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Operator: Thank you for standing by, and welcome to the PGG Wrightson Limited Half Year Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Stephen Guerin, Chief Executive Officer. Please go ahead. Stephen Guerin: Thank you, Amy. [Foreign Language] Good morning, and welcome to the PGG Wrightson's results briefing for the 6 months ended 31 December 2025. My name is Stephen Guerin, Chief Executive Officer, and I'm pleased to provide you an overview today of our interim results for the 2026 financial year. Joining me on the call are Peter Scott, our CFO; and Julian Daly, General Manager of Corporate Affairs, who is also our Company Secretary. Today, I'll summarize a high level of our financial results and trading performance and will comment on our thoughts on the year ahead. There will be time for questions at the end of my commentary, and I welcome you -- receiving those from you. A more detailed commentary on our half year results are available in our half year report, which we released to the NZX online today. I will present -- not present all of the content outlined in our release, but will summarize key matters so that we can provide -- move on to the more questions and answer time at the end of this call. Turning to the financial performance. Operating EBITDA of $45.7 million was up $4.4 million or 11% on the prior corresponding period. Operating revenue of $619.4 million was up $49.1 million or 9%. Net profit after tax of $17.3 million was up $1.3 million or 8.6 -- sorry, 8% up. Just repeat that again, net profit after tax of $17.3 million was up $1.3 million or 8%. An interim dividend of $0.045 per share was declared today. We have reaffirmed our forecast for FY '26 full year operating EBITDA guidance of around $64 million. PGW delivered improved performance on the 6 months of the financial year, reflecting both strong operating execution and generally supportive market environment. The first half of the year was characterized by favorable commodity prices across a number of key segments for PGW customers. Dairy pricing remains supportive, providing confidence in cash flow stability. Red meat markets were particularly strong, driven by tight global supply and resilient offshore demand. Improved on-farm profitability translated into demand for PGW's livestock services, pasture renewal, agronomy and animal health products. All prices also improved during the period. Positive export pricing for kiwifruit and apples resulted in good demand for PGW's products and advisory services. By contrast, the viticulture and arable sectors have experienced weaker demand. The buoyant rural real estate market has contributed positively during the period, reflecting increased confidence across the rural property sector generally. Against this backdrop, PGW delivered improved performance across several key areas of the business. PGW invested in strategic initiatives designed to strengthen its market position and enhance customer value. Investments during the period include the acquisition of the animal health manufacturer of Nexan Group and the launch of PGW's Blue Ag agricultural product range. Turning specifically to the individual business units. Our Retail & Water business, which incorporates Rural Supplies, Fruitfed Supplies, Water and Agritrade saw operating EBITDA of $41.8 million, up $2.3 million or 6%. And revenue was $528.6 million, up $38.3 million or 8% on the prior corresponding period. PGW acquired the lease of the Geelan Family Research Station in Hastings, our long-standing commitment to research and development. The 2.8 hectare site provides our team with a dedicated hub for horticulture and agricultural product trials. This strengthens PGW's technical capability and innovation product development pipeline. PGW acquired the Nexan Group, owner of the Nexan and VetMed Animal Health brands. This acquisition strengthened our position by bringing this trusted New Zealand made product range in-house. This business is trading well, and we're already seeing the benefits of a well aligned to our strategic fit. Another key initiative was Blue Ag, our private label for AgChem range, which was launched and has been through its first trading season. The new portfolio of rich and active ingredients improves supply chain resilience, provides price point control and offers customers greater choice. Turning to our Agency businesses. Our Agency businesses include livestock, wool and real estate. The Agency Group delivered an operating EBITDA of $8.7 million for the first 6 months of the 2026 financial year, an increase of $1.8 million or 27% compared to the same prior period. Revenue was $89.8 million, up $10.7 million or 14% compared to the prior period. Cattle continue to be in high demand, supported by firm beef schedules, which encouraged increased trading activity. [indiscernible] prices were significantly higher than last year and confidence in the dairy sector improved on the back of strong milk forecast and pricing. Demand for our GO-STOCK products continues to grow with a large number of new contracts being signed. [indiscernible] throughput was also strong across the network. Bidr, our online trading -- livestock trading platform made gains through the first half of FY '26, reinforced by sustained demand for online bidding and live streaming saleyards and on-farm auctions. Headage volumes with key partners remained ahead of the prior period as more livestock was transacted through supply chain relationships. Momentum has gathered across a strong wool market with prices maintaining the upward trajectory, providing a more positive outlook for growers. PGW Real Estate delivered a pleasing first half performance, supported by continued confidence and improved profitability in the rural sector. Turning to the all important cash flow. PGW recorded operating cash outflow of $49.9 million for the first 6 months of the financial year. This represented an $18.9 million higher outflow versus the prior comparative period of $31 million. The higher operating cash flow was a result of a seasonal increase in working capital over the spring trading period. Strong trading in our Retail and Water and Livestock businesses, together with higher livestock values resulted in higher net working capital movements, including GO-STOCK of $22.3 million versus the prior comparative period. Cash outflows from investing activities was $20.5 million, an increase of $15.2 million. This included $19.7 million acquisition of Nexan Group, along with fixed asset and intangible purchases of $2.3 million, partially offset by proceeds from fixed asset disposals of $1.5 million. Net interest-bearing debt was up $64 million from 31 December 2024 to be $170.7 million. The Board declared a fully imputed dividend of $0.045 per share, which will be paid on the 8th of April 2026 to shareholders on PGW's share registry at 5:00 p.m. on the 26th of March 2026. We've included an update on our sustainability progress in the half year report, including the introduction of further electric vehicles into PGW's fleet. I refer you to Page 16 of the half year report for full details in that regard. Looking ahead for the remainder of the financial year, the operating environment is expected to continue to be predominantly positive and presents big opportunities for PGW in the sector. Overall conditions across agriculture remain favorable with most parts of the sector performing well, supported by good demand and strong export pricing. The red meat market remains particularly source of strength, underpinned by constrained global supply. The positive outlook for dairy was reinforced last week by Fonterra raising the forecast milk price midpoint range from $9 to $9.50 per kilogram of milk solids. Wool has also shown renewed momentum with improving demand assisting greater price stability. These conditions increased positive returns and underpinned farmer confidence. Horticultural continues a moderately steady expansion led by kiwifruit and apple sectors. Viticulture and arable cropping remain the key exceptions with subdued demand and pricing. Confidence in the rural real estate market is expected to continue, supported by dairy profitability and lower interest rates. The broader economic indicators are looking more encouraging also. Together, these trends contribute positively to farmer incomes and reinforce an optimistic outlook for the rural sector moving forward. PGW is well placed to support its farmer and grower customers and to benefit from opportunities arising from the forecast export demand. While remaining mindful of the ongoing challenges, we are optimistic about the remainder of the financial year and remain on track to deliver our forecast 2026 full year operating EBITDA guidance of around $64 million. Grateful to the contribution of our nationwide team of specialists and their commitment to supporting our customers and rural communities and each other. I want to thank and acknowledge our shareholders for their continuous confidence in PGW as we work to deliver long-term value. Our half year report is available on the New Zealand Stock Exchange website under the PGW ticker and on PGW's website also. This concludes the formal part of our presentation. And Amy, I now welcome questions from participants. Thank you. Operator: [Operator Instructions] The first question comes from [ Paul Grant ], private investor. Unknown Attendee: Good to have a growing result there. I'm just wondering what the NPAT contribution was for Nexan, it cost about $20 million as an investment. So what -- maybe I should ask you, Peter, what was its contribution to NPAT? Peter Scott: Yes. Good question, Paul. If you go to Note 7 in the financial statements, you'll see the revenue and the NPAT, the NPAT contribution for the -- it was actually 5 months, so from the 1st of August through to the 31st of December, given we acquired on the 31st of July was $1.9 million. One thing to bear in mind, of course, is that Nexan -- most of the transactions are within intercompany, so they're eliminated from an accounting perspective, but the contribution was $1.9 million from an NPAT point of view. Stephen Guerin: Paul, Stephen here. Again, I may add a couple of additional comments. As I said, that was -- as Peter acknowledged that's for first 5 months. In terms of our business case for approval from our Board, the business is trading ahead of expectations in that regard, too. So thank you for the question. Operator: [Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Guerin for closing remarks. Stephen Guerin: Thank you, Amy. And I want to again acknowledge the support of our staff in producing the result. The market environment is conducive, but our team have to get out of bed every day of the week and across the country, and we really appreciate their efforts in supporting our investors and their confidence in PGW. So thank you again. We look forward to talking to you in August when we deliver our full year results, and we're focused on meeting our market guidance. And we thank you for your time today, and we really appreciate you making yourselves available for this call. Thank you, Amy. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the AMA Group HY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Ray Smith-Roberts, Group Managing Director. Please go ahead. Raymond Smith-Roberts: Good morning, everyone. Thank you for taking the time to join us for the presentation of the AMA Group FY '26 half year results. For those of you joining us via webcast, you should be able to view the presentation on your screen. If you're joining us via teleconference, you should have access to it via our investor presentation on the ASX platform or our company website. I'll begin today's presentation with a business update along with details of our portfolio and our business results. I will then hand over to our group CFO, Dom Romanelli, who will take you through the group financials. I'll then return a bit later to cover outlook. We'll be taking questions throughout the webcast facility today. You can submit these at any time during the presentation, and we will address them at the end. So if we get underway, let's begin on Slide 4, a bit about 1 half '26 overview. I'm pleased to report that AMA Group produced the first half result for FY '26 of pre-AASB 16 normalized EBITDA of $30.5 million. That's up almost 22% on the first half of FY '25 and continues our positive profit growth trajectory. In conjunction with our profit growth, our operating cash flow also improved by 16.2% for the corresponding reporting period. This solid results we have delivered for the first half is headlined by continued strong performance in the Capital SMART network, considerable improvement in the financial performance of our AMA Collision network and ACM Parts contributing a positive EBITDA to the group for the first time. We are a people business and have continued to focus on upskilling, growing and retaining our team always in a safe manner. Our LTIFR of 3.1 as at the 31st of December 2025 is down from 4.2 in the corresponding period. We've increased our team by 37 members and maintained our voluntary turnover at very good rates. So if we look at the headline of our businesses, Capital SMART achieved EBITDA of $24 million for 1 half '26, which is down from the $25.8 million in 1 half '25, but that is in line with our expectations. AMA Collision continued on its good progress in this optimization and capability improvement program with an $8.1 million EBITDA improvement in the first half of FY '26 compared to the first half of FY '25. With continuing focus in our disciplined approach, there is significant opportunity for further improvement to continue to drive improved financial performance. Wales performance was impacted by softer work provisions of large crash repair work and improved financial performance is expected in the second half of FY '26. The Specialist Businesses has seen significant improvement in financial performance in particular, within inside our Prestige network. In relation to ACM Parts, it continues to improve its financial performance as it implements continued operating improvement actions. Overall, group revenue of $524.1 million increased $29.6 million on the first half of FY '25. That's a 6% increase, with revenue from our core vehicle collision repair businesses, increasing 6.6% to $503.5 million. Normalized half 1 FY '26 pre-AASB 16 EBITDA of $30.5 million. This is up $5.5 million or 21.9% in the first half of FY '25. And our EBITDA margin has increased from 5% up to 5.8% in the first half of FY '26. Operating cash flow after the payment of lease costs was a positive $12.2 million, an improvement of $1.7 million or 16.2% on the first half of FY '25. Underlying financial performance, improvement in key strategic growth is expected to continue into the remainder of this year and beyond, and we'll cover that in more detail further later in outlook. Now if we move on to the specific slides on each business. Slide 5, Capital SMART. In the first half of FY '26, Capital SMART was in line with expectations. Capital SMART continues to deliver improved customer outcomes in conjunction with our key customers, Suncorp. Despite moderately lower volumes, particularly in Victoria, revenue increased as a result of higher severity and complexity of repairs. As previously indicated, 1 half '25 and second half '25 both included incentives, which have not been nor were they expected to be replicated in FY '26. This has impacted the EBITDA margin slightly, reducing it as expected. Continued cost control measures and productivity initiatives will preserve margins going forward. 3 new sites were opened in the first half of FY '26, one in South Australia, one in Newcastle in New South Wales and one in Tasmania. These are all locations where opportunity is strong and where our network is underrepresented. These will deliver incremental EBITDA as they ramp up in operations. We did close 1 site in New Zealand during the first half of this period. We have 2 further site expansions planned for this calendar year, one in Sydney and one in Adelaide, and hopefully, they'll both be up and running before the end of the calendar year, as I said. Overall, revenue increased $7.8 million to $245.9 million, an increase of 3.3% on the corresponding period. Normalized half 1 '26 pre-AASB 16 EBITDA of $24 million is down $1.8 million in the first half of '25. Capital SMART will pursue further optimization and growth. We're focusing on optimizing operations through in-sourcing, timely repairs and utilizing technology. We will continue to develop the workforce by attracting and training and mentoring high-performing people. And we will continue to invest in the nationwide network in both refurbishment of existing sites and new sites where key opportunity locations are aligned to our customer needs. And we'll continue to evolve and enhance our customer experience and convenience. If we move on to the Collision business, turning to Slide 6. The transformational change program within AMA Collision business continues with significantly improved financial performance as mentioned. Revenues increased $18.4 million to $194.1 million, an increase of 10.5%. And normalized EBITDA for 1 half '26 pre-AASB 16 of $6.1 million is up $8.1 million from 1 half FY '25. The operational optimization and key capability focus within the business continues to achieve results. This disciplined focus will continue for the remainder of this year and into next year with further upside from existing operations will be derived. Key insurance customer relationships continue to improve and strengthen. The business will continue to focus on network optimization, including investment in vehicle repair capacity, team capability and customer experience. This will include site rationalizations and site expansions where appropriate. In addition, we will seek strategic growth where opportunity capability and capacity are aligned. Overall, a very pleasing result in Collision. We turn to Slide 7 and the Wales heavy vehicle division. Wales heavy vehicle business was impacted by some softer work provisions in this last half. In the half 1 '26, it delivered a normalized pre-AASB 16 EBITDA of $3.8 million, down $1.6 million from 1 half FY '25. There has been a shift in work mix during this period with reduced claim volume and large-scale repairs being lower, impacting growth in some states. This is expected to persist in the short term but more large-scale repairs are expected to normalize over the next 12 months. Wales is well placed to take on more volume with capacity available as the volume returns with additional opportunities being explored with insurers, government, corporate and private fleet operators and insurance brokers. The business continues to strengthen its relationship with both market-leading insurers and smaller insurers and fleets who are seeking preferred repairs as well as continue to expand its service offering with different types of repairs, including machinery, motor homes and specialist equipment. We turn now to Slide 8, our Specialist division. AMA Prestige sites revenue and EBITDA were well ahead of the prior corresponding period. Its financial performance was improved on the back of improved productivity following a range of initiatives being implemented. The business will continue to focus on enhancing capability and strengthening key OEM and insurance relationships. The TechRight business volumes have increased in 1 half '26 compared to the prior corresponding period, which has led to improved financial performance. Development plans continue where appropriate. Our TrackRight Mechanical division, the financial performance was also ahead of last year and the prior corresponding period. Work on optimizing these sites in Queensland and Western Australia continues. If we move to Slide 9, ACM Parts. The ACM Parts business continues to improve with positive pre-AASB 16 normalized EBITDA of $0.7 million, up $1.4 million to the corresponding period. There was a strong uplift in financial performance as key initiatives relating to the reclaim and genuine parts businesses, and growth in the consumables business have yielded positive results. Network optimization or our warehouse capacity remains a key focus with a planned relocation of a site to a more fit-for-purpose facility currently underway. The business has seen a strong uplift in external revenues. This is attributed to a strong focus on operational quality and service performance along with a competitive offering given from improved sourcing. Procurement continues to be one of the business' biggest opportunities. With the business now self-sustaining and continuing to improve its performance through these operational efficiencies, we will continue to focus on the outcomes we can control and maximize value for our company. I will now hand you over to Dom to take you through the group financials. Domenic Romanelli: Thanks, Ray, and good morning, everyone. Slide 11 is a summary of the first half FY '26 financial performance. The financial performance is presented on a post-AASB 16 basis below EBITDA. However, we have included supplementary analysis on Slide 19, which provides a comparison of first half FY '26 results on a pre- and post-AASB 16 basis. As Ray has outlined, our first half FY '26 financial performance was a continued improvement on the first half of FY '25 with revenues up $29.6 million or 6% to $524.1 million and normalized pre-AASB EBITDA of $30.5 million, up $5.5 million, 22% up on the first half of FY '25. This reflected an EBITDA margin improvement from 5.0% to 5.8% for the first half of FY '26. If we look at purely at our core vehicle collision repair businesses, our EBITDA percentage margin grew from 5.4% to 5.9%. This uplift was largely driven by the continued operational performance of our AMA Collision, Specialist and ACM Parts businesses. Finance costs in total were down $1.5 million for the first half of FY '26 when compared to the corresponding first half period. Pleasingly, finance cost other reduced by $3.7 million for the first half year due to an improved cost of funding and debt levels following the refinancing of the group's senior debt in February 2025. This benefit was partially offset by an increase of $2.2 million in the finance cost of our leases, reflecting the increase in market rents and interest rates. Consistent with FY '25, there is no dividend declared for the first half of the '26 financial year and the increase in income tax expense reflects the uplift in earnings, particularly within the Capital SMART tax group, the nondeductible nature of our P&L expense relating to our executive share plan and prior period under provision adjustments that have been corrected. The normalizations we have called out for the first half of FY '26 relates to planned site closures within AMA Collision, which represents $0.8 million and the planned ACM warehouse relocation of $0.6 million. The normalization in the corresponding period of $3.5 million related to a legal settlement claim relating to an earn-out of an acquisition that took place in 2018. Turning to Slide 12 and the summary financial position. We ended the first half to 31 December 2025 with net debt of $20.7 million, a slight increase from the 30 June '25 balance of $17.7 million. Our balance sheet remains strong and provides the organization the capability to execute its capital expenditure program. The group continues to meet all its financial covenants and expects to operate within them for the next 12 months, and we also completed a 1 for 10 share consolidation during this period. Now to Slide 13. The group had positive operating cash flows of $12.2 million for the first half of FY '26 once the principal elements of lease payments are taken into account, which was an improvement of $1.7 million or 16.2% on the corresponding half year period. This was driven by the group's stronger EBITDA, continued improved cash management albeit we are now starting to pay income taxes, which we will continue to increase in the second half of the financial year and $2.5 million reduction in interest paid due to our improved cost of funding. The first half of the financial year saw capital expenditure payments of $15.3 million, an increase of $5.6 million on the corresponding half year period. This was primarily due to investment in greenfield sites and investment in replacement equipment and site expansions. The group has a healthy cash position at 31 December 2025. Turning to Slide 14. Normalized corporate costs were $2.2 million higher than in the corresponding half year period. This was predominantly due to a higher expense of $2 million relating to our executive share plan in this half year period compared to the corresponding half year period. This expense is of a noncash nature and is only deductible for income tax purposes if the shares ultimately vest. The normalization noted in the slide for the last year's half year period related to the legal settlement claim over the earn-out calculated on a 2018 acquisition. In addition, Slides 18 to 21 provide additional financial information that will assist with your analysis. I'll now hand back to Ray. Raymond Smith-Roberts: Thank you, Dom. If we now turn to Slide 16 and the outlook. AMA Group continues to progress on its journey to achieving a pre-AASB 16 EBITDA percentage of 10% within our core collision vehicle repair businesses. We've set a target of doing that in the next 3 to 4 years as a maximum, but I'm confident of doing it sooner. Capital SMART is expecting another strong result albeit slightly lower than FY '25. There will be some rationalization within the existing network, partially offset by a key focus on specialized and value-add activities and on further developing high-performing, highly capable teams. As mentioned earlier, we have opened 3 sites so far this financial year, where the network was underrepresented. The plan continues to be growth where demand and opportunity aligned with our key partners. AMA Collision continues through the transformational change program with further operational capability improvements being implemented. A strong runway of continuous improvement exists with continued execution. Wales is expected to have a better second half than our first half. The Specialist Businesses will see within the Prestige businesses continued improvement from operational parameters and focus. Our TrackRight and TechRight business will continue with the development and opportunity where capability and capacity are aligned, and we will continue to improve the ACM Parts performance maximizing value to the company. Overall, we continue to target 5,000 repairs a week as an average volume, which we are very confident of being able to do sustainably. Strategic growth in all core businesses will be pursued where opportunity, capability and capacity are aligned via greenfield, brownfield and acquisition where appropriate. We will continue to further develop our high-performing, high capability team and work with our people. And finally, we're maintaining our guidance for FY '26 financial year. We expect a normalized pre-AASB 16 EBITDA to be in the range of $70 million to $75 million. I will now address questions. Please note that you may submit your questions through the webcast facility. Operator: [Operator Instructions] The first phone question today comes from Chris Savage from Bell Potter. Chris Savage: Ray, probably one for you, firstly, just volume. You flagged at the AGM that there had been some weakness in September. and they continued into October. Can you talk us through how it transpires for the rest of the year? Raymond Smith-Roberts: Look, overall, Chris, there's no one answer to volume. We're a diversified group. There are -- we're continuing to see a changing landscape in what events looks like and severity and complexity looks like. But if we look at volume generally, it's improving. It's -- we had a -- there was a couple of months late last year, it was a bit under what we expected. We're certainly seeing overall volumes stronger than where we expected as well. So they've actually going the other way. So the volumes are sustained. We work in different areas in different divisions. If I had a volume concern, we're certainly seeing in our heavy business where overall larger collision works. The volumes themselves are holding up. It's a very -- it's a bit different because it's a higher rate write-off rate than what we've been seeing for a while. The volumes -- we're seeing some areas -- we are heavily footprint in Victoria. Victoria is a struggling state in a few areas. So we tend to feel it more than relative to the overall nation. Volumes in New South Wales and strong. Volumes in Queensland is strong. Volumes in Western Australia is strong. South Australia, Tasmania Canberra and strong in most areas of our network, we have more than enough volume. We have pockets of our network where we don't have enough volume. Chris Savage: Sure. So can you say what the repairs averaged in the first half per week? Raymond Smith-Roberts: In terms of volume? Chris Savage: Yes, you're targeting 5,000 repairs per week. I'm guessing that the number was below that in that one. Raymond Smith-Roberts: We achieved, I think, 4,772 was the average. And yes, 5,000 a week, again, over at a 52-week average is going to require weeks of 5,500. There are some weeks where based on calendar cycles and public holidays and times of year where it's just not possible. If I just completed a week last week 5,600. So the volumes, as I say, are strong at the moment, but they're trending in the right direction overall. As I say, we see a mix -- there's an average repair price mix changing based on severity and complexity. But volume isn't -- other than in Wales where it is probably seasonally or down where I expect it to normalize, everywhere else, we have pockets of volume where again, the network is overrepresented or there is a range of oversupply. But generally, volumes are fine. Chris Savage: Okay. And just your thinking on ACM Parts now going forward? Raymond Smith-Roberts: Look, at the moment, I'm just focusing on what we can control. First, the business is going well. I mean my thoughts around it. The better we get it, the more strategically important to us it is network our size having influence over our own parts supply. We'll always have strong relationships and heavy dependence on the dealer network and the OEM relationships, but there is a range of areas, especially as we move into the need for all of our new climate reporting and the area of recycled in those areas being right. It's becoming stronger. It's far less of a distraction, and we're actually continuing to get benefit out of it. If someone comes along and writes me a big check, we then we'll look at it. And for the time being, I'm focusing in what we can do, and it's working well. Operator: [Operator Instructions] The next phone question comes from Jared Gelsomino from Morgans. Jared Gelsomino: Just a quick one. Just interested in -- just on the volumes, how we're looking -- how have volumes started in this calendar year, just noting that you had a really strong third quarter last year and just trying to understand the third quarter or fourth quarter dynamic as we work through this half? Raymond Smith-Roberts: Volumes at the moment are very good, Jared. Actually, we're on track for February in smart to have our highest average per day volume that we've had all financial year. Volumes in Collision is strong, and volumes in Wales are improving. Volumes in Prestige are also holding quite steady and up around target. So right now -- but there's always a bit of a glitch at Christmas, where we have a range of where we don't operate, but we keep sites open or our ability to take vehicles open. We do a lot of drivable work, so you don't always get drive. We don't get either volume of drivable work over Christmas. But volume is built in January, continue to build in February. We're carrying a very good level of WIP at the moment. So the network is actually in very good shape from a WIP processing point of view. So I'm very happy with where volume at the moment how they're shaping up. Jared Gelsomino: Perfect. And maybe just a small one on CapEx. I mean, obviously, you stepped up in years putting that investment back into the network. Just interested in the outlook for CapEx and how it sort of balanced between new store openings as well as sort of the refurbs going through the rest of the network. Domenic Romanelli: Jared, we're still forecasting CapEx of $40 million for the financial year. And we believe with the EBITDA that we're guiding towards that we'll still end up with a positive free cash flow at the end of the financial year if we did $40 million, but we'll keep monitoring it. Ray and I have always got our eye on the CapEx and how it's progressing through the year, how our cash is progressing through the year, and we'll manage it accordingly, but we're comfortable still that $40 million forecast for the financial year. Raymond Smith-Roberts: Well, overall, Jared, things are happening a little bit slower right here. We've got 2 site expansions in SMART that are underway. We've got 2 site expansions in Collision that are underway. But I'm also doing some site rationalization, which unfortunately does take some capital, but it gets it right. So it is definitely at a slower rate. We're continuing to invest in our existing facilities where they need it. And there's still a little bit to do there. But again, it's all about increasing our capacity and our team's ability. Our continued throughput and our growth is not coming from new sites. It's coming from optimizing what we've got. In some areas, that does need some investment. If we look at it sort of very generally, it's going to be a bit slower, right, in the second half than it was in the first. Operator: Thank you. At this time, we're showing no further questions. I'll hand the conference back to Ray for any closing remarks. Raymond Smith-Roberts: I expected a few more than that but thank you. Look, I think overall, I know for some of you, you were hoping for a stronger first half result, but I'm actually very pleased with where we are and where we're going. We are in good shape. All of the hard work that we're continuing to do driving results. I know some of you will also be disappointed in the point I put on the 10% EBITDA and I put the 3 to 4x year there. I think keep that very much in mind. I've put that down as an absolute an annunciation point and I have no doubt, we're going to get there. The speed to it still remains the biggest challenge. If I look at it from a run rate or a bridge, I'm still very focused on the road to it. And I hope that while I'm working toward has been there -- being on a quarter basis, I think it's possible. We can be there at quarter 4 this year did not guarantee but definitely possible. I hope to be there for 2 quarters next year. And then the year after that, it's about doing enough in being able to be enough above it in quarter 3 and quarter 4 gives us very difficult to be there in quarter 1 and 2 given those times. So things are going in the right direction. I don't think that I've changed my view. I haven't. I'm trying to describe it in a slightly different way to give people comfort, but the bridge to it is still very clear. I can see there's another question come up there. Are we going to take that? Operator: Absolutely. From the webcast, Capital SMART has rolled out 3 new sites with 2 further planned. Is this keeping up with the previously flagged expansion? Are there new site rollouts representing any short-term drag on divisional earnings in SMART? Raymond Smith-Roberts: Yes. There's two parts to that. I mean, yes, it's -- I mean these aren't new sites we own that both of these are site expansion. So where we operate in Sydney, there's a site there that we're increasing the capacity where we operate in South Australia. We've already got 3 sites in South Australia, but we are pretty much doubling the capacity of one. So yes, they are part of the previous plan in terms of where we're going. And look, there is no doubt we've opened 3 new sites this year, and we had some start-up costs. We -- right now, we're carrying some costs in Sydney. That site will get operational. We were carrying cost in Tasmania, and we were carrying cost in Newcastle. All three of those now have moved into production and producing, and all three of them are actually a positive EBITDA. But during the last half, they actually reduced it, no doubt. And that's going to happen a little bit until we get Sydney up and running until we get -- we're not carrying cost in South Australia yet, but that will commence in about April. So there is going to be some cost drag, but we manage that very carefully. Operator: Thank you. Confirming that once again, we're showing no further questions. Raymond Smith-Roberts: All right, guys. Well, I look forward to there's probably some people will be catching up with one-to-one over the next few days. Thank you. As I say, we've got a lot to do. Pleased with where we are and pleased with where we're going. And if you're a shareholder, thank you for your support. If you think of becoming a shareholder, then I think it's a better time.
Operator: Good day, everyone. Thank you for standing by. Welcome to Adeia's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Chris Chaney, Vice President of Investor Relations for Adeia. Chris, please go ahead. Chris Chaney: Good afternoon, everyone. Thank you for joining us as we share with you details of our quarterly financial results. With me on the call today are Paul Davis, our President and CEO; and Keith Jones, our CFO. Paul will share with you some general observations regarding the quarter, and then Keith will give further details on our financial results and guidance. We will then conclude with a question-and-answer period. In addition to today's earnings release, there is an earnings presentation, which you can access along with the webcast in the IR portion of our website. Before turning the call over to Paul, I would like to provide a few reminders. First, today's discussion contains forward-looking statements that are predictions, projections or other statements about future events, which are based on management's current expectations and beliefs and therefore, are subject to risks, uncertainties and changes in circumstances. For more information on the risks and uncertainties that could cause our actual results to differ materially from what we discuss today, please refer to the Risk Factors section in our SEC filings, including our annual report on Form 10-K and our quarterly report on Form 10-Q. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after this call. To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP information during this call. We use non-GAAP financial measures internally to evaluate and manage our operations. We have, therefore, chosen to provide this information to enable you to perform comparisons of our operating results as we do internally. We have provided reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the earnings release, the earnings presentation and on the Investor Relations section of our website. A recording of this conference call will be made available on the Investor Relations website at adeia.com. Now I'd like to turn the call over to our CEO, Paul Davis. Paul Davis: Thank you, Chris, and thank you, everyone, for joining us today. I'm pleased to be here to share our results for the fourth quarter and full year 2025. We delivered an outstanding year both financially and operationally. Our record annual revenue exceeded the high end of our guidance range, and we delivered excellent operating income and EBITDA, also exceeding the high end of our guidance. Our record revenue for both the quarter and the year was driven by our dedicated focus on key growth areas, including OTT. I'm proud of our team's commitment to maintaining relationships and finding ways to resolve litigation matters efficiently, resulting in outstanding outcomes for our stakeholders. As we mentioned during the prior call, we were pursuing multiple opportunities that would lead to a strong start for 2026. With this deal momentum, we have already executed several new agreements this year, most notably a multiyear license agreement with Microsoft, a leading technology company. This agreement covers our media portfolio with broad applicability to Microsoft's business including their consumer electronics and social media products and services. Let me discuss our fourth quarter results in a little more detail. In the fourth quarter, we delivered revenue of $183 million, highlighted by 9 deals, including 8 in media and 1 in semiconductors with 4 new customers. Our efforts to diversify our revenue base continue to show results with non-Pay-TV recurring revenue growing 30% in the quarter year-over-year. We are pleased to have signed Disney, our biggest new customer in the quarter. With Amazon and Disney, we now have licensed 2 of the largest OTT providers in the world. After an extended period of engagement with Disney, we took formal steps to protect our intellectual property while continuing constructive dialogue. Through the course of the litigation, which lasted approximately 1 year, we believe we are able to demonstrate to Disney, the applicability of our portfolio to their services and both parties reached a comprehensive agreement resolving all disputes. Concluding this matter efficiently, reinforces the strength and broad applicability of our IP portfolio and provides additional momentum as we pursue further OTT opportunities. Another new customer in the fourth quarter was Major League Baseball, the second major U.S. professional sports league to sign a multiyear agreement for access to our media portfolio. We were also pleased to sign a multiyear renewal with Vodafone, reaffirming our relevance and strength in international Pay-TV markets. In addition, during the quarter, we signed a new OTT customer in South Korea, a new Consumer Electronics customer in Japan, a domestic Consumer Electronics renewal and 2 Pay-TV renewals, further demonstrating the breadth of our licensing platform. In semiconductors, we signed a prototype development agreement with an existing customer following an initial license agreement with them last year. The customer recognized early on the value of our hybrid bonding technology for high-performance imaging and detection systems. Now I'd like to provide a brief review of our accomplishments for the year. Turning to the full year. 2025 was a record year for Adeia. Revenue reached $443 million, exceeding the upper end of our revised guidance with operating income of $276 million and adjusted EBITDA of $278 million, both above the high end of our guidance. Our results were driven by the execution of 26 license agreements across a diverse customer base spanning OTT, semiconductors, consumer electronics, Pay-TV and e-commerce verticals. Importantly, we added a record 12 new customers, significantly expanding and diversifying our licensing base. Momentum was strong across both core and growth verticals, including 9 Pay-TV deals, 7 in OTT and 4 semiconductor deals. New customers such as Disney, STMicro, Major League Baseball and several e-commerce platforms contributed meaningfully to growth. Renewals with customers, including Altice USA, Vodafone and others continue to support the stability and predictability of our recurring revenue stream. Balanced capital allocation remained a priority in 2025. During the year, we reduced debt by $60 million, returned capital through dividends and share repurchases and acquired 6 tuck-in patent portfolios, all while growing our cash balance. Our semiconductor innovation also received industry recognition. Our hybrid bonding technology was awarded Best of Show for Most Innovative Technology at the Future of Memory and Storage Conference. In addition, RapidCool received the Global Brands Award for Technology Excellence as demand for high-performance computing, driven by AI continues to grow, we believe the effective thermal solutions will be increasingly critical and we remain focused on advancing RapidCool with partners and potential customers. Several opportunities we previously discussed have closed or are expected to close early in 2026, supporting our confidence in our annual revenue guidance. The opportunities in our pipeline continue to expand across both media and semiconductors. As we have previously mentioned, we are expecting Pay-TV as a percentage of revenue to decline below the historical average of approximately 50% to 60%. We are now anticipating Pay-TV will represent approximately 35% to 40% of our forecasted revenue this year. We are closely monitoring and taking direct action to challenges within our Pay-TV licensing program. Specifically, DIRECTV has filed certain litigation, which ultimately challenges the need for a new license agreement. We believe this is a clear violation of the agreements we had in place, and we have, in turn, filed a breach of contract suit against them. As we have demonstrated in recent disputes, including Altice USA and Disney, we are confident we will ultimately be able to successfully resolve this matter. As a reminder, the vast majority of U.S. Pay-TV operators are licensed to our media portfolio, several of which agreements extend into the next decade. We continue to diversify our customer base. One of our primary strategic priorities over the last few years has been to grow our revenue in non-Pay-TV verticals such as OTT, semiconductors, consumer electronics, social media and adjacent media markets. By adding new customers in these verticals, we have made tremendous progress. In 2025, we grew our non-Pay-TV recurring revenue by more than 20%. And since 2022, we have grown it by more than 60%. In semiconductors, we see the adoption of hybrid bonding, broadening with new product releases anticipated in 2026. Hybrid bonding enables further advancement of Moore's Law in an environment where there is a growing need for innovations that support rapidly evolving AI ecosystems and related infrastructure. While AMD is already in production with their hybrid bonded products, other logic leaders such as Intel, Broadcom and Marvell have publicly disclosed product road maps that will utilize hybrid bonding. Hybrid bonding is also becoming critical in memory, especially in high-bandwidth memory and NAND, which are increasingly needed to process today's large language models and other AI applications. Micron, Samsung, and SK hynix are all making significant multibillion dollar investments in advanced packaging capacity that support their hybrid bonding strategies for HBM and NAND. Semiconductor equipment toolmakers involved in the hybrid bonding supply chain have further confirmed the rising adoption within their tool orders recently accelerating. With AI driving significant transitions in semiconductor architectures and the need for better cooling technologies only increasing, our hybrid bonding and RapidCool technologies position us well to capture meaningful opportunities in the next several years. Our patent portfolio underpins our future licensing activity. In 2025, we grew our portfolio by 13%, marking our third consecutive year of double-digit growth, driven by strategic R&D and targeted M&A. While portfolio expansion remains a priority, we expect growth to moderate over time. I'm pleased, once again, we were recognized by Harrity & Harrity as one of the most prolific inventors in the U.S., with our ranking rising compared to last year and ahead of industry leaders such as AMD, Broadcom, Verizon and AT&T. Amongst these industry titans, I'm extremely proud that we had the 66 most new U.S. patents issued in 2025, a remarkable achievement for a company of our size and attainment to our commitment to innovation. We achieved a lot in 2025. We strengthened our predictable revenue stream while expanding into key growth markets, positioning Adeia for continued long-term value creation. We also recently enhanced our leadership structure to strengthen execution towards the company's long-term strategy and growth priorities. Specifically, we welcome back Craig Mitchell, to