any OS data, interim or final. And presumably, you would need the OS to file anyway. So can you help square that for me? And sorry to beat the horse on this one. Dave Gancarz: No. Great. Thanks for the question, Brad. And so I think there's a couple of things in terms of what you said. So first of all, you can't really have a discussion with respect to data with the regulatory agencies without data, right? And so part of the interim analysis allows for the generation of primary endpoint-based data. And then as we continue to mature that data, you'll see also no change in our guidance with respect to final PFS as well as interim OS timing in the second half of the year as well. And so when you kind of combine those 2 points, it allows for the acceleration of the conversation without much delay with respect to -- there's several months in between, obviously, second quarter versus the second half of the year, but it allows for progressing that conversation with the agency with data in hand to allow for next steps. Bradley Canino: And I guess when I hear this and along with the regulatory strategy in EGFR mutant, should we read this as like a company's evolving view that frontline lung could see approvals with just PFS benefits and only OS trends? Dave Gancarz: Yes. I mean I think there -- depending on -- it's a combination, right? It depends on the timing, right? The magnitude of the benefit is important. And then obviously, there'll be some contribution in terms of overall survival trends. And I think that's where we see dual primary endpoints in this study. And then across solid tumors, you see that in several places as well. The studies, to be clear, are certainly powered for both primary endpoints, which is an important point as well. Manmeet Soni: So Brad, this is Manmeet. I think in other words, right, depending upon this earlier interim PFS data and the magnitude of the PFS, that will allow us a potential discussion with the FDA to accelerate our submission as we submit, right, OS may come and mature, and that is the path forward to accelerate providing this drug to patients much earlier. Operator: We'll go next to Cory Kasimov at Evercore ISI. Unknown Analyst: This is Josh on for Cory Kasimov. Our question is on the head and neck Phase III. Why opt to go through a co-op group here? And what signal will you want to see before committing to expanding into the U.S. here? And could it be used to leverage for a U.S. approval? Dave Gancarz: Yes. Josh, thanks for the question. So a couple of points there. I think, one, we've talked a few times now in terms of expanding our Phase III program more broadly. So I think in some ways, there's an opportunity to work with some of the premier cooperative groups in terms of adding additional indications that we see promise in as well. And this is one of those indications. There's a highly competitive space in head and neck cancer, and we think there are multiple opportunities for patients in this setting. And we think ivonescimab presents a strong opportunity, in particular, ivonescimab and then potentially ivonescimab in combination with ligufalimab, right? And so working with cooperative groups also expands the number of trials that are able to be performed ultimately. And so it's important that we are taking on as much opportunities as we can with respect to bringing ivonescimab to as broad of a set of patients who are impacted by cancer as we can. So we think that, that is a strong approach overall. It's a strong cooperative group who's run multiple studies as well, and they were highly enthusiastic based on the data that's been presented and obviously working with them since. And so as Maky emphasized earlier as well, it's important to note that we do plan to continue to expand that Phase III program in 2026. And I think we've been pretty clear that as we plan to launch additional studies, we would wait until we get to the readiness to launch and we'd have FPI in sight. And so part of this will be over the course of '26, but this was an important concept that we had with respect to working with a highly enthusiastic cooperative group in a setting which they specialize, and it was an opportunity to really explore on a multiregional setting these 2 regimens, really the monotherapy as well as the combination regimen. Unknown Analyst: Anything -- go ahead, sorry. Allen Yang: I was just going to add, they approached us, right? So they came to us. Head and neck is an unmet need. It's not the largest unmet need in the PD-1 VEGF space. And so I think we are going to, as Dave said, focus our resources on the largest unmet needs, and this one was convenient because they came to us wanting to do a study. Yes. Sorry, Josh, I interrupted you. Unknown Analyst: No, no. I was going to ask if there was anything specific you could give us on what may trigger like a U.S. expansion here? Dave Gancarz: Yes. Not -- I don't know that at this time we want to start disclosing specific details. But obviously, we'll get enthusiasm with respect to enrollment. There's several countries in Europe who are enrolling in the study, feedback from GORTEC as they operationalize the study. There's also additional data being generated by our partners at Akeso in Phase III in China with respect to the setting. So I think there's a multitude of different -- and there's continuing maturity of the Phase II, obviously, as well. So there's multiple paths with respect to that, but nothing more specific there, just at this point. Operator: We'll take our next question from Tyler Van Buren at TD Cowen. Tyler Van Buren: Congrats on the squamous enrollment completion and the progress. So should we expect the HARMONi-6 OS data later this year? And how about HARMONi-2 OS data as well? And in general, given the upcoming HARMONi-3 OS data over the next year, can you just reiterate what gives you the most confidence that all the positive PFS data we have seen from the frontline lung cancer trials will ultimately translate to OS benefits in the frontline Western population or global studies? Dave Gancarz: Appreciate the question, Tyler. I think as we have said a few times, so the HARMONi-2 and the HARMONi-6 studies are studies that are conducted by and sponsored by our partners in China at Akeso. And so they have not necessarily guided in terms of looks on overall survival readouts at this point. It's important to note again, HARMONi-2 is not necessarily powered for overall survival and was not powered for overall survival at all. That was a PFS primary endpoint exclusively. HARMONi-6 was also a PFS primary endpoint, but obviously a little bit larger in the sample size, over 500 patients. And so I think the protocol for HARMONi-6 was published. And so that would appear at some point to look like 2026 as an event, but they have not guided more specifically to that. I think the second half of your question with respect to translation into HARMONi-3 and then obviously, the confidence that we have with the PFS data translating to OS. So I'd make a couple of points. I don't think there's a better analogy in terms of opportunity with respect to a randomized Phase III study and in this case, in squamous non-small cell lung cancer, ivo plus chemo versus PD-1 plus chemo, than a randomized Phase III that was nearly identical, just run in China, right? And so that was strongly positive. The PFS hazard ratio indicated a 40% improvement in terms of PFS reduction of risk and/or death. And so when we look at the translation from China to the global setting, we're obviously very confident and HARMONi helped enforce that with very consistent results with respect to OS, both from a median perspective as well as hazard ratio. I think the other thing as we step back, we often talk about the question with respect to PFS and hey, what's the confidence level translating that into OS? And so at this point, 4 randomized Phase IIIs have read out, right? HARMONi-A was the first, and that was in China, the EGFR mutant non-small cell lung cancer after TKI. In that, final OS analysis was statistically significant, and that was displayed at SITC. The second was the HARMONi study, and we've talked at length there with a very strong showing with respect to overall survival. The final analysis was not statistically significant, but with longer follow-up time given the delays in initial enrollment and the follow-up time differences between China and the U.S., we saw a nominal p-value that was below any threshold with respect to what would be required for significance. We saw a p-value of 0.03. When we look at HARMONi-2, the only readout we've seen thus far was the NMPA, the Chinese health authority, requested look. And that showed an OS hazard ratio of 0.777 comparing ivo to pembro. So at this point, HARMONi-6 has not even hit that point, and it's still -- that application is in review as our partners at Akeso have announced. And so there hasn't been a look yet at overall survival. But of the 4 that have read out, 3 of those studies have shown some data towards OS. All of them have shown a hazard ratio less than 0.8, which when we speak to KOLs, we speak to physicians globally, that's kind of the generally agreed-upon threshold for clinical meaningfulness, if you will. And so the amount of encouragement that we've seen with respect to OS is about as high as you can get with respect to the time that we're at. I appreciate everyone's focus on overall survival, but overall survival takes time in terms of the readout, and all of the readouts that we've seen to date have pointed in one direction, which has been highly encouraging. So hopefully, Tyler, a comprehensive answer to your question, but one that answers it. Allen Yang: And Tyler, this is Allen. I would just add from a clinical perspective, from the mechanics of the study, they are not a crossover design. The standard of care for both arms is the same, right? And the patients are blinded. So they don't even know whether -- which arm they were on. So they should get balanced standard of care. Now if you start that standard of care in the second line or later line 5 months later, because of the PFS benefit seen it on, that should translate to a benefit in OS, right? It's just such a large magnitude in delaying that next line of therapy. Operator: [indiscernible] Asthika, your line open. Please go ahead. Asthika Goonewardene: So I've got a more of a commercial question here. So as you're thinking about the commercial footprint you're going to need for EGFR mutant non-small cell lung that you're building out right now, how much of that footprint could you -- would be usable for the broader squamous population. I'm assuming all of that. But then how much more would you have to add on top of that to address the broader squamous population? And then I have a follow-up. Manmeet Soni: Asthika, this is Manmeet, and I can take that question on commercial readiness, right? There are a lot of synergies, right? If you see our EGFR and squamous and non-squamous, all are coming from the non-small cell lung cancer, right? And as you would note, right, most of them are treated by similar physicians over there. So our footprint and synergies will come, right, pretty much. EGFR is a much smaller population base, squamous gets over like 2.5 to 3x bigger than EGFR and then non-squamous comes, which is almost double of squamous, right? So it keeps expanding, but it gets our foot into the door. We will have to do a lot of education, a lot of learning from our setting, our basic infrastructure in the next coming quarters, and that will be the backbone of -- as we expand into squamous and non-squamous, because these are all similar physicians, same institutions. Asthika Goonewardene: So Manmeet, how should we think about, I guess, the ramp-up in your expenditure for the SG&A line item? Manmeet Soni: Yes, we have been like pretty efficient over there. As I said, EGFR is the smallest one, right, to initiate. We don't have to put a lot of expenditure, and the most of the expenditure will come, right, when we hire our sales teams over there. We have been already doing a lot of activities on the medical affairs front, which we initiated, right, last quarter, and those all are happening. So I would say there will be expense, but that will come a quarter before the PDUFA, right? As you get into that, you hire more salespeople and other things. But other than that, we are already doing much of the activities and managing that right now very well. Asthika Goonewardene: Got it. And then elsewhere. I like that you guys are offsetting some of the development to these cooperative groups, like GORTEC. But of course, these groups are going off the data that's generated in China, also with novel agents that are not yet approved in the U.S. and Europe. So I guess how are you thinking about -- when you think about these data, converting them for U.S. submissions, how are you thinking about some of the regulatory requirements by Project Optimus that might be required perhaps to be done before a Phase III is started? And how are you getting these cooperative groups to kind of play ball with that and make sure that the data that they're generating is going to be applicable for a U.S. submission too? Dave Gancarz: Yes, it's a great question, Asthika. And so importantly, our partners at Akeso here have started a Phase III in China in the setting. And so that also speaks to the additional data that exists with respect to some of the work that's been done in this setting. And also, there's Optimus, there's contribution of components, which we spoke to earlier as well. And obviously, with the novel, novel opportunity here with ivo and ligu, it's important to show ivo as a monotherapy as well as ivo and ligu combined. And so I think a lot of the concepts that you're speaking to are something that's permeating both in the U.S. as well as Europe. The cooperative groups are very familiar with those thought processes of the health authorities. And so in general, that's not something that is of high concern in terms of pushback or anything like that with the cooperative groups. That's something that's pretty well understood at this point. Allen Yang: Asthika, this is Allen. I'd just add to what Dave said is that we've used Chinese data clearly to satisfy Project Optimus before. So that shouldn't be an issue. Operator: We'll take our next question from David Dai at UBS. Xiaochuan Dai: Just on the HARMONi-A trial in second-line EGFR non-small cell lung cancer. I mean just could