the newly created role of Chief Semiconductor Officer, where he will lead the company's semiconductor technology and R&D organization and will be responsible for shaping Adeia's semiconductor vision. In addition, Dr. Mark Kokes was appointed Chief Revenue Officer. Mark will oversee our global sales and go-to-market strategy across the organization. Finally, Bill Thomas was appointed to Chief Strategy Officer, a newly created position to oversee our long-term planning, market analysis and growth initiatives. With this new leadership, I am confident we have the right team and structure to execute on our strategy. We are off to a strong start in 2026, supported by recent agreements and a growing pipeline. We remain focused on achieving our long-term goal of $500 million in annual licensing revenue. And now I'll turn the call over to Keith for further details on our financial results. Keith Jones: Thank you, Paul. I'm pleased to be speaking with you today to share details of our fourth quarter 2025 financial results. During the fourth quarter, we delivered strong financial results with revenue, operating income and adjusted EBITDA, all exceeding the high end of our guidance. Record revenue of $182.6 million was driven by the execution of 9 deals across a diverse mix of customers, including OTT, Pay-TV, consumer electronics and semiconductor. During the quarter, we signed 4 new license agreements. This includes signing a significant license agreement with Disney, which greatly adds to our presence in the OTT market. Now I'd like to discuss our operating expenses, for which I will be referring to non-GAAP numbers only. During the fourth quarter, operating expenses were $49.2 million, an increase of $12.1 million or 33% from the prior quarter. The increase is primarily due to increased variable compensation as a result of exceeding certain performance targets. Research and development expenses increased $3.1 million or 21% from the prior quarter. The increase is primarily due to increased variable compensation as well as increased portfolio development costs. Selling, general and administrative expenses increased $7.7 million or 44% from the prior quarter, reflecting increased variable compensation costs. Litigation expense was $6.5 million, an increase of $1.3 million or 25% compared to the prior quarter, primarily due to higher spending on AMD and Canadian litigation matters. Interest expense during the fourth quarter was $9.4 million, a decrease of $614,000, primarily attributable to our continued debt payments and due to lower variable interest rates during the period. Our current effective interest rate, which includes amortization of debt issuance costs, was 7.5%. Other income was $1.7 million and was primarily related to interest earned on our cash and investment portfolio and due to interest income earned on our revenue agreements with long-term billing structures under ASC 606. Our adjusted EBITDA for the fourth quarter was $133.9 million, reflecting an adjusted EBITDA margin of 73%. Depreciation expense for the fourth quarter was $484,000. Our non-GAAP income tax rate remained at 23% for the quarter. Our income tax expense consists primarily of federal and state domestic taxes as well as Korean withholding taxes. Now for a few details on the balance sheet. We ended the fourth quarter with $136.7 million in cash, cash equivalents and marketable securities, and we generated $60 million in cash from operations. As demonstrated by our results, the fourth quarter has historically been a very strong cash generation period for us. This strong financial performance allowed us to execute on all 4 pillars of our balanced capital allocation approach while growing our cash balance. This includes paying down our debt, repurchasing shares, paying our dividend and making 2 tuck-in acquisitions. We made $21.1 million in principal payments on our debt in the fourth quarter and ended the quarter with a term loan balance of for $426.7 million. In the fourth quarter, we repurchased approximately 718,000 shares for $10 million, bringing the remaining amount available for future repurchases to $160 million under our current stock repurchase program. We paid a cash dividend of $0.05 per share of common stock. Our Board also approved a payment of another $0.05 per share dividend, to be paid on March 30 to shareholders of record as of March 16. Now I'll go over our guidance for the full year 2026. Our 2026 revenue guidance range is $395 million to $435 million. As we mentioned in our previous call, our sales pipeline was and continues to be very strong. This has manifested in not only a strong close to 2025, but serves as a springboard to early success in 2026, which we see propelling us through the remainder of the year with future wins. Overall, we see the first half of the year and the second half of the year being relatively equal in terms of revenue contribution. Operating expenses are expected to be in the range of $184 million to $192 million. We anticipate modest single-digit growth for both R&D as well as SG&A expenses. As we continue to prioritize investing in our technology and infrastructure in both our media and semiconductor businesses. We anticipate that our litigation expense will increase year-over-year. Even with recent settlements, our litigation docket remains active as we pursue additional large licensing opportunities. We expect interest expense to be in the range of $34 million to $36 million. We expect other income to be in the range of $5.5 million to $6.5 million. We expect a resulting adjusted EBITDA margin of approximately 55%. We expect the non-GAAP tax rate to be 21% for the full year. We also expect capital expenditures to be approximately $2 million for the full year. I could not be more pleased with our performance in 2025. Our operating results reflect significant records for Adeia for revenue as well as earnings. Our deal momentum and execution have led to a record number of new customers, which are a key catalyst for our future growth as we look to expand our business. We have shown that we have a relevant and sustainable licensing program, which is bolstered by our commitment to investing in our portfolio development. With momentum that we have generated, I am excited and encouraged by our prospects in 2026 and beyond. I'm incredibly proud of our dedicated employees who have worked tirelessly to accomplish our goals and thankful for their continued belief and our mission. Now I'd like to turn the call back to Paul for a few additional remarks. Paul? Paul Davis: Thank you, Keith. I'd like to take a moment to congratulate our employees for delivering a record year in setting us up for success in the future. I'd also like to note, we will be attending the ROTH Annual Conference in March. We look forward to seeing you at this and other upcoming events. I would now like to turn the call over to the operator to begin our question-and-answer session. Operator? Operator: [Operator Instructions] Your first question comes from Kevin Cassidy with Rosenblatt Securities. Kevin Cassidy: Congratulations on the great year. As we look at the Pay-TV customers, that's going to be down to 35% to 40% of your revenue, a lot more derisked. Do you see that -- is that starting -- is the subscriber loss slowing? Or do you think that gets to an asymptote eventually? We did have -- in the fourth quarter, there was -- Charter announced an increase in their number of subscribers. I'm just wondering if you're seeing what kind of trend you're seeing there? Paul Davis: Thanks, Kevin, and I appreciate the comments. Yes, you're spot on in terms of what we're seeing with the likes of Charter and seeing an actual increase in their video subscribers. We do see some moderation in the declines as a total percentage, and we expect that to continue. But we have built in subscriber declines into what we forecast, and that's part of that 30% to 45% moving forward. This is why we've been so focused on non-Pay-TV recurring revenue, while Pay TV still remains a very important part of our business, we've intentionally diversified our revenue base since we separated over 3 years ago and made tremendous success with that. As you see in our nonrecurring -- our Pay-TV -- our non-Pay-TV recurring revenue, I should say. So we're very pleased with those results and the progress we made, especially around OTT, semiconductors and adjacent media markets. But yes, Pay-TV continues to be an important market for us. And we've got a number, as I noted in my prepared remarks that -- of deals that go out into the next decade. So our customers in Pay-TV still see a lot of relevance in our portfolio. We're still getting deals done in that space, but those subscriber declines are built into our expectations. And we do think over time that those will moderate. But great question. Thanks, Kevin. Kevin Cassidy: Okay. Great. Yes. Just a follow-up, if I can ask on the -- on RapidCool, the interest is encouraging. And just wondering, if you could discuss the competitive landscape. What other solutions are your customers looking at? Or what's the -- I guess, what is their decision process on evaluating RapidCool or adopting it? Paul Davis: Yes. What's unique about our business is we don't compete in the typical sense, right? We license our technology on a portfolio-wide basis, and RapidCool will be part of that moving forward. And we're getting a lot of interest, both on the logic side and on the memory side. We think there's applicability in both, especially as these AI workloads require more and more memory. As you know, Kevin. And we see RapidCool being relevant for HBM in addition to logic. And so we're getting a lot of pull on that. What's great about our solution and what we think differentiates it is it's plug and play, right? You can use the same equipment that is being used today. You can put it into a liquid cooling rack and data center, right, that is already set up liquid cooling today and use RapidCool in the same way that you would use a liquid cooling cold plate, so that's tremendous, and we're hearing a lot of benefits around our solution related to that. And so that's what excites us about our solution versus competitive solutions. Operator: Your Next question comes from Scott Searle with ROTH Capital. Scott Searle: Nice to see the strong conclusion to '25 and strong start to '26. Maybe Keith, just to drive in, in terms of the mix of business in the fourth quarter. I'm wondering if you could provide a little bit more color in terms of recurring and nonrecurring and also media and semiconductor kind of the splits in terms of those businesses? And maybe a quick update in terms of, how sequentially the 3D NAND market has been progressing? And then I had a couple of follow-ups. Keith Jones: Scott. Great to hear from you. So for us in Q4, the amount of recurring versus nonrecurring, it was almost equally split. It was pretty close to 50-50, that just kind of gives you a feel of the size of the magnitude of the license agreement that we signed with Disney and the amount that we had recognized related to some of the prior licensing period. So that in itself was significant. So that actually brought us up for the year where we ended the year at 80% recurring, 20% nonrecurring, which is pretty consistent if you take a look at our history and how we trended as a business. So that number when we take a look at back a year ago, this is kind of where we thought we could end and actually a little bit greater. So everything kind of really lines up to where we thought it would be. In terms of other mix of the business in semiconductor and as well as media, I kind of start off with semiconductor [ for a reason ] because I'm quite proud of that group. We had an increase in revenue if we compare '24 to '25, '24 we did about $18 million in revenue from semiconductor. This year, we did about $26 million, so 40% increase. So those deals that we signed late in '24 and early in '25, we talked about STMicro being a significant deal, really started at the traction, and we're seeing a little bit more of a pickup really on the NAND flash of things. So I think that might have been your third question in kind of how we see things progressing. We can't be more pleased on how we -- what we're seeing in the NAND market. One of the things I do have to remind is that, when we signed that agreement, there were certain minimums that were built into the agreement that as a result of those minimums, we took a certain amount of revenue upfront when we signed that. So we had to work through some of those minimums so that impacts the revenue that we work recognized in '25 and '24 as well. So we will see an increase. We'll see a modest increase, but we'll pretty much fundamentally work through most of those minimums in '27, so it will be more pronounced then. But everything is up and to the right in that regard. So really off to a great start. Our media business, absolutely fantastic. Roughly 94% of our total revenue, and we are -- couldn't be more happy about how we started the year. We signed a couple of new deals. We talked about Microsoft and then we also signed a few deals or a deal on the semiconductor side of the business as well. So off to a great start and upward trajectory. Scott Searle: Great. Very helpful. If I could just quickly follow-up on a clarification on the NAND front. Just want to clarify in terms of pricing. You guys -- as I understand it, right, you're not -- you don't benefit necessarily from the price increases that are going on in the marketplace. They're driven by unit volumes? And is that -- does that include capacity overall in terms of overall NAND capacity that you guys are shipping? Is that how the royalty agreement is priced? Keith Jones: Yes, you picked up on a great note there. So our agreements are not based on the selling price. When we go to renegotiate for those agreements, it's based on a fixed amount per unit. There is some degree of scaling in there, but usually it's more so of volume discounts. So the more they produce, the more benefit that we kind of give them later on down the road. So what you're seeing is that dynamic of 2 things: of increases in NAND; and then increases in volume. We benefit from the increase in volume and not the increase in pricing. Paul Davis: I would also just add, Scott, on NAND just as a reminder, we signed the deals with Kioxia and SanDisk in March of 2023. At that time, they had no NAND products that utilized hybrid bonding. And so there's been this ramp of the mix of their product lines that include hybrid bonded products, which also impacts as we see it. So as total NAND goes up, we're focused on what is the percentage of that, that is a hybrid bonded as well. Scott Searle: Very helpful. And if I could, in terms of the guidance for 2026, and this will be a little bit of a multipart question here, but I wanted to get calibrated on a couple of fronts. It seems like media, there's a lot of momentum that's building. We have the initial step down in the first quarter of non-Pay-TV customer. But given Disney, given some of the other momentum with Microsoft and otherwise, 2 things, are you expecting in media to see sequential growth throughout the course of the year from the March quarter on? And do you expect media to grow from a recurring standpoint on a year-over-year basis. And then as it relates to semi, I'm kind of wondering if you could frame your optimism for 2026. It seems like there's certainly momentum building with the existing 3D NAND customer base. But Paul, you called out some of the ongoing discussions that you've got with some of the larger logic players out there that will introduce products in the course of 2026. So I'm wondering what are you guys factoring in to that guidance. Are you assuming that there's a logic customer that comes in? Or is that basically a baseline view of just kind of growing the existing NAND business and what you've got visibility to in front of you on the media side? Paul Davis: Yes. A lot to unpack there, Scott, but let me attempt to address the second part of your question around the semiconductor business, and then I'll turn it back to Keith on the first part of your question. Our optimism in semi is still very strong. I think not only in logic, but as we look out further beyond 2026, what we're seeing in memory, not just in the NAND market, but also further down the road as we've talked about before, with HBM and the broader memory market as we have relicensing opportunities down the road, really just tremendous amount of investment today, as I noted in my prepared remarks. And in advanced packaging and hybrid bonding, specifically as the Big 3 really try to control their own destiny on hybrid bonding and advanced packaging, which is great for us as we move forward. So yes, we do have a lot of optimism in our in our guide overall, we actually have multiple paths to get to where we need to be. And I think our pipeline is stronger going into this year than it has been and since we've separated in terms of the number of large opportunities that we have on the table. And so there's multiple ways that we can get to within our guidance range. And could be -- continue to be driven by media, but there's some large semiconductor opportunities as well that are possible in addition to that. Keith Jones: Yes, Scott. And just to add a little bit of -- no. I'm sorry. So you asked about how do we kind of see the media business kind of looking in '26. So a lot of great momentum. I think on the Pay-TV front, I know Paul did a good job of capturing that, seeing that shift being about 35% to 40%. But really, one of the tremendous stories on the OTT front, right. So we see that business being about 30-plus percent of our total revenue next year, which is just absolutely exciting. So I think 30% to 35% is really kind of a way to kind of take a look at it. And that just really shows a lot of growth from where we started. So our market share today is about 50% for -- on the OTT side. So that's really driving it. So that sets us up quite well to kind of get back to your question in terms of how do we see the media business. So when you kind of balance things out for recurring kind of related revenue, it really sets us up to have a nice modest increase in our revenue year-over-year. And so really kind of a great exciting story for us. Scott Searle: Got you. Very helpful. And lastly, if I could just follow up with 1 more, just because the semi side is so intriguing and exciting. Paul, so it sounds like, look, there are some opportunities this year. It sounds like more logic based. But from -- in the marketplace, there's a tremendous amount of press talking about demand for HBM, what we're seeing in data center and otherwise and pricing and the evolution quicker than people expected from HBM3 to 4, 4E et cetera. So I'm just wondering, I know this is tied to renewal agreements with some of the larger players out there in '27, '28. But I'm wondering how the view is from a customer standpoint, engagement standpoint on that front? It seems like the market is accelerating well ahead of where we thought it would be probably 12 or 18 months ago. Is that how you guys are viewing that? And is that translating into at least productive conversations notwithstanding that we require renewals in the 27, '28 time frame. Paul Davis: Yes. Thanks, Scott. I mean, we're tremendously pleased with what we're seeing from a marketplace standpoint on memory. And as you think about Micron, Samsung and SK Hynix, not only on HBM, but what we're seeing with NAND, as we talked about before, we're thrilled to get the deals done with Kioxia and SanDisk. And we see the need for NAND and the other 3 providers as they get to around 400 layers to eventually go to hybrid bonding as well. And so I think there's an opportunity on both fronts and memory, both in NAND and with HBM. And so I don't want everyone to forget about NAND either because it's pretty significant for those players as well and what they're trying to provide. And we think hybrid bonding will be an important story. And when you think about AI, NAND is becoming more important as well on that side as well. So as people are trying to deal with these AI workloads. So it's exciting on both fronts and certainly the conversations and not just with hybrid bonding, as I mentioned earlier, with RapidCool as well being, I think, an enabling technology, not only for logic but also for the memory market, we see an opportunity there and certainly conversations are progressing with a number of folks on that front as well. Operator: Your next question comes from Hamed Khorsand with BWS Financial. Hamed Khorsand: Could you talk about the quarter's revenue? And you outperformed given the guidance you gave right before Christmas. So what drove that outperformance? Is there any recognition from '26 into '25. If you just give a little bit more details about that, please? Keith Jones: Hamed, great question. So when we announced the deal with Disney, it was cut off the press after we signed that. So frankly, the accounting wasn't done. And it's a very large and complex transaction. I think you and I discussed that before. And then ultimately, we got the accounting settle up. So there were some things there that were more favorable to us. But also to add to that and where you see this overachievement on the revenue and the guidance, we closed more business. And we had a strong close to the year. Most notably, I could kind of point to -- we talked about Major League Baseball as one, but there's others that with great momentum from our sales team. Those guys didn't take a vacation [ at baseline ] Disney, they kept on working hard, and we benefit from that. Last but not least, but it was quite frankly, very meaningful to us, is that both on our media side and our semiconductor side, we've got some very favorable royalty reports from increased volume. You heard earlier, in particular, One of the other -- Kevin Cassidy had talked about where you see from Charter and we saw that across the board that the numbers that we reported on Pay-TV were favorable. And then also to no surprise, what we've seen also on the semiconductor side and particularly on the NAND and how that has been going, it was more favorable to us. So that all added up to a tremendous beat for us in coming out with the revenue number that was significantly over the guidance that we had set forth. Hamed Khorsand: Okay. And then if you go into '26, you've announced Microsoft, that's obviously a great big name. But is that going to be material for you in '26? Is it going to be cash driven? Or is there a minimum guarantees? Could you rank that as to how big that opportunity is for you? Paul Davis: I'll take it first, Hamed, and then let Keith add anything. But it's a great deal for us. We're very pleased with getting Microsoft done, especially so early in the year. As I mentioned at the end of 2025 when we talked in November, we had a lot of opportunities that we were chasing and a lot of significant opportunities. And certainly, we've been able to execute on some of them here early in 2026 that we're very pleased with, Microsoft being one of those. So we can't get into the specifics, obviously, of the economics, but we -- it's structured like many of our other Pay-TV, non-Pay TV deals, I should say. And so that's what I would highlight for you. And it will be -- there'll be a significant customer for us. Operator: [Operator Instructions] Your next question comes from Matthew Galinko with Maxim Group. Matthew Galinko: I think, Keith, you mentioned and I didn't do the math, but 55% EBITDA margin implied in guidance. If that's correct, it seems like a step down from the last couple of years. So I was hoping you could maybe just go into the assumptions there of why we'd be seeing compression of what seems like a pretty strong revenue guide? Keith Jones: Yes. Matt, I think the one thing that I would point to, the -- our business, if we take a look at our operating expenses of research and development and SG&A, they -- you heard me talk about that we're going to grow that at single digits in rates, and that's pretty consistent that we've done for the last several years. The one thing that is different is in -- and Paul I have talked about this going back to 2022, is that traditionally, when we take a look at that legal expense for '22, '23 and '24, it was historically low, and that was something that was an anomaly, and that's something that we didn't expect. So when Paul and I always took a look at the business and we said, if we look at history and what does it take to run our business and being kind of who we are and what we need to do to ensure that we defend our we IP, we had always thought that litigation expense should be in the 20s. And that's something that we always talked to you about and talked with others. So but that being said, in '25, you -- 2025, you saw that we spent about $25 million in litigation expense, and that's what we always alluded to. And then in '26, you heard Paul talk about and you heard me talk about that our litigation expense will increase. And I would say they increase anywhere between $5 million to $10 million above that $25 million amount. And let's just talk about why that's important. Paul alluded to it. We take our IP very seriously, and we want to defend our IP as much as our customers want to defend their own products and services. And what we find is that we have a lot of great adoption of our technology in the marketplace. And we want to make sure that we're properly compensated for that. And in some instances, that might involve litigation. So it's a matter of being prepared more than anything else. And we -- as Paul said, we saw some great benefits of that. So that incremental spend, quite frankly, is changing the margin from be it low 60s to that 55% in its entirety. So hopefully, that gives you a little bit more color. Matthew Galinko: Sure. It does. And maybe just a follow-ups that. I think Paul might have referenced the long-term goal of $500 million of annual revenue. And again, correct me if I got that wrong, but maybe if we sort of take that number and think about what the litigation expense might be to get there, is that $30 million, $40 million, right kind of level? Or do you kind of need to keep pushing that up a little bit to drive revenue to the long-term level? Paul Davis: Matt, I think it's a great question. And I think I've been consistent in always saying, we prefer getting deals done without litigation. And that is our ethos, that's our -- that's how we approach all of our customer is we go to great strides to avoid litigation and find a path forward that gets deals done without it. But at times, it's needed. And what you've seen with Disney and even with Altice and what we think it's going to -- what you're going to see in the future is we're good at it when we need to, right? And it can really drive great results for us. And so we're not afraid to file litigation when needed to defend our IP, as Keith eloquently said earlier. And so that is part of that spend. That's always going to be there. And so I think it's always going to be around kind of that $25 million, $35 million from just how we think about it and how we forecast it. Are there going to be years where it might be lower than that? Sure. Are there going to be years where it could take a little higher than that? Yes, it could. But for us, we plan for it because it can really drive some great results. As I look at the OTT market, though, there's a couple of examples now that are really big. One we did without litigation, Amazon, great result for us. We got done at the end of 2024. And one with litigation, Disney, great result for us at the end of 2025. And so we can drive really great results with or without litigation, but sometimes the customers put you in a position where you need to go down that path. But at the end of the day, our IP stands up either way, and we end up -- I'm comfortable when we need to go down that path, even though it's not my first preference. Operator: This concludes the question-and-answer session. I'll turn the call to CEO, Paul Davis, for closing remarks. Paul Davis: Thank you, operator, and thanks for everyone for being with us today. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Emera Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Monday, February 23, 2026. I would now like to turn the conference call over to Dave Bezanson. Please go ahead. David Bezanson: Thank you, Jenny, and thank you all for joining us this morning for Emera's Fourth Quarter 2025 Conference Call and Live Webcast. Emera's fourth quarter earnings release was distributed this morning via Newswire and the financial statements, management's discussion and analysis and the presentation being referenced on this call are available on our website at emera.com. Joining me for this morning's call are Scott Balfour, Emera's President and Chief Executive Officer; Jared Green, Emera's Chief Financial Officer; and other members of Emera's management team. Before we begin, I'd like to advise you that this morning's discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide. Today's discussion and presentation will also include references to non-GAAP financial measures. You should refer to the appendix for reconciliations of historical non-GAAP measures to the closest GAAP financial measure. Unless otherwise specified, all financial information referenced is in Canadian dollars. And now I will turn the call over to Scott. Scott Balfour: Thank you, Dave, and good morning, everyone. Before I begin, I want to introduce Jared Green. Today is Jared's first earnings call as CFO since joining us in December. We're excited about the value his expertise and leadership will bring going forward. Jared, welcome to Emera and your first earnings call. Emera is entering 2026 with strong momentum, building on record performance in 2025. Our 2025 results are evidence of both the strength of our strategy and the quality of our portfolio. Our team safely deployed a record $3.6 billion in capital investment, resulting in approximately 8% rate base growth over 2024. In addition, we delivered significant adjusted earnings growth, achieving more than $1 billion in annual adjusted net income for the first time in Emera's history. This performance is the outcome of disciplined customer-focused operational management and execution of our capital plan with investments centered on safely delivering the energy needs of our customers. As we enter 2026, we're confident in our ability to continue to deliver sustainable value for customers and shareholders alike. This morning, we reported annual adjusted earnings per share of $3.49, representing an increase of $0.55 or 19% over 2024. This performance significantly exceeds the upper end of our stated annual EPS -- adjusted EPS growth target of 5% to 7%. We also delivered a 19% increase to operating cash flow, further underscoring the strength of our financial results. By almost every measure, 2025 was our strongest year in the company's history. This exceptional performance positions us to continue making the critical investments required to strengthen our systems and ensure the safe, reliable delivery of energy that our customers depend on every day. Looking back in 2025, our continued financial and operational success highlights the effectiveness of our strategy, the quality of our premium portfolio of regulated utilities and the unwavering commitment of our highly skilled teams. I am deeply proud of our people and of what we continue to achieve together. Much of our success in 2025 can be attributed to strong performance at Tampa Electric. Emera Energy's record first quarter was also a contributor to our performance due to cold weather in the Northeast, which drove higher pricing and market volatility and where market conditions were strong again in the fourth quarter. In both instances, the team did an excellent job of responding to these favorable market conditions. We've made meaningful progress on disciplined operating and management cost management. By sharply -- by staying sharply focused on efficiency, we are helping offset upward pressure on customer bills while continuing to invest where it matters. Technology is a key enabler of this work. At Nova Scotia Power, more modern technologies, including AI tools are being deployed across a number of customer-facing and operational functions from the contact center to generation. This will make it easier for customers to do business with us while improving reliability through earlier detection of equipment issues, fewer unplanned outages and a safer, more efficient system. At Peoples Gas, we're similarly applying AI-enabled technology to improve crew dispatch efficiency, strengthen damage prevention and location practices and reduce outage risk. We're also optimizing upstream pipeline capacity through off-system sales with benefits flowing directly back to customers through a lower purchased gas adjustment. At Tampa Electric, drone and AI technology are being deployed to support inspections at solar sites. This approach reduces manual effort and inspection time, enhances safety and helps optimize asset performance. The result is a more efficient, cost-effective inspection process. In 2025, our operating companies safely deployed $3.6 billion of capital, representing the largest annual investment in Emera's history. These essential investments advance our reliability and resiliency initiatives and support the safe, reliable delivery of energy our customers expect. Importantly, we continue to carefully pace these investments, aligning project timing and execution to balance system needs with affordability impacts helping to ease rate pressure for customers while positioning our systems for long-term value. At Tampa Electric, the team installed an additional 150 megawatts of solar generation in 2025, bringing their total installed solar in service to 1,505 megawatts. These solar investments continue to reduce exposure to volatile fuel costs and deliver real savings for customers. The Tampa Electric team also made meaningful progress on grid resilience, undergrounding 77 miles of overhead distribution circuits in 2025 as part of its Storm Hardening Program. With more than 54% of the system now underground, the grid is better protected from severe weather and supporting improved reliability. 2025 also marked an important milestone for Tampa Electric with the opening of its new state-of-the-art energy control center. This facility brings teams together in a modern, centralized environment that strengthens day-to-day coordination and operational performance and which importantly is much more resilient to the impacts of severe weather, ensuring critical operational and system controls can be maintained. As part of its grid modernization and reliability improvement initiatives, Tampa Electric is also near complete in the deployment of a private LTE network, a progressive and industry-leading means to strengthen system-wide communications, enabling real-time connectivity to increasingly modern system devices to better support critical grid and field operations. At Peoples Gas, the 2025 capital program was supported by a steady residential and commercial growth, requiring continued reliability and distribution expansion investment across the state. Florida is still leading the nation in residential and commercial customer growth rates and signings for future residential business were strong in 2025 as builders and developers remain optimistic about the long-term growth outlook in the state. I'd also like to highlight that Peoples Gas was ranked #1 in the nation in J.D. Power's 2025 residential customer satisfaction study, a distinction that reflects the team's unwavering focus on customers and service excellence. We are extremely proud of this achievement and of the people who made it possible. At Nova Scotia Power, the team brought 250-megawatt 4-hour battery storage facilities into service, delivering immediate customer value by supporting the system during peak demand, including 2 cold snaps already this winter. A third battery facility is on track to come online this summer. The company also executed more than $200 million in the first year of its $1.3 billion 5-year Reliability Plan, consistent with the capital profile supported by all customer representatives as part of Nova Scotia Power's general rate application. In 2026, we plan to execute a record $4 billion of capital across our regulated utilities, part of our 5-year, $20 billion capital plan, supporting the 7% to 8% rate base growth outlined on our Q3 call. This plan is centered on essential investments that strengthen resiliency and reliability while meeting customers' evolving needs. More than half of our 5-year program is directed towards transmission, distribution and gas infrastructure expansion, enabling customer growth while enhancing system resilience through storm hardening, vegetation management and grid modernization. Notably, our capital plan does not reflect any data center-driven growth. While we do not have any data center signings to announce today, we remain actively engaged in discussions and are optimistic about future opportunities. From a regulatory perspective, 2025 delivered steady and constructive progress. We achieved a favorable rate case outcome at Peoples Gas. And in the fourth quarter, the Florida Commission approved an USD 88 million rate base adjustment for Tampa Electric for 2026, consistent with the company's 2024 rate case decision. These outcomes provide important regulatory clarity and reinforce our confidence in deploying the capital needed to support Florida's growth, strengthen system reliability and continue delivering stable long-term value for customers and shareholders. Supported by this strong growth environment and regulatory framework and through a disciplined focus on cost effectiveness and operational excellence, Tampa Electric continues to maintain customer rates that are below the national average. In Nova Scotia, the general rate application continues to progress. The hearing concluded in mid-January, and we are awaiting a final decision from the Nova Scotia Energy Board. This GRA supports critical reliability and infrastructure investments needed to serve homes, businesses and communities across the province while also carefully considering and balancing affordability pressures for customers. The consensus solution brought forward by Nova Scotia Power, which limits the average rate increases to an average of 2% per year across all customer classes over the 2026 to 2027 period is the result of extensive collaboration with all customer representatives and a shared focus on enabling essential investment while minimizing customer impacts. All parties agreed this application strikes the right balance. The consensus filing also reflects a proposal to securitize approximately $700 million of Nova Scotia Power's retiring thermal assets, providing significant customer savings. Together, the GRA and securitization demonstrate Nova Scotia Power's disciplined, thoughtful approach to managing affordability for customers. In keeping with the independent regulatory process in Nova Scotia, the Energy Board will now review the full record and set customer rates. We believe the evidentiary record is very strong, and we expect the decision will be rendered in the next month or 2. If approved as filed, the settlement provides Nova Scotia Power with a clear path to returning to its approved ROE band in 2026 and 2027. And finally, at New Mexico Gas, the sales process is proceeding. The hearing concluded in mid-November, and we're currently awaiting the hearing examiner's recommendation. We continue to expect a positive decision and a closing of the sale transaction in the first half of 2026. I'm also pleased to note that we're extending our average adjusted EPS growth target of 5% to 7% through 2030, while continuing to anchor the outlook to our 2024 results. Extending our growth rate out to 2030 shows our commitment to driving shareholder value over the long term and our confidence in the growth we continue to see in our company. Given that 2025 represented a step change for Emera's earnings with a 19% increase over 2024, we believe maintaining 2024 as the base year remains the most appropriate measure for the long-term growth of our company. With Tampa Electric now representing approximately 59% of our total operating company earnings, new rates in that business drive meaningful increases in our consolidated earnings as we experienced in 2025, but that we would not expect to replicate every year. By moving to a 5-year growth target from our previous 3-year outlook, we are providing greater long-term visibility into our adjusted earnings trajectory that is more closely aligned with our projected rate base growth of 7% to 8% through 2030. This longer horizon better reflects the multiyear nature of our capital planning and regulatory cycles and aligns our disclosure with evolving practices across the North American utility sector where the 5-year forecast periods are increasingly standard. Before handing the call over to Jared, I want to take a moment to acknowledge Peter Gregg, who will soon conclude his tenure as President and CEO of Nova Scotia Power and take on the new role of EVP of Strategy and Policy at Emera. On behalf of the entire team, I want to thank Peter for his leadership, integrity and commitment to serving customers in the province. And we extend a warm welcome to Vivek Sood, who will join us next week as the new President and CEO of Nova Scotia Power. And with that, I'll turn the call over to Jared to discuss our financial results. Jared Green: Thank you, Scott, and thank you all for joining us this morning. I am glad to be here with you for my very first Emera's earning call. So turning over to our financial highlights. This morning, we reported full year 2025 adjusted earnings of $1.45 billion and adjusted earnings per share of $3.49 compared to $849 million and $2.94 per share in 2024. This reflects a 19% or $0.55 increase in adjusted earnings per share over 2024. In addition, we reported fourth quarter adjusted earnings of $167 million and adjusted earnings per share of $0.55 compared to $246 million and $0.84 in the fourth quarter of 2024. Let me spend a few minutes walking through the key drivers of our full year results. Starting with Tampa Electric, we saw a strong performance in 2025, driven by new rates and continued customer growth. That said, some of this benefit was offset by higher O&M, increased depreciation, interest expense and income tax of the growing business. Emera Energy also had a very strong year. Results were supported by favorable market conditions, and the team did an excellent job of capitalizing on those opportunities. At our gas utilities, earnings at New Mexico Gas increased, reflecting the first full year of new rates in the business. Earnings at Peoples Gas were flat year-over-year. So across the segment, results were partially offset by higher O&M and increased depreciation at both of the growing utilities. At our Canadian electric utilities, earnings were lower compared to last year. This was primarily due to higher O&M and depreciation driving lower earnings at Nova Scotia Power as well as the sale of our equity interest in the Labrador Island Link in early 2024. These impacts were partially offset by stronger residential and commercial sales, along with modestly favorable weather in Nova Scotia. Corporate costs were largely in line with 2024. We did see higher interest expense as a result of increased corporate debt outstanding, although this was partially offset by lower interest rates. During the year, a higher share count reduced adjusted earnings by $0.13. And finally, foreign exchange had a meaningful impact on the year. A weaker Canadian dollar in 2025 benefited earnings from our U.S. utilities. Looking ahead to 2026, based on our current hedge adjusted position, we expect that every $0.01 change in the Canadian U.S. dollar foreign exchange rate will have an approximate $0.02 impact on our adjusted earnings per share. Now turning over to the drivers of our fourth quarter results. Many of the factors were consistent with what we discussed for the full year, but there are a few items worth calling out specifically for the quarter. Starting with our Canadian -- our Canadian electric utilities, contributions were lower year-over-year. This was largely driven by higher O&M costs as well as a tax recovery that was recognized at Nova Scotia Power in the fourth quarter of last year. That tax item had a meaningful impact to the utilities adjusted earnings. At the corporate level, costs were higher than the fourth quarter of last year. This is primarily because Q4 2024 benefited from the recognition of a deferred tax asset that did not repeat itself to the same extent in 2025. Corporate results also reflected higher operating expenses and modestly higher interest expense year-over-year. For our gas and other electric utilities, Peoples Gas delivered a strong quarter with earnings up 11%, supported by higher off-system sales. This performance was more than offset by softer results at New Mexico Gas, driven by higher labor and benefit costs as well as lower earnings at BLPC. At Tampa Electric, quarter-over-quarter earnings were essentially flat. Higher O&M, increased depreciation and less favorable weather were largely offset by the benefit of new rates compared to the fourth quarter of last year. And finally, foreign exchange had a modest impact on the quarter. A slightly stronger Canadian dollar compared to Q4 2024 resulted in a modest reduction to adjusted earnings. Our robust earnings growth drove a 19% or $386 million year-over-year increase in operating cash flow after normalizing for fuel and storm deferrals. This momentum translated into strong key credit metrics, including a 130 basis point improvement in the Moody's CFO preworking capital to debt. This improvement reflects significant and meaningful progress towards target metrics. And pro forma the announced New Mexico gas sale, we would have exceeded Moody's 12% threshold. Additionally, our strong financial results contributed to an improved payout ratio of 83% in 2025. This puts us on track to reach our 80% goal by 2027. Before I hand it over to Scott for closing remarks, I want to briefly touch on 2026. With roughly USD 2 billion of the TECO acquisition-related call dates and maturities approaching midyear, we do expect to return to the hybrid and bond markets over the next few months. Debt market conditions remain constructive as we enter 2026, supporting our plan to refinance our June bond maturities. As we continue the process of refinancing the hybrids, which we started in Q4 2025, we'd like to highlight additional capacity in our capital structure for hybrids over and above the USD 1.2 billion issued in 2016. And now I'll hand things back to Scott for his closing remarks. Scott Balfour: Thank you, Jared. As we reflect on 2025, I'm proud of the strong execution and discipline our teams demonstrated across the organization. That performance has created meaningful momentum as we enter 2026, supported by a clear strategy, a strong balance sheet trajectory and a portfolio of high-quality regulated assets. Looking ahead, our focus remains on executing our $20 billion capital plan, completing the New Mexico Gas transaction and continuing to work constructively with stakeholders, particularly in Nova Scotia to reliably deliver the energy our customers expect. This year also marks the 10th anniversary of our TECO acquisition, and it's notable that we have now invested more capital in our Florida utilities than the entirety of the original purchase price, a milestone that underscores how that transaction transformed Emera and created long-term value for customers and shareholders alike. With a solid foundation in place and strong visibility into our growth outlook, we are well positioned to continue delivering sustainable value for customers and shareholders in 2026 and beyond. With that, I'll be happy to answer your questions. Operator: [Operator Instructions] And your first question is from Maurice Choy from RBC Capital Markets. Maurice Choy: Just wanted to start with a question about the