you provide some additional color on the FDA interactions leading to the BLA submission? And then more importantly, anything you can share on the FDA stance on the OS? How has that changed over time? Allen Yang: Yes. This is Allen Yang. So again, I think we've been very transparent that the study is positive with a PFS endpoint. We just missed OS because of delays in enrollment due to sort of post effects from the pandemic. The FDA was clear that they wanted to see OS to make this a fileable package. And we said, look, we think the data are important. When we look at our data compared to other agents approved in this space, we think that this satisfies an important unmet need for patients. And so we wanted them to review the full package of the data. We've submitted it, and they've accepted that filing, and they're reviewing the data now. Xiaochuan Dai: Got it. Okay. That's helpful. And then just on the most recent collaboration with GSK of the B7-H3 ADC in combination with ivo. So just maybe help us understand a little more on the initial indication you're exploring. We know that the GSK is currently exploring B7-H3 for small cell lung cancer. Is that an indication you think it will make sense for you to explore in combination with ivo? Dave Gancarz: Yes. We've specifically talked about in our press release announcing the collaboration in small cell lung cancer, right? And so that is a place. We've also been clear also that there's multiple solid tumor settings where we believe both B7-H3 as well as ivo have shown promise. And so -- but there's obviously a place where with the evolving landscape of small cell lung cancer, that's an important place for us to explore. And we think the B7-H3 ADC that GSK has is very much showing a lot of the -- we're not going to go into details with respect to the comparisons we've done against the B7-H3s across multiple companies. But it's important that we did look at that asset and feel that, that was a very appropriate partner for ivo with respect to collaborating in small cell as well as a couple of other solid tumor settings. Operator: And we'll move next to Mitchell Kapoor at H.C. Wainwright. Mitchell Kapoor: With HARMONi under consideration from the FDA, could you walk through your high-level thoughts on pricing strategy given the competitive landscape in EGFR non-small cell lung cancer, but also the benefit of ivonescimab, what it could provide in future, expansion indications? Manmeet Soni: Mitchell, this is Manmeet. And it's very early to start talking about pricing. Pricing is dependent on -- is finally decided, right, based on the final label you have and the indication which we are launching in. And obviously, EGFR is our first one, but we will not be commenting on the price. Obviously, as you see the other benchmarks, right, and you can easily look at, right, how other second-line EGFR drugs are priced, you could see that there is big range, and we have the potential based on the benefit of ivonescimab to price it very well. But as you also stated, right, in the long run, we have multiple more indications to come. So we'll have to price it appropriately. But more to come, I think there is no decision or nothing to add over here right now. Mitchell Kapoor: Okay. Fair enough. And then on those potential expansion opportunities, obviously, ivonescimab is kind of -- this pipeline and a drug opportunity, which is rare these days. But what kind of gating items would be there to determine how fast you could initiate more trials? Is it additional partnerships or anything that can determine the next steps you take? Are you watching Akeso's next moves? Or what's helping you decide how fast to initiate additional studies? Dave Gancarz: Yes, it's a great question, Mitchell. I think -- so I want to emphasize one of the points that Maky spoke to, because I think there's a lot of really positive events that take place with ivo and sometimes it's important to slow down on a couple. And so over 4,000 patients have been treated with ivonescimab just in clinical trials sponsored by either Summit or Akeso, right? So this doesn't include the over 140 total clinical trials listed on clinicaltrials.gov at this point. This doesn't -- such as ISTs and whatnot. So when we look at the amount of data generated by ivonescimab, there's a significant amount of information that can be really well understood in several different settings. We've also -- it's important that our partners at Akeso have initiated 10 Phase III clinical studies. And so underneath that, you can see the amount of data that has been generated in terms of really understanding where ivonescimab can be successful. And then obviously, there's also a significant place where we can continue to explore, where maybe the prevalence of a particular disease in China is not necessarily as high as it may be in the U.S. and vice versa, right? But there's a lot of overlaps with respect to the characteristics of those diseases that's important for us to be able to kind of translate that information across. But because there's so much patient data with respect to how patients have performed on ivonescimab, that really allows us to triangulate, if you will, the information. So we're not running, hey, we've been able to dose 30, 40, 50 patients with ivo and now it's very encouraging. So we are trying to figure out how to move forward. There's a plethora of information and data. So much of it truly highly encouraging in terms of what that opportunity can be. And that really gives us the opportunity to really think through the different places, the different standards of care. It's important to also consider what the standard of care is in some of these settings. How is that evolving? How is that evolving in the short term? How is that evolving by the end of what would be a Phase III clinical study? And so we can really look at the information we have internally, what's happening in the market to really, at the end of the day, what we're trying to do, is provide a medicine that improves outcomes for patients, right? But that takes an ecosystem in order to do. Physicians need to be able to access, understand and have clear answers from that data, patients need to be able to see what opportunities exist based on data and outcomes from trials. And so when we look at the totality of the landscape across many of the tumor types that are sensitive either to immunotherapy, anti-angiogenic therapy, places where neither have been successful, but there's an opportunity with ivonescimab, we really can look at the totality of the landscape, the data generated, what physicians will need to see in a couple of years to really come up with the right answer. And that's why some of these even collaborative studies -- or collaboration opportunities rather, with RevMed with GSK, that's important. We'll have more of those coming as well. But when we look at the totality of what's out there, it's really important to consider each of those points. And so that's why we really look to expand much further in 2026 as well. Allen Yang: Yes, Mitch, I want to just address a couple of your comments. So at JPM, Maky announced that we're going to be doing multiple new Phase III programs. We will, of course, continue to explore cooperative group studies and collaborations with external partners, and you should expect more of those to come. But our strategy is not dependent on that. We will have sponsored studies based on the Akeso data and moving forward. And so you should expect more of those studies to come as well. Operator: Next, we'll go to Eric Schmidt at Cantor. Eric Schmidt: I wanted to go back to HARMONi-3 and beat the horse a little bit more. I'm wondering if you've had discussion with the FDA around what you think would be the maximum disclosable set of information given you need to maintain the integrity of the trial. Do you think, for example, you might be able to give us hazard ratios or any other meaningful data at that time? Dave Gancarz: And Eric -- just to be clear, Eric, you're speaking about the interim PFS? Eric Schmidt: I am. Thank you, Dave. Yes. Dave Gancarz: Yes. No, I appreciate it, Eric. So I mean, look, I think -- and I think we kind of mutually addressed this across comments from Manmeet, Maky and myself a little bit earlier. But it's important that the analysis is run and then we see the analysis in terms of outcomes, in terms of what the next logical steps are in that respect. And so -- and then obviously, positive data requires contemplation with respect to major medical conferences as well. And so it's -- we have several opportunities, if you will, in terms of the data and what that readout will look like. And as we get a little bit closer, we'll be providing a little bit more clarity on what that looks like. But obviously, we thought it was very important now to provide effectively an immediate answer with respect to the analysis being run in the second quarter. And then the amount of that disclosure in some ways, depends on what both the data shows and what the next steps are. Allen Yang: Yes. And Eric, we just want to manage expectations here. Once we get the data, the most important thing is trying to provide this agent to patients as soon as possible. That requires a regulatory interaction, right? And as a courtesy to them, we need to demonstrate to them first, right? Then in collaboration with our investigators, we want to present this at a major medical meeting. So unfortunately, sort of a press release with curves for you guys as investors and analysts are not going to be a high priority for us. Eric Schmidt: Well, I guess my question was even just very specific to maintaining integrity of the final PFS readout from a regulatory standpoint and whether even if you were able to give an interim PFS readout, that would be too great a disclosure, making regulators too uncomfortable. But do you have a view on that? Dave Gancarz: Sorry, Eric, I'm not sure we followed exactly what you're... Allen Yang: So I think what you're saying is -- Eric, correct me if I'm wrong, but what you're saying is if we were to release top line interim PFS, would that impact the study scientifically in terms of unblinding it for the final PFS, right? Eric Schmidt: Exactly. Thank you. Allen Yang: Yes. I understand what you're saying. And I guess I just don't want to disclose too much about what we're doing at this time. I understand your question. We're, of course, going to take that into consideration, but I just don't want to disclose how we're going to do this right now. Dave Gancarz: Yes. I would say a couple of key principles, right? We're never going to do anything that puts at risk the final analysis, if you will. And I think part of this becomes an outcomes-driven response as well in terms of what that data shows, to be able to provide the clarity and transparency, but also be able to maintain the integrity of the study itself as well as the interactions with the health authorities. Operator: And we have time for one more question. And we'll take that question from Faisal Khurshid at Jefferies. Faisal Khurshid: I wanted to ask on the FDA review for HARMONi. Have you guys had any interaction with the FDA since having the BLA submitted? And is there anything in the FDA's stance changing on acceptability of PFS and read-through of that to HARMONi-3? Dave Gancarz: Yes. Thanks, Faisal. I think we addressed most of this a little bit earlier. But yes, we have interactions with the agency. We don't necessarily disclose meeting-by-meeting discussions and whatnot. And so what we don't want to do is we're not looking to leverage external sources in terms of pressuring the agency or anything like that. We have -- those discussions are intended to be confidential. So we're not necessarily giving step-by-step updates with respect to that. But we do have interactions with the agency, both for this study as well as other current studies and then potential future studies. And so it's important in terms of the totality of what we're looking to accomplish with ivonescimab. We have the utmost respect for the FDA. I think that's just a level setting point. That becomes very important in terms of -- with the platform opportunity, if you will, for ivo, there's a lot of studies with a lot of potential settings where ivonescimab may bring benefit to patients, and we want to make sure that we have a strong relationship with the agency in order to do what -- our mission is really to bring ivonescimab to as many patients, facing an unmet need, as possible and doing what's right for ultimately patients facing cancer diagnoses. Operator: And that concludes our Q&A session. I will now turn the conference back over to Dave Gancarz for closing remarks. Robert Duggan: This is Bob Duggan. Not only is David correct in saying that we have a tremendous respect for the FDA, it is probably America's most respected agency around the world for its integrity, the due diligence of its work, putting patients first, and we're really honored to be reporting into them. Lastly, we're also very impressed with our partner, Akeso. Akeso has almost a few hundred million dollars of investment value in their ownership, along with you all that are owners of Summit, and we're happy that they chose to do that. We're also quite pleased to see that time after time when they introduce new drugs, they get through their own agency, they get clearances, they're doing quite well. If there's any China look-alike Regeneron, it's Akeso, just a fabulous company with great engineers, great scientists, and we're pleased that they are the source of the bispecific tetravalent back in 2013. And yes, we're proud to have that in-licensed, and we're making great progress with that. So thank you all, and we look forward to updating you on our next call unless there's great late-breaking news in between. Dave Gancarz: Thank you, everyone. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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GIGI 2025 Q4 财报电话会议

Jonas Warrer: Hi, welcome to Gentoo Media's quarterly presentation for Q4 2025. My name is Jonas Warrer. I'm the CEO of Gentoo Media, and I've been looking forward to present our business and our business results to you today. Gentoo Media is a leading affiliate in the iGaming industry. We help online Sportsbooks and casinos acquire higher-value players, acting as the bridge between players and operators. Affiliates are a vital part of the iGaming ecosystem. For many operators, affiliates are the main driver for player intake. You can say that we have the online stores that players visit before they decide where to place a bet or open an account. Getting to the Q4 2025 executive summary. Strongest quarter of 2025 for revenue, profitability and cash flow generation. Margin expansion driven by a structurally stronger cost base and disciplined execution. Q4 delivered record end user deposits. We also strengthened visibility across search, emerging AI-powered platforms and paid campaigns, supported by product enhancements and a positive December Google Core update. We see strong EBITDA to operating cash flow conversion, delivering full year operating cash flow of EUR 33 million. Q4 demonstrated operational resilience in a year impacted by Brazil regulation and market volatility. Revenue generation in 2025 is not where we wanted to be, and it has disappointed us. However, with the actions taken during the year, we enter 2026 with a structurally stronger business, with clear growth opportunities across core markets and continued focus on cash generation. It has been a rough year, but it has also been a year that has made us stronger. Going to the financial highlights of the quarter. Q4 delivered the strongest revenue and EBITDA performance of the year. Revenue ended at EUR 25.6 million, down 16% year-on-year, but up 13% quarter-over-quarter. The shortfall versus expectations was driven by softer December sports margins, while the year-over-year decline also reflects the sunset of low-margin activities in Q4 2024. Personnel and other OpEx ended down 33% year-over-year, reflecting the benefits of earlier cost rightsizing activities that were executed during the year. Year-end adjustments increased other OpEx by EUR 0.9 million in the quarter. Marketing spend was EUR 5.7 million, down 38% year-over-year, with the marketing ratio improving to 22%. EBITDA before special items reached EUR 14.9 million versus EUR 10.1 million in Q4 last year and up 16% -- 60% quarter-over-quarter. Special items totaled EUR 1.6 million. Cash flow from operations was EUR 11.4 million versus EUR 7.3 million in Q4 last year. If we look at Q4 this year and compare to Q4 last year, we can see that we have seen a decline in revenue, but we have also seen an increase in EBITDA. Going into revenue and a bit into the revenue details, 59% of revenue come from recurring revenue share agreements. Revenue in Europe decreased by 20% compared to Q4 2024, although revenue generated by the Nordic market remained stable. Revenue in the Americas declined by 11% year-over-year, with North America revenue growing over 40% year-over-year and reaching record levels. If we look at Q4 and compare to the previous quarter, all notable regions grew quarter-over-quarter with North America leading at 62% quarterly growth. Europe and the Americas contributed respectively, 56% and 22% of quarterly revenue, remaining core focus regions for the business, in line with previous quarters. Looking into player intake and value of deposits. Player intake reached 102,900 FTDs in Q4 2025. North America player intake more than doubled year-over-year and now accounts for nearly 20% of Q4 intake. Player intake from Europe declined year-on-year with the Nordics remaining broadly stable. The development reflects continued focus on higher-value markets and a more consolidated website portfolio following the strategic realignment that was executed earlier in the year. When we look at value of deposits, Q4 deposit values reached an all-time high of EUR 202 million. Full year deposit value reached EUR 774 million, slightly above 2024 numbers despite this being a year with Brazil regulation and the absence of major summer sports events. Going to the operational highlights. If we look into Publishing business, revenue grew 8% quarter-over-quarter with notably fixed fees improving. Publishing revenue experienced a softer-than-expected seasonal uplift in December, impacted by lower sports margins. The December Google Core update had a net positive impact. Flagship brands, including AskGamblers, saw traffic recovery following targeted SEO and content optimizations. We also piloted our next-generation WordPress platform, improving page speed and technical performance. The wider portfolio will benefit throughout 2026 as the platform is rolled out. CRO and product capabilities expanded alongside continued focus on omnichannel visibility across both search as well as emerging AI-driven platforms. Publishing enters 2026 with improved visibility, a stronger technical foundation and a more scalable platform. Moving to Paid and Paid highlights. Quarterly revenue increased 36%, driven by U.S. market expansion and broad channel improvements. Year-over-year, revenue declined 22%, reflecting the sunset of lower-margin Q4 2024 activities and the effects of the Brazil regulation. Following a strong October and November performance, December revenue was softer than expected due to lower sports margins. A larger share of marketing spend was allocated to the U.S. in the quarter, focusing on opportunities within Prediction Markets and DFS. Paid and Publishing strengthened cross-functional collaboration with the aim to improve and grow our CRM channel in Paid. Paid moved from reset to rebuild during 2025, improving unit economics and entering 2026 in a stronger position. Looking at events post quarter, in late January, Gentoo Media initiated a refinancing process of its existing bond. The net proceeds are expected to repay the current Bond and RCF facility. Management is currently evaluating whether the potential new bond terms are attractive for Gentoo Media and for its shareholders, comparing with alternative financing options. We will inform the market as soon as a decision is made. Summing up on the quarter, strongest quarter of 2025 for revenue, profitability and cash generation, demonstrating a structurally improved operating model and a structurally stronger business. A stronger cost base, drove margin expansion and improved cash conversion. Record end-user deposits and healthy underlying activity confirms continued strength in traffic quality and continued strength in our commercial engine. Visibility across key brands improved across search, paid channels and emerging AI-driven platforms, supported by product enhancements and a positive December Google Core update. Paid and Publishing exited 2025 with stronger unit economics, with closer commercial alignment and a more scalable operating platform. As said in the beginning, revenue generation for 2025 is not where we want it to be. However, with the actions taken during the year, Gentoo Media enters 2026 structurally stronger with improved visibility, a stronger underlying business and a scalable platform to drive sustainable cash-generative growth going forward. Thank you for listening in. This concludes our quarterly presentation. I would like to take this opportunity to thank our employees for their hard work and dedication in a demanding year. Next, I would also like to thank our shareholders for their trust and support throughout the year. We have an exciting year ahead of us. Gentoo Media enters 2026 as a stronger business. Our publishing portfolio demonstrates higher quality and our paid division now operates with higher efficiency. This year will also bring the largest sports event in human history with the World Cup this summer as a key growth driver for 2026. Lastly, I would like to thank you, the listener, for taking your time to hear this presentation. Thank you, and see you next quarter. Hjalmar Ahlberg: Okay. And now we move over to Q&A. So welcome, Jonas and Mads. Maybe starting a few questions on the headline numbers. Maybe Q4 for top line, you mentioned sports win margin. I mean that varies from time to time. But would you say that December was kind of an exceptional impact, if you could quantify something? Or is it more a normal variation there? Jonas Warrer: I would say December was lower than we normally see and lower than expected, definitely. And then in broader terms, I think also for -- notably for our Publishing portfolio, we saw a gentler seasonal uplift than we normally do in December. So we had a very strong October and November, but December fell short of expectations there, both in sports margins and then also a little bit lighter, as I said, gentler seasonal uplift than expected. Hjalmar Ahlberg: Yes. And you saw solid profitability here, good cost control. How should you look for the OpEx from here? Will you start investing more for growth again? Or do we see more opportunities to optimize the cost structure? Jonas Warrer: I think the main focus is what I would call disciplined growth. Of course, we have really optimized the business, and I think we have a structurally much stronger cost base. Is there room to optimize further things? Maybe. But I think the focus now is, of course, of cash generation and a token in that respect, an important factor in that respect is, of course, also that going forward that we manage to grow revenue going forward. So I would call it disciplined growth and disciplined investments. We should go where we see opportunities and where we see that we can generate revenue with high margins. Hjalmar Ahlberg: Makes sense. And also a question on how to understand this. You had a kind of a positive impact from the derecognition of a customer liability. Is this something that happens from time to time in the business? Or if you can give some more information how to view that number? Mads Albrechtsen: Yes. It happens from time to time in our business. It was just a quite high amount in this quarter, and that was why we felt that it was more fair to show it separately on one line item. But yes, it is something that happens in a daily business. Hjalmar Ahlberg: All right. And you highlighted there in the presentation, a few slides on the regional development there. And it was impressive to see North America growing quite quickly, and you mentioned Paid media there. Could you elaborate a bit more on what drove that growth in North America? Jonas Warrer: Yes. So we made movements within the DFS and Predictions Markets. I would say, material movements in Q4 for Paid. So very excited about that. And now North America nearly makes up in the Q4, 20% of our player intake. So of course very positive about that. So going into 2026, exciting to see what we can get out of that. Of course, with the note that the U.S. and North America is also characterized by seasonality. So -- but it's very positive to see that we have made a breakthrough into North American market. Hjalmar Ahlberg: And interesting about the Prediction Markets. I mean how do you see that business compared to traditional betting operators? Can you elaborate a bit on how you get paid? I mean, is it very similar model where you fly a new client and you get paid? Or if you can give us some information on how it works if it's different compared to betting? Jonas Warrer: Yes sure. A very similar setup. Of course, it's a new area for us. So if we -- as you know, in Paid, we can move fast and if we want to make a move in our publishing business, it's about building up assets and websites that ranks right. So this is something we are working on and have also worked on in the start of 2026. It's equivalent to ranking well for casino or sports betting keywords. So for Publishing, it will be a little bit of a longer journey, but it's something we are working on and are excited about. And of course, then also very happy to see that we have this, if I can call it, luxury situation where we can both use Paid for the short term first and then move in with Publishing when we see the positive results we have seen. Hjalmar Ahlberg: And also -- I mean, on South America or LatAm Brazil, I have a few questions here coming from the audience as well. I mean, how should we view that market from here? Do you think it has stabilized? And I mean, what's your view on South America in general, I guess, as well? Jonas Warrer: I think the market has stabilized in Brazil now in the sense that we have seen material improvements throughout 2025. If we talk specifically about Brazil, of course, it's a market that we think has strong potential. It's a market that we can generate good business in. But of course, also looking at how the situation has been in '25, it's not a market where we're going all in. So again, disciplined approach here. We are growing there, and we see partners performing better. But we are, of course, also cautious to not overinvest based on the volatility that we have seen in 2025. On the broader lines, I would say Latin America is, of course, interesting market. I think the value for Latin America will go up for us over the next years as more and more of the market adapts into casino. What you normally see, at least what we have seen in other markets is that you start out with sports betting and then later, the broader market adapts into casino. And as you know, this is where we are strong right in casino. So I think longer term, the Latin American market will have more and more value for us. Hjalmar Ahlberg: Got it. And also a question on Europe. You mentioned that you were down 20%, I think, year-over-year. Anything particular happening there? Or if you could give some flavor on that number? Jonas Warrer: Yes. No, I would say the main flavor to give is that the Nordics remains a stable market for us. Also in the Nordic region, we saw some volatility in more what you call Central Europe. So of course, trying to see what we can do about that. Some of the players there that we did also had, I would say, lower value. So also as part of our strategy to focus the portfolio, there was an effect from that. So there is a lot of players being made from the strategic realignment that we did in April. So you can say short term, we have probably said no to some revenue and to some player intake short term with the goal of making more revenue longer term. Hjalmar Ahlberg: Understood. And also, I mean, Google update always changes every quarter. It sounds like you had a positive effect overall this quarter. Anything you want to add there? Or is it a typical update, which can impact in various ways, I guess? Jonas Warrer: Yes. It was an update we have been waiting a long time for and one we prepared very much for. So very positive to see that we benefit from it. The latest update before that was in September, and that came a little bit as a surprise to us that a few of our assets got