extension of growth rates. So obviously, you are doing this for EPS all the way through to the end of the decade. And I wonder whether or not you could indulge us in what your outlook is for the dividend? Obviously, you've got 1% to 2% through to 2027. Is that also something that you think the Board may consider extending? Or put differently, what do you see the payout ratio being at the end of the decade. Jared Green: Maurice, as far as the dividend, we do like the 1% to 2% dividend growth that the organization is working within. We like seeing the trajectory of the payout ratio starting to decrease. If we were to look back a couple of years, we would have had a target of looking kind of 70%, 75% as a good payout ratio for the organization. We still have that belief. And as we do progress towards kind of that level, I think that you'll see that moving along. Maurice Choy: And if you could just finish off with a question on the data center discussion that you had in your prepared remarks. Given your optimism of future data center opportunities arriving, what are some of the early stakeholder engagements that you're doing right now and also perhaps power generation requisitions that you think you might do in the very near term to facilitate some of this power load coming on? Scott Balfour: Yes. Thanks for the question, Maurice. I'd say that Tampa Electric is involved in a number of discussions with potential data center developers and operators is in advanced system planning work with a number of them and continues to be optimistic that we're going to see some element of that kind of large load activity within its service territory. As it relates to generation, the current plans are similar to what we've shared before. We continue to invest in solar in the 150 megawatts to 200 megawatts a year range. As I said, we put in place 150 megawatts in '26 and expect another 170 megawatts in '27 -- sorry, I got myself advanced the year, 150 megawatts in '25 and another 170 megawatts in '26. And as you know, we are in the queue for 2 H-class machines from GE that would continue to provide generation support for the growing generation needs in Tampa Electric service territory, potentially including data center-driven load. So those would be the sort of the key aspects. And as I say, we're hoping that we'll see some of those things firm up as this year progresses. Maurice Choy: Just as a quick follow-up. I think in your prepared remarks, you mentioned that the CapEx plan that you have in front of you doesn't materially include much by way of data center investments. When we think about this extension of 5% to 7% EPS growth, would you say that the data center growth when it does come, is incremental to this 5% to 7% EPS growth target? Or has it all been baked in already? Scott Balfour: Well, no, I would not -- and it's not baked in already as to -- I mean, from our perspective, one of the biggest advantages and opportunities we see with large load additions into the Tampa service territory is the impact that it can have on broader customer affordability, helping to reduce rate pressure for other customers. And yes, depending on how this activity unfolds, it could drive the need for incremental investment in order to support those needs over time. And yes, that could contribute positively to earnings over time. But we have not assumed any of that within our current rate base forecast or within our continued 5% to 7% EPS guidance. And as I say, we see the primary benefits of attracting that kind of customer load is reducing rate pressure for customers. Maurice Choy: And my congrats and welcome to Jared and also to Vivek and Peter for the upcoming transition. Operator: Your next question is from Rob Hope from Scotiabank. Robert Hope: Just regarding the extension of the EPS outlook out to 2030, how should we think about the growth range in the context of Tampa Electric returns and rate filings? Which could move you to the top end of the range? And what could move you to the bottom end of the range, especially given the fact that you do have a step-up in earnings when you do have new rates at Tampa? Scott Balfour: Yes, Rob, thanks for the question. I think nothing new here in terms of the profile. I think for Tampa Electric, similar to most utilities, certainly those within our portfolio, generally, when new rates are secured as part of a regulatory application, often, we're able to earn in the upper half of the band if we're prudent in terms of our capital allocation and execution and the management of costs. And then as we get closer to the need for rates, typically every 2 to 3 years, depending on the capital investment profile, then, of course, the ROE profile starts to reduce. And we might see in the lower half of the range in the year of regulatory filing to secure new rates, which is really an indicator that the business requires those new rates to support the continued investment of capital. So that's the profile we expect with Tampa Electric. And of course, the other big driver is weather. And if we have favorable weather, then that can contribute positively. If we have less favorable weather, of course, that can drive ROE profiles lower a little bit. And generally, we've been pretty fortunate over the last few years, but you saw a bit of that impact in the fourth quarter, of course, with less favorable weather impacting results in a couple of our operations. Robert Hope: The 2026 outlook has Nova Scotia Power earning at the lower end of the band, even with the partial year of new rates. If the regulatory or political situation in Nova Scotia worsens. Could we see you materially cut capital and reallocate those funds to Florida, which the market views as more favorable? Scott Balfour: Yes, I'll pass it over to Peter in a second. But yes, there's always -- if there isn't regulatory support or the capital investment profile that's been put forward, then, of course, that capital won't be able to be invested. And so that could have an impact. But we continue to believe the evidentiary record and the capital profile that's been put forward and supported by all customers represents the right balance between the investments needed and the impact on affordability. But maybe I'll pass it over to Peter to take it from there. Peter Gregg: Thanks, Scott. Rob. Yes, I'd just underline our confidence in what we put before the regulator and our reliance on the independent regulatory process as well. It's important to remember that we did work with all of the customer representatives to put together a consensus agreement. So we've got support from all of the customer representatives. As Scott said, we think the evidentiary record is strong. So we do have confidence that we'll get a good decision from our regulator. Operator: Your next question is from Mark Jarvi from CIBC Capital Markets. Mark Jarvi: Just sticking with Nova Scotia, just there was some pushback around some of the terms of securitization. Just wondering where those conversations are, anything you've provided and sort of feedback to the government and when we might get clarity on that? Peter Gregg: Mark, it's Peter. So we continue to work with the province and are committed to continuing to work with the province to demonstrate the benefits to our customers through the proposed securitization. I guess all I can say is continue to address questions that come in from that, but confident that what we put forward is in the best interest of customers and look forward to what the Energy Board has to say on that as well. Mark Jarvi: Can you remind us again in terms of what cash has been provided and when the next sort of payments were expected? Scott Balfour: Sorry, not sure I follow your question, Rob (sic) [ Mark ] one more time. Mark Jarvi: No. I just can't remember, was all the securitization paid upfront? Or was there installments and when sort of what the next planned installment if there was? Scott Balfour: So there's been 2 securitizations that have been completed. So there was $117 million and then another $500 million that was done both relating to unrecovered fuel costs, the FAM. The proposed securitization as part of the general rate application is an additional $700 million that relates to the retiring thermal assets, the coal plants that are required to be retired by 2030 under provincial and federal legislation. Mark Jarvi: And then just going back to the EPS guidance. Anything else you guys can share in terms of any key assumptions, whether it's expected ATM usage or Jared, you brought up the refinancing in 2026 in terms of how much more you issue this year at the holdco and the rates you assume there? Jared Green: So I don't know if there's a whole lot of difference in color to give you on the financing plan on that side. Obviously, we do have the shelf prospectus is outstanding for the ATM, and we would be looking to utilize that throughout the year. Also remind on there that we do have the DRIP program. So we'd be accessing the equity through both of those mechanisms. As far as the upcoming financings, so June 15 is the date that we're coming up to that anniversary date. And so just the ability to get out a little bit ahead of that. And as we noted, we do have some incremental capacity as Emera has grown since the original size. And so being able to utilize that just in the hybrid market is something that it has obviously good credit components on it. And we are seeing, as I said before, a strong market in that side. So we're seeing the spreads and the cost there is something that we are liking. But going back, the overall financing plan for the $20 billion program over the 5-year period is very similar to what we have been saying over this last year. Mark Jarvi: And then you made a comment, Jared, about you would have been above the Moody's threshold. Can you just kind of outline where that would have been? Jared Green: So that would be with the pro forma of the closing of the New Mexico Gas. So we see the Moody's metric with the adjustments through there. We're at about 11.6% is what we ended the year at. And then we do see on an annualized basis, there's probably about 50 basis points of credit related to the closing of the New Mexico Gas. So that's where we would see that. Operator: Your next question is from Ben Pham from BMO Capital Markets. Benjamin Pham: A couple of questions on the New Mexico transaction. Can you give a context on the timing? Again, I know you had initially pushed it out from late last year to early this year because of the hearing change. And I'm curious what's driving the recent timing delay, if I can put it like that? And then also, is this decision then linked to the pending Blackstone application as well that hearings in early February? Scott Balfour: Yes. Ben, so as I mentioned, the hearing is complete. We believe the hearing went well. And now we're just awaiting the decision or the recommendation from the hearing examiner, which could be any day now. And then following that, the commission would meet and if the commission then approves the transaction, we could close almost immediately right after that. So we don't really have a good line of sight as to the exact timing of the hearing examiner decision. But as I said, it could literally be any day now. And no, we don't believe that there's any sort of knock-on impacts or connection of timing of this to the TXNM transaction with Blackstone. Benjamin Pham: And maybe going back a second on the NSPI at the sub-security situation last year weighed on your earnings to some extent. So where are you with that now in terms of remediation and any potential costs this year? Is that some of that built in the ROE expectation for NSPI for 2026? Jared Green: Sorry, Ben, could you repeat that again? I didn't think I caught the front end of that. Benjamin Pham: Yes, absolutely. You had the cybersecurity incident at NSPI impacted your earnings in that franchise. And my question is, is that the -- what's the remediation of that now? Is it pretty much all rectified? Is there impact to 2026 -- related to that at all? Peter Gregg: I missed that. We still remain confident that insurance will cover the costs -- largely cover the cost of this incident. We did expense the amounts in 2025, as you've seen in our financials. We're making really good progress. One of the biggest impacts we saw was the impact to the -- what we call the head-end system that connects the meters, AMI meters to our billing engine. We've made very good progress on that. We've got over 85% of our meters now communicating with our billing system and we'll have 100% of those meters communicating by the end of next month. So we continue to make very good progress. I don't expect to see any significant impact on 2026. Operator: Your next question is from John Mould from TD Cowen. John Mould: Just wanted to get a little more color on your coal assets. And I appreciate -- sorry, in Nova Scotia, and I appreciate you don't have responsibility for system operation anymore, but I'm just trying to get a sense of their importance to provincial reliability and how you're thinking about their actual operations through 2030 in the context of the phaseout timeline and maybe some color on the importance they've had for reliability in some of the recent periods of high demand and stormy weather. I think that would be helpful. Peter Gregg: Sure. John, it's Peter. I'll take a crack at that. So we do continue to make plans to have those coal assets shut down by 2030 as required. But we've seen electrification growth, and they do continue to contribute to reliability. The independent electricity system operator here in Nova Scotia has recently -- they just got the environmental assessment approved last week for 2 sites to put in some fast-acting gas generation. That's a really important step in terms of replacement energy and capacity for us to shut down those coal plants. We have had to make some tweaks to our plans. If you look at the most recent GRA, we've asked for the ability to spend up to $18 million to invest in our Lingan 2 generating assets because it continues to contribute meaningfully to reliability, especially during cold snaps. So that's $18 million to sort of keep it around until that 2030 phase out. So managing the system while new resources come online, but knowing that we have a legislative requirement to shut down the coal by 2030. Scott Balfour: And the only thing I'd add to that, John, is what Peter spoke about is all part of a plan, executing an approach to achieving the 2030 goals that was announced by the province and supported by the utility that in order to close those coal plants, really 4 key components to be able to make that happen and achieve -- both the provincial and the federal legislation. Two of those things, the responsibility of Nova Scotia Power, which is the addition of 150 megawatts of batteries. And as mentioned, 2/3 of that is now in service. The other 1/3 will go in service this year. And then the other part that is Nova Scotia Power's responsibility is the tie line, the transmission line interconnection between Nova Scotia and New Brunswick. The independent system operator is managing the procurement of the additional renewable resources, wind resources and the gas generation that Peter mentioned. It's the combination of those 4 things that enables the achievement of those 2030 goals. And as I said, the portion that Nova Scotia Power is responsible for is in progress and well on hand and certainly no risk to be able to deliver on its commitments to achieve that 2030 goal. John Mould: And then I'd just like to ask about potential new markets. You're on the list of eligible transmission bidders in Ontario's competitive transmission procurement. You do have underwater line development experience. Province is also running this PULSE Panel on its local distribution utilities. I'm just wondering if you could give us a sense of your appetite more broadly to deploy capital beyond your current markets and how Ontario might fit into that? Scott Balfour: Yes. So we're certainly paying attention to opportunities in that market. And yes, the decision by the Province to look to procure transmission interconnection between Darlington and the Port Lands of Toronto, downtown Toronto by way of underwater high-voltage DC cable is definitely something that we know something about. Of course, having built and now operating the 2 longest subsea cables in North America and doing that, I think everyone would agree quite successfully. So that's certainly an opportunity we're paying attention to, and we'll await the procurement process that the Province decides upon and what's going on with the LDC market in Ontario, we pay attention to as well and looking forward to seeing what opportunities might get created in Ontario. But in the meantime, our focus continues principally to be on the execution of the organic growth that we've got in the portfolio, that $20 billion that I mentioned that continues to drive strong EPS growth guidance based upon that extension of that 3-year guidance to 5 years as we talked about. Operator: Your next question is from Elias Jossen from JPMorgan. Elias Jossen: Maybe just thinking about the overall generation mix shift down in Tampa. Can you guys just frame, one, how the discussions are evolving with regards to generation type? I know you have a lot of different options there. And then maybe secondly, just more broadly, what the outlook is for renewables in the state long term, recognizing that you continue to deploy a good mix shift of renewables annually. Scott Balfour: Yes. Thanks for the question. So for Tampa Electric, pretty similar to other utilities in the state, natural gas is a really important part of the generation mix there. Over 70% of Tampa Electric's generation is natural gas. And as mentioned, we're looking at adding more of that in order to meet the growing needs and the growth in Tampa Electric service territory. But we also do continue to invest in solar and would expect to continue to do that for the next few years. Obviously, the impact of the One Big Beautiful Bill and the tax credits create some uncertainty in the long term. But certainly, over the profile of our capital investment -- 5-year capital investment forecast that's provided. You'll note there continues to be meaningful solar investment in Florida because we can continue to demonstrate that it saves customers money. And doing that on an economic basis continues to be an important part of how we meet the generation needs of customers in Tampa. So for the time being, continued investment in solar and some additional gas generation capacity that would be the primary generation sources for us in Tampa. The one remaining coal unit that we have is used very, very rarely, and the team is looking at what its retirement options might be in the near term. Elias Jossen: And then maybe sticking with Tampa, I know there's been a lot of discussion about data center opportunities, but we've seen others in the state structure sort of large-load tariffs. Is there any color you can provide about the nature of the discussions you're having, whether that's regarding size of the opportunities or just overall structure, again, given the sort of the other contracting we've seen in the state? Scott Balfour: Yes. So thank you for the question. And yes, one of our -- one of the other large investor-owned utilities in the state, as you know, had a large-load tariff supported through its settlement -- approved settlement of a recent rate case. And without surprise, the kind of conversations that we're having, the approach that we've taken to large-load tariff is completely aligned to that, which is really ensuring that these new large loads, data center-driven large loads fully pay for the cost, the incremental cost that is required to serve them and contribute some portion to the broader system in order to, as I mentioned before, help reduce the rate pressure on the socialized system on other customers. So that's very much aligned with our approach. And I'm sorry, I've now forgotten the second part of your question. Size, yes. Really, what we've been articulating over the last year or so is we've got the capacity to serve in 300-ish megawatts in the near term and the ability to grow that modestly over the years ahead. So we're not talking about the kind of massive multi-gigawatt type opportunities that some are discussing, but very incrementally helpful to all stakeholders to the extent that we're able to attract some of this large load into the Tampa service territory and the team is very focused on ensuring it's positioned to be able to meet that need. Operator: [Operator Instructions] And your next question is from Patrick Kenny from National Bank. Patrick Kenny: I guess just on Emera Energy with the performance in '25 here exceeding even the previously revised guidance. Just wondering what you're expecting to change or, I guess, normalize here over the near term in terms of market dynamics? Or should we be thinking about 2026 as having a similar upside potential? Judy Steele: It's Judy. Yes. So we've kind of provided the guidance that we think 2026 will be in line with 2025's results. We're still not changing what we consider our normal guidance. Clearly, the weather in the last -- especially over the winter and then the first quarter of last year has been a little abnormal, which has been good for us, but we keep the general guidance the same at 15% to 30%. And when we see conditions that tell us that we should update people for a little bit of a change, we'll do that -- deal with it that way. So again, I will reiterate though that we do think that 2026 will be closer in line to 2025. Patrick Kenny: And then I guess just stepping back and looking at the $20 billion capital plan, can you just remind us maybe where you might have certain flexibilities in terms of pushing certain projects out if cost inflation or FX rates move against you along the way? I'm just wondering how much flex you might have to be able to manage any affordability pressures that might pop up if need be? Scott Balfour: Yes. Let me start, and then Jared can add on. I think, Patrick, generally, our thinking and approach traditionally has been that 7% to 8% rate base growth guidance is kind of the right place to be and to the extent that we see inflationary pressures on projects start to drive costs up or as you mentioned, foreign exchange impacts or tariffs or whatever the case may be, then generally, yes, we would be reprofiling a little bit because we do want to make sure that we're not putting too much pressure on rates for customers. So I would not be expecting that we'd be sort of seeing those pressures drive our 7% to 8% guidance higher, but rather really just creating more durability, sort of a longer profile to continue to see that kind of rate base growth. But maybe Jared can give a little more color. Jared Green: No. Just adding on, Scott, for that. From a financial perspective, probably very similar to what we have seen in the $20 billion side. The scope of what goes within that utilities do have some ability to adjust that through time. But with, as Scott noted, customer affordability being a key factor in there, safety, reliability, customer growth are all legs to the stool that come into factor when you're looking at these investment plans. So we see -- we have pretty good comfort in that $20 billion forecast. And as Scott said, programs that might get pushed out a little add more to the durability of that growth program. Final color, I'll just put on that is we do feel quite confident in the durability of this 7% to 8% growth range into rate base. It's one where again you can factor in all 3 legs to that stool of customer affordability, safe, reliable and the sustainability that goes within it. So we do see a lot of good longevity to that growth as well. Patrick Kenny: And I know it's a relatively small investment for NSPI, but maybe just on the New Brunswick, intertie -- would you have an update there on where things are at from an engineering or construction standpoint and how things are progressing towards the 2028 in-service date? Peter Gregg: Yes. Patrick, it's Peter. As you know, we got approval for that in the fall. We've been doing land preparation forestry work through the winter. So doing the tree clearing. We expect to be doing foundation pours in the spring. So everything well on track for that '28 in-service date. Operator: Thank you. There are no further questions at this time. Please proceed. David Bezanson: Thank you all for your interest today. That wraps the call. Have a great day. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.
Conversation: Theodora XU: Good morning, ladies and gentlemen. Thank you for being with us today. Today is about 3 words: acceleration, profitability and value creation. And everything we'll discuss this morning will connect back to these 3 priorities. I'm Theodora Xu, Head of Investor Relations for Tikehau Capital, and I'm delighted to be hosting today's full year results and strategic update. So today, you'll hear from our 2 co-founders, Antoine Flamarion and Mathieu Chabran; our Deputy CEOs, Henri Marcoux, Thomas Friedberger and Maxime Laurent-Bellue; and our Group CFO, Vincent Picot. So a little bit of housekeeping element on the flow of this session. So we'll first start with a look on Tikehau Capital key achievements for 2025 and then open the floor for a first session of Q&A dedicated to our annual results. We'll then take a short break to allow everybody to refresh, to grab coffee before moving into our strategic update. Then you'll hear first from Thomas, who will share his perspectives on opportunities shaping the next decade. Then we'll have Maxime hosting a fireside chat with our co-founders, discussing accelerating profitability across asset management. Then we'll have our co-founders and Henri provide insights on our evolving approach to balance sheet allocation before taking us through the harvesting phase Tikehau Capital is now entering and providing more details on profitability drivers and value creation framework. We'll then host a second session of Q&A dedicated to our strategic update. With that, it's my pleasure to welcome to the stage, Mathieu Chabran, Co-Founder, for opening remarks. Mathieu Chabran: Thank you. Thank you, Theo. Welcome. Welcome, everyone, here in London, and welcome for all the people who dialed in on the webinar or the webcast. I hope that you can hear us okay. You got all the documents and that you will be enjoying this presentation with us. So very happy to be back in London, not only for our 2025 full year earnings, but also for this new Capital Market Day, as we call it, and very excited with -- on behalf of all the team to host you at Tikehau and give you a little bit of the forward-looking, which is really what we would like to focus on today. But first, let's start with our '25 earnings that were released this morning. I like to call it a record year because the numbers stand. But before we get into the numbers, I would like to tell you and witness how strongly the franchise has evolved over the past few years and the acceleration, as Theo was rightly saying that we benefited from in 2025. It's been a record year on the deployment despite if you look back and think about what 2025 was as a year and as markets to operate in, that was a record year on the deployment. On the realization, we come back to that on exiting some of our portfolio companies and distributing back to LPs and as well as the fundraising, the gross and net inflows, we'll get back to that. We told you in 2022 that the focus was to develop, grow the profitability of the asset management. Remember that when we went public 9 years ago, we were barely doing EUR 5 million of EBIT. It's close to EUR 150 million this year. And you will see that this growth and expansion in asset management profitability is here to stand and we'll give you some guidance where we think we can go. And then finally, on the portfolio, you've got these 2 engines at Tikehau, right, the asset management, the principal, our balance sheet, we saw some strong contribution, albeit this year impacted by some ForEx, and we'll come back to that. So as I was saying, record in deployment, realization inflows. On the deployment, it's EUR 7.6 billion that we put at work at Tikehau, which is an increase of 35% compared to 2024. On the realization, on the exit, we like to say at Tikehau that you have to give back so that people keep giving. And you keep hearing about investors not getting money back. What we tried to do last year is to demonstrate that, yes, you can exit some portfolio company, give back to your investors so that, that keeps fueling the next cycle of growth. And that was twice what we did in 2024. On the capital formation, it's EUR 10.5 billion of gross inflows, and that's the fourth consecutive year of a record year in fundraising. It's EUR 8 billion in net inflows. And what we are very encouraged by is that the whole investments we made in the platform over the past few years globally, remember, we went public, we had 5 offices. When we saw you in 2022 for the Capital Market Day, we had 7 offices. It's now 17 offices we've got across the world. And from Asia, including Japan, Middle East, across Europe today, North America, even South America now, we've got all these new customer base that are fueling the fundraising at Tikehau. So 80% last year came from new customer base, new geographies outside of our domestic market, taking our overall AUM to EUR 52.8 billion. So as I was saying, we've been focusing on larger transactions with a more global portfolio, not only in Europe, domestic market, but in Asia, in North America. And that has enabled us to raise additionally more than EUR 1 billion, EUR 1.2 billion of co-investments on some of those larger transactions. You'll have some examples later on that you may have picked up over the past year, but that has been a strong driver. On the capital formation, as I was saying, a few elements. In Asia and Middle East, it's EUR 1 billion that was contributed. We hit the EUR 1 billion of inventories of clients in Korea that we had opened 6 years ago. And just I'll give you an example that we kind of like just last year, out of the EUR 10.5 billion gross inflow we had, 4 investors -- 4 new investors actually accounted for 20% of our fundraising, and they were all new relationships of ours, bigger commitments. I mean, they came from some very complicated to penetrate markets. I'm thinking about Japan, thinking about Germany. I'm thinking about the U.S. I'm thinking about Middle East, GCC, Abu Dhabi. This is a strong illustration that the investment we made in the platform is now paying off, and we're harvesting all this investment that we had made. And so as I was saying, giving back capital to RPs EUR 4.1 billion that we returned to our LP last year. And just as a data point because people have been talking a lot about private equity last year, and I'm sure we'll have plenty of questions about private credit as well, and we're looking forward to addressing them. But it's a 2.6x that we returned to our investors on the realized transaction. So where does that leave us on the financial? I mean, we issued this morning all the numbers in the details, we'll come back. But if I look at the first pillar of our business, our asset management business, it's an 8% growth of our revenues, converting into 18% growth on the -- at the EBIT level. We grew by 12% our core FRE, this fee-related earnings. And for the first time, as we told you a few years ago, we passed the 40% core FRE margin, and you may have picked up, and we will come back to that, that we're giving an improved guidance on this very important profitability element. On the second pillar, on the portfolio, it's a 19% growth in our realized revenue for the balance sheet, our investment portfolios and a 33% revenue growth if we exclude once again these currency effects that Vincent will be detailing. So finally, it's EUR 136 million net income that we are reporting for 2025, which is 51% growth if you exclude this currency effect. And so we will be -- we propose EUR 0.80 dividend that we'll be voting at the next AGM. So that's for the key element. There will be plenty of details on the session. Once again, thank you very much. We look forward to an interactive session. Thank you, and I will hand over to Henri for more details. Henri Marcoux: Good morning, everyone. Thanks, Mathieu, for this introduction. So let's jump into our asset management flywheel. Maybe we'll start with deployment. As you have seen, deployment has clearly stepped up during the year '26. We've reached EUR 7.6 billion of deployment. So that's an additional EUR 2 billion, 35% compared to the year '24. Starting with private equity maybe, with a EUR 2 billion compared to EUR 600 million the year before. Clearly, we've accelerated deployment, notably on aerospace and defense, cybersecurity, decarbonation in Spain, Belgium, Germany and in U.S. through our flagship strategy, but as well through our co-investment vehicle. Real assets represented EUR 1.4 billion of investments compared to EUR 1 billion during the year '24. Here again, discipline has remained paramount. We continue to focus on high-quality, well-located assets, notably to be noticed during the year '24, big residential portfolio units in France as well as a big investment, first investment in real estate in the U.S. and notably several additional investments in the Netherlands. As far as credit is concerned, so that's clearly a stable deployment versus '24. We are standing at EUR 4 billion, very well diversified allocation through Spain, Italy, Netherlands, Belgium, U.K., very strong momentum as well on our CLO issuance business. And so we are ending the year with more than EUR 7.6 billion of dry powder end of '25 to be ready to capture new investment during the year '26. We've been talking about executing larger transaction. That's a very key important point that we wanted to mention today. So out of this EUR 7.6 billion of deployment during the year, we had EUR 1.2 billion that were deployed through dedicated co-investment vehicle. That has been the case on the private equity business, such as the Egis transaction we've been commenting for a few months. EYSA in Spain, that has been the case for as well ScioTeq aerospace and defense deal in Belgium. That has been the case as well for real assets through this residential deal. That has been the case as well for private debt, where we had several deals where we have welcomed co-investor. So that's clearly a new feature here, creating adjacencies, creating new funds alongside our flagship and welcoming co-investors. What does that mean? That means that through this creation of new vehicle, we are bringing into the platform additional fee paying. So management fees that are going to fuel our fee-related earnings and additional performance fees, which will depend on the exits, of course, but which will fuel as well our asset management EBIT. So looking at what happened in '25 over those co-investments, that's roughly more than EUR 1.2 billion of additional co-investment, bringing more than EUR 150 million of asset management EBIT for the coming year. Realization, clearly here, once again, a strong increase. It's almost double figure as what was exited in '24, so reaching EUR 4 billion of exits. Here, again, private equity has been increasing significantly. That's EUR 1 billion of exits for 5 positions that were exiting during the year, reaching 2.6x of multiple. So clearly in line with our fund expectation. As far as real estate is concerned, we remain stable, EUR 500 million of exits. Multiple on real estate achieved has been 1.6x. That's at asset level, unlevered and those exits are mainly residential and light industrial. As far as private credit is concerned here, clearly, very strong increase. Realization have reached a record that's almost EUR 2.7 billion. As far as direct lending and corporate lending are concerned, those are repayments. The average MOIC reached has been 1.4. As far as our specials business is concerned here, we've been exiting several positions as well at our initiative, achieving a gross MOIC of 1.6x. I want to insist on that because clearly, in '25, I think that the global macro environment as far as exit is concerned, has been challenging. In that context, we've been able to deliver EUR 4 billion of exits. So we are sending back money to our LP. we are increasing the DPI, which is key. We are increasing the performance and all the average gross MOIC that have been realized on all of our exits are clearly either in line or above our fund expectation. Fundraising. So here again, we've been mentioning EUR 10.5 billion of gross inflows, record year. As far as net inflows is concerned, that's EUR 8 billion of net inflows, so a 13% increase during the year. Looking at this fundraising a little bit more in detail. You can see that as far as private equity is concerned, we've reached EUR 2 billion. I'll come back on that. Notably, those inflows have been driven by the cybersecurity final close, regenerative agriculture as well. Our specialist fund being decarbonization fund #2, aerospace and defense fund #2 have been benefiting obviously from strong inflows in the current environment. As far as real estate is concerned here, it's a performance of EUR 1.3 billion of net inflows, focusing on value-add and Core and Core+. This is including the previous transaction I was mentioning, notably residential in France, the one in the Netherlands as well. Strong contribution from credit, EUR 4.4 billion, stable versus last year. As we just announced a few days ago, we've been closing our credit secondary fund #2, $1 billion, which is almost double the size versus previous vintage. As far as direct lending, vintage #6 is concerned, which is still open as we speak, we are close to EUR 5 billion. And here, we have secured the 2 largest individual LP commitments in our history from Germany and in U.S. Demand as far as direct lending is concerned, remained quite strong. So as you can see over here, diversified strategy, larger tickets, co-investment, client conviction, bringing us into this record EUR 8 billion for the year '25. So just a snapshot here on where we stand on our flagship. So I was mentioning special opportunity fund number -- vintage # 3, EUR 1.2 billion, which is almost the double versus the previous vintage. Credit secondary, $1 billion. As far as private equity is concerned, regenerative agriculture, vintage #1, EUR 600 million; cybersecurity fourth vintage, almost doubling the size versus the previous vintage. As far as '26 is concerned, lots of ongoing fundraising as we speak. Obviously, direct lending #6 still open as we speak and benefiting from strong inflows. This year will be as well a strong year as far as private equity is concerned, we are still open during all the year, Aerospace and defense fund #2 and decarbonization fund #2. So you have here on the screen the evolution of our AUM during the year. So it started at end December '24 at EUR 49 billion, ending at EUR 52.8 billion. Different movements of the year have been impacted by the inflows I was mentioning, EUR 8 billion and the distribution standing at EUR 4.1 billion. You have on the right side of the page, the diversified and complementary asset class, the split by business unit. Client base, as far as client base is concerned, one important feature, Mathieu was mentioning the number of offices we are operating, namely 17 offices as we speak. Important to notice that as far as inflows are concerned, that's more than 80% of net new money that has been raised from international clients. You have here the biggest contributors for the year '25 being U.S. investors, U.K., Spain, Germany. To be noticed during the year '25, strong contribution from Asia, namely from Korea and Japan. Korea has gone over the EUR 2 billion mark for the year '25. Contribution as well from Israel, where we are approaching the EUR 2 billion mark as far as the LP commitments are concerned. So those are the most represented nationalities in '25. On the right part of the page, you do have actually the split, which means that international clients have increased from 44% '24 to 46%. So that's a 13% increase, representing EUR 24 billion at end of '25. Private market is an important feature. We've been focusing significantly over the past year over the strong growth, era of growth. That has been the case as well for '25. That's 25% of third-party inflows that were raised through private clients. That's actually notably all the initiatives we've been launching on private debt, private credit, unit-linked products have now reached more than EUR 1.5 billion at end of December. As far as AUM are concerned, that means private customer clients are now representing more than 34% of our AUM. That's actually more than EUR 18 billion. Two dedicated initiatives that have been launched during the year '25, one on private credit, namely TEPC, European private credit, semi-liquid fund, focusing on midsized European company. And second important initiative that was launched during the summer, which is a unit-linked dedicated to defense, security, aerospace. This unit linked is currently distributed through partnership that we're having with big insurance company. We are currently sending over EUR 200 million for this product, which -- where the distribution has started end of '25, focusing on our aerospace and defense practice and notably the track record that we are benefiting on that practice, aerospace and defense practice that was launched back in 2018. Last point on sustainability. A few years ago, we had set a target on AUM dedicated to climate and biodiversity. Our target was to achieve at least EUR 5 billion of AUM dedicated to that practice. End of '25, we are standing at EUR 5.8 billion, notably thanks to our decarbonization practice, Fund #2. So that means continued sustainability integration across the several pillars that we are benefiting through the WL platform. I will now leave the floor to Vincent for the financial review. Thanks. Vincent Picot: Thank you, Henri. So I'll start the financial highlights with our fee-paying AUM and the revenue generation in terms of revenues. So first, fee paying AUM grew by 6% compared to 2024. It was driven by net money on our private equity practice, capital markets and also by a very dynamic fundraising and deployment activity for direct lending and CLO business. In addition, it's worth mentioning that future fee-paying AUM grew by 24%, and it was supported by solid net money in direct lending strategies. We charge management fees on invested capital. So together, fee-paying AUM and future fee-paying AUM increased by 8% year-on-year. So that's a sign of securing future management fee generation. Also and the impact it has on management fees is that management fees increased by 8%, reaching EUR 358 million. That's an acceleration that we have noticed specifically in H2. Average revenue margin stood at 88 bps, which remains resilient. And worth noting that we record a clear performance-related earnings level of EUR 22 million, which is a record. On the following slide, a few data points on performance-related earnings. So at end 2025, AUM eligible to carried interest grew by 10% to EUR 24.8 billion. In addition, at end September 2025, we had EUR 220 million of annualized performance-related revenues, which are actually accrued at fund level and such level is based on the current performance at portfolio level. This amount is not crystallized yet. It is not yet accounted for in our P&L, and it will be recognized as funds approach maturity. In terms of asset management profitability and as Mathieu mentioned, we grew our asset management EBIT by 18% year-over-year, reaching for the first time EUR 150 million. This growth reflects specifically the increase in the core fee-related earnings with a notable acceleration in H2. This is mostly due to an increase in management fees in this period. Overall, Core fee-related earnings increased to 41% in terms of margin, exceeding so for the first time, the 40%, and it reached exactly 46% in H2. Overall and looking now at the cost base, we remained very disciplined because the operating cost base only grew by a mere 3% year-over-year. So that's a testament of an efficient resource allocation. Moving now to our investment portfolio. So at end 2025, the total fair value reached EUR 4.4 billion, very -- and still very granular with a bit more than 300 investments. Approximately EUR 3 billion of this amount is invested in our own management strategies. So it ensures an alignment of interest with our client investors. The remainder of this amount, EUR 1.3 billion is invested in our direct investment ecosystem. As you can see on the right-hand side, we've got a pretty well diversified portfolio in terms of asset classes. Now looking at the flows and what happened over the year, investments reached EUR 1.3 billion, of which EUR 951 million of capital calls in our own strategies, CLO, credit secondaries, private equity strategies mostly, but we also invested EUR 370 million in our ecosystem, and it was mostly driven last year by our investment in Schroders. 2025, so we carried out close to EUR 800 million of exits. Returns of capital were from various asset classes, CLOs, special opportunities, but also decarbonization and aerospace strategies that Henri mentioned when talking about distributions to our LPs. Market effects, minus EUR 18 million, reflecting mixed effects, positive fair value changes for our Schroders stake, also positive regulations in some of our private equity strategies, mostly aerospace and defense and also decarbonization, but it was offset by negative market effects in some very specific credit and real estate situations. And finally, currency effects amounted to minus EUR 161 million, and it's mostly linked to the sterling euro exchange rate. Slide 20 -- next slide. So in terms of portfolio revenues. So in 2025, portfolio revenues reached EUR 166 million. That compares to EUR 207 million in 2024. But as mentioned also by Mathieu, realized revenues actually grew very significantly by 19% year-over-year, reaching EUR 239 million. So that's worth highlighting. It's composed primarily of coupon, dividend and distribution from our whole spectrum of credit strategies, listed REITs and also ecosystem investments. As regards unrealized revenue of minus EUR 73 million, we've got a P&L impact of foreign exchange for minus EUR 52 million, mostly linked to the euro-sterling exchange rate. And as I explained in the slide earlier, also around minus EUR 20 million of unrealized negative changes in fair value. So excluding currency effects, our portfolio revenues grew by 33% year-over-year. If I have to wrap up our 2025 financial performance, strong performance in our asset management platform, as explained on the asset management EBIT growth. It was offset to some extent by currency effects and also by unrealized fair value changes on our investment portfolio. Looking now in a bit more detail, nonrecurring items and other of EUR 13 million. It's mostly linked to positive ForEx impacts on our U.S. financings. Tax expenses, EUR 51 million in 2025, in line with our net result before tax and a tax rate of around 25%. So overall, our net result group share amounts to EUR 136 million. And if we exclude main currency effects, our net result grew by 51% year-over-year. In terms of balance sheet metrics, our model is strong, supported by means of EUR 3.1 billion of shareholders' equity group share and also by short-term financial resources of EUR 1.2 billion. As regard our financial debt, which stood at EUR 1.9 billion, it encompasses a EUR 500 million new bond issue, a renewed and upsized RCF line of EUR 1.15 billion. And at end of December 2025, we had drawn EUR 150 million of our revolving credit facility. And as of today, we have fully reimbursed our RCF. In terms of -- so based on this -- so building on what I disclosed and building on our 2025 performance, we're also pleased to formulate a new 2026 vision that is disclosed on the screen. We will be laser focused on reaching an AUM of at least EUR 60 billion by end 2026, reaching FRE between EUR 175 million and EUR 225 million and the net result group share between EUR 420 million and EUR 520 million, excluding ForEx effects. Worth noting that approximately EUR 180 million of net result comes from the full disposal of our stake in Schroders that happened earlier this year. And also, we also disclosed a return on equity between 13% and 16%. So all those metrics show improvement compared to 2025 and are above market expectations. 