negatively impacted there. So of course, very happy to see that we managed to do a fast turnaround and can prove that we consistently are able to deal with search volatility and to maintain strong visibility in search. Hjalmar Ahlberg: Okay. And you also mentioned investments in AI-driven platforms. Is that the kind of experimentation or do you see, I mean, material effects of those investments in terms of am I getting anything after this? Jonas Warrer: No, that's a very good question. Very interesting question, of course. We don't see any changes in search behavior right now, notably when it comes to transactional searches where users are just before they decide to place a bet on an open account with an operator. We haven't seen that impacted. But of course, we know that AI-driven platforms might take over and will take over some parts of users. So of course, we have also started optimizing for that. And I think a very clear message here that I think is important to note is that when you optimize for traditional search -- do traditional search optimizations, actually, to a very large degree, you're also optimizing for strong visibility in AI-driven platforms. Then there is a few nuances that you can say that you need to do when you -- if you want to have higher rankings or high rankings in AI-driven platforms. But a lot of the groundwork is the same. So I think we have actually in most of 2025 been on that journey. We will probably add a few extra things to activities now. And honestly, I see this more as a hedge. If the users are turning more and more into AI, we also want to be there. We haven't seen that movement yet, but we know that what we are doing and what we are working on will have a positive effect on ensuring high rankings, if I can say that, a high visibility in AI-driven platforms. I did a test myself some days ago to see to what degree our sites are used as sources, for instance, on ChatGPT. And that was a very positive result, I would say, for me personally when I saw that our sites are seen as authority websites. So will continue what we do, add a bit extra flavor and then ensure that we have maintained high visibility, whether it is in traditional search or in AI-driven platforms. Hjalmar Ahlberg: And also a question here from the audience that there's one person that sees that industry-focaled sites like maybe NEXT.io or getting premiered by Google. Is that something you see? Is it something that you reflect on when you put content on your site, so to say? Mads Albrechtsen: I think that reflects right that there has been a move from Google to use, you can say, reward at 40 websites. It's in line with what we already do. And we also have strong at 40 websites. Next.io is just another competitor joining out of many. Nothing specific there, anything notable there beyond, of course, that they have managed to do good in the market, so yes... Hjalmar Ahlberg: Interesting. And then moving over to the guidance for 2026. I mean it implies that you're returning to growth. I guess one question is, I mean, you mentioned the Football World Cup, of course. How important is that for the growth just as one part? Or is that maybe that the year will be more seasonality driven by the quarters during the World Cup? Or how big is that event for your outlook for 2026? Jonas Warrer: I would say the event that's a bit of extra sugar in the summer months that normally are very low season for us. So what we see or what we expect from the World Cup this summer is that instead of having very low summer months, we have very good summer months. We also use an event like the World Cup internally to strengthen our position within sports and to drive our sports assets forward. So there's a lot of positive, you can say, more indirect thing coming out of a big event like that. And then, of course, as we know, as we have seen before with bigger summer events that when the event is over, players have active player accounts or funded player accounts. And then we normally also see a benefit on our casino earnings after that. But it's not that the World Cup is going to save the year for us. It's an extra benefit and extra driver, but it is, of course, a sustained push throughout the year that will drive Gentoo Media forward. Hjalmar Ahlberg: And also a few questions from the audience here, if you can comment anything more on January and February this far. I think you mentioned some input in the preliminary announcement of the results. But if you have any flavor, that would be interesting. Mads Albrechtsen: January ended in line with expectations, maybe a little bit higher. Then February started out softer with lower sports margins. I think that's a thing that has been noted in the industry now that the sports margins that started in February were low. So we have to see how the remaining part of February plays out. And then, of course, very excited for March ahead of us. Hjalmar Ahlberg: And looking at the EBITDA guidance and the implied margin, it looks like you're aiming for a recovery as well. Do you also see, I guess, less special items this year because you had a lot of things going on this year, if you could update on that? Mads Albrechtsen: Yes. I think if we take the special item bucket, they mainly covers 3 different items. One thing is the redundancy part, which has been, of course, natural in a year where we had to, unfortunately, say goodbye to a lot of employees due to reorganization exercise in April. That bucket will naturally go away going forward. Then we have had a lot of investments coming out of the split. The split was made in Q4 '24. So there was also cost running into '25 related to split. That bucket will naturally also -- goes down. And then we will have a third bucket, which is more or less normal if people are resigning and not being replaced or there is important operational projects or whatever, but the bucket overall is expected to go materially down. Jonas Warrer: If I can add also, historically, we have always had very strong EBITDA margins. And I think what we have now seen is that we have restored the strong EBITDA margins that we have. And I think that's, of course, also an aim for the future, so yes. Hjalmar Ahlberg: And also, if you can -- I mean, look longer term, I mean, now you have said that growth is coming back in 2026. What do you think about the longer-term growth rates? I mean, should you look at the kind of online gambling industry for what should be reasonable for your business as well? Or if you can give some input on that would be interesting to say as well. Jonas Warrer: I think we have enough opportunities in 2026 to stay within iGaming, if that's what you're asking. That's a lot of interesting markets, a lot of interesting opportunities. Alone as we said, there's Prediction Markets now in the U.S. We also saw positive movements in DFS, sweepstakes. We can still grow in some of the markets that we have been in for many years. So I would say for '26, it's about the disciplined execution, getting more out of our websites, intensifying the conversion rate optimization efforts we do, so we can monetize our user base even better. We have just launched a loyalty program on AskGamblers. Then, of course, we need to ensure that we monetize that to the fullest. So you can say there is a lot of initiatives that we are doing and have done that we just need to keep on doing and do better and better. And then I think there's enough opportunity in the market for us right now in '26. Beyond that, the iGaming market continues to grow. But of course, we are aware that we have very strong capabilities, I would say, both in search or sale and also in paid campaigns, right? So of course, there is an opportunity at one point to look beside the iGaming market. But I don't see that happening, at least not in 2026. We have a lot of opportunities that we want to take, claim and also gain market share. Hjalmar Ahlberg: Got it. And also my question on the EBITDA margin guidance or the EBITDA guidance. What kind of -- what can drive the upside, downside? And I mean, looking at this year, the guidance compared to maybe last year's guidance, how convinced or certain are you that you will be able to deliver on the guidance? Mads Albrechtsen: I think we are fairly convinced and quite conservative. We have also provided a quite big of a range to the market, making sure that, of course, we are quite early on giving this guidance to the market. And as Jonas was saying, we need some room to do investments if that's needed to drive revenue and opportunities. But of course, it's also evident if we look at our current cost base, we can actually just take the cost base in Q3, which is maybe a bit more structurally reflected where the business long term is looking like on the cost side. Then if we take that cost base and apply on a full year basis, then we can add EUR 5 million to EUR 6 million on top of our EBITDA performance in '25. And then we are quite close to what we have guided to the market, I would say, for next year. So we are convinced that we can reach within this guidance. And I can say that with the cost base we have today, we can also look into a first quarter where margins are significantly better than Q1 '25. Hjalmar Ahlberg: All right. And if you look at the '26 year -- I mean, 2025, you had the change to Brazilian regulation, which impacted a lot. If you look at the different regions you are active in during 2026, do you see any countries or regions where there are any material changes that you know as of now that could have any impact this year? Jonas Warrer: There's, of course, a tax change coming in the U.K. that we think will have a marginal effect on us. I think there, it's more about understanding which way our operators going, our partners and which operators they want to stay or invest even more and who wants to maybe scale down after that change. So that's something we are looking into and engaging with partners on. Then is it in the summer of '27, there will be a change probably in Finland. But I think that would be the 2 main markets right now I would highlight as where we see a change, at least the markets that matters to us. Hjalmar Ahlberg: Okay. And also interesting there that you have your refinancing that it looks to progress well and you state that you are evaluating bond versus other types of financing. I don't know how much you can tell us, but is it the cost of the debt, the maturity? Or what are you evaluating, so to say? Mads Albrechtsen: We are evaluating all kind of the buckets there, both pricing terms, general conditions. We have been in the bond market very long, and we have -- we are pleased to have seen all the support we have given from bond investors throughout many years. But of course, there's always a price and attack to everything, and that's why we're currently evaluating what would be the best solution for the company going forward. Preferable, of course, it could have been good to go out today and tell the market about our considerations and where we are. We are not there right now. We need to assess this very carefully, and that's why we are giving, you can call it, the announcement today that we are evaluating the options we have on the table, and we will share the news with the market within due course. Hjalmar Ahlberg: And I mean, looking at the guidance for '26 and the pretty solid cash flow you had now in Q4, how do you think we should view leverage going forward? Do you think it's good to have a sort of leverage in your business? Or are you aiming to have only a margin leverage longer term, if you can give some input on that? Mads Albrechtsen: Yes. I think it's fair to say that throughout '25, of course, our leverage climbed above 3 for the first time, at least for many years for the business. We preferred leveraging close to 2.5, something in that ballpark. We think that that's good for our business that we always have some room for growth and investments, which we have done in the past as well. So I would say, from a structural point of view, in the bucket, close to 2.5 would be a preferable leverage for us. By year-end, we have climbed down again below 3, and we expect the numbers to come further down throughout '26 and especially the first half of '26, impacting by 2 main things. Of course, that our profitability is getting better. We are still -- if we look at last 12 months numbers, we are still heavily impacted by the first 2 quarters of '25 with kind of a low profitability compared to second half of the year and especially profitability in Q4. And the other thing is that we have taken the amount of cash flow we have generated here in Q4 and reduced our debt position as well, overall with EUR 5.5 million throughout the quarter. So I would say, on both ends, we expect leverage to climb down to a structural level 2.5 in a mix between higher profitability and reducing debt. Hjalmar Ahlberg: All right. And also, it would be interesting to hear something about if you can give some view on the M&A market. I mean both -- I mean, you've historically done some acquisitions, which have been good. And also interested to hear Genius Sports acquired Legend. So it seems like new players are entering the media affiliate space. If you have any interesting comments on that would be nice there as well. Jonas Warrer: Yes, that was, of course, a very interesting movement. There is a lot of opportunity, I would say, right now in the industry for M&A. But I think we have a very clear opinion here that we are not there right now. We have a focus on disciplined growth now, derisking the company, being very cash generative. And I think that's the focus. Then of course, if an opportunity comes up that is too good to say no to, then of course, it's something that the Board will need to discuss together with us and then things can change. But I would say at this stage, M&A is not something that is, I would say, relevant for us, we would rather continue the discipline that we have always been very good at, which is growing the business organically. We have also done some good M&As, right, but we have always been very good at growing the business organically, and that's a focus also now for '26. It's interesting to see that new players, of course, are joining the market as acquirers. I think that's probably positive for the market for obvious reasons. So yes, interesting to see how that will play out also in '26. Hjalmar Ahlberg: All right. Thank you very much, guys. Jonas Warrer: Thank you very much.