2026 has to be seen as a step in our journey towards a long-term profitable growth that will be disclosed and presented just after. And we will be providing, of course, more details on our targets later this morning. Thank you very much for your attention. I will let Antoine for the concluding remarks. Theodora XU: Thank you, gentlemen, for this very thorough presentation. We'll now open the floor to questions. [Operator Instructions] And we will address in priority questions from the room, obviously, and also take questions from the webcast. So one question from Sharath Kumar from Deutsche Bank. Sharath Ramanathan: Very impressive presentation. So congratulations. I have 2 questions, if that is okay. So first one is while I totally understand your investment story, but I think it will be much simpler with an asset-light business, although I kind of understand where you're coming from in terms of your balance sheet, funding your strategies. But ultimately, I think it is very hard to deny that this has been hugely dilutive to your valuation. So has there been discussions to eye off the investment activity outside the listed entity so that it can improve your valuation? So that is the first one. And I want to come back to the usual topic on your share price valuation, low free float. A couple of years ago is when you disclosed your 2026 targets, at least on the asset management side, you have been mostly on track, while on the investment activity side, is there, I think consensus is widely divergent from your targets. Just been a very painful wait for the sector to rerate and you have not been alone in that. So -- but when it comes to increasing the free float, what is the latest update that you can give you? I know it's been a chicken and egg situation for the valuation to increase or the free float to increase, but what is the latest update that we can? Antoine Flamarion: Thank you for your question. That's a usual relevant question we had on balance sheet and asset light. As you all know, we started the firm just as an investment company in 2004. In 2007, we launched the asset management. So our asset management is 19 years old. We are celebrating next year our 20-year anniversary for the asset management. So we decided from day 1 that having a balance sheet will help fuel grow the asset management. And as we discuss a little bit later during our strategic update, we'll be more precise into that. But the truth is that we've been using the balance sheet to seed sponsor new initiative. Without the balance sheet, it would have been impossible to launch CLO in 2012, direct lending in 2009, decarb in 2018, aerospace and defense in 2020. Needless to say that nobody will even answer our phone. So we used the balance sheet to seed sponsor that. As a result, we have this balance sheet, a EUR 5 billion balance sheet and now a EUR 53 billion AUM business. We are clearly unhappy with the valuation. The sum of the part is miles away of what we should be. So clearly, we don't get the credit of having both the balance sheet and the asset management. For all of you who are very familiar, you just saw the latest M&A transaction announced, which is the Coller purchase for EUR 3.2 billion. Coller is making EUR 145 million of EBIT, let's say. So we just announced EUR 150 million. So that tells you more or less the valuation we should get on the asset management. And on top of that, we've got EUR 3.1 billion of equity. So we've been growing the firm using the balance sheet to seed sponsor, launch new initiative. As we enter now a new chapter, and we'll discuss that during the strategic update, we are committing less amounts to our funds. We don't really need now to seed sponsor with large amount of money. And as you see for the first year in 2015, the commitment we had in our fund declined. So we started the year with EUR 1.6 billion of commitment in our fund. At the end of the year, it's EUR 1.3 billion. So that's telling you that we don't really need as much capital as we needed before. So moving forward, we'll have really the 2 businesses, the principal investing, which will still remain invested in our funds. Skin in the game is critical for us. And we have the asset management business, which is now profitable. When we leased the firm, if you remember, we are making EUR 4 million EBIT, so no profitability at all. In 9 years, we grew from EUR 4 million to EUR 150 million. As you saw on the 2026 guidance and vision, we are targeting between EUR 175 million and EUR 225 million of FRE. So now asset management is profitable. The balance sheet, we think, is really back on track to be profitable. Vincent mentioned, for instance, Schroders, we will detail that, but Schroders has been a 64% IRR and a EUR 240 million net income. So that's why we are highly confident on the 2026 net income. So it's a very long answer to your question. People have very clear view on asset-light versus non-asset-light. Blackstone is really asset light. KKR is not asset-light. KKR is not compounding at a strong pace, the balance sheet. And at the end of the day, for the shareholder, I think what matters the most is the net income and to increase the net income, having the 2 engine, the balance sheet and the asset management will probably lead into more net income, more dividend and share price appreciation at the end. Theodora XU: Thank you. Two more questions in the room from Arnaud Palliez from CIC. Arnaud Palliez: Two questions related to currency impact. The first one is, can you give us the breakdown of your AUM by currency in order to forecast what could be currency impact on these assets? Then do you intend to put in place any hedging policy? I think all your debt is in euro. So do you intend also on the liability side to have a diversification by currencies? And the last one is regarding the net profit guidance for 2026. Is it at constant currency? Or do you make any assumption at this level? Vincent Picot: Okay. Thank you for your question. So as regards assets under management and the part of the share in foreign currency, so it's about 10% and mostly in U.S. dollars. We're exposed to the U.S. dollars around and through our U.S. CLO and private debt strategies mostly. As regard to your question around hedging, so we've got a hybrid approach at Tikehau. Like other actors in the sector, we have decided to put in place a natural hedging with financing in dollars. So it's $180 million private placement put in place in 2022. And we also put in place some forward contracts on some sterling on our sterling exposure to some extent. So we've got this hybrid approach using these options at our hand. And regarding your last question around our 2026 guidance in terms of net results, which we mentioned is between EUR 420 million to EUR 550 million. We mentioned very specifically that it's excluding foreign impacts. So basically at constant currency December 2025. Antoine Flamarion: And what we'll do moving forward when it comes to currency, when we have been issuing bonds, we've been initially only raising money denominated in euro. A few years ago, 3 years ago, we raised for the first time a USPP, dollar-denominated. So moving forward, we will probably match our non-European currency exposure, matching with the right liabilities, so probably issuing more USPP rather than euro if we need. We consider that it's probably the best way to hedge having a proper asset and liability match. It costs less money. It's much more efficient. And this hedging currency are always complex because you can hedge the amount of money you invest. So let's say you invest $100 million, GBP 100 million, you hedge that. But if you end up making 3x multiple having just the nominal hedge, your capital gain is not hedged. So we think that moving forward, we're going to issue more in other currency, if I may say. Theodora XU: One question from Nicolas Vaysselier from Exane BNP. Nicolas Vaysselier: The first one is on Schroders. I mean, you have a big windfall coming your way. That's a great problem to have, right? I'd like to know how you think about reallocating those proceeds between reinvestments or potentially payout to shareholders through share buybacks, exceptional dividends? Second question on your 2026 new FRE guidance. I'd like you to help us understand a bit how we bridge from where we are in '25 to get to the bottom end or even the top end of this guidance. So I'm wondering if you bake in some lumpier items like catch-up fees that you're expecting for this year, expecting some recovery at Sofidy in the subscription fees because they are meaningfully accretive to the margin. And what you expect in terms of evolution of the cost base next year? And then finally, my third question, you mentioned some negative mark-to-market effects on the credit portfolio. We've seen some of your peers actually suffering quite a bit. So I'm interested in any comments about your credit portfolio, balance sheet exposure, how it's performing and on the equity CLOs notably. Antoine Flamarion: Thank you for your question. Maybe I take the first 2 one. On reallocation or reinvestment, as mentioned before, we still have EUR 1.3 billion of commitment into our funds. So first of all, for instance, the Schroders proceeds is close to EUR 600 million. As Vincent mentioned, we are going to -- we reimburse already our RCF, which was EUR 150 million drawn. So that means that we have excess cash on the balance sheet. We're going to probably use that for our capital call, EUR 1.3 billion. Also it's over the next few years. So it takes time. We're going to continue to invest the balance sheet alongside our strategies. So we have commitment in our funds, but the balance sheet is now doing 2 things, co-investing within our strategy. So I suspect we're going to probably deploy more money into aerospace and defense, where we are clearly ahead of the curve. Same thing for decarb. And we start seeing more and more credit opportunities as the cycle is becoming more complex. You probably read a few days ago that we closed our secondary -- second vintage of private debt above EUR 1 billion, so twice the previous vintage. We are the only firm having such track record when it comes to secondary private debt. So I suspect that we're going to allocate the balance sheet more into secondary private credit. Maybe I start on the -- your question on 2026, and I will let Henri comment. So we have 4 metrics in our 2026. One is our return on equity between 13% and 16%, which is mid-teen double digit, as mentioned before. We are fairly convinced that we should reach between EUR 420 million and EUR 520 million of net income for 2026. Part of that is obviously the Schroders disposal. And as disclosed in the market, we decided to sell in the market our stake rather than waiting the end of the offer, which could happen in Q4, but could happen maybe in Q1 2027. You never know. So we are fairly convinced that we're going to reach this level of net income and as a consequence, this return on equity. Your question specifically on catch-up fees and FRE we have several vintage of private equity currently raised, namely AAP2, which is aerospace and defense and decarb 2. There is potentially a very large amount of catch-up fees as stated in the bylaws. So within this range of EUR 175 million to EUR 225 million, there is some amount of catch-up fees, and we are fairly convinced of -- when we look at our pipeline right now coming from LP, there is a very strong demand, obviously, for aerospace and defense, and there is still many European appetite for decarb. Henri Marcoux: Yes. Maybe in summary on that, there are many 3 drivers on that. First of all, you may have seen that future fee paying have been increasing significantly end of '25. So all these future fee paying will obviously be transformed into fee-paying when we will be deploying these funds. So this is the first driver for our evolution of fee-related earnings in '26. Second one is a mix effect. Obviously, as just described on the pipeline within our funds, we are now on the road investing and fundraising on our 2 big platform PE funds, namely decarbonization Fund #2, aerospace and defense Fund #2. Yes, there will be catch-up fees. But namely out of the -- maybe excluding even the catch-up fees, there's a mix effect with these 2 private equity funds and the track record we have benefiting on these 2 area. And maybe the third driver to increase effectively the FRE in '26 is obviously cost control. We started to be more -- to take carefully more of the issue around cost already back in '25, and we will be keeping in that area for '26. Mathieu Chabran: No, I just want to address the third question on private credit. I mean, I wish we had 2 hours to discuss private credit since so many things have been written over the past few weeks or a few months. But more specifically, we happen to have our CLO business within private credit. So just to answer specifically on the U.S. side beyond the ForEx that Vincent elaborated on, obviously, last year was a volatile year. And as you know, the CLOs or some arbitrage vehicle with some liabilities issued and that can be reset. And so what we had last year was effectively on this specific part, some kind of a lag between the end of September, end of December valuation at the asset side and the reset on the refinancing. So we're expecting to catch up on this side when we reprice and reset the CLO. Now more specifically on the private credit, I think there are as Antoine said, that's a big opportunity for secondary private debt, but we've never been as bullish on the opportunities to keep deploying with the same underwriting discipline when it comes to direct lending. The issue we've been facing, there are 2 comments. One is cyclical. The other is structural. On the cyclical aspect, what we've experienced partly in the U.S. is this massive growth and fundraise on credit where many managers and not being judgmental whatsoever have started to have to deploy resilient raise. And as you know, when some of our competitors raise $50 billion a quarter, it takes some time to keep the same discipline underwriting. We're still, I think -- and our partner, Cecile is in the room, I think we have 5% to 7% selection rate on our private credit deployment. So that has been driven effectively a lot of talk around the direct lending. The other thing that in the U.S., the bulk of all the noise you've been hearing was coming from the U.S. You've got the mid-market direct lending, which is on average, 6 to 7x now level. In Europe, it's more like 5 to 5.5. Our portfolio is 4.4. So as always, with credit, because the only thing you're getting is par, it's how do you underwrite and how do you structure going in. So it's a much more defensive portfolio that we've been having, and we just closed the sixth vintage of our strategy. We started in 2007. So it's a 19 years track record when, as I'm sure you know, 92% of the private credit managers were launched post GFC. So I think that here, it's important to -- I mean, we have our share of situation of negative watch where we're working. A lot of the cyclical aspect is effectively all the credits that were originated in 2021, the 0 interest rate environment, the Central Bank very accommodating policy and when people -- you had a base rate at 0 and spreads at 300, obviously, fast forward 5 years and you got a base rate at 4 or 5 and the spreads may be at 4 or 5, obviously, your cost of refinancing is much higher, and then you have to effectively recapitalize part of them. Now the silver lining, as Antoine alluded to, is that we're entering the golden age of the secondary private credit, and we are best positioned to tackle that. Theodora XU: Well, thank you so much. I'm sorry, I'm conscious of time. We'll address more questions later on during the second Q&A session. So let's take a short break. We'll resume in 10 minutes. Thank you very much. [Break] Theodora XU: Welcome back, everyone. So before moving into the strategic update, we would like to take a few moments to step back and revisit who we are and how we have built our platform. So we're going to show you a short video that retraces our journey, highlighting the evolution of our platform and the areas of expertise that position us as a differentiated asset management. Let's watch. [Presentation] Theodora XU: We hope you enjoy this video that really captures our journey. So today is not only about looking back, it's about what our platform is capable of delivering. We would like you to leave today's session with 3 key messages. First, we're exiting our build-out phase in asset management to move into a harvesting phase with accelerating profitability. Second, we're entering a new phase characterized by a greater strategic allocation of our balance sheet. It has been used since IPO as a great growth enabler. And now looking ahead, it will be used as a more strategic allocator. Finally, as Antoine mentioned a bit earlier, those 2 distinct and complementary growth engines will offer significant optionality for us to close the valuation gap and also maximize value creation for our shareholders. Aligned with our '26-'29 road map, we'll be focused on delivering the following objectives. First, deliver cumulative net inflows of over EUR 34 billion, representing a 22% growth compared to the EUR 28 billion we have raised over the last fundraising cycle. This is first one. And the second one is that we aim to generate core fee-related earnings margin of between 45% and 50% by 2029 compared to 41% achieved in '25. On top of those objectives, we have formulated 2 commitments. Those are to maintain our investment-grade rating and continue to distribute over 80% of our asset management EBIT to our shareholders. So now let's start with the first section of this new chapter. And please join me in welcoming on stage Thomas Friedberger to share his perspective on opportunities shaping the next decade. Thomas Friedberger: Thank you. Theodora XU: So Thomas, first question for you, and thank you for being here with us today. What would you characterize -- how, sorry, would you characterize the evolution of global markets today? And what do you see as the most impactful trend shaping the industry today? Thomas Friedberger: Thank you, Teo. So if we look at the size of the private markets, they were estimated at $26 trillion in 2022. They are expected to grow at $61 trillion in 2032. Those are not small numbers. It's approximately 50% of the current global GDP. And if you want to compare that to other markets, let's say, you have a global market cap today in listed equities of $140 trillion. So this number of $61 trillion expected in a couple of years is not small at all. It means that the private markets are converging with liquid markets and the convergence doesn't stop there. Let me take the example of private credit. Private credit has converged in size with the high-yield corporate bond market and with the leveraged loan market, both in the U.S. and in Europe. That's done already. As a consequence, the fixed income markets are more and more integrated with private credit spreading to investment grade to asset-backed lending. And this will offer a full range of new options to issuers going forward. We also think that, by the way, having a strong expertise in liquid credit through our capital market strategies is a strong advantage in that perspective of convergence. I would also say that in a complex world where uncertainty, volatility, dispersion are increasing, where asset allocators need to deploy large amounts of capital on the back of a strong growth in savings, the one-stop shop model is appealing. Why? Because platforms benefit from clear processes, from clear risk management methodologies, compliance, conflict of interest management, better client servicing, better reporting capabilities. Platforms also are able to source larger transactions, allowing co-investors to deploy large amounts of capital quickly. And they also can afford the multi-local approach, which we think is absolutely essential in the generation of performance. So the message here is that the convergence between public markets and private markets creates value. It creates value for companies and issuers. The increase in size -- in deal size in private equity and private debt provide more options for companies issuing debt. They can allow company to be taken private, for example, or to remain private for longer. It also creates value for LPs. We said that it's allowing asset allocators, large asset allocators to deploy large amounts of capital in private markets. It also gives access to private markets for private investors, which is kind of new. And also, it will bring the best practice of liquid markets to the private markets in terms of conflict of interest management, reporting and risk management. So all of that is positive. Theodora XU: Thank you, Thomas, for those very interesting insights. We've seen increasing sophistication, sorry, in private markets. What investor behavior shifts are most material? And what capabilities must managers build to truly differentiate and capture growth? Thomas Friedberger: So if I start with the institutional world, we noticed a sharp increase in demand for co-investments, for SMAs, for bespoke solutions. And that requires from us robust origination capabilities. I mean, capability to originate locally but at scale, which is the challenge. Also solid fund structuring and tailor-made solution to address all the specific demand from all over the world and also robust processes in terms of allocation, valuations, reporting. So that's on the institutional side. And so hence, the importance of the strength of the platform. If I now go to the democratization of private assets, so addressing private investors, it requires from us global distribution channels, so the necessity to talk to a large number of distributors or global distributors all around the world and also digitalization to deliver data-driven client experience and reporting, which we are addressing partially through our Opale platform. Theodora XU: So as we look to the future now, what structural themes do you see defining the next decade? And where do you see the most compelling opportunities emerging? Thomas Friedberger: So complex question to answer in a couple of minutes, but I'll try to do my best. We -- so there will be growth in 2026, 2027. But we think we have the conviction that this growth is going to be led by investments more than consumption. So CapEx-led growth, meaning that growth will be probably more concentrated on the sectors that are the priorities of the government. So the famous 4 Ds of McKinsey, Decarbonation, Defense, Digitalization, Deglobalization. We think that the growth will be concentrated with the companies able to enable this to happen. So the sellers of picks and shovels of the resilience, if you will. So aerospace and defense, energy transition, cybersecurity are among those sectors, and that's the reason why we are focusing on them. But let me also consider deglobalization. There is a need in Europe to create European champions also at the SME level. And that is addressed through direct lending because private equity players use 3x more direct lending than capital markets or leverage loans to finance those transactions. And so we think there is a strong opportunity also in European direct lending to build those European champions. Number two, we think that the economic value creation is in the world is switching from efficiency to resilience and resilience has a cost. The cost of producing closer to the consumer, the cost of getting insurance against climate risk, against cyber risk; the cost of operating with higher equity buffers and less debt to cope with COVID-like situations; the cost of having more robust supply chains. So we expect lower growth in the world with high growth concentrated on the sectors I mentioned. It will also probably change the way to invest in private equity. Companies are becoming more asset heavy than before. Even in the tech sector, you look at some companies now own data centers. They were asset-light before their own data centers. Some of them are now building their own electricity production capabilities to feed those data centers. So it will be more asset heavy and probably that the way to invest in private equity will switch towards more what Warren Buffett was doing, which is invest in more asset-heavy sectors, looking more at return on invested capital. And it will not be easy because the best CapEx are done by the best management teams, but you can expect a lot of misallocation of capital also when there is a lot of CapEx in the sector. So probably less reliance on multiple expansion and the investors will need to use less leverage. And if you look at what we've been doing for the last 15 years at Tikehau, it's exactly that. We've invested in sectors that are more asset heavy, aerospace and defense, for example, with less leverage than the average. Third theme is we are entering into a war economy, which doesn't mean hopefully that we will go to war, but which means that all economic agents are put at the service of the priorities of a given government. And that means probably accommodative monetary policies going forward, starting probably in May in the U.S., but also massive fiscal expansion, which means probably lower short-term interest rates and higher long-term interest rates, so steeper yield curve, which is good for banks, which drives the strong conviction that we've been having at Tikehau for years, saying that we prefer credit risk to duration risk. And so from that perspective, we think that direct lending, which is 100% floating rate is very well adapted to this environment, but also, for example, short duration credit in our credit capital markets activities. And last but not least, we think there is a strong opportunity in Europe because Europe is accumulating accommodative monetary policy, massive fiscal expansion in Germany, which will have consequences all over Europe, lower valuations compared to the U.S., lower levels of leverage in the corporate world and the end of the deleveraging of Southern European banks, which probably provides appetite to finance the economy from those banks, not only in Southern Europe, but in the whole of Europe. So a very benign investment environment despite all the European bashing that we see. And so with the condition of being disciplined, there is a very strong opportunity in Europe, where we deploy 80% of our AUMs right now. Theodora XU: Very insightful. Thank you, Thomas. Last question. In that context, what are the implications for our different asset classes if we go through each of our strategies? And what aspects of our value proposition best position us to capture these opportunities? Thomas Friedberger: So of course, I mean, it will be all about performance. Performance will drive fundraising. So performance will be key. And for that, we will continue to rely on, one, local sourcing, which is absolutely essential to the generation of performance, but also in terms of risk management, addressing tricky situations locally. Strong corporate culture of alignment of interest and as such, strong investment discipline, which we think we have by DNA and also partnerships to benefit from superior expertise and avoid crowded areas, partnership with corporates, partnership with partners in regions where we are less developed with why not other asset managers. So that's the create, don't compete angle of what we do. Now in terms of opportunities, there are a lot. I will regroup them in 3 categories: growth, value and niches. So in terms of growth, as I said, in private equity, the solution providers through the sovereignty, through the resilience will continue to experience strong growth in a world that will grow at a slower pace. So Aerospace & Defense and decarbonation are 2 strong convictions, and we are really confident there that by allocating our capital well, we can generate a lot of value for investors. In liquid strategies, we are very excited by anything related to the building of European sovereignty, which is a theme which is connected to what I just said on private equity. And on European direct lending, of course, this opportunity to build European champions in the credit space that is growing and is going also more towards larger cap financing with the condition, of course, to have the right allocation geographically and by sector is also a strong growth opportunity. Now value, value being benefiting from low valuations, but also liquidity gaps. We think that here, real estate is the obvious candidate, both in equity and financing, very strong opportunity in real estate with depressed valuations and volumes that are starting to pick up. Private debt secondary is also addressing this opportunity, buying LP interest or GP and LP interest at a discount, being selective is a strong opportunity. Special situations, which we define as financing good companies or good assets with a bad capital structure, so having a problem at a certain moment of their development. There is a lot of things to do in Europe. And with regards to niches, I would mention financial subordinated bonds. Those 3 yield curves will continue to favor banks. It's very European-centric opportunity, but we have a very strong expertise there in capital markets. Asia credit is also something that we want to be involved in. We launched a fund recently, and we think it will be a high-growth area in the coming decades. Theodora XU: Okay. Very interesting discussion. Thank you, Thomas, for your time. Well, to explore these themes further, we'll now be joined on stage by our 2 co-founders and Maxime Laurent-Bellue, our Deputy CEO, for a fireside chat on accelerating growth across asset management. Thank you, Thomas. Maxime Laurent-Bellue: Good morning, everyone. Thanks for being here today. It's a real pleasure for me to have this chat with our 2 co-founders gathered in the same place, which is not every day. Today, we will talk about the firm. We'll talk about the industry. We'll talk about the perspective. I want to talk -- I want to start with Antoine maybe -- and I know -- CEO said that we would not do too much history, and we'd rather look forward, but just a quick question to start. It's been a 20 years-plus entrepreneurial journey, which was quite incredible. And I must say I took part of -- a decent part of it, probably around 19 years today and I've seen the firm changing, improving, growing from the startup I joined in '07 to global asset management and investment company with 17 offices globally. So obviously, a lot has happened, and Antoine, in your own words, I'd like to understand what are the sort of key strengths or the key defining features that have been shaping or positioning? Antoine Flamarion: Thank you, Max. Let's try to capture the secret sauce. The truth is that as all of you know there is no secret sauce, it is a lot of conviction, ambition entrepreneurship, innovation and may be I start with that, we are entrepreneurs, as Max said, as Teo said, the plan is to look forward for the next 20 years. But the truth is that we started, as you know, with EUR 4 million as real entrepreneurs. And the journey has been colorful, complex. There is not a single day when you have (sic) [ haven't ] something new coming up, someone resigning, someone you're trying to hire, a deal going not in the right direction, a financing not in place at the right time, a historical shareholder willing to sell shares. So that's what's happening all the time. But because we are entrepreneurs, and I think a lot of people at the firm became entrepreneurs, maybe some in a different manner. But everybody is putting a lot of energy to make sure we keep the drive, we keep the energy and we innovate all the time. Financial industry is boring. As I keep saying, we used to have banks, insurance company. Now one of the largest European financial institution is probably Revolut, if you look at least on the valuation, $75 billion. Now the banks are trading up, and you've got several banks above $100 billion market cap. But this is what's happening. Revolut was nowhere, now it's $75 billion. Everybody wants to make sure that they put their funds on the Revolut platform. As Thomas mentioned, we create our own digital platform called Opale. It's been a record year last year. So we sell Tikehau funds and other GP on the platform. It's a greenfield. We've started with 0. Hopefully, in a few years, it's going to be several billions. And we started that again from scratch. So part of the secret sauce has been innovation. And you can innovate in this boring industry either on the way you raise money or the way you invest. We discussed earlier, Mathieu mentioned secondary private credit. We've been the first firm to launch secondary private credit in 2020 in the U.S. Secondary private equity was everywhere, but secondary private credit was really new. Now we raised our second vintage. We are accelerating on this front. And we've been doing that all the time. When we launched direct lending in 2009 in Europe, it was popular and well known in the U.S., but nobody was doing that in Europe. Defense is a very good example. And I think there were a question online we did not answer earlier about the deal flow when it comes to Aerospace & Defense. It's multibillions coming, and we launched that in 2020. So I think part of the journey, and I don't know if it's the success or not, but we've been innovating all the time. We're going to keep innovating. And you can innovate, as I said, on the asset or the liability side. When you partner with corporation, nobody in the industry has been partnering with corporation. When it comes to Aerospace & Defense, you know our partners, Airbus, Dassault, Thales, Safran, they put money, they sit on some of the committee. They help us analyze some of the company. And as a result, since 2020, we own 35 companies in the sector. We exited already 3 of them, reaching on average 2.7x multiple. You partner with these guys, you're probably ahead of the curve. When you launch decarb with Total and we launched already the second generation, again, you partner with Total that gives you an edge of understanding the sector, the trend. Does it make sense to look at hydrogen? Yes, no. Battery storage? Yes, no. And we've been doing that all the time. Max has been part of the team, who a few years ago, start investing and financing data center. We've done that a while ago. We sold one in the Netherlands in December. Because we are born in France, everybody know Mistral, the French AI company. We've been the one financing their data center. And I think it's been all the time for more than 20 years. So we're going to continue to innovate. Hopefully, that will generate more businesses. We will create more partnership with financial institution, with corporation. And it's a very long answer because as I said, there is no secret sauce. We are entrepreneur. We innovate. We keep the same pace. As some of you know, we put a lot of energy, we being the 715 employees are putting a lot of energy to make sure we make things happening. And that's going to be the same thing. But if you look now for the next 20 years, now we have 17 offices, a very strong platform, a very talented pool of people, and we see a big acceleration coming. Maxime Laurent-Bellue: And so it's interesting because innovation and partnerships have been at the foundation of our journey and sort of interconnected together. Should we expect obviously more innovation and more partnership? Antoine Flamarion: Yes. I think it's we've been -- I don't know if it's good, but we always find, Thomas mentioned, niche, a very specific thing because when we launched Decarb, it was a niche in Europe, frankly. When we launched Aerospace & Defense, now it's super popular, but it was not even a niche. It was -- nobody wanted to touch that. And I think we are looking all the time at what's happening in the financial service industry, and we look at traditional asset manager, Schroders is a good example. We look at alternative asset manager. We look at insurance company. We look at digital company. And you could expect more innovation, more partnership because that's how we build the firm. And I think now the partnership we can achieve are probably much bigger in terms of size than what we've done before. Maxime Laurent-Bellue: Thanks, Antoine. Mathieu, I'd like to move on the more the industry. In the same period of time, obviously, the industry has transformed rapidly tremendously. Thomas touched on the growth of the market, how the market and participants have been increasingly sophisticated, more players coming in, more competition, I guess, more strategies. So it's in constant movement. I'm not even mentioning the backdrop, which is obviously quite complex right now with geopolitics, tax and so on and so on. But how do we prepare for the next growth phase of the firm in that context? And how do we define our approach in this fast-moving environment and fast-transforming industry? It is a long question, sorry? Mathieu Chabran: It's a great question. First of all, congratulations for coping 19 years with us. I must say I did not realize, but that certainly illustrates that it's an entrepreneurial and it's a people business journey. But I mean, think about where we started and what -- when you joined us in 2007, what the -- I don't even think that alternative asset management was defined as a term. We barely talked about private credit that really was born on the ashes of the GFC, I mean, certainly in Europe. We were still very much in the GPLP world. I mean, if you look at the -- we were born in Europe, as Antoine said, not to mention France. And the market was extremely defined. It was the GPLP, you were doing mid-market European buyout. We were barely talking about private credit, as I said. You had some real estate managers for sure, but even real estate was not really perceived as, I think, an alternative asset class. That was probably certainly in Europe, the most advanced and most developed asset class that was -- that people could address and not to mention infrastructure, et cetera. Fast forward 2026, the name of the game every day, you read in the press, you see in the media are these juggernaut platforms. I mean, I can name them because they've been modeled in our development, the Blackstones, the Apollos, the KKRs managing more than $1 trillion. I mean we like to use this anecdote with Antoine. When we started in 2004, TKO with EUR 4 million of assets under management, Blackstone was managing $40 billion. And he was sitting at Goldman Sachs. I was at Merrill Lynch over there, and we were like, well, $40 billion. Fast forward today, it's $1.5 trillion, $1.6 trillion, the getting or something, and it's only starting. So this transformation of the industry which has accelerated over the past 5 years, it's complicated to date that. But you see that there is this massive transformation of increased savings on the one hand, private savings, bank, insurance, regulation, which is now very different in Europe than it is in the U.S., interest rate structure in some part of the world, I can think of Japan, I can think of others. And this globalization phase, which all of a sudden enter a deglobalization phase because maybe there is this cyclical moment with the U.S., where you're constantly on the edge. It's like being on a rugby playfield, right, and waiting for the information and seeing where the ball is going to be coming from, where we're going to have to play defense, to play attack. And that has been extremely exciting as far as I am concerned, we are concerned. And we've only been able to do that because we were lean, agile, that obviously, our team, our people were fully embarked in this dynamic. And that's why we're so -- I am certainly, I guess, we are, Antoine and I, are so excited about what's ahead because I can tell you that when people ask us what have you done differently? Well, maybe starting with $50 billion and not $4 billion with 17 offices and not just sitting in our seller in Paris. So we're at this crossroad now where we can tackle an industry that has been, as we said, changing dramatically, which I must say, has been somehow dominated by American brands, platform franchise, which once again, I respect greatly, but the world is in a different place now. And I think you cannot have some limitation on goods with tariffs. You cannot have some limitation on people movement with immigration and not have at some point some limitation on the most liquid assets, which is capital. And what we're seeing right now, which is rightly the point that Thomas made about sovereignty and the real defining investment that needs to happen right now, there will be a massive opportunity for platform like us. We've been seeing all along that you have to be multi-local, which means that when you're addressing Europe, and we're all seeing in London today, but I can see in the room, many people coming from different places. And we all know that doing business in Madrid, in Milan, in Frankfurt, in Paris, in London, it's different. The culture is different. The rural -- I mean, the legal environment is different. The networks are different. And we've been making this investment for the past 20 years. When we're talking about harvesting, that's what we are referring to, that TKO today is deeply rooted in every single market to be able to size, to execute, to monitor, to -- sometimes to restructure this situation. And that's what investors or certainly the 80% of the investors we've been referring to that we are now trusting us, that's what they are looking for. I'll give you an anecdote. When we started talking to Korean investors 7 years ago, -- and you spent a lot of time there. We all spent a lot of time there. I remember 7 years ago that some of them in our direct lending, for example, strategy, they were asking specifically to carve out Spain and Italy because back then, we were coming out of the euro crisis, the peaks, the whatever. Over the past 12 months, all the capital we raised in the region has been for private equity investment in Madrid and in Milan because it's moving so fast. And what those people are expecting from us is to be the local guide with the skin in the game, not just selling them the product of the months, but effectively promoting some investment strategy where there are some strong conviction at heart, but with capital aligned to them. And so here, again, a long answer, but I've never been as excited because the platform we have to tackle this new chapter in the market where effectively there is a dominance like in many other sectors by some of our U.S. friends, there is this, I guess, once in a lifetime for us opportunity to be this next-gen native European alternative asset managers, which has grown organically across asset classes with capital fully aligned. We might discuss later on M&A or something, but not trying to build artificially a one-size-fits-all platform, but to have a real bespoke and hopefully relevant, performing, as Thomas said, offering for those investors. So long answer, but I think we're best -- that's why we wanted to have this discussion with you now because I think the platform now is mature. It's mature to be harvesting these opportunities. Maxime Laurent-Bellue: Thanks, Mathieu. Shorter question now for Antoine maybe. We've -- I think we've sort of outlined a bit of the road map for the next few years earlier today. I want to be very specific, Antoine, on what would you -- and if you could elaborate on our key priorities. We mentioned scale. We've mentioned profitability. I'm sure underwriting is one of them as well. But could you give us your vision on that? Antoine Flamarion: Thanks, Max. Maybe I will start using what Mathieu described as harvesting. We've been investing for the last 20 years, building the platform. And we consider that the platform, which is multi-local, 17 countries, strong local investment team is fairly unique, meaning that we can source a lot of local opportunities. And when it comes to private assets, you're not buying assets behind your Bloomberg. You need to be local. So we started doing, I don't know, a lot of residential, for instance, in Portugal, in Spain, in Germany. And as you know, real estate market is very difficult, now we start seeing really big guys, almost all the sovereign wealth fund coming, knocking at the door to say, we want to co-invest with you in your residential expertise. And I think that's exactly the illustration of harvesting. We invest in the platform. We can source fairly unique assets with a very strong risk-reward profile. And that's about now the time to make sure we do -- we deliver a larger transaction. We keep the same investment discipline. And at the end of the day, it's not about growing the AUM. The most important thing is making sure you deliver performance for your LP, for your investor and as a consequence for the balance sheet and your shareholder. And I think now for this chapter, we're going to be focusing on more profitability at the fund level, at the firm level because we've been investing for 20 years. So now the operating leverage is much higher. We reached EUR 150 million of EBIT 19 years after launching the asset management. The asset management has been launched in 2007. After 19 years, now we reached EUR 150 million, and it's exponential. So I think now it's about time to harvest to make sure we increase the profitability. We need to be very selective in a very changing world. The example of Mathieu is clearly what's happening. 