82天前Insight Analytics约5分钟阅读

TARS 2025 Q4 财报电话会议

Operator: Good afternoon, and welcome to Tarsus Fourth Quarter and Full Year 2025 Financial Results Conference Call. As a reminder, this call is being recorded. [Operator Instructions]. At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations, to lead off the call. David, you may begin. David Nakasone: Thank you. Before we begin, I encourage everyone to visit the Investor section of the Tarsus website to view the earnings release and related materials we will be discussing today. Joining me on the call this afternoon are Bobby Azamian, our Chief Executive Officer and Chairman; Aziz Mottiwala, our Chief Commercial Officer; Seshadri Neervannan, our Chief Operating Officer; and Jeff Farrow, our Chief Financial Officer and Chief Strategy Officer. I'd like to draw your attention to Slide 3, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail. With that, I'll turn the call over to Bobby. Bobak Azamian: Good afternoon, and thank you for joining us. 2025 was a breakout year for Tarsus and for XDEMVY. The first and only FDA-approved therapeutic for Demodex blepharitis, an impactful disease that affects more than 25 million Americans. Among the key highlights for the year, we delivered more than $450 million in full year net sales. We have helped more than 0.5 million patients living with Demodex blepharitis since launch, underscoring the meaningful real-world impact of XDEMVY and by creating and leading an entirely new category in eye care, we have established Tarsus as a differentiated company fully capable of translating scientific insight into commercial leadership. We believed from the beginning that XDEMVY could be a breakthrough medicine. Today, the data and real-world experience validate our conviction. In just 2 years since launch, XDEMVY has fundamentally changed the eye care experience. We see that transformation reflected in 3 clear proof points. First, XDEMVY is delivering consistent meaningful outcomes for patients. Second, eye care professionals have fundamentally changed the way they practice. And third, we've redefined the rules of launch and have succeeded in rewriting the biotech playbook. We're now ready to share what we've always believed that XDEMVY can reach blockbuster status within the next couple of years with sales potential exceeding $2 billion. At the same time, we are intentionally building Tarsus for its next phase of growth. Our primary strategy is disciplined and built for repetition identify diseases with clear root causes, significant demand for better solutions and the potential to establish a new standard of care and then apply the development and commercial playbook, we have proven with XDEMVY. We are already executing against that framework with TP-04 and Ocular Rosacea and TP-05 and Lyme disease prevention, 2 clinical stage programs where the biology is clear, the unmet need is substantial, and our approach has the potential to deliver a new standard of care. Importantly, we also intend to expand our pipeline in a measured way, targeting 1 to 2 new programs per year. This pace allows us to remain focused, leverage our existing infrastructure and allocate capital responsibly while extending our long-term growth trajectory and patient impact. What excites me the most is that we have the right team in place to accelerate our goal of becoming the next leader in eye care. You may have seen last week that we welcomed David Pyott, a distinguished leader in the global biopharmaceutical industry and former Chairman and CEO of Allergan to our Board of Directors. His experience building enduring global eye care franchises and driving disciplined growth at scale will be invaluable as we continue to expand Tarsus' reach. We have proven we can build and scale. We have a product that continues to grow. In a pipeline with tangible proof points that position us to do even more. Looking ahead, our ambition is clear: to build a company capable of repeatedly creating and leading new categories in eye care and beyond. Before I hand it over to Aziz, I want to thank the entire Tarsus team. Our performance in 2025 reflects extraordinary execution in our award-winning culture, laying the foundation as we become a leader in eye care. Aziz? Aziz Mottiwala: Thanks, Bobby. We entered 2026 from a position of strength and momentum. XDEMVY is one of the best-selling prescription eye drops and from a product line perspective, is now profitable and growing. This gives us the leverage and flexibility to continue investing in our proven growth drivers that we believe will best support this opportunity. We are still early in reaching the estimated 25 million Americans living with Demodex blepharitis, or DB. And as Bobby mentioned, we have fundamentally changed medicine. We've transformed the eye care experience and now see U.S. sales potential exceeding $2 billion. Beyond the large untapped addressable market, this outlook is reinforced by 3 fundamentals: One, a highly effective medicine that delivers consistently positive outcomes for an easy to diagnose disease. Two, our top prescribers have a significant opportunity to increase utilization and almost every doctor we talk to is looking for more patients to treat. And three, the tremendous growth in patient interest with many coming in and asking for XDEMVY by name. We've seen a meaningful shift in eye care professional or ECP practice behavior and patterns. ECPs are continuing to deepen utilization across all of the patient types we've been talking about, including DB patients with congruent MGD, dry eye and cataracts where visual outcomes are so important. Furthermore, I constantly hear from ECPs that they're beginning to look beyond these initial 9 million patients we originally focused on. And are now screening for DB patients being treated for glaucoma, receiving eye injections or presenting with styes, the lumps and bumps you typically get on your eyelids. At the same time, patients are becoming more proactive and are increasingly self-identified. Together with strong access where we have more than 90% of coverage across commercial, Medicare and Medicaid, these dynamics are expanding the funnel of diagnosed and treated patients. To further accelerate the depth of utilization among ECPs, we're making a targeted investment in one of the most impactful parts of our business, our sales force. In 2026, we plan to add approximately 15 to 20 key account leaders. This is a relatively modest investment that is strategically focused on increasing depth within high opportunity practices, and we expect it to contribute meaningfully to growth in the second half of the year. Another critical growth lever is evidence generation. We plan to share additional clinical and real-world data to reinforce the consistency of outcomes, strengthen physician confidence and further expand screening and treatment patterns. This will also feed another powerful amplifier of ECP utilization, peer-to-peer influence. Having been in the eye care space for a long time, I know that when ECPs hear directly from colleagues about XDEMVY's consistent outcomes, adoption accelerate. We see this dynamic repeatedly at conferences and across professional forums. In complementing all the great work we're doing with our ECPs, our powerful direct-to-consumer campaign and surround sound approach to patient education also continues to deliver a positive and growing return on investment. In 2026, we plan to execute with even greater precision, focusing on the channels and formats that we know drive the greatest return while maintaining a similar level of spend as in 2025. And you can feel the momentum of our campaign in the field. I was recently with a group of optometrists at a large eye-care conference, and they were blown away by how often patients are now coming in asking to be screened for DB. In many cases, making appointments specifically to ask about XDEMVY. It's also amazing to see the change in objective measures of unaided awareness of DB and XDEMVY, which has gone from just 2% at the start of our campaign to now 25% or 1 in 4 patient surveyed. Finally, retreatment dynamics are continuing to progress. Weekly refills are trending in the low to mid-teens range as practices formalized protocols, moving towards our expected steady-state rate of approximately 20%. Taken together, these trends of sustained shift in vision behavior, expanded screening, growing consumer awareness and emerging retreatment practices, making diagnosing and treating new patients more efficient than ever. Before I pass the call over to Sesha, I just want to say how proud and thankful I am for our commercial team. At conferences and meetings, we constantly hear from ECPs about all the great work our team is doing and the impact they're having on patient lives. As you can clearly see, we have a lot more in store for 2026 and look forward to sharing our progress with you. Over to you, Sesha. Seshadri Neervannan: Thanks, Aziz, and good afternoon, everyone. We are leading the way in category creation and have proven that our model works. XDEMVY is the first proof point, and we are now applying that same scientific and strategic framework for the next set of opportunities in our pipeline. Today, I'll share updates on 2 programs that reflect the attributes that drove XDEMVY success. Clear biology, significant unmet need and the opportunity to pioneer new standards of care. I'll start with TP-04 for Ocular Rosacea. Ocular Rosacea is a natural extension of our Demodex expertise. Like DB, it is driven by Demodex mites and can significantly impact how patients look, feel and see. It is also easily identified during a routine eye exam by the hallmark signs of inflammation and redness. Ocular Rosacea affects an estimated 15 million to 18 million Americans, and there are currently no FDA-approved treatments. Importantly, this opportunity is highly complementary to our existing infrastructure. It involves the same physicians and the same diagnostic process, enabling us to build on what we've already established, lotilaner's positive clinical data across several related conditions. In particular, in Papulopustular Rosacea, a related inflammatory facial skin condition with similar pathophysiology, lotilaner demonstrated statistically significant improvements in inflammation and redness in a Phase II trial. The insights from that trial have further informed our understanding of and confidence in TP-04's potential in Ocular Rosacea. TP-04 is a novel lotilaner based sterile investigational ophthalmic gel designed specifically for application to the area around the eye. In December 2025, we initiated the first-ever Phase II trial for the potential treatment of Ocular Rosacea which we believe is the next blockbuster category in eye care. The goal of this trial is to evaluate safety and improvements in erythema and telangiectasias around the eye, 2 of the most impactful signs of the disease using novel and proprietary grading scales informed by feedback from the FDA. As with XDEMVY, this Phase II trial is designed to inform decisions on dose and endpoints for later-stage development. Importantly, the FDA has indicated that we are not required to show a cure, but rather improvements in the endpoint. We expect top line data in the first half of 2027. Turning to TP-05 for Lyme disease prevention, a significant and growing public health concern. I'm excited to announce that we plan to initiate a Phase II clinical trial in the second quarter of 2026, we plan to enroll approximately 700 participants at risk of Lyme disease in 1 tick season with the goal of generating data that gives us confidence in TP-05's potential to prevent Lyme disease. Top line data is expected in the first half of 2027. As a reminder, TP-05 is an investigational, on-demand oral tablet that is designed to potentially kill Lyme-infected ticks before disease transmission occurs directly targeting the root cause. Approximately 27 million Americans are at moderate to high risk of contracting Lyme disease with no FDA-approved preventative therapies and an annual health care burden of over $1 billion. Our approach is already established in Animal Health and further supported by the results of our previous Tick-Kill trial, where TP-05 demonstrated greater than 95% tick-killing activity within 24 hours compared to placebo. Furthermore, our market research showed that patients and physicians alike are excited about the potential of a new oral preventative therapy. With 90% of patients willing to try it, and a majority of physicians willing to prescribe to up to 95% of their high-risk patients. We believe advancing this program ourselves is the right strategic decision at this stage given the foundation we have in place, which includes deep experience with the lotilaner molecule, patent protection projected through 2040, alignment with the FDA on a regulatory path forward and engagement with and support from many of our top Lyme disease experts in the country. And with the data from our Phase II trial, we expect to generate a robust Phase III ready package that will potentially maximize the program's long-term value. Before I turn the call over to Jeff, we also continue to make progress in the potential of TP-03 globally. In Europe, TP-03 remains on track for potential regulatory approval in 2027. In Japan, we are engaged with regulators to define the development pathway. And in China, our partner, Grand Pharma expects approval later this year. These milestones represent potential long-term growth drivers as we work to establish TP-03 as a global standard of care. We have an exciting year ahead and look forward to sharing continued progress across our pipeline. With that, I'll turn it over to Jeff. Jeffrey S. Farrow: Thanks, Sesha. 2025 was a year of strong financial performance and disciplined execution. For the fourth quarter of 2025, we delivered $151.7 million in net product sales at a gross to net discount of 44%. For the full year, we delivered $451.4 million at a gross to net discount of approximately 45%. Total operating expenses were $522.3 million driven in large part by commercial investments supporting the XDEMVY launch. We ended the year with approximately [ $418 ] million in cash, cash equivalents and marketable securities providing meaningful financial flexibility as we scale the business and expand our pipeline. Turning to 2026. With more than 2 years of revenue history, a clear understanding of seasonality, broad and stable payer coverage and proven DTC effectiveness, we are providing full year guidance for the first time. For 2026, we expect strong net product sales in the range of $670 million to $700 million or annual growth of more than $230 million and 50% at the midpoint of our guidance. It is important to note that projected annual revenue growth is not anticipated to be linear throughout the year. Consistent with what we have seen across eye care and other therapeutic areas, we expect typical first quarter seasonality to impact growth, including deductible resets that increased out-of-pocket costs and temporarily reduce new patient visits. We also expect this dynamic to increase the gross to net discount for the first quarter. Additionally, given that XDEMVY remains primarily driven by new patients, holidays, medical meetings and this year's severe weather disruptions are influencing near-term trends. As a result, we expect first quarter 2026 revenues to be flat to slightly below our Q4 2025 revenue. Further, sequential growth through 2026 is expected to be similar to what we observed in 2025 and consistent with broader sector dynamics. We expect strong growth in the second quarter, more tempered growth in the third quarter and robust growth in the fourth quarter. Turning to expenses. For 2026, we expect gross margins to remain strong at approximately 93%, SG&A expenses to be in the range of $545 million to $565 million, which includes stock-based compensation of approximately $40 million, continued investment in our DTC campaign, XDEMVY-related marketing and commercial support at levels consistent with 2025 or approximately $80 million, the incremental planned 15 to 20 new key account leaders, anticipated utilization of patient support services and variable costs that scale with higher sales, including pharmacy administration fees and the branded prescription drug fee. We also expect R&D expenses to be in the range of $115 million to $135 million and includes stock-based compensation of approximately $20 million. The Phase II trial of TP-04 for the potential treatment of ocular rosacea expected to cost between $7 million to $10 million, with the majority planned to be recognized in 2026 and the Phase II trial of TP-05 for the potential prevention of Lyme disease. As Sesha noted, this is a relatively large trial, and expected to cost approximately $25 million to $30 million in total. Given our expertise with TP-05 and lotilaner we believe we are best positioned to run the trial and generate the most value for this program by developing a Phase III-ready package for our potential partner. Importantly, and as Aziz mentioned, XDEMVY is profitable and growing from a product line perspective today. As revenue continues to scale, we expect increasing operating leverage and maintain a clear line of sight towards potential company level profitability while maintaining the flexibility to invest in other high-return opportunities. Overall, our 2026 plan reflects a balanced approach. Extending XDEMVY's leadership while advancing pipeline programs that expand our long-term growth potential and value creation. In summary, we believe we are entering 2026 strong revenue visibility, a scalable cost structure and a disciplined investment plan. We look forward to sharing more updates with you in the coming quarters. I'll now turn the call back to Bobby for closing remarks. Bobak Azamian: Thanks, Jeff. In just 2 years since the launch of XDEMVY, we have driven a fundamental shift in eye care and expect a clear path to peak sales potential of more than $2 billion. And as you heard today, Tarsus is not a single product story. XDEMVY is proof of a repeatable model, one that integrates science, commercial execution and disciplined investment to create and lead new categories in underserved disease states. The foundation is built, the model has proven. We've rewritten the biotech playbook and are on our way to becoming a leading pharma company. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Eddie Hickman with Guggenheim. Eddie Hickman: Congrats on the progress. Can you give us a little bit more detail into what is going into your expectations beyond 1Q for that $370 million to $400 million guidance in terms of a little bit more about like the bottles and the refill and sort of what your expectations are around the cadence of that? Appreciate it. Jeffrey S. Farrow: So yes, are you talking about Q1, Eddie, in particular? Eddie Hickman: Sort of beyond Q1, anything you can give us to get you to that full year guidance that you gave us in terms of the number of bottles and sort of how you expect retreatments to work throughout the year? Jeffrey S. Farrow: Yes. No, I think just the big picture guidance that we provided in the prepared remarks is we do expect flat to slightly down in the Q1, just given the typical dynamics that you see with deductibles resetting. And then historically, we've seen a nice bump up in Q2. And then as you think about eye care space in general, you typically see some tempered growth in the Q3 summer time frame. And then fourth quarter with FSAs expiring and deductibles are basically expiring as well, you see more robust growth there. So all of that, the gross to nets and the bottles dispensed are baked into our guidance. We're not going to really provide that typical bottle guidance or gross to net guidance that we've historically done now that we've given the full year guidance here. But absent a material change, we're probably not going to comment on those type of things. But if there is something that changes dynamically, we'll be sure to make sure the street knows. Eddie Hickman: Got it. And then one clarification is, as the launch continues and docs and patients get more familiar with how this is administered and maybe some getting refilled, do we expect sort of the impact of those seasonal disruptions for conferences and weather and holidays to continue to be as impactful from a magnitude perspective going forward? Aziz Mottiwala: Eddie, it's Aziz. Yes, thanks for that clarifying question. I think as you move further in the launch, you are going to be more susceptible to the typical seasonality. That's pretty typical for most brands. We see this across the eye care space and actually areas outside of eye care as well. So we're seeing that now in the first quarter. I think the dynamics you're referring to are what give us the confidence in the continued growth of the brand and to eventually achieve the peak that we provided today. And I think the fundamentals there are really strong, as you alluded to, right? We've got a strong and growing base of prescribers that are actively deepening their utilization. They're looking for other use cases. We're meeting that with a strong consumer effort. We're now 1 in 4 patients aware. So if you think about our DTC even at a similar spend level, we're likely going to be able to convert patients more quickly and more effectively as we progress on that effort. And then, of course, the refills will continue to help drive that. But I do think from time to time, conferences, weather, et cetera, is certainly going to affect it, considering that even at our steady-state 20% refill rate, we're still primarily NRx driven, right? So you'll see that across every brand. We're probably just as susceptible to it given the NRx dynamic. But certainly, the long-range view here looks really great given the drivers I've outlined. Operator: Our next question comes from Jason Gerberry with Bank of America. Bhavin Patel: This is Bhavin Patel on for Jason Gerberry. First on the gross to net side, you landed at about 44% for 4Q. And I know that 1Q typically has the reset pressure. But I guess as we look at full year 2026, where do you see that steady-state gross to net settling out? And are there any favorable dynamics potentially offsetting the 1Q pressures? And then the second question is, obviously, raising the peak sales target to over $2 billion is a big update. And I'm just wondering if you can unpack what's driving that increased conviction? Is it more about the breadth of the prescriber base continuing to expand? Or is it about really getting deeper with those top-tier weekly writers and maybe it has something to do with adding those new key account leaders that you mentioned? Jeffrey S. Farrow: Bhavin, it's Jeff. Just to answer your question on the gross to net side of the house, you are right, we do expect some pressure on the gross to net discount in Q1 as most manufacturers will face this quarter. But we do expect it to go to fundamentally where we have guided for long-term gross to net discount, which is in the 43% to 45%. As you highlighted in the fourth quarter, we exited at 44%. We'll probably get to that range in the middle of this year. So we'll see a stepwise decrease in Q2 and then fundamentally get to that sort of lower end of the 43% to 44% to 45% range. Bobak Azamian: And Bhavin, this is Bobby. Thanks for the question about $2 billion. We have gotten a lot of people interested in what's the potential of XDEMVY, and we're really excited to be able to talk about that today. What's really changed there is that we have a great view of how XDEMVY is performing now 2 years in. We know that this is a breakthrough. We've served only 0.5 million patients with this medicine. There are 25 million Americans with DB. So that represents less than 10% penetration, that $2 billion-plus figure. We also have transformed the practice of eye care in general, and that's allowed doctors to look beyond those segments to all their patients. They're starting to look at all their patients and recognizing the importance of DB. And then to your point, there's just continued flawless execution across the board with our commercial effort, education, access, evidence. You mentioned a couple of things there that we're going to continue to execute flawlessly on. So that's allowed us to rewrite the playbook and confidently say this is a $2 billion-plus medicine. Operator: Our next question comes from Lachlan Hanbury-Brown with William Blair. Lachlan Hanbury-Brown: I guess the first maybe on the DTC campaign. You said that it's -- you've seen a great response. It's sort of got a positive ROI, and it's probably achieved that earlier than you had expected. So just curious on the thoughts of is it worth putting more behind that, investing more money in a DTC campaign, how you've thought about that and sort of land on $80 million being the right level of spend for that? Aziz Mottiwala: Yes. Thanks, Lachlan. Yes, you're absolutely right. The DTC campaign so far is performing exceptionally well, ahead of our expectations in terms of timing to reach that positive ROI, which confirmed our rationale to continue to advance that in 2026. When you think about what's driving the improvement in ROI in '26 and why we're excited about that, there's a couple of factors. One, now you've got 1 in 4 patients aware. And two, you've got doctors actively looking. These 2 things, along with our ability to execute, right, we've learned a lot in the last year, is going to allow us to really scale that ROI impactfully. It's a compounding effect, if you will. We should be able to convert those patients more quickly, more effectively. $80 million feels right. And ultimately, look, where we're making a slight incremental investment is actually with the sales force because ultimately, the physician writing the prescription. And we think that getting the patients into the