7 years ago, people will tell you, please, no Spain, no Italy. And now people will tell you, you're doing too much France. We want to do really Italy and Spain. And it's changing all the time. When it comes to real estate, people have been obsessed by buying retail real estate, office real estate. Needless to say, what the office market looks like now. So we need to continue to adapt. So I will say to answer and summarize what I say, scale, operating leverage, profitability, investment discipline and keep the same ambition, and that's the plan. Maxime Laurent-Bellue: What about M&A, Mathieu? -- we are -- as we discussed, we are well capitalized. So we are a potential buyer for not anything, but for many objects. The industry has been consolidating recently. How do you -- do you think we'll be active? And how do we assess the right match essentially? Mathieu Chabran: Yes. That goes back to what we were saying. I mean there is this imperative of scale right now, be in terms of footprint, size, assets and strategies, platform. And whilst there will always be the great and perfect investors very focused either locally or by industry. Clearly, the trend that we've been seeing over the past few years is accelerating and we'll be -- I think we'll be even more impacted by the cost of doing business, from a regulation standpoint, from a -- as I said, the footprint you need to have. And we are very well positioned. I mean, it's going back to some of the question we had earlier on about the balance sheet. The balance sheet has been a huge enabler for the asset management business, as Antoine addressed. It's always been as entrepreneur, you're never overcapitalized. It's quite often very the opposite. And so having this opportunity to be able to buy, seed, merge, sponsor, we've become the partner of choice for many bankers, some of you in the room, and I'd like to call on you to give you some evidence. But I mean, I think today, we've got 85 names in our spreadsheet in the pipeline of situation that we are looking at, small single strategy, single country platform all the way to some of the large platform that traded recently. And we have become partners of choice because of this balance sheet. I mean if people just want to sell, cash in and move on, that's not the type of things we're looking at. But people say, okay, now we need to have a stronger partner that can seed anchor the next phase of fundraising, the next fund to be fully aligned in the mindset and the culture and see the cross synergy we can have in the distribution, then the discussion becomes highly interested. Obviously, the -- I mean, the starting point is that there needs to be -- I think the first and foremost is the cultural fit. I think it goes past the financial merits. And now that we are 5, 7 years into some structuring M&A., I think that some of them will demonstrate that the cultural fit was not there, and there could be some issue there. So I will always put culture first. Then it has to be about the complementarity, obviously, because there will be little merit for us to be doubling up on some strategies where we are already a market leader in a market or in a strategy. And then it has to be financially accretive, right? The last thing we want to become is an asset aggregator because that comes back to the discussion we are making about -- we are having about the -- our earnings. It has to be a profitable growth. And so that -- when you put all that as a filter, it leaves from 100, it gets you maybe 10 situations, right? And from 10 situation, there's maybe only 3 you want to do and maybe one that will conclude. But we believe that M&A will keep -- as a general comment, M&A will keep developing, certainly in Europe, where some platforms are subscales, partly for some investors. We also discussed the fact that many asset owners, they are reducing the number of relationships that they're working with, but they are increasing the amount of capital they are allocating to. And that's something that we can benefit from now that we are at scale. And the other thing, I don't think we commented on this KPI and Vincent tell me if I'm off beat here, but I think we're still at 2/3 of our investors, LPs are invested into more than 2 strategies. So they will be into credit and private equity, into infrastructure and real estate. And that's something this cross-selling and the upscaling that you can have with your LP, that's where you can make obviously a big difference. So it's about being very selective. Maxime Laurent-Bellue: And on that, Mathieu, I was actually thinking probably even more selective than in any of our strategy, right? Because you certainly don't want to misunderwrite an investment in credit, in PE, real estate, but you, for sure, don't want to misunderwrite an M&A opportunity, right? Because... Mathieu Chabran: 100%. 100%, it's -- it's a people business. You have not seen us entering into transformative M&A that with all due respect from our investment bankers friends in the room, what I call sometimes the bankers idea, which is on paper, on XL, it's always perfect. It always works on XL. And then you've got this people business component that needs to be factoring. But as the industry mature, as some people get into some succession challenges, as some platform may be struggling to raise the next fund, those discussions are becoming very interesting. Antoine Flamarion: Maybe I'm adding a comment on M&A. All the transactions you've seen in the sector, all the comments are about how many times what's the multiple on FRE, okay? BlackRock is buying HPS on whatever, 17x. Collier has been purchased on 17x and so on and so on. Our view is that we should be focusing on the underlying fund and not the FRE multiple at the management company at the GP. Because at the end of the day, the value of an asset management business is the underlying performance. And I think people have been a little bit distracted in the last 15 years. So people have been buying a lot. As you noticed, we bought nothing. And we are in a position whereby we will be the one consolidating. But as long as we make sure that we are buying a very strong team, the same DNA and culture and very strong performances at the fund level because if you start having good performances, the value of your business is probably close to 0. So we're going to remain disciplined. We look at a lot of situation. And thanks to the balance sheet and our shareholder base, we can -- if we want, if it makes sense, be acquisitive. But no doubt that we're going to be very, very cautious. And we see -- we start seeing more and more opportunities coming. And as the cycle change, which is the case, for instance, in private credit in the U.S., there are more and more people knocking at the door. So we are really well positioned if we want, if it makes sense. Mathieu Chabran: And an extension to your question, Max, is it doesn't just have to be an M&A deal. It can be all these partnerships where we've been, as Antoine pointed out, I think, pretty good at with some corporates, with some financial partners, with some asset managers. I think that, that's going to be increasing. And when we were detailing the fact that moving forward, you have this asset management pillar, this balance sheet pillar on the asset management level, we become a partner of choice for those partnerships, partly with more traditional insurance companies, I can think of, with some other asset owners who are looking for some ways to deploy more into certain strategies. And that's also a step forward where our track record of having this partnership will certainly resonate well with this at this time in the cycle. Maxime Laurent-Bellue: Thanks. I'm conscious of time. So maybe before wrapping up, 2 questions, 2 final questions on each. Maybe starting with Mathieu. What would you say -- what would you like to preserve the most? Or what would you like to never change within the firm regardless of where we go, how we grow? Mathieu Chabran: Yes. Well, Put this little movie there. And obviously, we're in a particular seat on [indiscernible] because it was the 2 of us and now it's 700-plus people, we are working with. It was in a small office in Paris, and now we're on the road all the time, meeting with all our teams and colleagues and partners locally. I think it's close to 50 nationality we've got across the platform now. And this -- I no longer want to use the word DNA, but I think this culture, the singularity that we tried to develop over the years and still maintain that makes effectively hopefully, a small difference between similar platforms is certainly what we need to be focusing on. And when I look at the breadth, the expertise, the wealth of the people working around us, I mean, that makes a huge difference. Because at the end of the day, as Antoine said, what we do is not rocket science. But for as long as you are fully aligned, that you are fully embarked in terms of the people that are working to, then you can make effectively a difference in good and bad times. And you will know very, very well, you personally and many of our people that sometimes sitting at an investment committee, sometimes we don't even have to talk looking at each other, people because having been through all these cycles together and that might be the benefit of now time and experience, it makes a huge difference in the way you're approaching what is at core, as Antoine said, the investment, the risk underwriting, the fact not to be forced to doing something or -- I mean, each time we did something wrong was when we got to live into the former. And for as long as we can resist that because the people, we've been in the locker room together. We've been on the pitch together. We had the fight, the win, the losses sometimes, but we came back, that's what we need to preserve for sure. Maxime Laurent-Bellue: Is it difficult... Mathieu Chabran: For sure. For sure, I said. Maxime Laurent-Bellue: Is it difficult something to combine ambition, growth with maintaining entrepreneurial spirit, nimbleness? Mathieu Chabran: Just to share maybe with the audience, I mean, where I'm really, really happy is that today, our team, our senior leadership team, our partners, they're spread across all our offices from Singapore to New York, obviously, here in London. And that is something that has also been a key differentiating aspect where you need to obviously hire locally, but you need to maintain this backbone, this what is the culture of Tikehau and hopefully, the discipline too. Maxime Laurent-Bellue: Antoine, you opened, you closed. Any key message, any key commitment maybe for our partner, shareholders, investors? Antoine Flamarion: Talking about commitment, we've been committed to this business with our 715 people. We are very committed. We remain entrepreneurs. Mathieu mentioned DNA. It's still the same company with the same drive, the same energy, a more global platform, a longer track record because when you start, you have not a real track record. Now we can claim that in several strategies, we have a strong track record, a solid track record. The world is becoming more and more complex, and we mentioned sovereignty, technological changes, geopolitics, politics. It's going to continue to be like that. So we're going to keep diversifying our business from a geographical point of view, from a sector point of view. We need to adapt the firm. I mentioned Revolut, our own platform, Opale. We launched several initiatives called either Retina or Lagoon, which is our own AI tools. So we need to adapt all the time because we are not really AI or tech native. So we had to spend time. We hire younger people specialized in this area. So it's going to be the same. We still have a lot of appetite. We are not going to do stupid things. We discussed briefly M&A. We've got very strong conviction globally. We could be -- and I don't want to be arrogant, but we could be discussing U.S. asset management for 2 hours is there. We spend a lot of time there. I'm not telling you that we are announcing in the next 10 minutes something in the U.S., but we are looking at all of our options. We've got these 2 very solid businesses, the balance sheet with permanent capital that everybody is looking at. 10 years ago, you talked to some people in the GP industry, they said, we're going to enter permanent capital. And we said we have a EUR 5 billion balance sheet. And we've got this now profitable asset manager. So we're going to have the 2 businesses, making sure they are both highly profitable. And we're going to keep doing the same thing with the same drive, same energy with a very strong group of talented people internally and a very -- and I finish here, a very unique set of partners, corporate partners, financial partners. We did not really discuss today. But as you know, some of the largest families around the globe are invested with us from the U.S., from Greece, from France, from Italy, from Netherlands. And that's also part of our cloud. So more or less the same. with a little bit of new innovation coming. Maxime Laurent-Bellue: 23 seconds over time, I think that's fine. Thank you so much. Antoine Flamarion: Thanks Max. Theodora XU: Thank you very much, gentlemen, for this very interesting insight. Before delving into our final sections, beyond strategy and expertise, what truly defines us is the way we operate. Our entrepreneurial spirit is not confined to our offices. It shapes how we think, how we collaborate and how we challenge ourselves. So we'd like now to share a short video that captures this spirit in action. [Presentation] Antoine Flamarion: We just do cycling, FRE, net income, that's the real Tikehau. It's a cycling and sport company. Henri Marcoux: Just got down from my bicycle. Good morning again. Yes. So we'll be finalizing this presentation, starting maybe a quick introduction in terms of compounding effect and velocity focus. We wanted to remind you a few data points. First one, there was a question earlier this morning on our balance sheet, asset-light. We wanted to remind you a little bit the way we've been using our balance sheet, how have we been operating over the last years. Here, a quick snapshot once again on our investment portfolio. A few take away. First one, a significant increase of our investment portfolio went up from EUR 1.6 billion back in 2017 to EUR 4.4 billion as we speak. Second takeaway, the way we've been rebalancing this investment portfolio. Earlier back in 2017, it was allocated 33% through our strategies. It has gone up roughly to 80% in '23. End of '25, the allocation to our own strategy stands at 69%. And that's actually a direction we want to keep on going, which means actually having lower intensive allocation to our investment strategies. So what have we been doing with our balance sheet? A few examples have been given this morning. But obviously, investment in our own strategy, we've been mentioning that. We put our own capital at work. We invest alongside our LP, alongside our partner that enables us to effectively have a compounding third-party fundraising, accelerate international expansion. On the other way, investment in all our ecosystem, as we've been doing in the past, to forge partnership, complement our expertise and structure co-investment. We'll be coming back on the 2 first pillar. So first one, Tikehau Capital strategies. EUR 4.3 billion have been committed in our own strategy. As you can see, credit has represented most of this allocation up until now, 48% out of that 18% in our CLO platform, which, by the way, has enabled us to launch effectively 24 European and U.S. CLO since we started the business. Alongside that, launch as well vintage and new flagship and adjacencies. Another 17% of allocation has been done through real estate and a significant part of our allocation of this EUR 4.3 billion has been carried out in private equity, roughly 36%. And all the initiatives that we've been talking about up until this morning, decarbonization cyber security, aerospace and defense, all these initiatives that were launched back in 2018 have been done, thanks to the allocation initially made by the balance sheet. One important point. We've been talking about this kind of third-party fundraising compounder. You can see here, each time from 2018 to 2021, that we were putting EUR 1 from the balance sheet, we had a kind of a multiple of by 7 of third-party inflows. Since '22, so during the last -- latest fundraising cycle from '22 to 25, this multiple has increased to 13. Several aspects to that. First, it's true that once the flagship are becoming bigger, once vintage are more advanced, for example, which is the case on vintage on direct lending, the multiple is higher. So clearly, we've been demonstrating that this fundraising companying effect was very efficient. Other key priorities already that was announced this morning as well as co-investment the use of the balance sheet is a key asset for effectively in this co-investment opportunity. We are using the balance sheet to warehouse partially some of these co-investments. That was the case back in '22 on this first private debt secondary initiative, more than EUR 500 million. It has been the case last year on several co-investment deals in real estate, in private equity, in private debt. We mentioned the deal in Spain, EYSA. So here, clearly, you can see that this warehousing capacity and use of the benefit is clearly playing a strong role in our business model. Now switching to ecosystem and direct investment. I won't come back -- won't belong on that, EUR 1.4 billion. But once again, here, it's a kind of full ecosystem, which clearly this full network is expanding deal flow. It is deepening expertise, and it is clearly enhancing market intelligence. So we are partnering here with 56 GP, 60 LP interest and it's providing a huge diversity around investment type, geography coverage or sector coverage. Antoine, do you want to provide a comment on that as far as our GP relationships are concerned? Antoine Flamarion: One thing we -- thank you, Henri. One thing we try to do is build relationships around the globe and long-term relationship across asset classes, geographies, sector. And we've been using this balance sheet in what we call ecosystem to generate opportunities. It could be co-investment opportunities when it comes to private equity, to private debt, to real estate. It could be financing, and you've got 2 examples here. We co-invested 5x with J.C. Flowers doing financial services all around the globe. So for instance, when they invested into BTG Pactual a while ago, when the bank was private in Brazil, we co-invested with them alongside GIC. More recently, we invested with them in Jefferson Capital. We just conducted an IPO. And for us, it's 2x realization, but the multiple is close to 8x now after the IPO. And so we generate within our ecosystem long-term relationship with families, with financial institution with very strong GP. And that's part also of what I described earlier as the cloud. Tikehau is not only 17 countries, 715 people. It's several families, several really big and smart investors. And I think when I keep doing that, that will generate more opportunities and also that's avoid you to do mistakes. When you partner with some of the smartest investor in the financial service sector, it could be Flowers, but we've done things with Stone Point, which is the other big investor in the financial industry in the U.S. Then you're a little bit smarter, if you look at a leasing company, at a private equity company, at an insurance company and so on and so on. And that really illustrates the DNA of Tikehau. It's not only one firm, one culture, one P&L., it's a cloud of partners all around the globe, which enable you to find smarter opportunities, avoid mistake and accelerate when it times to accelerate. Henri Marcoux: And what's the takeaway you're going to tell me? So here, we've provided a few data points, both from listed ecosystem investments. Realized proceeds now are amounting above EUR 1.5 billion, net MOIC 1.4x, that's a 13.2% net IRR. And as far as exited investment -- co-investments are concerned, that's more than EUR 270 million of realized profit and 2.3x net MOIC. So once again, here, you're demonstrating quite demonstration of what we've been achieving over the last cycles have clearly demonstrated strong returns within our business model. Do you want to provide a comment or we can... Antoine Flamarion: Yes. No. We had the opportunity to discuss a little bit earlier our investment in Schroder. But as you know, we've been using our balance sheet to invest in the financial services. Back in 2012, we bought Salvepar from Societe Generale. In 2017, we were the second largest shareholder of Eurazeo with a 9.5%. So we are always screening the entire financial services industry. When it comes to Schroder, which is probably -- which was the best name in the city of London with a very unique business, size, very strong track record. The company has been under some pressure and as a consequence, valuation was very bad. So we decided to do 2 things: one, to become a relevant shareholder falling more than 5.4% of Schroder, but also building a relationship with them, trying to be able to create products, increase our distribution channel and we are still discussing with them on opportunities. And suddenly, a U.S. investor came almost 2 years after we made the initial investment, decided to launch a takeover. And that's, for us, is generated close to EUR 240 million of P&L, a very strong return. And we use the balance sheet to really do 2 things: deliver good investment and generate business. And that's part -- that illustrates perfectly what we've been doing for 22 years. Henri Marcoux: So now moving forward and looking at the next 4 years, the next chapter, what are going to be our allocation policy to -- as far as balance sheet is concerned. We are now exiting this phase where, as we mentioned, balance sheet was a growth enabler. We are entering into this next phase where our balance sheet will be strategic allocator. Our priority will be now probably to deploy less, rotate faster, target higher velocity and more value-add opportunities. So what -- no change here. Balance sheet allocation will be gearing forward Tikehau Capital strategies and ecosystem. As far as Tikehau Capital strategies are concerned, obviously, we will keep on going and we will have still strong skin in the game alongside our partners, but a focus will be reinforced on value-add strategies in PE, in real estate and in credit, with expected returns over 15%. And as I mentioned previously as well, greater flexibility, notably on co-investment. On ecosystem, similar pattern, strategic transaction, focus on high-performing investment and ancillary business. Three main objectives, very clear: improved portfolio velocity, generate increasing profitability and grow shareholder return. I mentioned lower capital intensity into the funds. If you have a look at the 2 previous cycles from 2018 to 2021, average yearly allocation in the funds was roughly 450 million a year. Since last cycle from '22 to 25, it was roughly 450 million, but including co-investment, the allocation will still be -- keep on going within co-investment and secured capital fund. But once again, lower capital intensity expected on this new cycle coming. We mentioned profitability and this next phase with a strong objective. Clearly, 3 main pillars will be enhancing our profitability them for the coming years. First one, operating leverage, and I'll be giving you in a minute the details of that. Performance-related earnings will be the second pillar on which we will be relying and investment portfolio. Operating leverage, we are exiting this cycle '22-'25, where we have reached EUR 28 billion. We are now targeting more than EUR 35 billion for this next chapter in the coming years. So clearly, here, more selectively adding -- we will be more selective in adding adjacencies and target new initiatives. We will be more focused clearly on scaling existing strategies. How are we going to achieve that? Once again, by deepening institutional relationship, high-growth region such as APAC, Middle East, North America, and we will also broaden our distribution, like was mentioned before by Antoine and Mathieu, notably to capture more private wealth demand. What will be the growth driver? You have them here, but clearly, all of them will be clearly used and all the structure that was developed over the last 20 years, the 17 offices and the setup in place will be clear in this new target to once again achieve more than EUR 35 billion -- EUR 34 billion of fundraising for this new cycle. Operating leverage once again here, I think that we have demonstrated that over the latest 2 fundraising cycle, operating leverage has already taken place. So Asset Management EBIT moving from EUR 4 million to EUR 114 million at the time of the latest Capital Market Day back in '22. Since then, reaching EUR 150 million, as we have described this morning. So that's a 52% CAGR since IPO. And once again, this sustainable growth has been supported by mix improvement and scale efficiencies. In that context, new chapter will be focused on reinforcement of this operating leverage, and we will be harvesting in this new phase. We are now targeting both between 45% and 50% of core FRE margin by the year 2029. Second pillar of this new phase of profitability of this new phase of development will be performance-related earnings. We've been repeating that for many years, strong value embedded within the underlying value, the underlying funds, shareholder allocation, more than 54% of allocation of this carried interest to the balance sheet, significant profitability driver. We've seen that during the year '25, by the way, it was the highest year in terms of performance-related earnings, EUR 22 million. So we mentioned this morning, this EUR 220 million of unrealized performance-related earnings. That's the picture -- how the picture looks like at end of September '25. So that's the underlying carried interest, which are being valued at fund level. We are expecting more than EUR 160 million to be maturing before the year '29. So we are here providing you a kind of a data point where we think the timing of this EUR 220 million where we think it will be realized. By the way, that does not include any additional value creation that can be created between '25 and the next coming 4 years, which will potentially create additional carried interest. Third pillar of this new chapter. We mentioned operating leverage. We mentioned performance-related earnings. Third one will be investment portfolio. And here, we wanted to provide you a data point. Sorry to be a bit technical on that. But in terms of how do we recognize within our P&L, the return of the fund. So up until now, all of our funds in which the balance sheet was invested have obviously been realizing capital gains. They have been disclosed underlying stake and cash has been returned to the balance sheet. However, we want to assess that up until the DPI is below 1, it does not create any P&L impact at our balance sheet level. So up until now, we have effectively some cash flow, but no P&L impact. As we are exiting the G-curve (sic) [ J-curve ] of most of our flagship and as we will be entering over -- DPI over 1, we are expecting significant P&L effect from our balance sheet and thus the new -- the kind of new forward looking that we are providing today as far as net result profitability is concerned. I was mentioning this G-curve (sic) [ J-curve ] effect once again here, 2 key decisions, 2 new allocations that are being discussed today. First, allocation in new investments which are allowing higher velocity. And second one, exiting J-curve for existing investments. These 2 elements will clearly drive this third pillar of the investment portfolio. Important data point as well on investment portfolio. Since the IPO, 2 clear cycle, 2018, 2021, '22, '25, these 2 cycles have so far returned -- have generated more than EUR 1.6 billion of capital return to the balance sheet. The next cycle that we are facing from '26 to '29, we are expecting an increasing return of capital for the balance sheet roughly above EUR 2 billion for the next 4 years. So which means that all the investments, once again, the investment portfolio that we have been describing together a few minutes ago, will generate more than EUR 4 billion of return of capital for the balance sheet. But how we're going to use this EUR 4 billion and we had the question earlier today, new investment within our fund, balance sheet optimization and shareholder return. Talking about shareholder return here, providing you a few data points, our historical dividend distribution history since IPO. We are reiterating today our guidance, which is effectively a strong commitment to distribute more than 80% of our Asset Management EBIT per year. And meanwhile, we are providing you this new guidance on Asset Management EBIT for '26 and as well for -- up until '29, notably reaching this 55% to -- 45% to 50% core FRE margin. So I hope that all this point, once again, are illustrating this next phase of development, once again, based on these 3 pillars clearly identified and described together. Antoine, Mathieu, maybe I will let you the floor for any conclusion remarks, if any, or otherwise, we can open Q&A. Antoine Flamarion: Thank you, Henri. Just commenting on the last slide on the dividend. As you noticed, we've been 2x since the IPO paying exceptional dividend. If we continue to deliver strongly on the balance sheet return, we'll probably have excess capital because as Henri described, we need to put less money into our asset management funds. So we could expect probably in the next cycle to make sure that we improve the return for shareholders. Shall we take some questions? Yes. Theodora XU: Let's take some questions. So several questions from the room. Question from RBC. Unknown Analyst: [indiscernible], RBC Capital Markets. The first one on fee-related earnings margin development. Can you share more color on what sort of cost discipline assumption underpin margin expansion as you continue to scale? Second is on secondaries. Perhaps you could expand on what is your longer-term ambition for these funds? And how competitive do you expect the secondary space to be over the next few years as your listed peers -- well, some of your listed peers are actively pushing to accelerate growth there. And then lastly, on AI and specifically, if you observed any material impact on your cybersecurity mandates? Also interested to know how you distinguish between AI winners and AI losers within your investment process? Antoine Flamarion: Thank you for your question. Maybe I take the first one on operational margin. I think we have a slide on basis points per management fees per asset class, if you can show that. As everybody know, there is a strong pressure from management fees in the traditional asset manager, which get totally disrupted by the ETF business. When it comes to private assets, we continue to preserve the management fees, if I may say. And if we can get the slide, you will get a sense. But overall, our management fees remain a little bit stable, declined a little bit, but we have our private equity increasing in terms of size. And as you will see on the slide, the private equity management fees is improving. We're at [ EUR 177 million ]. So 1.77 percentage management fee last year. We are above 1.85% management fees. So when it comes to revenues, we think that revenue will increase because of the private equity is increasing at TKO in terms of size and businesses. When we look at credit, there is some -- it's not pressure, but our average management fee is declining because we are issuing more CLOs and CLOs, the management fees is lower than the direct lending of the secondary private debt. But overall, we managed to keep the same management fees. As Henri pointed, we have more performance fees. We noticed that in 2005, with a 5.4 basis points. So when it comes to revenue, to answer your question, revenues will continue to increase. We are fairly convinced of that. Henri mentioned it, we start managing the cost. The first phase was really the growth phase. We open offices. We hire people. Now we are becoming much more cost conscious. So that means that operating expense will probably be managed in a better way. And as a result, that will lead to an increase in the margin of our Asset Management business. Mathieu Chabran: Yes, I'm happy to take the one on the secondaries. So when we decided to launch the private credit secondaries, which is what we are focusing on right now, that was in the context of our opening in North America in New York. And when we discuss with our partners, with Cecile here who's leading our direct lending practice, we say, okay, I mean, what would be the differentiating angle for us to be another direct lender in the U.S., which is already highly populated market, and that was 7 years ago. That was even before what's going on right now. And we came to the conclusion that after this very solid and robust cycle of primary allocation to private credit over the past 10, 15 years, similar to what had happened to private equities and the development of secondaries private equity, there will be a natural opportunity to provide liquidity to some LPs allocated to the asset class, we would be willing to rebalance their portfolios. And we thought that we were best positioned to do that because we were not a secondary solution provider like many of our competitors can be and that's their positioning. But we were credit investors at heart. And so we could demonstrate the merits of doing the underwriting, using our balance sheet as Henri just told you, and that's how we launched this practice. And what was perceived in 2020, like a very cyclical opportunity that was right in the middle of COVID, people were throwing away their financial assets became very quickly a structural strategy. And today, as some of our competitors and some more established names started to develop there in a matter of 4 years, it has become an asset class on its own. As Antoine said, we just closed our second vintage. So we now have more track record than some of our competitors to demonstrate the merits of the strategy. We've been allocating a lot of our own balance sheet. We've been using the balance sheet. The example that Henri was saying earlier, I can elaborate on that. Our first fund was shy of $500 million. And then came an opportunity to buy a portfolio, actually a single asset, but a portfolio from a Taiwanese insurance company was getting out of a Goldman Sachs mezzanine fund, a very large $15 billion trend, which we're already an LP with. And we knew the credit and we knew that in order to do that, we could not do that with the fund. Or by the time we would go and pitch our LPs, "Oh, are you interested with this co-invest?" The opportunity would be gone. So that's where the balance sheet is the most differentiating asset. And that's why today, we're trying to once again convince you that it's not a burden. It's our most valuable assets, enabled us to underwrite that, get these assets at some very attractive financial terms. And then once you have secured this opportunity, bring on some LPs, including some Hong Kong-based insurance companies, European insurance companies and turn this balance sheet capital into third-party fee-paying asset management. And so today, as we close the second vintage at $1 billion in our capital, we are convinced, as I said earlier, that not only it's a natural evolution when you're in the private market to find some liquidity and add on top of that, the little noise that we've been having for the past few weeks, we would expect this to increase. And today, when you look at all the competitive landscape of our friends, all the managers, it's probably $20 billion that has been raised by way of funds or SMAs and the opportunity set in front that is $100 billion. And those are public private pension funds, insurance companies, family offices, who are rebalancing the portfolio. And we like the situation where the supply demand is totally unbalanced because that's where you become a little bit of a price setter. And as a consequence, I mean, today, we saw public numbers where we're disclosing our fundraising, the close to $2 billion that we have deployed there have been both at $0.84, $0.85 a dollar which on an average, 3, 3.5 years remaining portfolio, you're creating a 500 basis point pickup for this illiquidity. If you remember, in secondary private equity during COVID, when interest rates were at 0, the secondary market was trading at a premium to NAV, because that's when people were like, if I can deploy overnight some capital instead of having -- we had some negative interest rates, if you remember, having some cash at the bank was costing me some money. So obviously, in some more defensive downside protected credit investment that we can underwrite in a bottom up, we like the risk reward and that we can generate effectively some mid-teens return. That's the return that we've been generating so far, which ticks exactly the type of return on equity we're going to have for the balance sheet. Henri Marcoux: You had a question on AI and impact on our cybersecurity business. Difficult for me to comment on. I'm a bit puzzled to say the list on AI winners and AI losers. I've seen some companies that are dealing with food premises and so on being AI losers and suddenly having decreasing value. So trying to understand that. I will not provide further comments. All I can tell is that our cybersecurity business, we are currently operating the fourth vintage. We had strong demand from investors and the size of fund #4 has roughly doubled. And by the way, meanwhile, something is currently happening over the last years, notably since '22, which is clearly called sovereignty. And I think that there's a clear here, a new environment, new paradigm where people are realizing that it's key. And I can tell you that within our portfolio, we are the biggest venture cybersecurity business with this fund in Europe. We are a shareholder of a company called ChapsVision. It's a global data treatment. All its systems are being used by the European government. Some may call it the European Palantir, but clearly, this company is growing significantly. We are a shareholder of Memority, which is a company providing data access to local information system locally or at distance. And I can tell you what we are seeing is strong business growth in all this company because major -- many companies in Europe are trying to replace and to be less dependent from the U.S. on all these sectors. Theodora XU: [ Isabel ] from Autonomous. Unknown Analyst: [ Isabel ] from Autonomous Research. So I have 2, please. My first question within the context that I understood from the full year '25 results session that you expect FRE operating expenses to be broadly flat year-on-year. So first of all, correct me if I misunderstood there. But given this, we are seeing a number of your global peers move aggressively into Europe, both institutional fundraising and on the private wealth side, including lots of hiring of dedicated sales teams to push distribution. So how are you thinking about reconciling the need for operating cost control against maintaining or expanding your competitive positioning and market share? And then my second question is on PRE. Thank you for the color on when you think it's going to mature. On the EUR 160 million that you expect to mature before 2029, should we expect that to be more back-end loaded towards 2029? Or could we see a substantial share come through this year, please? I appreciate that might be hard to predict, but maybe if you could set out some parameters, do we need a certain fund to do very well or a couple of disposals should trigger that first recognition? Mathieu Chabran: So -- go ahead... Henri Marcoux: You know that performance-related earnings. I don't have an Excel spreadsheet with every month for the -- it will obviously depend on from value creation and exits. So obviously, internally, we are -- we have all of our underlying EUR 600 million position that we are hosting on PE private debt. We are working on some kind of forecast, but difficult effectively to provide you data, strong data sets, either by year or by quarter by quarter. Antoine Flamarion: But maybe what we can say is that the figure you saw here, the EUR 220 million, it was the same figure 2 years ago, if you recollect. And we had in between for the 2 years, EUR 40 million. So we'll receive EUR 40 million, EUR 22 million this year and a little bit less in 2023. So we still have the same EUR 220 million. So that means that our AUM base is growing. Our eligible AUM base to carry interest is growing. As you know, we try to be conservative on that because you cannot really predict PRE. What we can say is that we are building more and more private equity exposure, which will generate probably more carried interest than traditional real estate or credit. When Henri and Vincent highlighted 2.6x multiple on exit on private equity is generating more carried. So I think we are very optimistic, very difficult to predict because it depends on the market, on your asset where you're going to exit. But we are fairly confident that, one, it's growing, and it's highly diversified because secondary private debt is another example where we're going to get carried interest as well. So that means that we are diversifying our pool of carried interest, difficult to predict, but it's improving, and we are very confident on that. Henri Marcoux: And if I make co-investment carried interest are obviously quicker than fund carried interest. Antoine Flamarion: And maybe if you go back to your first question on -- regarding retail, one of the firm motto is create, don't compete. 30% of the money we manage is coming from retail investors directly or indirectly. So we've been pioneer in France with unit-linked product. We launched with our partner, Intesa 4 years ago, a very big program. We've done the same thing with our partner in Abu Dhabi, First Abu Dhabi Bank. We just signed something with the largest bank in Singapore. So my comment is that we still have 30% of AUM coming from retail investor. I mentioned large family offices that are investing directly with us. So do we need -- to go back to your question, do we need to build a giant sales force to tackle the retail? We are not convinced, and that's not what we're going to do. We see our peer group in the U.S. hiring hundreds of people to cover IFAs, banks and so on. We are fairly convinced that we can keep growing there without adding gigantic cost, number one. Number two, we'll try to be more digital. So we create our own platform, Opale, which is already fully operational. It's not gigantic. But in 2025, we raised EUR 260 million through this channel, and it's a greenfield. So we don't think we need to add a lot of resources. Our competition is doing the other way around, and they have larger brands than us, the U.S. guys, not the European guys. But we are fairly convinced that it will not destroy the profitability of the asset management. Mathieu Chabran: Maybe to preempt a follow-on question, which is all this retail focus by many, we've been fairly constant and public on that. We thought that there might have been a bit of misselling in trying to address this market with open-ended evergreen structure. And I'm not only reacting to the headlines over the past few days, but there's been -- I don't want to name anybody, but there's been some things on the real estate happening, how can you have some daily liquidity when you're owning 25 building a city of London, how do you want to offer the liquidity to your clients? On the private equity, the same thing and some of the Boost funds have grown exponentially because obviously, you had a very good brand, a good track record. And some people may have said, and it's not about the managers, sometimes the distribution saying, "Oh, you can buy this private equity or have a debt fund, it's like buying European equity usage". Well, it's not the same thing when it comes to liquidity. And our conviction is that you rarely die of your assets, but very often of your liabilities. And that's a risk that is now in the market that don't want to be overreacting to some news flow. But part of what we show you, we have out of the EUR 52.8 billion, we've got EUR 200 million in an open-ended structure with a targeted return of 7% to 8%, when the other people are showing a low teens because of the leverage, [indiscernible]. So we are looking at the technology. We want to make sure that we can address and tackle the opportunity, but there will never be -- that we will never compromise with the asset liability matching that we believe is what we owe to our customers. Antoine Flamarion: And there are some products whereby you don't really need a specific sales force. So we have -- we launched one unit-linked product with our French partner, Societe Generale. It's a unit-linked product dedicated to aerospace and defense. And for the first 2 months, it's been EUR 1 million per day more or less. And it's not our sales force. It's really the sales force of the bank. So we don't need to add extra people to market that. Theodora XU: Question from Nicolas Payen from Kepler. Nicolas Payen: Nicolas Payen from Kepler Cheuvreux. First one on net inflows. Just wondering, what kind of environment assumption have you baked in, in your in your planning when you set up your net inflow targets? And also, if you could give us a bit of color regarding the kind of asset class mix you're expecting regarding net inflows until 2029. That's the first question. Then the second one will be on balance sheet investment returns. Thank you very much for your comments regarding the acceleration on the G-curve (sic) [ J-curve ]. Just wondering what kind of return shall we expect on the -- in the balance sheet? If I remember well, last time, you mentioned something like 10% to 15% return on balance sheet investments. So wondering if that still holds. Antoine Flamarion: So maybe when -- I start with net inflows. As Mathieu, when he started, highlighted its fourth year in a row record year when it comes to fundraising. If you look at the net new money, the EUR 8 billion we get or the EUR 10.5 million gross, it's now really coming from all around the world and still 50% is going into private credit. But within private credit, it's highly diversified between secondary private debt, direct lending, CLO and so on. So my point here is that we try to diversify as much as possible. As business owner, you want to build a very diversified business. So now that the platform is fully operating, we're going to expect net inflows coming from all around the globe. For the first time, we had a reinsurance company invested EUR 500 million with us in 2025. 12 months ago, we never came across this investor. We had a German reinsurer company investing EUR 350 million with us in 2025, first time. Large Japanese insurance company invested EUR 200 million in 2025 in a direct lend fund. So to illustrate that, the net inflows will come from all around the globe. We will probably benefit from the geopolitic at some point. So I'll give you one of our favorite topic Canadian pension fund, which are by far the largest, probably similar to the super annuities in Australia. They used to put all their money with the large U.S. GPs. Now they want to find European and Asian GP. So going back to your question, the net inflows will really come broadly from all the geographies, number one. When you look at institutional investor and retail, we commented a little bit earlier, but we keep build the infrastructure, the technology to attract retail investor. It will also come on specific asset classes. So as everybody know, real estate has been very difficult for a lot of people around the globe. We've been very acquisitive in 2024 and 2025. So we start reinvesting in real estate because we see very good opportunities. So I suspect we're going to be the one benefiting from this shift back to real estate. We are not commenting and giving the exact breakdown of the 2029 in terms of asset classes breakdown. So that would be my question -- sorry, my answer on net inflows, maybe, Mathieu? Mathieu Chabran: There's one -- it's an anecdote, but I kind of like it. Q2 '25, so a year ago, we raised more in Latin America than we raised in France. And for me, it was an interesting anecdote because I've never been there. Antoine has never been there. We've got our colleagues covering Peru, Chile, Mexico from Madrid. And by working this market over the past 2 years, now we're starting harvesting at a time with some -- our domestic market. So that's where this complementary comes. And this harvesting concept we've been reinforcing all morning, it's really about that, that we made the investments because our CapEx, our OpEx, and now you're starting to have the investment payback. Antoine Flamarion: Maybe your second question on balance sheet return. Our goal is to make sure we continue to deliver mid-teen returns. We've been a little bit trapped into J-curve, as Henri described. So the way we are allocating the balance sheet moving forward is probably in a much more cautious manner. We have still the same target. And by the way, we build the firm being good investor at building the balance sheet. I like saying that, but we started Tikehau as an investment company in 2004. And it's only 3 years after that we launched the asset management. And the asset management has been able to grow from EUR 4 million EBIT to EUR 150 million of EBIT because we've been seeding the strategy and investing. And we are investor before being asset manager, and I think we're going to be very disciplined and probably much more disciplined than when we were before. I'm not saying that we are not disciplined. But now it's really the time of harvesting and the investment committee managing the balance sheet called the Capital Allocation Committee is becoming much more difficult, for instance, when internal teams are knocking at the door to say, yes, we have a new strategy. We want to -- we want -- sorry, to launch a new fund dedicating to cycling and we are targeting 7%, but the likelihood we take the piece of paper, and it's going directly in the shredder is 100%. So when it comes to balance sheet, investment and balance sheet return, we're going to stick to the same mid-teen return, which is going to be a mix of stuff because asset classes are different, but that's what we target. There's -- sorry go ahead. Mathieu Chabran: Last point is going back to your first question. There's no dependence on one market -- sorry, on one geography or one asset owner type for a fundraising. Now it's really broaden. And the same thing you may have picked up this morning in the detailed report we issued. Last year, our real estate fundraising on our open-end trends and our CMS fundraising was actually very modest to say the least, which historically have been very strong engine of growth. So obviously, those are open-ended, but you should expect a significant pick up there, too. Antoine Flamarion: He wanted to say engine. Theodora XU: Questions from Julian, ODDO BHF. Julian Dobrovolschi: I have 2. Perhaps the first one is on the core FRE guidance that you gave. Just wondering if you could speak about the drivers for reaching the upper end of the range, so that will be the 50% kind of think about the building blocks. So what would be the step up from 45% to 50%? And the other one is, if you could also say something about the potential gaps that you've identified in the operation model, so perhaps strategies, niches and that you'd like to develop or I think using Antoine's words, innovate, as you enter in this new growth cycle. Henri Marcoux: On the core FRE margin, I provided earlier the 3 main drivers. Obviously, we have the mixed effect driving the core FRE margin. We have, in terms of revenue, the pace of co-investment as well as an important feature. The more we are able to structure co-investment with additional revenue will be as well impacting that. And then you have on the other way around, obviously, all the cost initiatives. And here, we will be most -- we'll be more cautious, notably on extending any geography or extending any services. So difficult to assess in terms of timing, but we are clearly seeing something like 50% could be achieved depending on the pace on deployment on these 3 drivers. Antoine Flamarion: And probably, it will depend, as you know, on the business mix. So if we have more private equity coming, obviously, the operating margin is improving and the plan is really to keep growing at a faster pace our private equity. If you think about it, at the IPO time, we had no private equity, a part of balance sheet investment. Now we are getting close to $10 million of private equity. So in a difficult market because nobody has been waiting for us, private equity is suffering a lot, but the margin will be depending also on the pace of our private equity expansion. Henri Marcoux: But if I may add on private equity, I think you mentioned it, but I think we are the only one to have such differentiating factors, notably this partnering with industrial. We are relying on these 2 vein transition -- energy transition, decarbonization on one hand, aerospace and defense on the other hand. And on both strategies, we've been partnering with the biggest knowledgeable people in the industry, and that provides a key differentiating factor. Antoine Flamarion: Going back to your question on innovation, we really built the firm innovating, and it's been asset class. It just was Henri described, people doing private equity have been generalist. We decided to be specialized just because we said that we're not going to be another LBO shop. So we decided to be vertical. We are studying various vertical right now. So you're going to see us innovating. We want to make sure while we innovate, we are doing stuff we understand. So we don't expect to be active in cryptocurrency or we're in a stick to what we are good at. Its sourcing good opportunities that we understand. We have a lot of idea and we keep having a lot of idea. What changed probably is that we want to make sure that when we launch a new strategy, it needs to be really scalable. In the past, we thought that we had great ideas. So for instance, my colleague will kill me, but we launched something called Tikehau Green Assets, which was an amazing idea, an amazing team, and we have EUR 130 million into the fund. And I must say that EUR 130 million is totally subscale. So we want to make sure that while we innovate, it needs to be really scalable, above EUR 1 billion for sure and potentially make sure it's multibillion. Mathieu Chabran: You should see, I guess, some extension or, let's say, adjacencies. So when launching, let's say, CLO, CLO is a very scalable, but commoditized product. When we launched in the U.S. 4 years ago, we had been operating in London since 2015. The CLO pool in the U.S. because of the nature of -- and the structure of the market is running twice as fast, and we're scaling. We're now pricing our CLO #8 in 4 years when we had 15 in London. When we launched direct lending in Asia, that's because we think that we're getting to the point with the right partnership, the right shareholders the right investors to effectively have these adjacencies of a first fund, a first move that then we'll be able to scale. As Antoine said, our very first direct lending fund in 2007, so it's almost 20 years now, it was EUR 125 million. The last vintage, #6 that we just closed a couple of weeks ago is passed EUR 5 billion. So you get effectively -- all that is feeding of the operating leverage and the operating margin that we were talking about. You should see us expanding in real estate in North America. We've got a 20 billion real estate platform in Europe. We're managing public REIT, private REITs, commingled funds, open-ended funds. There is an opportunity right now that the natural extension into real estate bid debt or equity is made, I wouldn't say, at marginal cost, but it made at a phase in our development that the drop-through is also feeding your bottom line. So that's where you would see some -- you will see some natural expansion of the platform. Theodora XU: Maybe I'm conscious of time. One last question from this gentleman from [indiscernible]. Unknown Analyst: I have 2, if I may. First one is share price, very strong execution, very strong everything, but the share price does not reflect it. So how far is this management team willing to execute its tools in order that the market recognizes its intrinsic value because I think the market is not nearly recognizing the net asset value of its balance sheet. And the second is strategies for risk mitigation for the first of the French government of taxing and everything. So what ideas when we see all competitors, sometimes they have other jurisdictions to make their tax not go higher and higher. So thank you very much, and thank you for the strong execution. Antoine Flamarion: Thank you for your question. Share price, needless to say, not only because as we are the largest shareholder because we still control the employees still control 54% of the firm, we get very frustrated as some of our shareholders. So I think to cope with that, a few things. One, we need to make sure we keep executing and it's painful because you execute and your share price is not moving. So if you look at the slide I like on the EBIT, you started when you lease the asset management was EUR 4 million EBIT. Now it's EUR 150 million. Let's forget everything, okay? I'm launching a new company. I give you a business plan, and I'm telling you that 9 years from now, I'm going to reach EUR 150 million of EBIT, everybody will tell, okay, this guy smoke something because you cannot move from 0 to EUR 150 million of EBIT. So we're going to keep delivering on the profitability of the asset management. And I think it's really accelerating, so that's number one. Number two, the balance sheet, and that's why on purpose, I put this slide, we have really 2 businesses, which are very different. We use the balance sheet to launch the asset management to see to accelerate. But we are fairly convinced that the sum of the 2 balance sheets, the sum of the parts, if I may say, is probably twice at least where we trade now at EUR 16. So we're going to try to keep delivering. But also at some point, if we are not able to move the share price, and it's not only, I think, hopefully, us, the sector, it's also mid-market stock market in Europe is a little bit broken. So at some point, it will come back, and we start seeing a lot of U.S. investors coming to buy European shares, not only doing takeover as Nuveen on Schroder, but we start more U.S. guys coming. So hopefully, it will change the market because we need the market to change. But I must say that if we are not able to change the stock price just doing a regular job and probably increasing the payout for the shareholder, we may took more, I don't know, structural changes. And we already simplified the structure when we listed, as everybody remember, we had a [indiscernible] structure. We simplified the group. So now we are clearly saying that we have 2 businesses. And I'm not telling you that we are going to split the company in 2 companies. But we want to make sure if you are listed that the stock price and the stock performance is working because when you travel the world, everybody is looking at your stock price, you pitch a Korean investor for your direct lending. The first thing he's doing is Google, stock price, flat a little bit down. What these guys are telling me to deliver a lot of performances at their fund level. But -- so we are all on top of that. We are spending a fair amount of time. Now as the asset management is more profitable, I think it's going to be much more easy for us to change that. Mathieu Chabran: There is plenty of structural optionality. I guess that's part of the message we wanted to convey today. I mean we've always been a long-term greedy in making sure we can demonstrate and execute because when you start from 0, 5, you have to show over a cycle, a few cycles that you're delivering, which I'm convinced we are doing. And the rest should follow. If it does not follow, there are some structural optionality. Henri Marcoux: Now your question on France is a key question. We're going to face election... Unknown Analyst: [Foreign Language] Henri Marcoux: In a few months, we are -- I mean, we are dealing with it. And -- but difficult to comment, but we are dealing with it. Antoine Flamarion: And that's why, I think I mentioned it 2 times already, but we make sure we build a very diversified business in terms of asset classes, geographies, both on the asset and the liability side. So we want to make sure we raise money all around the globe, and we want to make sure we invest more or less everywhere in Europe, but also Mathieu mentioned North America, we start doing more and more real estate because real estate is a mess. So we took advantage of that being contrarian. And at the end of the day, we're going to build a global diversified business. And it's changing all the time. The perspective, we discussed Spain and Italy, 10 years ago, when we opened -- so this year -- sorry, in 2025, it was the 10-year anniversary of our Italian opening in Milan, okay? People at the Board of Tikehau told us 10 years ago, "you're opening in Milan. Are you crazy?" And now everybody is going to Milan. So that's why, once again, create, don't compete. We have very strong conviction. France remain France. It's one of the largest countries in Europe when you look at economic footprint, innovation. And so we're going to continue to do stuff in France, but maybe the way we allocate is going to be more diversified. Theodora XU: Well, thank you so much, everybody. Thank you to the speakers, to the audience today for your engagement. We can continue our discussions in a more informal manner with a light cocktail. A big thank you to the IR team that works in the shadow. And thank you very much, and we look forward to build this next chapter together. Thank you.
Conversation: Theodora XU: Good morning, ladies and gentlemen. Thank you for being with us today. Today is about 3 words: acceleration, profitability and value creation. And everything we'll discuss this morning will connect back to these 3 priorities. I'm Theodora Xu, Head of Investor Relations for Tikehau Capital, and I'm delighted to be hosting today's full year results and strategic update. So today, you'll hear from our 2 co-founders, Antoine Flamarion and Mathieu Chabran; our Deputy CEOs, Henri Marcoux, Thomas Friedberger and Maxime Laurent-Bellue; and our Group CFO, Vincent Picot. So a little bit of housekeeping element on the flow of this session. So we'll first start with a look on Tikehau Capital key achievements for 2025 and then open the floor for a first session of Q&A dedicated to our annual results. We'll then take a short break to allow everybody to refresh, to grab coffee before moving into our strategic update. Then you'll hear first from Thomas, who will share his perspectives on opportunities shaping the next decade. Then we'll have Maxime hosting a fireside chat with our co-founders, discussing accelerating profitability across asset management. Then we'll have our co-founders and Henri provide insights on our evolving approach to balance sheet allocation before taking us through the harvesting phase Tikehau Capital is now entering and providing more details on profitability drivers and value creation framework. We'll then host a second session of Q&A dedicated to our strategic update. With that, it's my pleasure to welcome to the stage, Mathieu Chabran, Co-Founder, for opening remarks. Mathieu Chabran: Thank you. Thank you, Theo. Welcome. Welcome, everyone, here in London, and welcome for all the people who dialed in on the webinar or the webcast. I hope that you can hear us okay. You got all the documents and that you will be enjoying this presentation with us. So very happy to be back in London, not only for our 2025 full year earnings, but also for this new Capital Market Day, as we call it, and very excited with -- on behalf of all the team to host you at Tikehau and give you a little bit of the forward-looking, which is really what we would like to focus on today. But first, let's start with our '25 earnings that were released this morning. I like to call it a record year because the numbers stand. But before we get into the numbers, I would like to tell you and witness how strongly the franchise has evolved over the past few years and the acceleration, as Theo was rightly saying that we benefited from in 2025. It's been a record year on the deployment despite if you look back and think about what 2025 was as a year and as markets to operate in, that was a record year on the deployment. On the realization, we come back to that on exiting some of our portfolio companies and distributing back to LPs and as well as the fundraising, the gross and net inflows, we'll get back to that. We told you in 2022 that the focus was to develop, grow the profitability of the asset management. Remember that when we went public 9 years ago, we were barely doing EUR 5 million of EBIT. It's close to EUR 150 million this year. And you will see that this growth and expansion in asset management profitability is here to stand and we'll give you some guidance where we think we can go. And then finally, on the portfolio, you've got these 2 engines at Tikehau, right, the asset management, the principal, our balance sheet, we saw some strong contribution, albeit this year impacted by some ForEx, and we'll come back to that. So as I was saying, record in deployment, realization inflows. On the deployment, it's EUR 7.6 billion that we put at work at Tikehau, which is an increase of 35% compared to 2024. On the realization, on the exit, we like to say at Tikehau that you have to give back so that people keep giving. And you keep hearing about investors not getting money back. What we tried to do last year is to demonstrate that, yes, you can exit some portfolio company, give back to your investors so that, that keeps fueling the next cycle of growth. And that was twice what we did in 2024. On the capital formation, it's EUR 10.5 billion of gross inflows, and that's the fourth consecutive year of a record year in fundraising. It's EUR 8 billion in net inflows. And what we are very encouraged by is that the whole investments we made in the platform over the past few years globally, remember, we went public, we had 5 offices. When we saw you in 2022 for the Capital Market Day, we had 7 offices. It's now 17 offices we've got across the world. And from Asia, including Japan, Middle East, across Europe today, North America, even South America now, we've got all these new customer base that are fueling the fundraising at Tikehau. So 80% last year came from new customer base, new geographies outside of our domestic market, taking our overall AUM to EUR 52.8 billion. So as I was saying, we've been focusing on larger transactions with a more global portfolio, not only in Europe, domestic market, but in Asia, in North America. And that has enabled us to raise additionally more than EUR 1 billion, EUR 1.2 billion of co-investments on some of those larger transactions. You'll have some examples later on that you may have picked up over the past year, but that has been a strong driver. On the capital formation, as I was saying, a few elements. In Asia and Middle East, it's EUR 1 billion that was contributed. We hit the EUR 1 billion of inventories of clients in Korea that we had opened 6 years ago. And just I'll give you an example that we kind of like just last year, out of the EUR 10.5 billion gross inflow we had, 4 investors -- 4 new investors actually accounted for 20% of our fundraising, and they were all new relationships of ours, bigger commitments. I mean, they came from some very complicated to penetrate markets. I'm thinking about Japan, thinking about Germany. I'm thinking about the U.S. I'm thinking about Middle East, GCC, Abu Dhabi. This is a strong illustration that the investment we made in the platform is now paying off, and we're harvesting all this investment that we had made. And so as I was saying, giving back capital to RPs EUR 4.1 billion that we returned to our LP last year. And just as a data point because people have been talking a lot about private equity last year, and I'm sure we'll have plenty of questions about private credit as well, and we're looking forward to addressing them. But it's a 2.6x that we returned to our investors on the realized transaction. So where does that leave us on the financial? I mean, we issued this morning all the numbers in the details, we'll come back. But if I look at the first pillar of our business, our asset management business, it's an 8% growth of our revenues, converting into 18% growth on the -- at the EBIT level. We grew by 12% our core FRE, this fee-related earnings. And for the first time, as we told you a few years ago, we passed the 40% core FRE margin, and you may have picked up, and we will come back to that, that we're giving an improved guidance on this very important profitability element. On the second pillar, on the portfolio, it's a 19% growth in our realized revenue for the balance sheet, our investment portfolios and a 33% revenue growth if we exclude once again these currency effects that Vincent will be detailing. So finally, it's EUR 136 million net income that we are reporting for 2025, which is 51% growth if you exclude this currency effect. And so we will be -- we propose EUR 0.80 dividend that we'll be voting at the next AGM. So that's for the key element. There will be plenty of details on the session. Once again, thank you very much. We look forward to an interactive session. Thank you, and I will hand over to Henri for more details. Henri Marcoux: Good morning, everyone. Thanks, Mathieu, for this introduction. So let's jump into our asset management flywheel. Maybe we'll start with deployment. As you have seen, deployment has clearly stepped up during the year '26. We've reached EUR 7.6 billion of deployment. So that's an additional EUR 2 billion, 35% compared to the year '24. Starting with private equity maybe, with a EUR 2 billion compared to EUR 600 million the year before. Clearly, we've accelerated deployment, notably on aerospace and defense, cybersecurity, decarbonation in Spain, Belgium, Germany and in U.S. through our flagship strategy, but as well through our co-investment vehicle. Real assets represented EUR 1.4 billion of investments compared to EUR 1 billion during the year '24. Here again, discipline has remained paramount. We continue to focus on high-quality, well-located assets, notably to be noticed during the year '24, big residential portfolio units in France as well as a big investment, first investment in real estate in the U.S. and notably several additional investments in the Netherlands. As far as credit is concerned, so that's clearly a stable deployment versus '24. We are standing at EUR 4 billion, very well diversified allocation through Spain, Italy, Netherlands, Belgium, U.K., very strong momentum as well on our CLO issuance business. And so we are ending the year with more than EUR 7.6 billion of dry powder end of '25 to be ready to capture new investment during the year '26. We've been talking about executing larger transaction. That's a very key important point that we wanted to mention today. So out of this EUR 7.6 billion of deployment during the year, we had EUR 1.2 billion that were deployed through dedicated co-investment vehicle. That has been the case on the private equity business, such as the Egis transaction we've been commenting for a few months. EYSA in Spain, that has been the case for as well ScioTeq aerospace and defense deal in Belgium. That has been the case as well for real assets through this residential deal. That has been the case as well for private debt, where we had several deals where we have welcomed co-investor. So that's clearly a new feature here, creating adjacencies, creating new funds alongside our flagship and welcoming co-investors. What does that mean? That means that through this creation of new vehicle, we are bringing into the platform additional fee paying. So management fees that are going to fuel our fee-related earnings and additional performance fees, which will depend on the exits, of course, but which will fuel as well our asset management EBIT. So looking at what happened in '25 over those co-investments, that's roughly more than EUR 1.2 billion of additional co-investment, bringing more than EUR 150 million of asset management EBIT for the coming year. Realization, clearly here, once again, a strong increase. It's almost double figure as what was exited in '24, so reaching EUR 4 billion of exits. Here, again, private equity has been increasing significantly. That's EUR 1 billion of exits for 5 positions that were exiting during the year, reaching 2.6x of multiple. So clearly in line with our fund expectation. As far as real estate is concerned, we remain stable, EUR 500 million of exits. Multiple on real estate achieved has been 1.6x. That's at asset level, unlevered and those exits are mainly residential and light industrial. As far as private credit is concerned here, clearly, very strong increase. Realization have reached a record that's almost EUR 2.7 billion. As far as direct lending and corporate lending are concerned, those are repayments. The average MOIC reached has been 1.4. As far as our specials business is concerned here, we've been exiting several positions as well at our initiative, achieving a gross MOIC of 1.6x. I want to insist on that because clearly, in '25, I think that the global macro environment as far as exit is concerned, has been challenging. In that context, we've been able to deliver EUR 4 billion of exits. So we are sending back money to our LP. we are increasing the DPI, which is key. We are increasing the performance and all the average gross MOIC that have been realized on all of our exits are clearly either in line or above our fund expectation. Fundraising. So here again, we've been mentioning EUR 10.5 billion of gross inflows, record year. As far as net inflows is concerned, that's EUR 8 billion of net inflows, so a 13% increase during the year. Looking at this fundraising a little bit more in detail. You can see that as far as private equity is concerned, we've reached EUR 2 billion. I'll come back on that. Notably, those inflows have been driven by the cybersecurity final close, regenerative agriculture as well. Our specialist fund being decarbonization fund #2, aerospace and defense fund #2 have been benefiting obviously from strong inflows in the current environment. As far as real estate is concerned here, it's a performance of EUR 1.3 billion of net inflows, focusing on value-add and Core and Core+. This is including the previous transaction I was mentioning, notably residential in France, the one in the Netherlands as well. Strong contribution from credit, EUR 4.4 billion, stable versus last year. As we just announced a few days ago, we've been closing our credit secondary fund #2, $1 billion, which is almost double the size versus previous vintage. As far as direct lending, vintage #6 is concerned, which is still open as we speak, we are close to EUR 5 billion. And here, we have secured the 2 largest individual LP commitments in our history from Germany and in U.S. Demand as far as direct lending is concerned, remained quite strong. So as you can see over here, diversified strategy, larger tickets, co-investment, client conviction, bringing us into this record EUR 8 billion for the year '25. So just a snapshot here on where we stand on our flagship. So I was mentioning special opportunity fund number -- vintage # 3, EUR 1.2 billion, which is almost the double versus the previous vintage. Credit secondary, $1 billion. As far as private equity is concerned, regenerative agriculture, vintage #1, EUR 600 million; cybersecurity fourth vintage, almost doubling the size versus the previous vintage. As far as '26 is concerned, lots of ongoing fundraising as we speak. Obviously, direct lending #6 still open as we speak and benefiting from strong inflows. This year will be as well a strong year as far as private equity is concerned, we are still open during all the year, Aerospace and defense fund #2 and decarbonization fund #2. So you have here on the screen the evolution of our AUM during the year. So it started at end December '24 at EUR 49 billion, ending at EUR 52.8 billion. Different movements of the year have been impacted by the inflows I was mentioning, EUR 8 billion and the distribution standing at EUR 4.1 billion. You have on the right side of the page, the diversified and complementary asset class, the split by business unit. Client base, as far as client base is concerned, one important feature, Mathieu was mentioning the number of offices we are operating, namely 17 offices as we speak. Important to notice that as far as inflows are concerned, that's more than 80% of net new money that has been raised from international clients. You have here the biggest contributors for the year '25 being U.S. investors, U.K., Spain, Germany. To be noticed during the year '25, strong contribution from Asia, namely from Korea and Japan. Korea has gone over the EUR 2 billion mark for the year '25. Contribution as well from Israel, where we are approaching the EUR 2 billion mark as far as the LP commitments are concerned. So those are the most represented nationalities in '25. On the right part of the page, you do have actually the split, which means that international clients have increased from 44% '24 to 46%. So that's a 13% increase, representing EUR 24 billion at end of '25. Private market is an important feature. We've been focusing significantly over the past year over the strong growth, era of growth. That has been the case as well for '25. That's 25% of third-party inflows that were raised through private clients. That's actually notably all the initiatives we've been launching on private debt, private credit, unit-linked products have now reached more than EUR 1.5 billion at end of December. As far as AUM are concerned, that means private customer clients are now representing more than 34% of our AUM. That's actually more than EUR 18 billion. Two dedicated initiatives that have been launched during the year '25, one on private credit, namely TEPC, European private credit, semi-liquid fund, focusing on midsized European company. And second important initiative that was launched during the summer, which is a unit-linked dedicated to defense, security, aerospace. This unit linked is currently distributed through partnership that we're having with big insurance company. We are currently sending over EUR 200 million for this product, which -- where the distribution has started end of '25, focusing on our aerospace and defense practice and notably the track record that we are benefiting on that practice, aerospace and defense practice that was launched back in 2018. Last point on sustainability. A few years ago, we had set a target on AUM dedicated to climate and biodiversity. Our target was to achieve at least EUR 5 billion of AUM dedicated to that practice. End of '25, we are standing at EUR 5.8 billion, notably thanks to our decarbonization practice, Fund #2. So that means continued sustainability integration across the several pillars that we are benefiting through the WL platform. I will now leave the floor to Vincent for the financial review. Thanks. Vincent Picot: Thank you, Henri. So I'll start the financial highlights with our fee-paying AUM and the revenue generation in terms of revenues. So first, fee paying AUM grew by 6% compared to 2024. It was driven by net money on our private equity practice, capital markets and also by a very dynamic fundraising and deployment activity for direct lending and CLO business. In addition, it's worth mentioning that future fee-paying AUM grew by 24%, and it was supported by solid net money in direct lending strategies. We charge management fees on invested capital. So together, fee-paying AUM and future fee-paying AUM increased by 8% year-on-year. So that's a sign of securing future management fee generation. Also and the impact it has on management fees is that management fees increased by 8%, reaching EUR 358 million. That's an acceleration that we have noticed specifically in H2. Average revenue margin stood at 88 bps, which remains resilient. And worth noting that we record a clear performance-related earnings level of EUR 22 million, which is a record. On the following slide, a few data points on performance-related earnings. So at end 2025, AUM eligible to carried interest grew by 10% to EUR 24.8 billion. In addition, at end September 2025, we had EUR 220 million of annualized performance-related revenues, which are actually accrued at fund level and such level is based on the current performance at portfolio level. This amount is not crystallized yet. It is not yet accounted for in our P&L, and it will be recognized as funds approach maturity. In terms of asset management profitability and as Mathieu mentioned, we grew our asset management EBIT by 18% year-over-year, reaching for the first time EUR 150 million. This growth reflects specifically the increase in the core fee-related earnings with a notable acceleration in H2. This is mostly due to an increase in management fees in this period. Overall, Core fee-related earnings increased to 41% in terms of margin, exceeding so for the first time, the 40%, and it reached exactly 46% in H2. Overall and looking now at the cost base, we remained very disciplined because the operating cost base only grew by a mere 3% year-over-year. So that's a testament of an efficient resource allocation. Moving now to our investment portfolio. So at end 2025, the total fair value reached EUR 4.4 billion, very -- and still very granular with a bit more than 300 investments. Approximately EUR 3 billion of this amount is invested in our own management strategies. So it ensures an alignment of interest with our client investors. The remainder of this amount, EUR 1.3 billion is invested in our direct investment ecosystem. As you can see on the right-hand side, we've got a pretty well diversified portfolio in terms of asset classes. Now looking at the flows and what happened over the year, investments reached EUR 1.3 billion, of which EUR 951 million of capital calls in our own strategies, CLO, credit secondaries, private equity strategies mostly, but we also invested EUR 370 million in our ecosystem, and it was mostly driven last year by our investment in Schroders. 2025, so we carried out close to EUR 800 million of exits. Returns of capital were from various asset classes, CLOs, special opportunities, but also decarbonization and aerospace strategies that Henri mentioned when talking about distributions to our LPs. Market effects, minus EUR 18 million, reflecting mixed effects, positive fair value changes for our Schroders stake, also positive regulations in some of our private equity strategies, mostly aerospace and defense and also decarbonization, but it was offset by negative market effects in some very specific credit and real estate situations. And finally, currency effects amounted to minus EUR 161 million, and it's mostly linked to the sterling euro exchange rate. Slide 20 -- next slide. So in terms of portfolio revenues. So in 2025, portfolio revenues reached EUR 166 million. That compares to EUR 207 million in 2024. But as mentioned also by Mathieu, realized revenues actually grew very significantly by 19% year-over-year, reaching EUR 239 million. So that's worth highlighting. It's composed primarily of coupon, dividend and distribution from our whole spectrum of credit strategies, listed REITs and also ecosystem investments. As regards unrealized revenue of minus EUR 73 million, we've got a P&L impact of foreign exchange for minus EUR 52 million, mostly linked to the euro-sterling exchange rate. And as I explained in the slide earlier, also around minus EUR 20 million of unrealized negative changes in fair value. So excluding currency effects, our portfolio revenues grew by 33% year-over-year. If I have to wrap up our 2025 financial performance, strong performance in our asset management platform, as explained on the asset management EBIT growth. It was offset to some extent by currency effects and also by unrealized fair value changes on our investment portfolio. Looking now in a bit more detail, nonrecurring items and other of EUR 13 million. It's mostly linked to positive ForEx impacts on our U.S. financings. Tax expenses, EUR 51 million in 2025, in line with our net result before tax and a tax rate of around 25%. So overall, our net result group share amounts to EUR 136 million. And if we exclude main currency effects, our net result grew by 51% year-over-year. In terms of balance sheet metrics, our model is strong, supported by means of EUR 3.1 billion of shareholders' equity group share and also by short-term financial resources of EUR 1.2 billion. As regard our financial debt, which stood at EUR 1.9 billion, it encompasses a EUR 500 million new bond issue, a renewed and upsized RCF line of EUR 1.15 billion. And at end of December 2025, we had drawn EUR 150 million of our revolving credit facility. And as of today, we have fully reimbursed our RCF. In terms of -- so based on this -- so building on what I disclosed and building on our 2025 performance, we're also pleased to formulate a new 2026 vision that is disclosed on the screen. We will be laser focused on reaching an AUM of at least EUR 60 billion by end 2026, reaching FRE between EUR 175 million and EUR 225 million and the net result group share between EUR 420 million and EUR 520 million, excluding ForEx effects. Worth noting that approximately EUR 180 million of net result comes from the full disposal of our stake in Schroders that happened earlier this year. And also, we also disclosed a return on equity between 13% and 16%. So all those metrics show improvement compared to 2025 and are above market expectations. 2026 has to be seen as a step in our journey towards a long-term profitable growth that will be disclosed and presented just after. And we will be providing, of course, more details on our targets later this morning. Thank you very much for your attention. I will let Antoine for the concluding remarks. Theodora XU: Thank you, gentlemen, for this very thorough presentation. We'll now open the floor to questions. [Operator Instructions] And we will address in priority questions from the room, obviously, and also take questions from the webcast. So one question from Sharath Kumar from Deutsche Bank. Sharath Ramanathan: Very impressive presentation. So congratulations. I have 2 questions, if that is okay. So first one is while I totally understand your investment story, but I think it will be much simpler with an asset-light business, although I kind of understand where you're coming from in terms of your balance sheet, funding your strategies. But ultimately, I think it is very hard to deny that this has been hugely dilutive to your valuation. So has there been discussions to eye off the investment activity outside the listed entity so that it can improve your valuation? So that is the first one. And I want to come back to the usual topic on your share price valuation, low free float. A couple of years ago is when you disclosed your 2026 targets, at least on the asset management side, you have been mostly on track, while on the investment activity side, is there, I think consensus is widely divergent from your targets. Just been a very painful wait for the sector to rerate and you have not been alone in that. So -- but when it comes to increasing the free float, what is the latest update that you can give you? I know it's been a chicken and egg situation for the valuation to increase or the free float to increase, but what is the latest update that we can? Antoine Flamarion: Thank you for your question. That's a usual relevant question we had on balance sheet and asset light. As you all know, we started the firm just as an investment company in 2004. In 2007, we launched the asset management. So our asset management is 19 years old. We are celebrating next year our 20-year anniversary for the asset management. So we decided from day 1 that having a balance sheet will help fuel grow the asset management. And as we discuss a little bit later during our strategic update, we'll be more precise into that. But the truth is that we've been using the balance sheet to seed sponsor new initiative. Without the balance sheet, it would have been impossible to launch CLO in 2012, direct lending in 2009, decarb in 2018, aerospace and defense in 2020. Needless to say that nobody will even answer our phone. So we used the balance sheet to seed sponsor that. As a result, we have this balance sheet, a EUR 5 billion balance sheet and now a EUR 53 billion AUM business. We are clearly unhappy with the valuation. The sum of the part is miles away of what we should be. So clearly, we don't get the credit of having both the balance sheet and the asset management. For all of you who are very familiar, you just saw the latest M&A transaction announced, which is the Coller purchase for EUR 3.2 billion. Coller is making EUR 145 million of EBIT, let's say. So we just announced EUR 150 million. So that tells you more or less the valuation we should get on the asset management. And on top of that, we've got EUR 3.1 billion of equity. So we've been growing the firm using the balance sheet to seed sponsor, launch new initiative. As we enter now a new chapter, and we'll discuss that during the strategic update, we are committing less amounts to our funds. We don't really need now to seed sponsor with large amount of money. And as you see for the first year in 2015, the commitment we had in our fund declined. So we started the year with EUR 1.6 billion of commitment in our fund. At the end of the year, it's EUR 1.3 billion. So that's telling you that we don't really need as much capital as we needed before. So moving forward, we'll have really the 2 businesses, the principal investing, which will still remain invested in our funds. Skin in the game is critical for us. And we have the asset management business, which is now profitable. When we leased the firm, if you remember, we are making EUR 4 million EBIT, so no profitability at all. In 9 years, we grew from EUR 4 million to EUR 150 million. As you saw on the 2026 guidance and vision, we are targeting between EUR 175 million and EUR 225 million of FRE. So now asset management is profitable. The balance sheet, we think, is really back on track to be profitable. Vincent mentioned, for instance, Schroders, we will detail that, but Schroders has been a 64% IRR and a EUR 240 million net income. So that's why we are highly confident on the 2026 net income. So it's a very long answer to your question. People have very clear view on asset-light versus non-asset-light. Blackstone is really asset light. KKR is not asset-light. KKR is not compounding at a strong pace, the balance sheet. And at the end of the day, for the shareholder, I think what matters the most is the net income and to increase the net income, having the 2 engine, the balance sheet and the asset management will probably lead into more net income, more dividend and share price appreciation at the end. Theodora XU: Thank you. Two more questions in the room from Arnaud Palliez from CIC. Arnaud Palliez: Two questions related to currency impact. The first one is, can you give us the breakdown of your AUM by currency in order to forecast what could be currency impact on these assets? Then do you intend to put in place any hedging policy? I think all your debt is in euro. So do you intend also on the liability side to have a diversification by currencies? And the last one is regarding the net profit guidance for 2026. Is it at constant currency? Or do you make any assumption at this level? Vincent Picot: Okay. Thank you for your question. So as regards assets under management and the part of the share in foreign currency, so it's about 10% and mostly in U.S. dollars. We're exposed to the U.S. dollars around and through our U.S. CLO and private debt strategies mostly. As regard to your question around hedging, so we've got a hybrid approach at Tikehau. Like other actors in the sector, we have decided to put in place a natural hedging with financing in dollars. So it's $180 million private placement put in place in 2022. And we also put in place some forward contracts on some sterling on our sterling exposure to some extent. So we've got this hybrid approach using these options at our hand. And regarding your last question around our 2026 guidance in terms of net results, which we mentioned is between EUR 420 million to EUR 550 million. We mentioned very specifically that it's excluding foreign impacts. So basically at constant currency December 2025. Antoine Flamarion: And what we'll do moving forward when it comes to currency, when we have been issuing bonds, we've been initially only raising money denominated in euro. A few years ago, 3 years ago, we raised for the first time a USPP, dollar-denominated. So moving forward, we will probably match our non-European currency exposure, matching with the right liabilities, so probably issuing more USPP rather than euro if we need. We consider that it's probably the best way to hedge having a proper asset and liability match. It costs less money. It's much more efficient. And this hedging currency are always complex because you can hedge the amount of money you invest. So let's say you invest $100 million, GBP 100 million, you hedge that. But if you end up making 3x multiple having just the nominal hedge, your capital gain is not hedged. So we think that moving forward, we're going to issue more in other currency, if I may say. Theodora XU: One question from Nicolas Vaysselier from Exane BNP. Nicolas Vaysselier: The first one is on Schroders. I mean, you have a big windfall coming your way. That's a great problem to have, right? I'd like to know how you think about reallocating those proceeds between reinvestments or potentially payout to shareholders through share buybacks, exceptional dividends? Second question on your 2026 new FRE guidance. I'd like you to help us understand a bit how we bridge from where we are in '25 to get to the bottom end or even the top end of this guidance. So I'm wondering if you bake in some lumpier items like catch-up fees that you're expecting for this year, expecting some recovery at Sofidy in the subscription fees because they are meaningfully accretive to the margin. And what you expect in terms of evolution of the cost base next year? And then finally, my third question, you mentioned some negative mark-to-market effects on the credit portfolio. We've seen some of your peers actually suffering quite a bit. So I'm interested in any comments about your credit portfolio, balance sheet exposure, how it's performing and on the equity CLOs notably. Antoine Flamarion: Thank you for your question. Maybe I take the first 2 one. On reallocation or reinvestment, as mentioned before, we still have EUR 1.3 billion of commitment into our funds. So first of all, for instance, the Schroders proceeds is close to EUR 600 million. As Vincent mentioned, we are going to -- we reimburse already our RCF, which was EUR 150 million drawn. So that means that we have excess cash on the balance sheet. We're going to probably use that for our capital call, EUR 1.3 billion. Also it's over the next few years. So it takes time. We're going to continue to invest the balance sheet alongside our strategies. So we have commitment in our funds, but the balance sheet is now doing 2 things, co-investing within our strategy. So I suspect we're going to probably deploy more money into aerospace and defense, where we are clearly ahead of the curve. Same thing for decarb. And we start seeing more and more credit opportunities as the cycle is becoming more complex. You probably read a few days ago that we closed our secondary -- second vintage of private debt above EUR 1 billion, so twice the previous vintage. We are the only firm having such track record when it comes to secondary private debt. So I suspect that we're going to allocate the balance sheet more into secondary private credit. Maybe I start on the -- your question on 2026, and I will let Henri comment. So we have 4 metrics in our 2026. One is our return on equity between 13% and 16%, which is mid-teen double digit, as mentioned before. We are fairly convinced that we should reach between EUR 420 million and EUR 520 million of net income for 2026. Part of that is obviously the Schroders disposal. And as disclosed in the market, we decided to sell in the market our stake rather than waiting the end of the offer, which could happen in Q4, but could happen maybe in Q1 2027. You never know. So we are fairly convinced that we're going to reach this level of net income and as a consequence, this return on equity. Your question specifically on catch-up fees and FRE we have several vintage of private equity currently raised, namely AAP2, which is aerospace and defense and decarb 2. There is potentially a very large amount of catch-up fees as stated in the bylaws. So within this range of EUR 175 million to EUR 225 million, there is some amount of catch-up fees, and we are fairly convinced of -- when we look at our pipeline right now coming from LP, there is a very strong demand, obviously, for aerospace and defense, and there is still many European appetite for decarb. Henri Marcoux: Yes. Maybe in summary on that, there are many 3 drivers on that. First of all, you may have seen that future fee paying have been increasing significantly end of '25. So all these future fee paying will obviously be transformed into fee-paying when we will be deploying these funds. So this is the first driver for our evolution of fee-related earnings in '26. Second one is a mix effect. Obviously, as just described on the pipeline within our funds, we are now on the road investing and fundraising on our 2 big platform PE funds, namely decarbonization Fund #2, aerospace and defense Fund #2. Yes, there will be catch-up fees. But namely out of the -- maybe excluding even the catch-up fees, there's a mix effect with these 2 private equity funds and the track record we have benefiting on these 2 area. And maybe the third driver to increase effectively the FRE in '26 is obviously cost