practice is important, but continuing to support that deepening of prescribing and that deepening of utilization is another factor. So we're sort of hitting on both sides of the funnel, if you will. We're driving patients at the top and really investing and converting as many of those patients as possible. And as we sit today, we feel really good about the outlook on converting patients from DTC, but also improving the physician dynamics and building on that momentum as well. So TBD, I think long term, we feel really good about the investment level, and we've got the right things in place to capitalize on it. Lachlan Hanbury-Brown: Great. And maybe a second on the Lyme disease program. Can you give any more details on what that study looks like, what the endpoints might be, how long it would be, what sort of duration of treatment is? Seshadri Neervannan: Yes. Lachlan, this is Sesha. Thanks for the question. So Lyme disease is a Phase IIb trial, as we said, about 700 participants. We plan to enroll them in 1 peak season. Beyond safety, which is an important part of a prophylactic program, we are looking to measure other measures. One of the key ones is the blood level of lotilaner, which we want to see that could really translate into our confidence of overall effectiveness of TP-05. So the purpose of the study is to generate data that gives us a strong Phase III ready package, gives us additional confidence on the program and in a large enough population that can give us directional input to a Phase III study. Operator: Our next question comes from Jenna Davidner with Barclays. Jenna Davidner: Just on the operating expenses, which I think came in a little bit ahead of what people were modeling, and it makes sense given the R&D and the investments in sales and marketing. I was just curious, maybe looking beyond 2026, would you expect this, a similar level of step-up going forward? Or is there a point in time where maybe the increase in OpEx spend would kind of moderate a little bit? Jeffrey S. Farrow: Thanks, Jenna. This is Jeff. Great question. We don't expect a big step-up, absent a major change in the business. The only thing I would continue to think about is certain variable costs that will continue to increase with revenues increasing. There are certain things that we pay in terms of pharmacy fees, fees to run the co-pay program, also patient support programs that will increase with increasing revenue. So that would be the main item there. The other thing that we could explore in potential out years is maybe a reduction in DTC spend. We'll have to see how that experiment plays out, but there could be a potential to us to pare back on it or pulse it or something like that. But that's more of a '27 and beyond type of question there. But big picture, no material step-ups in the out years, absent a material change in the business. Operator: Our next question comes from Matthew Caufield with H.C. Wainwright. Matthew Caufield: Great to see the continued progress. I appreciate the question. So there was obviously a mention of the European preservative-free formulation in 2027, the discussions in Japan and the potential partnered approval in 2026 in China. Can you tell us a little bit more about these opportunities and how these markets compare in terms of anticipated prescriber receptivity overall? Aziz Mottiwala: Yes. Thank you for that question. I think when we look at ex-U.S., what's really interesting is the overall dynamics are very similar to the U.S. The prevalence of the disease is pretty consistent regardless of the geography. And in most of the markets, the treatment paradigm is very similar to what we saw in the U.S. prior to launch of XDEMVY, where doctors are aware, they're typically using palliative approaches and are really eager to have a definitive cure or treatment for the disease. Furthermore, the positive U.S. experience is getting out there. As we mentioned, doctors like to hear from each other. And I've been to a few of these European conferences, and the European doctors are really excited with what they're seeing their U.S. colleagues do with XDEMVY. So there's a lot of interest and excitement around the market opportunity. The market dynamics are very similar, albeit there's always differences in pricing and reimbursement, but the patient and physician dynamics are very similar. And ultimately, the pricing and reimbursement dynamics will sort of dictate our go-to-market approach, which we're currently evaluating in each of those markets. Operator: Our next question comes from Dennis Ding with Jefferies. Unknown Analyst: This is Anthea on for Dennis. Congrats on the quarter. In terms of the peak sales guidance, can you talk about when you expect to achieve that $2 billion in sales? And if that would be before 2032 and when your composition of matter patent expires? Is there some more room beyond that based on your secondary patents out to 2038? And then secondly, on ocular rosacea, can you talk a little bit more about what a meaningful trend on erythema would be and if there's a scenario to hit stat sig there? Bobak Azamian: Thank you very much. This is Bobby, and I appreciate the question. It's a little early to say exactly when that peak is going to be hit. What we see is we're 2-plus years into the launch, and we've seen continued incredible growth, and we continue to see no slowing of that growth. So we're about a couple of years from $1 billion plus. And then we see no signs of slowing down. And all these metrics that we've talked about on the commercial side continue to be very, very strong. So that's what I can say about the peak, and I'll pass to Sesha to talk about ocular rosacea. Seshadri Neervannan: Yes. Thanks, Bobby. Can you please repeat that question so I can clarify that? Matthew Caufield: Yes, for sure. In terms of ocular rosacea, what do you see as a meaningful trend on erythema and then if there's a scenario to hit stat sig on that endpoint? Seshadri Neervannan: Yes. Thank you. So thank you for the question. So one of the things I would start by saying that this is the first-ever trial in ocular rosacea, and we are not new to this paradigm. We have done this once well before, developing new clinical measures. So that's an important part of what we do here. So in addition to erythema, we are also looking at telangiectasia, which are prominent blood vessels. These are the hallmark signs of the disease. And when we talk to the ECPs, given the fact that there is no approved treatment, what they're looking for is any improvement in these conditions. It's very meaningful for them, and that's exactly what we are focused on. We have alignment with the FDA on these 2 measures. And what we are striving to show is an objective improvement on these measures. And that's -- and then we'll continue to evaluate the data and move it forward with continued conversations with the FDA. Operator: Our next question comes from Andreas Argyrides with Oppenheimer. Andreas Argyrides: Congrats on all the success and progress in '25. Most of our questions were asked, but I'm going to ask a couple here. Can you give us -- you mentioned something around the seasonal dynamics while you provided the robust sales guidance. Can you give us any additional insight into those seasonal trends? And then assuming you advance both ocular rosacea and Lyme disease programs, how much do you think those pivotal studies would cost? Aziz Mottiwala: Yes. And I'll take the first part here. So the seasonal dynamics are what you typically see across the industry. And again, as we move further down the launch curve here, we'd expect XDEMVY to be part of that typical seasonality, right? And there's a few dynamics here, right? There's resetting co-pays. There's deductible resets for both patient visits. So you're thinking about patients -- fewer patients going into the office, and then those that are going in the office are paying more out of pocket. So it affects both the demand as well as the gross to net, which Jeff alluded to earlier. What we do see is that, that is already starting to work its way through. If you look at the most recent weeks in the IQVIA data, which most people track, we are seeing a positive trajectory in the last few weeks, and we expect that to continue outside of anything unexpected. But I think once you're past the bulk of the season and of course, the weather, you start to see people come back into the eye care offices, you start to see conversion of those scripts. And fundamentally, all the signs we're seeing are really great. When we go to the conferences, the doctors are telling us -- there's no end in sight. You've seen a lot of utility and success with the product, and we see that in the numbers, too, that we analyze, right? The doctors are looking for more and more cases. We think rolling out our key account leaders will help facilitate that. They'll be kind of out there in the back half of the year. We expect that to pay for itself. So these are some key drivers, and we talked a little bit about DTC earlier as well. So we'd expect all the things we're doing to continue to amplify the growth. And certainly, the Q1 dynamics are going to play through. But absent of that, we expect a really strong year in line with the guidance that Jeff provided. Bobak Azamian: And Jeff, do you want to talk about the pivotal potential cost for OR in line? Jeffrey S. Farrow: Yes. So Andreas, the OR study is expected to cost somewhere between $7 million to $10 million, with the majority of those costs incurred in 2026. And then for the Phase III or Phase II Lyme study, somewhere in the range of $25 million to $30 million with most of those costs coming in during 2026 and a few trailing over into 2027. Operator: [Operator Instructions] Our next question comes from the line of Graig Suvannavejh with Mizuho. Graig Suvannavejh: Congrats on the quarter. Two questions, if I could. Just one, could you just go into XDEMVY current prescribing trends and differences happening between the 2 segments, ophthalmologists and optometrists. And then secondly, just a follow-up on the peak sales guidance. Any way you can provide color on the U.S. versus ex-U.S. kind of split there? Aziz Mottiwala: Yes. Great, it's Aziz. I can provide a little bit of color on both of those. So in terms of the prescribing dynamics, what we're excited about is the continued depth of prescribing. And we're seeing this across both ophthalmology and optometry. And I'll remind folks that our split is roughly 2/3 optometry and about 1/3 ophthalmology with both segments growing really strongly. In fact, when we think about depth of prescribing, we've seen some really good movement there. In the most recent quarter, we hit a stat of about 40% of our core target now prescribing weekly, meaning they're prescribing at least 5 a week -- sorry, once a week. And then we saw a 20% growth in those that are writing at least 5 a week or what we call a daily writer. So they're writing at least once a day. That grew 20%. So you've got about 40% of your total audience writing this with good regularity, and then the fundamental heavy users are growing even more at 20%. So there's some good signals there, and that's, again, across both those segments. So we really feel good about the prescribing dynamics. We think about the utility of expanding that effort further with the key account leaders. And then, of course, thinking about the effort that DTC has there, right? Every time a patient comes in from DTC, that's actually pulling from our 25 TAM into that 9 million TAM. So you're expanding the funnel, as we mentioned earlier. So that's going to help continue to facilitate that depth of prescribing. And then to clarify, the $2 billion peak, that's specific to the U.S., right? So that's where we're in market right now, and that's where we're focusing the guidance, and that peak is $2 billion in the U.S. Graig Suvannavejh: Got it. And maybe as a follow-up then, any -- I know it's early days, but any way to help us think about what then the ex U.S. component might look like? Again, it's hard at this point, but any color there? Jeffrey S. Farrow: Graig, it's Jeff. Yes, it is a little bit challenging, particularly given some of the dynamics that we're facing now with MFN. And I think what we're doing is we're making thoughtful investments along the way to do ECP education, get engaged with patient groups and do everything we can before crossing the Rubicon and really launching over there. So we're monitoring that. But big picture, I think a good sort of proxy is typically 90% U.S., 10% rest of world. So I think that would be something you could think about. I would say Japan is probably a little bit higher on the opportunity scale than maybe Europe is. But I think that for modeling purposes, that would probably be a good model. Operator: [indiscernible] conclude today's question-and-answer session. This concludes today's conference call. Thank you for participating. You may now disconnect.

82天前Insight Analytics约5分钟阅读

CNNE 2025 Q4 财报电话会议

Operator: Good afternoon, ladies and gentlemen, and welcome to the Cannae Holdings, Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, and a replay is available through 11:59 p.m. Eastern Time on March 9, 2026. With that, I would like to turn the call over to Jamie Lillis of Solebury Strategic Communications. Please go ahead. Jamie Lillis: Thank you, operator, and all of you for joining us. On the call today, we have Cannae's CEO, Ryan Caswell; and Bryan Coy, our Chief Financial Officer. Before we begin, I would like to remind listeners that this conference call and the Q&A following our remarks may contain forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about Cannae's expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future financial and operating results, and are not statements of fact, actual results may differ materially from those projected. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties, which forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our quarterly shareholder letter, which was released this afternoon, and in our other filings with the SEC. Today's remarks will also include references to non-GAAP financial measures. Additional information, including a reconciliation between non-GAAP financial information to the GAAP financial information is provided in our shareholder letter. I would now like to turn the call over to Ryan. Ryan Caswell: Thank you, Jamie. Over the last year, we have made substantial progress executing our strategic initiatives outlined in 2024, designed to generate long-term shareholder value. Notable accomplishments in 2025 include the further transformation of our portfolio with the sale of Dun & Bradstreet to Clearlake Capital for total proceeds of $630 million to Cannae. In the fourth quarter, we also sold shares of Paysafe, System1 and Sightline to realize losses, which created a $55 million tax refund that will be paid to us in the summer of 2026. We continued significant returns of capital to shareholders through the repurchase of $323 million of stock, representing 17.4 million shares, or 28% of our shares outstanding. We also increased our dividend by 25% to $0.15 per quarter, and paid $30 million in total dividends in 2025. We made new investments in proprietary opportunities where we can help drive value. In 2025, Cannae invested an additional $50 million in Black Knight Football Club and also invested an additional $67.5 million in JANA Partners to increase our ownership from 20% to 50%. With these investments and the sale of public securities like D&B, our portfolio today is primarily investments in proprietary private opportunities that public investors otherwise wouldn't be able to access. We believe it is important to provide our investors with these differentiated investment opportunities and invest in structures where Cannae can drive value. We have also continued to create value in our portfolio companies. This is best evidenced by activity at our largest investment, Black Knight Football, which continues its strong performance across our group of clubs. Today, AFC Bournemouth sits in 8th place in the Premier League with 38 points through 27 matches. This performance is a testament to the coaching and recruiting staff at AFCB. Over the last two transfer windows, AFCB has generated over $400 million in transfer proceeds, which according to third-party reports, represents the second highest net profit in European football, and demonstrates the team's ability to maximize profits while continuing to refresh the squad and drive performance. We also continue to make progress on our stadium expansion. We recently reviewed planning approval from the local council and Phase 1 of our stadium renovation is expected to be completed by the '26, '27 season. Phase 1 will now increase total capacity by approximately 1,500 seats, but will increase hospitality by 600 seats, or approximately 100%. Phase 2 will be completed by the start of the '27, '28 season and increase capacity to over 20,000 seats, an approximately 80% increase in capacity. In January, we acquired the remaining 60% of FC Lorient for approximately EUR 60 million through a combination of Black Knight Football stock and cash. The value was based roughly on the put call that was structured in the 2023 purchase. BKFC now owns 100% of FC Lorient, and we are excited about the strategic potential of the team within our multi-club. The team sits in 9th place in Ligue 1 and is in the quarter finals of the French Cup. After 23 matches, Moreirense F.C. at Football Club sits in 7th place in the Primeira Liga with 33 points from 10 wins and 3 draws. The success of each team demonstrates the upside of our multi-club operations, and we remain excited about the value we are creating for an eventual monetization. Despite our accomplishments in 2025, the Board and management team are not satisfied with our stock price and believe that it does not reflect the intrinsic value of our assets or the long-term potential of the platform. As a result and based on feedback from our shareholders, the Board has established a new set of strategic priorities designed to provide greater clarity and drive sustained long-term value creation for our shareholders. The tenets of this strategy are as follows. One. Portfolio transformation and strategic focus. We are accelerating the transformation of our portfolio to concentrate primarily on sports and entertainment related assets where Cannae has demonstrated a differentiated competitive advantage. We continue to benefit from access to proprietary investment opportunities in these sectors and intend to build a more focused, efficient portfolio of synergistic assets where Cannae can actively drive value creation. As part of this transformation, we will continue to monetize nonstrategic assets in a disciplined manner to redeploy capital towards higher returning opportunities. As a result, Cannae is exploring strategic alternatives with regards to its restaurant group. Two, enhanced operating performance and transparency. We are intensifying our efforts on improving the operating performance of our portfolio companies, while increasing the level of disclosure provided to our shareholders. Beginning this quarter, we are broadening our reporting to provide greater visibility into asset level operating value -- asset level operating results and value creation initiatives at our portfolio companies. This can be seen from the information provided in our investor letter, and we will also be posting an overview deck of Black Knight Football, our largest investment. On our website that provides more details around the strategy, clubs and financials. Three, disciplined capital return. Returning capital to our shareholders remains a priority. We are committed to maintaining a consistent quarterly dividend subject to capital -- and subject to capital availability, may pursue selective and opportunistic share repurchases. In the short term, the Board is prioritizing capital flexibility given our current capital base and the focus on the strategic transformation described earlier. Four, ongoing governance evolution. The Board remains committed to continuous evaluation and enhancement of our governance policies and procedures consistent with best practices. With four new independent directors joining the Board in 2025, the Board has purposely refreshed committees and continues to focus on areas to improve governance and shareholder alignment. We believe executing on these strategic priorities will lead to growth in Cannae NAV and stock price. With that, I'll turn the call over to Bryan. Bryan Coy: Thanks, Ryan. I will walk through our fourth quarter and full year results, followed by a brief note on liquidity. Starting with our fourth quarter results. Total operating revenues of Cannae were $103 million in the fourth quarter of 2025, a 6% decrease from $110 million in 2024. This was primarily from lower restaurant revenue, a result of generally lower guest traffic and 9 fewer O'Charley's locations that were closed during the year, abated in part by higher average guest checks. This was also slightly offset by higher lot sales and hospitality revenue at Brasada Ranch, our resort in Oregon. Cannae's total operating expenses of $127 million in the fourth quarter of '25, down from $132 million in the prior year. Cannae's current year operating expenses included $12 million of noncash impairment charges, mainly associated with right-of-use assets at certain O'Charley's locations. Absent that noncash charge, Cannae operating expenses decreased by approximately $17 million or 13%. That decrease reflects lower cost of restaurant revenue, lower personnel costs and no external management fees following termination of the agreement earlier this year, as well as other actions taken to reduce corporate operating expenses, which were offset in part by increased professional fees associated with our recent proxy contest. Of note, below Cannae's operating loss line, recognized -- net recognized losses decreased $8 million in the fourth quarter of 2025, largely comprising mark-to-market losses on our exit from Paysafe. Equity and losses of unconsolidated holdings was $69 million in the fourth quarter of 2025, and the majority of this represents our share of Alight's fourth quarter results with the large goodwill write-off. Moving to full year numbers. For the full year 2025, total operating revenue was $424 million, compared to $453 million in 2024, reflecting lower restaurant rotations and associated revenue. Our operating loss was $119 million in 2025, compared to $104 million in 2024. The 2025 figure reflects lower cost of revenue, as well as $24 million of nonrecurring management charges, $14 million of noncash impairment charges at the restaurant group, and $5 million of increased professional fees associated with our recent proxy contest. Without these fees, operating expenses would have declined by approximately 27%. The results below the operating line in 2025 were largely influenced by noncash impairments associated with the Alight, offset in part by increases in the value of our holdings in the CSI partnership. Turning to the year-end balance sheet. Cannae had over $1.3 billion in total assets offsetting $330 million of liabilities. At the corporate level, Cannae has over $147 million of cash today, and our only corporate debt outstanding is $48 million of fixed rate, interest-only term debt that doesn't mature for over 4 years. Additionally, as noted above, we expect to receive $55 million in tax refunds this summer. Operator, we'll now pause and open the line for questions. Operator: [Operator Instructions] The first question will come from Ian Zaffino with Oppenheimer. Pardon me, Kenneth Lee with RBC Capital Markets. Kenneth Lee: Just in terms of the strategic priorities, the new goals there, you talked about potentially accelerating more to the sports and entertainment side. With that, how do you view the potential monetizations across the portfolio? I think you talked about strategic actions for the Restaurant Group, but should we consider any other non-sports investments as being open for potential monetizations over time? Ryan Caswell: Ken, thanks for the question. Yes. I mean I think we have started to really transform our portfolio last year with some of the sales of D&B, Dayforce, Paysafe, System1. And then as you rightly pointed out, we announced strategic alternatives related to the Restaurant Group today. The Board, and we are going through each of the individual assets and trying to figure out where we are and does it make sense for monetization. Clearly, some will be more strategic than others. But with the focus of where it is around sports and entertainment related assets, we will be going through our portfolio and looking at each of our assets and determining the appropriate time. And we make a decision like we did with the restaurants, we will let you know. Kenneth Lee: Got you. Very helpful there. And one follow-up, if I may. In terms of the JANA partnership there, you've been in partnership for some time now. And obviously, just given the recent market volatility, wondering if there's any change or updated outlook around potential investments associated with that. Or once again, does the recent move towards sports and media kind of not put that on the front burner anymore? Ryan Caswell: No. We remain very optimistic about our partnership with JANA. They just entered 25 years in business and have had an incredible career, or an incredible track record over that. So we do remain optimistic. We think they are -- they will continue to source us different opportunities. Given the strategic direction around sports and entertainment related assets, the box is maybe a little bit smaller given the capital base that we have today, but we continue to be optimistic about them, the long-term track record and our ability to find stuff with them. But the Board is very focused at the current time on sports and related entertainment assets. So we would have to find something that fits within that box with them. Kenneth Lee: Got you. And just one more follow-up, if I may. When you look across the current portfolio -- Cannae's current portfolio, across the various fintech and software associated companies within the portfolio. How do you view the risk of AI across that portfolio? And how do you think about potential valuations around there? Ryan Caswell: Yes. No. We've obviously spent a bunch of time thinking about kind of AI and AI impact across the portfolio. I think we're fortunate that our biggest investment around football. While there may be AI things that improve processes in the business, sports is quite a ways away from AI. In terms of the financial services and other businesses that we have, we think they are all incredibly -- or we think most of them are very embedded with long-term contracts and in very important parts of their customers' processes. And so we think that those are more sheltered, and they are trying to basically implement AI into their businesses, and all of them are going through processes, looking at where they can be more efficient with AI. And so we feel good about that. But clearly, they and we are aware of all of the AI risk that's out there and disintermediation and we're trying to be proactive in thinking with them about things that they can do to make their business more secure from that. Operator: The next question will come from Ian Zaffino with Oppenheimer. Ian Zaffino: I wanted to ask on -- first, you spent a lot of time on Black Knight Football Club and kind of what you've been doing there. How do we think about the valuation of these businesses? Just kind of given, number one, I don't think you've updated the valuations in a while. So what would that look like if you did update those valuations? And is there any way you could give us a framework? I know there's been a bunch of at least U.S. assets that have changed hands at kind of astronomical prices. And so wondering how you guys are thinking about valuation of these assets, whether it's just from a revaluation or then ultimately what they could be worth? Ryan Caswell: Yes. Thanks, Ian. So I think there's a couple of ways to think about it. The first is, as you look at the sum of the parts, I mentioned this earlier, but we issued some stock in conjunction with the acquisition of FCL, and we issued that at about roughly 12.5% premium to kind of the par value. And so that's what the mark is based on in our sum of the parts. And I think as we think about the value of the business -- again, we continue to think about over time that where other Premier League teams have traded around 3x. There are some public marks that are out there in that and applying that to our business. I think what we've also tried to do is if you look in some of the disclosure in the shareholder letter, we've tried to provide more detailed financials on all of our investments. But in Black Knight Football, in particular, for this question, which will give investors more details on the financials of the business, the balance sheet, our ownership. There has been some movement in that, given the purchase of the FC Lorient, as well as Morientes. So some of those will be coming in as the financials are updated. There's a 1-month lag on those -- or I'm sorry, 1 quarter lag. But we've tried to give people much more details into the financial implications, which will allow them and us to better think about what that value is. Ian Zaffino: Okay. And then the next question will be on SpaceX. What should we expect there? I know you have a small investment in there, but how do we think about that? And I guess if this does go public, would that be like a use of funds for you guys? Would it be a source of funds? How will we look at that investment? Ryan Caswell: Yes. So if you look in our sum of the parts, we actually broke out the SpaceX investment. And so the value that we're using is based on the publicly announced merger that they had with xAI, excuse me. And so I think as we move forward, clearly, we've been -- the business has done very well since we've owned it, it's up significant value from where we bought it. But if you think about the strategic -- the strategy that we outlined earlier in the call, it seems like it will be a source of cash for us over time. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ryan Caswell for any closing remarks. Ryan Caswell: Thank you, operator. To conclude, while we made progress in 2025, the Board and management are not satisfied with our stock price performance and are executing a new strategic plan to drive long-term value creation. We thank you for your continued support, and we'll update you on our progress as we move forward. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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