control. We started to be more -- to take carefully more of the issue around cost already back in '25, and we will be keeping in that area for '26. Mathieu Chabran: No, I just want to address the third question on private credit. I mean, I wish we had 2 hours to discuss private credit since so many things have been written over the past few weeks or a few months. But more specifically, we happen to have our CLO business within private credit. So just to answer specifically on the U.S. side beyond the ForEx that Vincent elaborated on, obviously, last year was a volatile year. And as you know, the CLOs or some arbitrage vehicle with some liabilities issued and that can be reset. And so what we had last year was effectively on this specific part, some kind of a lag between the end of September, end of December valuation at the asset side and the reset on the refinancing. So we're expecting to catch up on this side when we reprice and reset the CLO. Now more specifically on the private credit, I think there are as Antoine said, that's a big opportunity for secondary private debt, but we've never been as bullish on the opportunities to keep deploying with the same underwriting discipline when it comes to direct lending. The issue we've been facing, there are 2 comments. One is cyclical. The other is structural. On the cyclical aspect, what we've experienced partly in the U.S. is this massive growth and fundraise on credit where many managers and not being judgmental whatsoever have started to have to deploy resilient raise. And as you know, when some of our competitors raise $50 billion a quarter, it takes some time to keep the same discipline underwriting. We're still, I think -- and our partner, Cecile is in the room, I think we have 5% to 7% selection rate on our private credit deployment. So that has been driven effectively a lot of talk around the direct lending. The other thing that in the U.S., the bulk of all the noise you've been hearing was coming from the U.S. You've got the mid-market direct lending, which is on average, 6 to 7x now level. In Europe, it's more like 5 to 5.5. Our portfolio is 4.4. So as always, with credit, because the only thing you're getting is par, it's how do you underwrite and how do you structure going in. So it's a much more defensive portfolio that we've been having, and we just closed the sixth vintage of our strategy. We started in 2007. So it's a 19 years track record when, as I'm sure you know, 92% of the private credit managers were launched post GFC. So I think that here, it's important to -- I mean, we have our share of situation of negative watch where we're working. A lot of the cyclical aspect is effectively all the credits that were originated in 2021, the 0 interest rate environment, the Central Bank very accommodating policy and when people -- you had a base rate at 0 and spreads at 300, obviously, fast forward 5 years and you got a base rate at 4 or 5 and the spreads may be at 4 or 5, obviously, your cost of refinancing is much higher, and then you have to effectively recapitalize part of them. Now the silver lining, as Antoine alluded to, is that we're entering the golden age of the secondary private credit, and we are best positioned to tackle that. Theodora XU: Well, thank you so much. I'm sorry, I'm conscious of time. We'll address more questions later on during the second Q&A session. So let's take a short break. We'll resume in 10 minutes. Thank you very much. [Break] Theodora XU: Welcome back, everyone. So before moving into the strategic update, we would like to take a few moments to step back and revisit who we are and how we have built our platform. So we're going to show you a short video that retraces our journey, highlighting the evolution of our platform and the areas of expertise that position us as a differentiated asset management. Let's watch. [Presentation] Theodora XU: We hope you enjoy this video that really captures our journey. So today is not only about looking back, it's about what our platform is capable of delivering. We would like you to leave today's session with 3 key messages. First, we're exiting our build-out phase in asset management to move into a harvesting phase with accelerating profitability. Second, we're entering a new phase characterized by a greater strategic allocation of our balance sheet. It has been used since IPO as a great growth enabler. And now looking ahead, it will be used as a more strategic allocator. Finally, as Antoine mentioned a bit earlier, those 2 distinct and complementary growth engines will offer significant optionality for us to close the valuation gap and also maximize value creation for our shareholders. Aligned with our '26-'29 road map, we'll be focused on delivering the following objectives. First, deliver cumulative net inflows of over EUR 34 billion, representing a 22% growth compared to the EUR 28 billion we have raised over the last fundraising cycle. This is first one. And the second one is that we aim to generate core fee-related earnings margin of between 45% and 50% by 2029 compared to 41% achieved in '25. On top of those objectives, we have formulated 2 commitments. Those are to maintain our investment-grade rating and continue to distribute over 80% of our asset management EBIT to our shareholders. So now let's start with the first section of this new chapter. And please join me in welcoming on stage Thomas Friedberger to share his perspective on opportunities shaping the next decade. Thomas Friedberger: Thank you. Theodora XU: So Thomas, first question for you, and thank you for being here with us today. What would you characterize -- how, sorry, would you characterize the evolution of global markets today? And what do you see as the most impactful trend shaping the industry today? Thomas Friedberger: Thank you, Teo. So if we look at the size of the private markets, they were estimated at $26 trillion in 2022. They are expected to grow at $61 trillion in 2032. Those are not small numbers. It's approximately 50% of the current global GDP. And if you want to compare that to other markets, let's say, you have a global market cap today in listed equities of $140 trillion. So this number of $61 trillion expected in a couple of years is not small at all. It means that the private markets are converging with liquid markets and the convergence doesn't stop there. Let me take the example of private credit. Private credit has converged in size with the high-yield corporate bond market and with the leveraged loan market, both in the U.S. and in Europe. That's done already. As a consequence, the fixed income markets are more and more integrated with private credit spreading to investment grade to asset-backed lending. And this will offer a full range of new options to issuers going forward. We also think that, by the way, having a strong expertise in liquid credit through our capital market strategies is a strong advantage in that perspective of convergence. I would also say that in a complex world where uncertainty, volatility, dispersion are increasing, where asset allocators need to deploy large amounts of capital on the back of a strong growth in savings, the one-stop shop model is appealing. Why? Because platforms benefit from clear processes, from clear risk management methodologies, compliance, conflict of interest management, better client servicing, better reporting capabilities. Platforms also are able to source larger transactions, allowing co-investors to deploy large amounts of capital quickly. And they also can afford the multi-local approach, which we think is absolutely essential in the generation of performance. So the message here is that the convergence between public markets and private markets creates value. It creates value for companies and issuers. The increase in size -- in deal size in private equity and private debt provide more options for companies issuing debt. They can allow company to be taken private, for example, or to remain private for longer. It also creates value for LPs. We said that it's allowing asset allocators, large asset allocators to deploy large amounts of capital in private markets. It also gives access to private markets for private investors, which is kind of new. And also, it will bring the best practice of liquid markets to the private markets in terms of conflict of interest management, reporting and risk management. So all of that is positive. Theodora XU: Thank you, Thomas, for those very interesting insights. We've seen increasing sophistication, sorry, in private markets. What investor behavior shifts are most material? And what capabilities must managers build to truly differentiate and capture growth? Thomas Friedberger: So if I start with the institutional world, we noticed a sharp increase in demand for co-investments, for SMAs, for bespoke solutions. And that requires from us robust origination capabilities. I mean, capability to originate locally but at scale, which is the challenge. Also solid fund structuring and tailor-made solution to address all the specific demand from all over the world and also robust processes in terms of allocation, valuations, reporting. So that's on the institutional side. And so hence, the importance of the strength of the platform. If I now go to the democratization of private assets, so addressing private investors, it requires from us global distribution channels, so the necessity to talk to a large number of distributors or global distributors all around the world and also digitalization to deliver data-driven client experience and reporting, which we are addressing partially through our Opale platform. Theodora XU: So as we look to the future now, what structural themes do you see defining the next decade? And where do you see the most compelling opportunities emerging? Thomas Friedberger: So complex question to answer in a couple of minutes, but I'll try to do my best. We -- so there will be growth in 2026, 2027. But we think we have the conviction that this growth is going to be led by investments more than consumption. So CapEx-led growth, meaning that growth will be probably more concentrated on the sectors that are the priorities of the government. So the famous 4 Ds of McKinsey, Decarbonation, Defense, Digitalization, Deglobalization. We think that the growth will be concentrated with the companies able to enable this to happen. So the sellers of picks and shovels of the resilience, if you will. So aerospace and defense, energy transition, cybersecurity are among those sectors, and that's the reason why we are focusing on them. But let me also consider deglobalization. There is a need in Europe to create European champions also at the SME level. And that is addressed through direct lending because private equity players use 3x more direct lending than capital markets or leverage loans to finance those transactions. And so we think there is a strong opportunity also in European direct lending to build those European champions. Number two, we think that the economic value creation is in the world is switching from efficiency to resilience and resilience has a cost. The cost of producing closer to the consumer, the cost of getting insurance against climate risk, against cyber risk; the cost of operating with higher equity buffers and less debt to cope with COVID-like situations; the cost of having more robust supply chains. So we expect lower growth in the world with high growth concentrated on the sectors I mentioned. It will also probably change the way to invest in private equity. Companies are becoming more asset heavy than before. Even in the tech sector, you look at some companies now own data centers. They were asset-light before their own data centers. Some of them are now building their own electricity production capabilities to feed those data centers. So it will be more asset heavy and probably that the way to invest in private equity will switch towards more what Warren Buffett was doing, which is invest in more asset-heavy sectors, looking more at return on invested capital. And it will not be easy because the best CapEx are done by the best management teams, but you can expect a lot of misallocation of capital also when there is a lot of CapEx in the sector. So probably less reliance on multiple expansion and the investors will need to use less leverage. And if you look at what we've been doing for the last 15 years at Tikehau, it's exactly that. We've invested in sectors that are more asset heavy, aerospace and defense, for example, with less leverage than the average. Third theme is we are entering into a war economy, which doesn't mean hopefully that we will go to war, but which means that all economic agents are put at the service of the priorities of a given government. And that means probably accommodative monetary policies going forward, starting probably in May in the U.S., but also massive fiscal expansion, which means probably lower short-term interest rates and higher long-term interest rates, so steeper yield curve, which is good for banks, which drives the strong conviction that we've been having at Tikehau for years, saying that we prefer credit risk to duration risk. And so from that perspective, we think that direct lending, which is 100% floating rate is very well adapted to this environment, but also, for example, short duration credit in our credit capital markets activities. And last but not least, we think there is a strong opportunity in Europe because Europe is accumulating accommodative monetary policy, massive fiscal expansion in Germany, which will have consequences all over Europe, lower valuations compared to the U.S., lower levels of leverage in the corporate world and the end of the deleveraging of Southern European banks, which probably provides appetite to finance the economy from those banks, not only in Southern Europe, but in the whole of Europe. So a very benign investment environment despite all the European bashing that we see. And so with the condition of being disciplined, there is a very strong opportunity in Europe, where we deploy 80% of our AUMs right now. Theodora XU: Very insightful. Thank you, Thomas. Last question. In that context, what are the implications for our different asset classes if we go through each of our strategies? And what aspects of our value proposition best position us to capture these opportunities? Thomas Friedberger: So of course, I mean, it will be all about performance. Performance will drive fundraising. So performance will be key. And for that, we will continue to rely on, one, local sourcing, which is absolutely essential to the generation of performance, but also in terms of risk management, addressing tricky situations locally. Strong corporate culture of alignment of interest and as such, strong investment discipline, which we think we have by DNA and also partnerships to benefit from superior expertise and avoid crowded areas, partnership with corporates, partnership with partners in regions where we are less developed with why not other asset managers. So that's the create, don't compete angle of what we do. Now in terms of opportunities, there are a lot. I will regroup them in 3 categories: growth, value and niches. So in terms of growth, as I said, in private equity, the solution providers through the sovereignty, through the resilience will continue to experience strong growth in a world that will grow at a slower pace. So Aerospace & Defense and decarbonation are 2 strong convictions, and we are really confident there that by allocating our capital well, we can generate a lot of value for investors. In liquid strategies, we are very excited by anything related to the building of European sovereignty, which is a theme which is connected to what I just said on private equity. And on European direct lending, of course, this opportunity to build European champions in the credit space that is growing and is going also more towards larger cap financing with the condition, of course, to have the right allocation geographically and by sector is also a strong growth opportunity. Now value, value being benefiting from low valuations, but also liquidity gaps. We think that here, real estate is the obvious candidate, both in equity and financing, very strong opportunity in real estate with depressed valuations and volumes that are starting to pick up. Private debt secondary is also addressing this opportunity, buying LP interest or GP and LP interest at a discount, being selective is a strong opportunity. Special situations, which we define as financing good companies or good assets with a bad capital structure, so having a problem at a certain moment of their development. There is a lot of things to do in Europe. And with regards to niches, I would mention financial subordinated bonds. Those 3 yield curves will continue to favor banks. It's very European-centric opportunity, but we have a very strong expertise there in capital markets. Asia credit is also something that we want to be involved in. We launched a fund recently, and we think it will be a high-growth area in the coming decades. Theodora XU: Okay. Very interesting discussion. Thank you, Thomas, for your time. Well, to explore these themes further, we'll now be joined on stage by our 2 co-founders and Maxime Laurent-Bellue, our Deputy CEO, for a fireside chat on accelerating growth across asset management. Thank you, Thomas. Maxime Laurent-Bellue: Good morning, everyone. Thanks for being here today. It's a real pleasure for me to have this chat with our 2 co-founders gathered in the same place, which is not every day. Today, we will talk about the firm. We'll talk about the industry. We'll talk about the perspective. I want to talk -- I want to start with Antoine maybe -- and I know -- CEO said that we would not do too much history, and we'd rather look forward, but just a quick question to start. It's been a 20 years-plus entrepreneurial journey, which was quite incredible. And I must say I took part of -- a decent part of it, probably around 19 years today and I've seen the firm changing, improving, growing from the startup I joined in '07 to global asset management and investment company with 17 offices globally. So obviously, a lot has happened, and Antoine, in your own words, I'd like to understand what are the sort of key strengths or the key defining features that have been shaping or positioning? Antoine Flamarion: Thank you, Max. Let's try to capture the secret sauce. The truth is that as all of you know there is no secret sauce, it is a lot of conviction, ambition entrepreneurship, innovation and may be I start with that, we are entrepreneurs, as Max said, as Teo said, the plan is to look forward for the next 20 years. But the truth is that we started, as you know, with EUR 4 million as real entrepreneurs. And the journey has been colorful, complex. There is not a single day when you have (sic) [ haven't ] something new coming up, someone resigning, someone you're trying to hire, a deal going not in the right direction, a financing not in place at the right time, a historical shareholder willing to sell shares. So that's what's happening all the time. But because we are entrepreneurs, and I think a lot of people at the firm became entrepreneurs, maybe some in a different manner. But everybody is putting a lot of energy to make sure we keep the drive, we keep the energy and we innovate all the time. Financial industry is boring. As I keep saying, we used to have banks, insurance company. Now one of the largest European financial institution is probably Revolut, if you look at least on the valuation, $75 billion. Now the banks are trading up, and you've got several banks above $100 billion market cap. But this is what's happening. Revolut was nowhere, now it's $75 billion. Everybody wants to make sure that they put their funds on the Revolut platform. As Thomas mentioned, we create our own digital platform called Opale. It's been a record year last year. So we sell Tikehau funds and other GP on the platform. It's a greenfield. We've started with 0. Hopefully, in a few years, it's going to be several billions. And we started that again from scratch. So part of the secret sauce has been innovation. And you can innovate in this boring industry either on the way you raise money or the way you invest. We discussed earlier, Mathieu mentioned secondary private credit. We've been the first firm to launch secondary private credit in 2020 in the U.S. Secondary private equity was everywhere, but secondary private credit was really new. Now we raised our second vintage. We are accelerating on this front. And we've been doing that all the time. When we launched direct lending in 2009 in Europe, it was popular and well known in the U.S., but nobody was doing that in Europe. Defense is a very good example. And I think there were a question online we did not answer earlier about the deal flow when it comes to Aerospace & Defense. It's multibillions coming, and we launched that in 2020. So I think part of the journey, and I don't know if it's the success or not, but we've been innovating all the time. We're going to keep innovating. And you can innovate, as I said, on the asset or the liability side. When you partner with corporation, nobody in the industry has been partnering with corporation. When it comes to Aerospace & Defense, you know our partners, Airbus, Dassault, Thales, Safran, they put money, they sit on some of the committee. They help us analyze some of the company. And as a result, since 2020, we own 35 companies in the sector. We exited already 3 of them, reaching on average 2.7x multiple. You partner with these guys, you're probably ahead of the curve. When you launch decarb with Total and we launched already the second generation, again, you partner with Total that gives you an edge of understanding the sector, the trend. Does it make sense to look at hydrogen? Yes, no. Battery storage? Yes, no. And we've been doing that all the time. Max has been part of the team, who a few years ago, start investing and financing data center. We've done that a while ago. We sold one in the Netherlands in December. Because we are born in France, everybody know Mistral, the French AI company. We've been the one financing their data center. And I think it's been all the time for more than 20 years. So we're going to continue to innovate. Hopefully, that will generate more businesses. We will create more partnership with financial institution, with corporation. And it's a very long answer because as I said, there is no secret sauce. We are entrepreneur. We innovate. We keep the same pace. As some of you know, we put a lot of energy, we being the 715 employees are putting a lot of energy to make sure we make things happening. And that's going to be the same thing. But if you look now for the next 20 years, now we have 17 offices, a very strong platform, a very talented pool of people, and we see a big acceleration coming. Maxime Laurent-Bellue: And so it's interesting because innovation and partnerships have been at the foundation of our journey and sort of interconnected together. Should we expect obviously more innovation and more partnership? Antoine Flamarion: Yes. I think it's we've been -- I don't know if it's good, but we always find, Thomas mentioned, niche, a very specific thing because when we launched Decarb, it was a niche in Europe, frankly. When we launched Aerospace & Defense, now it's super popular, but it was not even a niche. It was -- nobody wanted to touch that. And I think we are looking all the time at what's happening in the financial service industry, and we look at traditional asset manager, Schroders is a good example. We look at alternative asset manager. We look at insurance company. We look at digital company. And you could expect more innovation, more partnership because that's how we build the firm. And I think now the partnership we can achieve are probably much bigger in terms of size than what we've done before. Maxime Laurent-Bellue: Thanks, Antoine. Mathieu, I'd like to move on the more the industry. In the same period of time, obviously, the industry has transformed rapidly tremendously. Thomas touched on the growth of the market, how the market and participants have been increasingly sophisticated, more players coming in, more competition, I guess, more strategies. So it's in constant movement. I'm not even mentioning the backdrop, which is obviously quite complex right now with geopolitics, tax and so on and so on. But how do we prepare for the next growth phase of the firm in that context? And how do we define our approach in this fast-moving environment and fast-transforming industry? It is a long question, sorry? Mathieu Chabran: It's a great question. First of all, congratulations for coping 19 years with us. I must say I did not realize, but that certainly illustrates that it's an entrepreneurial and it's a people business journey. But I mean, think about where we started and what -- when you joined us in 2007, what the -- I don't even think that alternative asset management was defined as a term. We barely talked about private credit that really was born on the ashes of the GFC, I mean, certainly in Europe. We were still very much in the GPLP world. I mean, if you look at the -- we were born in Europe, as Antoine said, not to mention France. And the market was extremely defined. It was the GPLP, you were doing mid-market European buyout. We were barely talking about private credit, as I said. You had some real estate managers for sure, but even real estate was not really perceived as, I think, an alternative asset class. That was probably certainly in Europe, the most advanced and most developed asset class that was -- that people could address and not to mention infrastructure, et cetera. Fast forward 2026, the name of the game every day, you read in the press, you see in the media are these juggernaut platforms. I mean, I can name them because they've been modeled in our development, the Blackstones, the Apollos, the KKRs managing more than $1 trillion. I mean we like to use this anecdote with Antoine. When we started in 2004, TKO with EUR 4 million of assets under management, Blackstone was managing $40 billion. And he was sitting at Goldman Sachs. I was at Merrill Lynch over there, and we were like, well, $40 billion. Fast forward today, it's $1.5 trillion, $1.6 trillion, the getting or something, and it's only starting. So this transformation of the industry which has accelerated over the past 5 years, it's complicated to date that. But you see that there is this massive transformation of increased savings on the one hand, private savings, bank, insurance, regulation, which is now very different in Europe than it is in the U.S., interest rate structure in some part of the world, I can think of Japan, I can think of others. And this globalization phase, which all of a sudden enter a deglobalization phase because maybe there is this cyclical moment with the U.S., where you're constantly on the edge. It's like being on a rugby playfield, right, and waiting for the information and seeing where the ball is going to be coming from, where we're going to have to play defense, to play attack. And that has been extremely exciting as far as I am concerned, we are concerned. And we've only been able to do that because we were lean, agile, that obviously, our team, our people were fully embarked in this dynamic. And that's why we're so -- I am certainly, I guess, we are, Antoine and I, are so excited about what's ahead because I can tell you that when people ask us what have you done differently? Well, maybe starting with $50 billion and not $4 billion with 17 offices and not just sitting in our seller in Paris. So we're at this crossroad now where we can tackle an industry that has been, as we said, changing dramatically, which I must say, has been somehow dominated by American brands, platform franchise, which once again, I respect greatly, but the world is in a different place now. And I think you cannot have some limitation on goods with tariffs. You cannot have some limitation on people movement with immigration and not have at some point some limitation on the most liquid assets, which is capital. And what we're seeing right now, which is rightly the point that Thomas made about sovereignty and the real defining investment that needs to happen right now, there will be a massive opportunity for platform like us. We've been seeing all along that you have to be multi-local, which means that when you're addressing Europe, and we're all seeing in London today, but I can see in the room, many people coming from different places. And we all know that doing business in Madrid, in Milan, in Frankfurt, in Paris, in London, it's different. The culture is different. The rural -- I mean, the legal environment is different. The networks are different. And we've been making this investment for the past 20 years. When we're talking about harvesting, that's what we are referring to, that TKO today is deeply rooted in every single market to be able to size, to execute, to monitor, to -- sometimes to restructure this situation. And that's what investors or certainly the 80% of the investors we've been referring to that we are now trusting us, that's what they are looking for. I'll give you an anecdote. When we started talking to Korean investors 7 years ago, -- and you spent a lot of time there. We all spent a lot of time there. I remember 7 years ago that some of them in our direct lending, for example, strategy, they were asking specifically to carve out Spain and Italy because back then, we were coming out of the euro crisis, the peaks, the whatever. Over the past 12 months, all the capital we raised in the region has been for private equity investment in Madrid and in Milan because it's moving so fast. And what those people are expecting from us is to be the local guide with the skin in the game, not just selling them the product of the months, but effectively promoting some investment strategy where there are some strong conviction at heart, but with capital aligned to them. And so here, again, a long answer, but I've never been as excited because the platform we have to tackle this new chapter in the market where effectively there is a dominance like in many other sectors by some of our U.S. friends, there is this, I guess, once in a lifetime for us opportunity to be this next-gen native European alternative asset managers, which has grown organically across asset classes with capital fully aligned. We might discuss later on M&A or something, but not trying to build artificially a one-size-fits-all platform, but to have a real bespoke and hopefully relevant, performing, as Thomas said, offering for those investors. So long answer, but I think we're best -- that's why we wanted to have this discussion with you now because I think the platform now is mature. It's mature to be harvesting these opportunities. Maxime Laurent-Bellue: Thanks, Mathieu. Shorter question now for Antoine maybe. We've -- I think we've sort of outlined a bit of the road map for the next few years earlier today. I want to be very specific, Antoine, on what would you -- and if you could elaborate on our key priorities. We mentioned scale. We've mentioned profitability. I'm sure underwriting is one of them as well. But could you give us your vision on that? Antoine Flamarion: Thanks, Max. Maybe I will start using what Mathieu described as harvesting. We've been investing for the last 20 years, building the platform. And we consider that the platform, which is multi-local, 17 countries, strong local investment team is fairly unique, meaning that we can source a lot of local opportunities. And when it comes to private assets, you're not buying assets behind your Bloomberg. You need to be local. So we started doing, I don't know, a lot of residential, for instance, in Portugal, in Spain, in Germany. And as you know, real estate market is very difficult, now we start seeing really big guys, almost all the sovereign wealth fund coming, knocking at the door to say, we want to co-invest with you in your residential expertise. And I think that's exactly the illustration of harvesting. We invest in the platform. We can source fairly unique assets with a very strong risk-reward profile. And that's about now the time to make sure we do -- we deliver a larger transaction. We keep the same investment discipline. And at the end of the day, it's not about growing the AUM. The most important thing is making sure you deliver performance for your LP, for your investor and as a consequence for the balance sheet and your shareholder. And I think now for this chapter, we're going to be focusing on more profitability at the fund level, at the firm level because we've been investing for 20 years. So now the operating leverage is much higher. We reached EUR 150 million of EBIT 19 years after launching the asset management. The asset management has been launched in 2007. After 19 years, now we reached EUR 150 million, and it's exponential. So I think now it's about time to harvest to make sure we increase the profitability. We need to be very selective in a very changing world. The example of Mathieu is clearly what's happening. 7 years ago, people will tell you, please, no Spain, no Italy. And now people will tell you, you're doing too much France. We want to do really Italy and Spain. And it's changing all the time. When it comes to real estate, people have been obsessed by buying retail real estate, office real estate. Needless to say, what the office market looks like now. So we need to continue to adapt. So I will say to answer and summarize what I say, scale, operating leverage, profitability, investment discipline and keep the same ambition, and that's the plan. Maxime Laurent-Bellue: What about M&A, Mathieu? -- we are -- as we discussed, we are well capitalized. So we are a potential buyer for not anything, but for many objects. The industry has been consolidating recently. How do you -- do you think we'll be active? And how do we assess the right match essentially? Mathieu Chabran: Yes. That goes back to what we were saying. I mean there is this imperative of scale right now, be in terms of footprint, size, assets and strategies, platform. And whilst there will always be the great and perfect investors very focused either locally or by industry. Clearly, the trend that we've been seeing over the past few years is accelerating and we'll be -- I think we'll be even more impacted by the cost of doing business, from a regulation standpoint, from a -- as I said, the footprint you need to have. And we are very well positioned. I mean, it's going back to some of the question we had earlier on about the balance sheet. The balance sheet has been a huge enabler for the asset management business, as Antoine addressed. It's always been as entrepreneur, you're never overcapitalized. It's quite often very the opposite. And so having this opportunity to be able to buy, seed, merge, sponsor, we've become the partner of choice for many bankers, some of you in the room, and I'd like to call on you to give you some evidence. But I mean, I think today, we've got 85 names in our spreadsheet in the pipeline of situation that we are looking at, small single strategy, single country platform all the way to some of the large platform that traded recently. And we have become partners of choice because of this balance sheet. I mean if people just want to sell, cash in and move on, that's not the type of things we're looking at. But people say, okay, now we need to have a stronger partner that can seed anchor the next phase of fundraising, the next fund to be fully aligned in the mindset and the culture and see the cross synergy we can have in the distribution, then the discussion becomes highly interested. Obviously, the -- I mean, the starting point is that there needs to be -- I think the first and foremost is the cultural fit. I think it goes past the financial merits. And now that we are 5, 7 years into some structuring M&A., I think that some of them will demonstrate that the cultural fit was not there, and there could be some issue there. So I will always put culture first. Then it has to be about the complementarity, obviously, because there will be little merit for us to be doubling up on some strategies where we are already a market leader in a market or in a strategy. And then it has to be financially accretive, right? The last thing we want to become is an asset aggregator because that comes back to the discussion we are making about -- we are having about the -- our earnings. It has to be a profitable growth. And so that -- when you put all that as a filter, it leaves from 100, it gets you maybe 10 situations, right? And from 10 situation, there's maybe only 3 you want to do and maybe one that will conclude. But we believe that M&A will keep -- as a general comment, M&A will keep developing, certainly in Europe, where some platforms are subscales, partly for some investors. We also discussed the fact that many asset owners, they are reducing the number of relationships that they're working with, but they are increasing the amount of capital they are allocating to. And that's something that we can benefit from now that we are at scale. And the other thing, I don't think we commented on this KPI and Vincent tell me if I'm off beat here, but I think we're still at 2/3 of our investors, LPs are invested into more than 2 strategies. So they will be into credit and private equity, into infrastructure and real estate. And that's something this cross-selling and the upscaling that you can have with your LP, that's where you can make obviously a big difference. So it's about being very selective. Maxime Laurent-Bellue: And on that, Mathieu, I was actually thinking probably even more selective than in any of our strategy, right? Because you certainly don't want to misunderwrite an investment in credit, in PE, real estate, but you, for sure, don't want to misunderwrite an M&A opportunity, right? Because... Mathieu Chabran: 100%. 100%, it's -- it's a people business. You have not seen us entering into transformative M&A that with all due respect from our investment bankers friends in the room, what I call sometimes the bankers idea, which is on paper, on XL, it's always perfect. It always works on XL. And then you've got this people business component that needs to be factoring. But as the industry mature, as some people get into some succession challenges, as some platform may be struggling to raise the next fund, those discussions are becoming very interesting. Antoine Flamarion: Maybe I'm adding a comment on M&A. All the transactions you've seen in the sector, all the comments are about how many times what's the multiple on FRE, okay? BlackRock is buying HPS on whatever, 17x. Collier has been purchased on 17x and so on and so on. Our view is that we should be focusing on the underlying fund and not the FRE multiple at the management company at the GP. Because at the end of the day, the value of an asset management business is the underlying performance. And I think people have been a little bit distracted in the last 15 years. So people have been buying a lot. As you noticed, we bought nothing. And we are in a position whereby we will be the one consolidating. But as long as we make sure that we are buying a very strong team, the same DNA and culture and very strong performances at the fund level because if you start having good performances, the value of your business is probably close to 0. So we're going to remain disciplined. We look at a lot of situation. And thanks to the balance sheet and our shareholder base, we can -- if we want, if it makes sense, be acquisitive. But no doubt that we're going to be very, very cautious. And we see -- we start seeing more and more opportunities coming. And as the cycle change, which is the case, for instance, in private credit in the U.S., there are more and more people knocking at the door. So we are really well positioned if we want, if it makes sense. Mathieu Chabran: And an extension to your question, Max, is it doesn't just have to be an M&A deal. It can be all these partnerships where we've been, as Antoine pointed out, I think, pretty good at with some corporates, with some financial partners, with some asset managers. I think that, that's going to be increasing. And when we were detailing the fact that moving forward, you have this asset management pillar, this balance sheet pillar on the asset management level, we become a partner of choice for those partnerships, partly with more traditional insurance companies, I can think of, with some other asset owners who are looking for some ways to deploy more into certain strategies. And that's also a step forward where our track record of having this partnership will certainly resonate well with this at this time in the cycle. Maxime Laurent-Bellue: Thanks. I'm conscious of time. So maybe before wrapping up, 2 questions, 2 final questions on each. Maybe starting with Mathieu. What would you say -- what would you like to preserve the most? Or what would you like to never change within the firm regardless of where we go, how we grow? Mathieu Chabran: Yes. Well, Put this little movie there. And obviously, we're in a particular seat on [indiscernible] because it was the 2 of us and now it's 700-plus people, we are working with. It was in a small office in Paris, and now we're on the road all the time, meeting with all our teams and colleagues and partners locally. I think it's close to 50 nationality we've got across the platform now. And this -- I no longer want to use the word DNA, but I think this culture, the singularity that we tried to develop over the years and still maintain that makes effectively hopefully, a small difference between similar platforms is certainly what we need to be focusing on. And when I look at the breadth, the expertise, the wealth of the people working around us, I mean, that makes a huge difference. Because at the end of the day, as Antoine said, what we do is not rocket science. But for as long as you are fully aligned, that you are fully embarked in terms of the people that are working to, then you can make effectively a difference in good and bad times. And you will know very, very well, you personally and many of our people that sometimes sitting at an investment committee, sometimes we don't even have to talk looking at each other, people because having been through all these cycles together and that might be the benefit of now time and experience, it makes a huge difference in the way you're approaching what is at core, as Antoine said, the investment, the risk underwriting, the fact not to be forced to doing something or -- I mean, each time we did something wrong was when we got to live into the former. And for as long as we can resist that because the people, we've been in the locker room together. We've been on the pitch together. We had the fight, the win, the losses sometimes, but we came back, that's what we need to preserve for sure. Maxime Laurent-Bellue: Is it difficult... Mathieu Chabran: For sure. For sure, I said. Maxime Laurent-Bellue: Is it difficult something to combine ambition, growth with maintaining entrepreneurial spirit, nimbleness? Mathieu Chabran: Just to share maybe with the audience, I mean, where I'm really, really happy is that today, our team, our senior leadership team, our partners, they're spread across all our offices from Singapore to New York, obviously, here in London. And that is something that has also been a key differentiating aspect where you need to obviously hire locally, but you need to maintain this backbone, this what is the culture of Tikehau and hopefully, the discipline too. Maxime Laurent-Bellue: Antoine, you opened, you closed. Any key message, any key commitment maybe for our partner, shareholders, investors? Antoine Flamarion: Talking about commitment, we've been committed to this business with our 715 people. We are very committed. We remain entrepreneurs. Mathieu mentioned DNA. It's still the same company with the same drive, the same energy, a more global platform, a longer track record because when you start, you have not a real track record. Now we can claim that in several strategies, we have a strong track record, a solid track record. The world is becoming more and more complex, and we mentioned sovereignty, technological changes, geopolitics, politics. It's going to continue to be like that. So we're going to keep diversifying our business from a geographical point of view, from a sector point of view. We need to adapt the firm. I mentioned Revolut, our own platform, Opale. We launched several initiatives called either Retina or Lagoon, which is our own AI tools. So we need to adapt all the time because we are not really AI or tech native. So we had to spend time. We hire younger people specialized in this area. So it's going to be the same. We still have a lot of appetite. We are not going to do stupid things. We discussed briefly M&A. We've got very strong conviction globally. We could be -- and I don't want to be arrogant, but we could be discussing U.S. asset management for 2 hours is there. We spend a lot of time there. I'm not telling you that we are announcing in the next 10 minutes something in the U.S., but we are looking at all of our options. We've got these 2 very solid businesses, the balance sheet with permanent capital that everybody is looking at. 10 years ago, you talked to some people in the GP industry, they said, we're going to enter permanent capital. And we said we have a EUR 5 billion balance sheet. And we've got this now profitable asset manager. So we're going to have the 2 businesses, making sure they are both highly profitable. And we're going to keep doing the same thing with the same drive, same energy with a very strong group of talented people internally and a very -- and I finish here, a very unique set of partners, corporate partners, financial partners. We did not really discuss today. But as you know, some of the largest families around the globe are invested with us from the U.S., from Greece, from France, from Italy, from Netherlands. And that's also part of our cloud. So more or less the same. with a little bit of new innovation coming. Maxime Laurent-Bellue: 23 seconds over time, I think that's fine. Thank you so much. Antoine Flamarion: Thanks Max. Theodora XU: Thank you very much, gentlemen, for this very interesting insight. Before delving into our final sections, beyond strategy and expertise, what truly defines us is the way we operate. Our entrepreneurial spirit is not confined to our offices. It shapes how we think, how we collaborate and how we challenge ourselves. So we'd like now to share a short video that captures this spirit in action. [Presentation] Antoine Flamarion: We just do cycling, FRE, net income, that's the real Tikehau. It's a cycling and sport company. Henri Marcoux: Just got down from my bicycle. Good morning again. Yes. So we'll be finalizing this presentation, starting maybe a quick introduction in terms of compounding effect and velocity focus. We wanted to remind you a few data points. First one, there was a question earlier this morning on our balance sheet, asset-light. We wanted to remind you a little bit the way we've been using our balance sheet, how have we been operating over the last years. Here, a quick snapshot once again on our investment portfolio. A few take away. First one, a significant increase of our investment portfolio went up from EUR 1.6 billion back in 2017 to EUR 4.4 billion as we speak. Second takeaway, the way we've been rebalancing this investment portfolio. Earlier back in 2017, it was allocated 33% through our strategies. It has gone up roughly to 80% in '23. End of '25, the allocation to our own strategy stands at 69%. And that's actually a direction we want to keep on going, which means actually having lower intensive allocation to our investment strategies. So what have we been doing with our balance sheet? A few examples have been given this morning. But obviously, investment in our own strategy, we've been mentioning that. We put our own capital at work. We invest alongside our LP, alongside our partner that enables us to effectively have a compounding third-party fundraising, accelerate international expansion. On the other way, investment in all our ecosystem, as we've been doing in the past, to forge partnership, complement our expertise and structure co-investment. We'll be coming back on the 2 first pillar. So first one, Tikehau Capital strategies. EUR 4.3 billion have been committed in our own strategy. As you can see, credit has represented most of this allocation up until now, 48% out of that 18% in our CLO platform, which, by the way, has enabled us to launch effectively 24 European and U.S. CLO since we started the business. Alongside that, launch as well vintage and new flagship and adjacencies. Another 17% of allocation has been done through real estate and a significant part of our allocation of this EUR 4.3 billion has been carried out in private equity, roughly 36%. And all the initiatives that we've been talking about up until this morning, decarbonization cyber security, aerospace and defense, all these initiatives that were launched back in 2018 have been done, thanks to the allocation initially made by the balance sheet. One important point. We've been talking about this kind of third-party fundraising compounder. You can see here, each time from 2018 to 2021, that we were putting EUR 1 from the balance sheet, we had a kind of a multiple of by 7 of third-party inflows. Since '22, so during the last -- latest fundraising cycle from '22 to 25, this multiple has increased to 13. Several aspects to that. First, it's true that once the flagship are becoming bigger, once vintage are more advanced, for example, which is the case on vintage on direct lending, the multiple is higher. So clearly, we've been demonstrating that this fundraising companying effect was very efficient. Other key priorities already that was announced this morning as well as co-investment the use of the balance sheet is a key asset for effectively in this co-investment opportunity. We are using the balance sheet to warehouse partially some of these co-investments. That was the case back in '22 on this first private debt secondary initiative, more than EUR 500 million. It has been the case last year on several co-investment deals in real estate, in private equity, in private debt. We mentioned the deal in Spain, EYSA. So here, clearly, you can see that this warehousing capacity and use of the benefit is clearly playing a strong role in our business model. Now switching to ecosystem and direct investment. I won't come back -- won't belong on that, EUR 1.4 billion. But once again, here, it's a kind of full ecosystem, which clearly this full network is expanding deal flow. It is deepening expertise, and it is clearly enhancing market intelligence. So we are partnering here with 56 GP, 60 LP interest and it's providing a huge diversity around investment type, geography coverage or sector coverage. Antoine, do you want to provide a comment on that as far as our GP relationships are concerned? Antoine Flamarion: One thing we -- thank you, Henri. One thing we try to do is build relationships around the globe and long-term relationship across asset classes, geographies, sector. And we've been using this balance sheet in what we call ecosystem to generate opportunities. It could be co-investment opportunities when it comes to private equity, to private debt, to real estate. It could be financing, and you've got 2 examples here. We co-invested 5x with J.C. Flowers doing financial services all around the globe. So for instance, when they invested into BTG Pactual a while ago, when the bank was private in Brazil, we co-invested with them alongside GIC. More recently, we invested with them in Jefferson Capital. We just conducted an IPO. And for us, it's 2x realization, but the multiple is close to 8x now after the IPO. And so we generate within our ecosystem long-term relationship with families, with financial institution with very strong GP. And that's part also of what I described earlier as the cloud. Tikehau is not only 17 countries, 715 people. It's several families, several really big and smart investors. And I think when I keep doing that, that will generate more opportunities and also that's avoid you to do mistakes. When you partner with some of the smartest investor in the financial service sector, it could be Flowers, but we've done things with Stone Point, which is the other big investor in the financial industry in the U.S. Then you're a little bit smarter, if you look at a leasing company, at a private equity company, at an insurance company and so on and so on. And that really illustrates the DNA of Tikehau. It's not only one firm, one culture, one P&L., it's a cloud of partners all around the globe, which enable you to find smarter opportunities, avoid mistake and accelerate when it times to accelerate. Henri Marcoux: And what's the takeaway you're going to tell me? So here, we've provided a few data points, both from listed ecosystem investments. Realized proceeds now are amounting above EUR 1.5 billion, net MOIC 1.4x, that's a 13.2% net IRR. And as far as exited investment -- co-investments are concerned, that's more than EUR 270 million of realized profit and 2.3x net MOIC. So once again, here, you're demonstrating quite demonstration of what we've been achieving over the last cycles have clearly demonstrated strong returns within our business model. Do you want to provide a comment or we can... Antoine Flamarion: Yes. No. We had the opportunity to discuss a little bit earlier our investment in Schroder. But as you know, we've been using our balance sheet to invest in the financial services. Back in 2012, we bought Salvepar from Societe Generale. In 2017, we were the second largest shareholder of Eurazeo with a 9.5%. So we are always screening the entire financial services industry. When it comes to Schroder, which is probably -- which was the best name in the city of London with a very unique business, size, very strong track record. The company has been under some pressure and as a consequence, valuation was very bad. So we decided to do 2 things: one, to become a relevant shareholder falling more than 5.4% of Schroder, but also building a relationship with them, trying to be able to create products, increase our distribution channel and we are still discussing with them on opportunities. And suddenly, a U.S. investor came almost 2 years after we made the initial investment, decided to launch a takeover. And that's, for us, is generated close to EUR 240 million of P&L, a very strong return. And we use the balance sheet to really do 2 things: deliver good investment and generate business. And that's part -- that illustrates perfectly what we've been doing for 22 years. Henri Marcoux: So now moving forward and looking at the next 4 years, the next chapter, what are going to be our allocation policy to -- as far as balance sheet is concerned. We are now exiting this phase where, as we mentioned, balance sheet was a growth enabler. We are entering into this next phase where our balance sheet will be strategic allocator. Our priority will be now probably to deploy less, rotate faster, target higher velocity and more value-add opportunities. So what -- no change here. Balance sheet allocation will be gearing forward Tikehau Capital strategies and ecosystem. As far as Tikehau Capital strategies are concerned, obviously, we will keep on going and we will have still strong skin in the game alongside our partners, but a focus will be reinforced on value-add strategies in PE, in real estate and in credit, with expected returns over 15%. And as I mentioned previously as well, greater flexibility, notably on co-investment. On ecosystem, similar pattern, strategic transaction, focus on high-performing investment and ancillary business. Three main objectives, very clear: improved portfolio velocity, generate increasing profitability and grow shareholder return. I mentioned lower capital intensity into the funds. If you have a look at the 2 previous cycles from 2018 to 2021, average yearly allocation in the funds was roughly 450 million a year. Since last cycle from '22 to 25, it was roughly 450 million, but including co-investment, the allocation will still be -- keep on going within co-investment and secured capital fund. But once again, lower capital intensity expected on this new cycle coming. We mentioned profitability and this next phase with a strong objective. Clearly, 3 main pillars will be enhancing our profitability them for the coming years. First one, operating leverage, and I'll be giving you in a minute the details of that. Performance-related earnings will be the second pillar on which we will be relying and investment portfolio. Operating leverage, we are exiting this cycle '22-'25, where we have reached EUR 28 billion. We are now targeting more than EUR 35 billion for this next chapter in the coming years. So clearly, here, more selectively adding -- we will be more selective in adding adjacencies and target new initiatives. We will be more focused clearly on scaling existing strategies. How are we going to achieve that? Once again, by deepening institutional relationship, high-growth region such as APAC, Middle East, North America, and we will also broaden our distribution, like was mentioned before by Antoine and Mathieu, notably to capture more private wealth demand. What will be the growth driver? You have them here, but clearly, all of them will be clearly used and all the structure that was developed over the last 20 years, the 17 offices and the setup in place will be clear in this new target to once again achieve more than EUR 35 billion -- EUR 34 billion of fundraising for this new cycle. Operating leverage once again here, I think that we have demonstrated that over the latest 2 fundraising cycle, operating leverage has already taken place. So Asset Management EBIT moving from EUR 4 million to EUR 114 million at the time of the latest Capital Market Day back in '22. Since then, reaching EUR 150 million, as we have described this morning. So that's a 52% CAGR since IPO. And once again, this sustainable growth has been supported by mix improvement and scale efficiencies. In that context, new chapter will be focused on reinforcement of this operating leverage, and we will be harvesting in this new phase. We are now targeting both between 45% and 50% of core FRE margin by the year 2029. Second pillar of this new phase of profitability of this new phase of development will be performance-related earnings. We've been repeating that for many years, strong value embedded within the underlying value, the underlying funds, shareholder allocation, more than 54% of allocation of this carried interest to the balance sheet, significant profitability driver. We've seen that during the year '25, by the way, it was the highest year in terms of performance-related earnings, EUR 22 million. So we mentioned this morning, this EUR 220 million of unrealized performance-related earnings. That's the picture -- how the picture looks like at end of September '25. So that's the underlying carried interest, which are being valued at fund level. We are expecting more than EUR 160 million to be maturing before the year '29. So we are here providing you a kind of a data point where we think the timing of this EUR 220 million where we think it will be realized. By the way, that does not include any additional value creation that can be created between '25 and the next coming 4 years, which will potentially create additional carried interest. Third pillar of this new chapter. We mentioned operating leverage. We mentioned performance-related earnings. Third one will be investment portfolio. And here, we wanted to provide you a data point. Sorry to be a bit technical on that. But in terms of how do we recognize within our P&L, the return of the fund. So up until now, all of our funds in which the balance sheet was invested have obviously been realizing capital gains. They have been disclosed underlying stake and cash has been returned to the balance sheet. However, we want to assess that up until the DPI is below 1, it does not create any P&L impact at our balance sheet level. So up until now, we have effectively some cash flow, but no P&L impact. As we are exiting the G-curve (sic) [ J-curve ] of most of our flagship and as we will be entering over -- DPI over 1, we are expecting significant P&L effect from our balance sheet and thus the new -- the kind of new forward looking that we are providing today as far as net result profitability is concerned. I was mentioning this G-curve (sic) [ J-curve ] effect once again here, 2 key decisions, 2 new allocations that are being discussed today. First, allocation in new investments which are allowing higher velocity. And second one, exiting J-curve for existing investments. These 2 elements will clearly drive this third pillar of the investment portfolio. Important data point as well on investment portfolio. Since the IPO, 2 clear cycle, 2018, 2021, '22, '25, these 2 cycles have so far returned -- have generated more than EUR 1.6 billion of capital return to the balance sheet. The next cycle that we are facing from '26 to '29, we are expecting an increasing return of capital for the balance sheet roughly above EUR 2 billion for the next 4 years. So which means that all the investments, once again, the investment portfolio that we have been describing together a few minutes ago, will generate more than EUR 4 billion of return of capital for the balance sheet. But how we're going to use this EUR 4 billion and we had the question earlier today, new investment within our fund, balance sheet optimization and shareholder return. Talking about shareholder return here, providing you a few data points, our historical dividend distribution history since IPO. We are reiterating today our guidance, which is effectively a strong commitment to distribute more than 80% of our Asset Management EBIT per year. And meanwhile, we are providing you this new guidance on Asset Management EBIT for '26 and as well for -- up until '29, notably reaching this 55% to -- 45% to 50% core FRE margin. So I hope that all this point, once again, are illustrating this next phase of development, once again, based on these 3 pillars clearly identified and described together. Antoine, Mathieu, maybe I will let you the floor for any conclusion remarks, if any, or otherwise, we can open Q&A. Antoine Flamarion: Thank you, Henri. Just commenting on the last slide on the dividend. As you noticed, we've been 2x since the IPO paying exceptional dividend. If we continue to deliver strongly on the balance sheet return, we'll probably have excess capital because as Henri described, we need to put less money into our asset management funds. So we could expect probably in the next cycle to make sure that we improve the return for shareholders. Shall we take some questions? Yes. Theodora XU: Let's take some questions. So several questions from the room. Question from RBC. Unknown Analyst: [indiscernible], RBC Capital Markets. The first one on fee-related earnings margin development. Can you share more color on what sort of cost discipline assumption underpin margin expansion as you continue to scale? Second is on secondaries. Perhaps you could expand on what is your longer-term ambition for these funds? And how competitive do you expect the secondary space to be over the next few years as your listed peers -- well, some of your listed peers are actively pushing to accelerate growth there. And then lastly, on AI and specifically, if you observed any material impact on your cybersecurity mandates? Also interested to know how you distinguish between AI winners and AI losers within your investment process? Antoine Flamarion: Thank you for your question. Maybe I take the first one on operational margin. I think we have a slide on basis points per management fees per asset class, if you can show that. As everybody know, there is a strong pressure from management fees in the traditional asset manager, which get totally disrupted by the ETF business. When it comes to private assets, we continue to preserve the management fees, if I may say. And if we can get the slide, you will get a sense. But overall, our management fees remain a little bit stable, declined a little bit, but we have our private equity increasing in terms of size. And as you will see on the slide, the private equity management fees is improving. We're at [ EUR 177 million ]. So 1.77 percentage management fee last year. We are above 1.85% management fees. So when it comes to revenues, we think that revenue will increase because of the private equity is increasing at TKO in terms of size and businesses. When we look at credit, there is some -- it's not pressure, but our average management fee is declining because we are issuing more CLOs and CLOs, the management fees is lower than the direct lending of the secondary private debt. But overall, we managed to keep the same management fees. As Henri pointed, we have more performance fees. We noticed that in 2005, with a 5.4 basis points. So when it comes to revenue, to answer your question, revenues will continue to increase. We are fairly convinced of that. Henri mentioned it, we start managing the cost. The first phase was really the growth phase. We open offices. We hire people. Now we are becoming much more cost conscious. So that means that operating expense will probably be managed in a better way. And as a result, that will lead to an increase in the margin of our Asset Management business. Mathieu Chabran: Yes, I'm happy to take the one on the secondaries. So when we decided to launch the private credit secondaries, which is what we are focusing on right now, that was in the context of our opening in North America in New York. And when we discuss with our partners, with Cecile here who's leading our direct lending practice, we say, okay, I mean, what would be the differentiating angle for us to be another direct lender in the U.S., which is already highly populated market, and that was 7 years ago. That was even before what's going on right now. And we came to the conclusion that after this very solid and robust cycle of primary allocation to private credit over the past 10, 15 years, similar to what had happened to private equities and the development of secondaries private equity, there will be a natural opportunity to provide liquidity to some LPs allocated to the asset class, we would be willing to rebalance their portfolios. And we thought that we were best positioned to do that because we were not a secondary solution provider like many of our competitors can be and that's their positioning. But we were credit investors at heart. And so we could demonstrate the merits of doing the underwriting, using our balance sheet as Henri just told you, and that's how we launched this practice. And what was perceived in 2020, like a very cyclical opportunity that was right in the middle of COVID, people were throwing away their financial assets became very quickly a structural strategy. And today, as some of our competitors and some more established names started to develop there in a matter of 4 years, it has become an asset class on its own. As Antoine said, we just closed our second vintage. So we now have more track record than some of our competitors to demonstrate the merits of the strategy. We've been allocating a lot of our own balance sheet. We've been using the balance sheet. The example that Henri was saying earlier, I can elaborate on that. Our first fund was shy of $500 million. And then came an opportunity to buy a portfolio, actually a single asset, but a portfolio from a Taiwanese insurance company was getting out of a Goldman Sachs mezzanine fund, a very large $15 billion trend, which we're already an LP with. And we knew the credit and we knew that in order to do that, we could not do that with the fund. Or by the time we would go and pitch our LPs, "Oh, are you interested with this co-invest?" The opportunity would be gone. So that's where the balance sheet is the most differentiating asset. And that's why today, we're trying to once again convince you that it's not a burden. It's our most valuable assets, enabled us to underwrite that, get these assets at some very attractive financial terms. And then once you have secured this opportunity, bring on some LPs, including some Hong Kong-based insurance companies, European insurance companies and turn this balance sheet capital into third-party fee-paying asset management. And so today, as we close the second vintage at $1 billion in our capital, we are convinced, as I said earlier, that not only it's a natural evolution when you're in the private market to find some liquidity and add on top of that, the little noise that we've been having for the past few weeks, we would expect this to increase. And today, when you look at all the competitive landscape of our friends, all the managers, it's probably $20 billion that has been raised by way of funds or SMAs and the opportunity set in front that is $100 billion. And those are public private pension funds, insurance companies, family offices, who are rebalancing the portfolio. And we like the situation where the supply demand is totally unbalanced because that's where you become a little bit of a price setter. And as a consequence, I mean, today, we saw public numbers where we're disclosing our fundraising, the close to $2 billion that we have deployed there have been both at $0.84, $0.85 a dollar which on an average, 3, 3.5 years remaining portfolio, you're creating a 500 basis point pickup for this illiquidity. If you remember, in secondary private equity during COVID, when interest rates were at 0, the secondary market was trading at a premium to NAV, because that's when people were like, if I can deploy overnight some capital instead of having -- we had some negative interest rates, if you remember, having some cash at the bank was costing me some money. So obviously, in some more defensive downside protected credit investment that we can underwrite in a bottom up, we like the risk reward and that we can generate effectively some mid-teens return. That's the return that we've been generating so far, which ticks exactly the type of return on equity we're going to have for the balance sheet. Henri Marcoux: You had a question on AI and impact on our cybersecurity business. Difficult for me to comment on. I'm a bit puzzled to say the list on AI winners and AI losers. I've seen some companies that are dealing with food premises and so on being AI losers and suddenly having decreasing value. So trying to understand that. I will not provide further comments. All I can tell is that our cybersecurity business, we are currently operating the fourth vintage. We had strong demand from investors and the size of fund #4 has roughly doubled. And by the way, meanwhile, something is currently happening over the last years, notably since '22, which is clearly called sovereignty. And I think that there's a clear here, a new environment, new paradigm where people are realizing that it's key. And I can tell you that within our portfolio, we are the biggest venture cybersecurity business with this fund in Europe. We are a shareholder of a company called ChapsVision. It's a global data treatment. All its systems are being used by the European government. Some may call it the European Palantir, but clearly, this company is growing significantly. We are a shareholder of Memority, which is a company providing data access to local information system locally or at distance. And I can tell you what we are seeing is strong business growth in all this company because major -- many companies in Europe are trying to replace and to be less dependent from the U.S. on all these sectors. Theodora XU: [ Isabel ] from Autonomous. Unknown Analyst: [ Isabel ] from Autonomous Research. So I have 2, please. My first question within the context that I understood from the full year '25 results session that you expect FRE operating expenses to be broadly flat year-on-year. So first of all, correct me if I misunderstood there. But given this, we are seeing a number of your global peers move aggressively into Europe, both institutional fundraising and on the private wealth side, including lots of hiring of dedicated sales teams to push distribution. So how are you thinking about reconciling the need for operating cost control against maintaining or expanding your competitive positioning and market share? And then my second question is on PRE. Thank you for the color on when you think it's going to mature. On the EUR 160 million that you expect to mature before 2029, should we expect that to be more back-end loaded towards 2029? Or could we see a substantial share come through this year, please? I appreciate that might be hard to predict, but maybe if you could set out some parameters, do we need a certain fund to do very well or a couple of disposals should trigger that first recognition? Mathieu Chabran: So -- go ahead... Henri Marcoux: You know that performance-related earnings. I don't have an Excel spreadsheet with every month for the -- it will obviously depend on from value creation and exits. So obviously, internally, we are -- we have all of our underlying EUR 600 million position that we are hosting on PE private debt. We are working on some kind of forecast, but difficult effectively to provide you data, strong data sets, either by year or by quarter by quarter. Antoine Flamarion: But maybe what we can say is that the figure you saw here, the EUR 220 million, it was the same figure 2 years ago, if you recollect. And we had in between for the 2 years, EUR 40 million. So we'll receive EUR 40 million, EUR 22 million this year and a little bit less in 2023. So we still have the same EUR 220 million. So that means that our AUM base is growing. Our eligible AUM base to carry interest is growing. As you know, we try to be conservative on that because you cannot really predict PRE. What we can say is that we are building more and more private equity exposure, which will generate probably more carried interest than traditional real estate or credit. When Henri and Vincent highlighted 2.6x multiple on exit on private equity is generating more carried. So I think we are very optimistic, very difficult to predict because it depends on the market, on your asset where you're going to exit. But we are fairly confident that, one, it's growing, and it's highly diversified because secondary private debt is another example where we're going to get carried interest as well. So that means that we are diversifying our pool of carried interest, difficult to predict, but it's improving, and we are very confident on that. Henri Marcoux: And if I make co-investment carried interest are obviously quicker than fund carried interest. Antoine Flamarion: And maybe if you go back to your first question on -- regarding retail, one of the firm motto is create, don't compete. 30% of the money we manage is coming from retail investors directly or indirectly. So we've been pioneer in France with unit-linked product. We launched with our partner, Intesa 4 years ago, a very big program. We've done the same thing with our partner in Abu Dhabi, First Abu Dhabi Bank. We just signed something with the largest bank in Singapore. So my comment is that we still have 30% of AUM coming from retail investor. I mentioned large family offices that are investing directly with us. So do we need -- to go back to your question, do we need to build a giant sales force to tackle the retail? We are not convinced, and that's not what we're going to do. We see our peer group in the U.S. hiring hundreds of people to cover IFAs, banks and so on. We are fairly convinced that we can keep growing there without adding gigantic cost, number one. Number two, we'll try to be more digital. So we create our own platform, Opale, which is already fully operational. It's not gigantic. But in 2025, we raised EUR 260 million through this channel, and it's a greenfield. So we don't think we need to add a lot of resources. Our competition is doing the other way around, and they have larger brands than us, the U.S. guys, not the European guys. But we are fairly convinced that it will not destroy the profitability of the asset management. Mathieu Chabran: Maybe to preempt a follow-on question, which is all this retail focus by many, we've been fairly constant and public on that. We thought that there might have been a bit of misselling in trying to address this market with open-ended evergreen structure. And I'm not only reacting to the headlines over the past few days, but there's been -- I don't want to name anybody, but there's been some things on the real estate happening, how can you have some daily liquidity when you're owning 25 building a city of London, how do you want to offer the liquidity to your clients? On the private equity, the same thing and some of the Boost funds have grown exponentially because obviously, you had a very good brand, a good track record. And some people may have said, and it's not about the managers, sometimes the distribution saying, "Oh, you can buy this private equity or have a debt fund, it's like buying European equity usage". Well, it's not the same thing when it comes to liquidity. And our conviction is that you rarely die of your assets, but very often of your liabilities. And that's a risk that is now in the market that don't want to be overreacting to some news flow. But part of what we show you, we have out of the EUR 52.8 billion, we've got EUR 200 million in an open-ended structure with a targeted return of 7% to 8%, when the other people are showing a low teens because of the leverage, [indiscernible]. So we are looking at the technology. We want to make sure that we can address and tackle the opportunity, but there will never be -- that we will never compromise with the asset liability matching that we believe is what we owe to our customers. Antoine Flamarion: And there are some products whereby you don't really need a specific sales force. So we have -- we launched one unit-linked product with our French partner, Societe Generale. It's a unit-linked product dedicated to aerospace and defense. And for the first 2 months, it's been EUR 1 million per day more or less. And it's not our sales force. It's really the sales force of the bank. So we don't need to add extra people to market that. Theodora XU: Question from Nicolas Payen from Kepler. Nicolas Payen: Nicolas Payen from Kepler Cheuvreux. First one on net inflows. Just wondering, what kind of environment assumption have you baked in, in your in your planning when you set up your net inflow targets? And also, if you could give us a bit of color regarding the kind of asset class mix you're expecting regarding net inflows until 2029. That's the first question. Then the second one will be on balance sheet investment returns. Thank you very much for your comments regarding the acceleration on the G-curve (sic) [ J-curve ]. Just wondering what kind of return shall we expect on the -- in the balance sheet? If I remember well, last time, you mentioned something like 10% to 15% return on balance sheet investments. So wondering if that still holds. Antoine Flamarion: So maybe when -- I start with net inflows. As Mathieu, when he started, highlighted its fourth year in a row record year when it comes to fundraising. If you look at the net new money, the EUR 8 billion we get or the EUR 10.5 million gross, it's now really coming from all around the world and still 50% is going into private credit. But within private credit, it's highly diversified between secondary private debt, direct lending, CLO and so on. So my point here is that we try to diversify as much as possible. As business owner, you want to build a very diversified business. So now that the platform is fully operating, we're going to expect net inflows coming from all around the globe. For the first time, we had a reinsurance company invested EUR 500 million with us in 2025. 12 months ago, we never came across this investor. We had a German reinsurer company investing EUR 350 million with us in 2025, first time. Large Japanese insurance company invested EUR 200 million in 2025 in a direct lend fund. So to illustrate that, the net inflows will come from all around the globe. We will probably benefit from the geopolitic at some point. So I'll give you one of our favorite topic Canadian pension fund, which are by far the largest, probably similar to the super annuities in Australia. They used to put all their money with the large U.S. GPs. Now they want to find European and Asian GP. So going back to your question, the net inflows will really come broadly from all the geographies, number one. When you look at institutional investor and retail, we commented a little bit earlier, but we keep build the infrastructure, the technology to attract retail investor. It will also come on specific asset classes. So as everybody know, real estate has been very difficult for a lot of people around the globe. We've been very acquisitive in 2024 and 2025. So we start reinvesting in real estate because we see very good opportunities. So I suspect we're going to be the one benefiting from this shift back to real estate. We are not commenting and giving the exact breakdown of the 2029 in terms of asset classes breakdown. So that would be my question -- sorry, my answer on net inflows, maybe, Mathieu? Mathieu Chabran: There's one -- it's an anecdote, but I kind of like it. Q2 '25, so a year ago, we raised more in Latin America than we raised in France. And for me, it was an interesting anecdote because I've never been there. Antoine has never been there. We've got our colleagues covering Peru, Chile, Mexico from Madrid. And by working this market over the past 2 years, now we're starting harvesting at a time with some -- our domestic market. So that's where this complementary comes. And this harvesting concept we've been reinforcing all morning, it's really about that, that we made the investments because our CapEx, our OpEx, and now you're starting to have the investment payback. Antoine Flamarion: Maybe your second question on balance sheet return. Our goal is to make sure we continue to deliver mid-teen returns. We've been a little bit trapped into J-curve, as Henri described. So the way we are allocating the balance sheet moving forward is probably in a much more cautious manner. We have still the same target. And by the way, we build the firm being good investor at building the balance sheet. I like saying that, but we started Tikehau as an investment company in 2004. And it's only 3 years after that we launched the asset management. And the asset management has been able to grow from EUR 4 million EBIT to EUR 150 million of EBIT because we've been seeding the strategy and investing. And we are investor before being asset manager, and I think we're going to be very disciplined and probably much more disciplined than when we were before. I'm not saying that we are not disciplined. But now it's really the time of harvesting and the investment committee managing the balance sheet called the Capital Allocation Committee is becoming much more difficult, for instance, when internal teams are knocking at the door to say, yes, we have a new strategy. We want to -- we want -- sorry, to launch a new fund dedicating to cycling and we are targeting 7%, but the likelihood we take the piece of paper, and it's going directly in the shredder is 100%. So when it comes to balance sheet, investment and balance sheet return, we're going to stick to the same mid-teen return, which is going to be a mix of stuff because asset classes are different, but that's what we target. There's -- sorry go ahead. Mathieu Chabran: Last point is going back to your first question. There's no dependence on one market -- sorry, on one geography or one asset owner type for a fundraising. Now it's really broaden. And the same thing you may have picked up this morning in the detailed report we issued. Last year, our real estate fundraising on our open-end trends and our CMS fundraising was actually very modest to say the least, which historically have been very strong engine of growth. So obviously, those are open-ended, but you should expect a significant pick up there, too. Antoine Flamarion: He wanted to say engine. Theodora XU: Questions from Julian, ODDO BHF. Julian Dobrovolschi: I have 2. Perhaps the first one is on the core FRE guidance that you gave. Just wondering if you could speak about the drivers for reaching the upper end of the range, so that will be the 50% kind of think about the building blocks. So what would be the step up from 45% to 50%? And the other one is, if you could also say something about the potential gaps that you've identified in the operation model, so perhaps strategies, niches and that you'd like to develop or I think using Antoine's words, innovate, as you enter in this new growth cycle. Henri Marcoux: On the core FRE margin, I provided earlier the 3 main drivers. Obviously, we have the mixed effect driving the core FRE margin. We have, in terms of revenue, the pace of co-investment as well as an important feature. The more we are able to structure co-investment with additional revenue will be as well impacting that. And then you have on the other way around, obviously, all the cost initiatives. And here, we will be most -- we'll be more cautious, notably on extending any geography or extending any services. So difficult to assess in terms of timing, but we are clearly seeing something like 50% could be achieved depending on the pace on deployment on these 3 drivers. Antoine Flamarion: And probably, it will depend, as you know, on the business mix. So if we have more private equity coming, obviously, the operating margin is improving and the plan is really to keep growing at a faster pace our private equity. If you think about it, at the IPO time, we had no private equity, a part of balance sheet investment. Now we are getting close to $10 million of private equity. So in a difficult market because nobody has been waiting for us, private equity is suffering a lot, but the margin will be depending also on the pace of our private equity expansion. Henri Marcoux: But if I may add on private equity, I think you mentioned it, but I think we are the only one to have such differentiating factors, notably this partnering with industrial. We are relying on these 2 vein transition -- energy transition, decarbonization on one hand, aerospace and defense on the other hand. And on both strategies, we've been partnering with the biggest knowledgeable people in the industry, and that provides a key differentiating factor. Antoine Flamarion: Going back to your question on innovation, we really built the firm innovating, and it's been asset class. It just was Henri described, people doing private equity have been generalist. We decided to be specialized just because we said that we're not going to be another LBO shop. So we decided to be vertical. We are studying various vertical right now. So you're going to see us innovating. We want to make sure while we innovate, we are doing stuff we understand. So we don't expect to be active in cryptocurrency or we're in a stick to what we are good at. Its sourcing good opportunities that we understand. We have a lot of idea and we keep having a lot of idea. What changed probably is that we want to make sure that when we launch a new strategy, it needs to be really scalable. In the past, we thought that we had great ideas. So for instance, my colleague will kill me, but we launched something called Tikehau Green Assets, which was an amazing idea, an amazing team, and we have EUR 130 million into the fund. And I must say that EUR 130 million is totally subscale. So we want to make sure that while we innovate, it needs to be really scalable, above EUR 1 billion for sure and potentially make sure it's multibillion. Mathieu Chabran: You should see, I guess, some extension or, let's say, adjacencies. So when launching, let's say, CLO, CLO is a very scalable, but commoditized product. When we launched in the U.S. 4 years ago, we had been operating in London since 2015. The CLO pool in the U.S. because of the nature of -- and the structure of the market is running twice as fast, and we're scaling. We're now pricing our CLO #8 in 4 years when we had 15 in London. When we launched direct lending in Asia, that's because we think that we're getting to the point with the right partnership, the right shareholders the right investors to effectively have these adjacencies of a first fund, a first move that then we'll be able to scale. As Antoine said, our very first direct lending fund in 2007, so it's almost 20 years now, it was EUR 125 million. The last vintage, #6 that we just closed a couple of weeks ago is passed EUR 5 billion. So you get effectively -- all that is feeding of the operating leverage and the operating margin that we were talking about. You should see us expanding in real estate in North America. We've got a 20 billion real estate platform in Europe. We're managing public REIT, private REITs, commingled funds, open-ended funds. There is an opportunity right now that the natural extension into real estate bid debt or equity is made, I wouldn't say, at marginal cost, but it made at a phase in our development that the drop-through is also feeding your bottom line. So that's where you would see some -- you will see some natural expansion of the platform. Theodora XU: Maybe I'm conscious of time. One last question from this gentleman from [indiscernible]. Unknown Analyst: I have 2, if I may. First one is share price, very strong execution, very strong everything, but the share price does not reflect it. So how far is this management team willing to execute its tools in order that the market recognizes its intrinsic value because I think the market is not nearly recognizing the net asset value of its balance sheet. And the second is strategies for risk mitigation for the first of the French government of taxing and everything. So what ideas when we see all competitors, sometimes they have other jurisdictions to make their tax not go higher and higher. So thank you very much, and thank you for the strong execution. Antoine Flamarion: Thank you for your question. Share price, needless to say, not only because as we are the largest shareholder because we still control the employees still control 54% of the firm, we get very frustrated as some of our shareholders. So I think to cope with that, a few things. One, we need to make sure we keep executing and it's painful because you execute and your share price is not moving. So if you look at the slide I like on the EBIT, you started when you lease the asset management was EUR 4 million EBIT. Now it's EUR 150 million. Let's forget everything, okay? I'm launching a new company. I give you a business plan, and I'm telling you that 9 years from now, I'm going to reach EUR 150 million of EBIT, everybody will tell, okay, this guy smoke something because you cannot move from 0 to EUR 150 million of EBIT. So we're going to keep delivering on the profitability of the asset management. And I think it's really accelerating, so that's number one. Number two, the balance sheet, and that's why on purpose, I put this slide, we have really 2 businesses, which are very different. We use the balance sheet to launch the asset management to see to accelerate. But we are fairly convinced that the sum of the 2 balance sheets, the sum of the parts, if I may say, is probably twice at least where we trade now at EUR 16. So we're going to try to keep delivering. But also at some point, if we are not able to move the share price, and it's not only, I think, hopefully, us, the sector, it's also mid-market stock market in Europe is a little bit broken. So at some point, it will come back, and we start seeing a lot of U.S. investors coming to buy European shares, not only doing takeover as Nuveen on Schroder, but we start more U.S. guys coming. So hopefully, it will change the market because we need the market to change. But I must say that if we are not able to change the stock price just doing a regular job and probably increasing the payout for the shareholder, we may took more, I don't know, structural changes. And we already simplified the structure when we listed, as everybody remember, we had a [indiscernible] structure. We simplified the group. So now we are clearly saying that we have 2 businesses. And I'm not telling you that we are going to split the company in 2 companies. But we want to make sure if you are listed that the stock price and the stock performance is working because when you travel the world, everybody is looking at your stock price, you pitch a Korean investor for your direct lending. The first thing he's doing is Google, stock price, flat a little bit down. What these guys are telling me to deliver a lot of performances at their fund level. But -- so we are all on top of that. We are spending a fair amount of time. Now as the asset management is more profitable, I think it's going to be much more easy for us to change that. Mathieu Chabran: There is plenty of structural optionality. I guess that's part of the message we wanted to convey today. I mean we've always been a long-term greedy in making sure we can demonstrate and execute because when you start from 0, 5, you have to show over a cycle, a few cycles that you're delivering, which I'm convinced we are doing. And the rest should follow. If it does not follow, there are some structural optionality. Henri Marcoux: Now your question on France is a key question. We're going to face election... Unknown Analyst: [Foreign Language] Henri Marcoux: In a few months, we are -- I mean, we are dealing with it. And -- but difficult to comment, but we are dealing with it. Antoine Flamarion: And that's why, I think I mentioned it 2 times already, but we make sure we build a very diversified business in terms of asset classes, geographies, both on the asset and the liability side. So we want to make sure we raise money all around the globe, and we want to make sure we invest more or less everywhere in Europe, but also Mathieu mentioned North America, we start doing more and more real estate because real estate is a mess. So we took advantage of that being contrarian. And at the end of the day, we're going to build a global diversified business. And it's changing all the time. The perspective, we discussed Spain and Italy, 10 years ago, when we opened -- so this year -- sorry, in 2025, it was the 10-year anniversary of our Italian opening in Milan, okay? People at the Board of Tikehau told us 10 years ago, "you're opening in Milan. Are you crazy?" And now everybody is going to Milan. So that's why, once again, create, don't compete. We have very strong conviction. France remain France. It's one of the largest countries in Europe when you look at economic footprint, innovation. And so we're going to continue to do stuff in France, but maybe the way we allocate is going to be more diversified. Theodora XU: Well, thank you so much, everybody. Thank you to the speakers, to the audience today for your engagement. We can continue our discussions in a more informal manner with a light cocktail. A big thank you to the IR team that works in the shadow. And thank you very much, and we look forward to build this next chapter together. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to Vivo's Fourth Quarter and Full Year 2025 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at ri.telefonica.com.br. The presentation will also be available for download. This call is also available in Portuguese. [Operator Instructions] [Foreign Language] I would like to inform you that all attendees will only be listening to the conference during the presentation, and then we will start the Q&A session when further instructions will be provided. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, operational and financial projections, and goals are the beliefs and assumptions of Vivo's Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events, and therefore, depends on circumstances that may or may not occur. Investors should be aware of events related to the macroeconomic scenario, the industry and other factors that could cause actual results to differ materially from those expressed in the respective forward-looking statements. Present at this conference, we have Mr. Christian Gebara, CEO of the company; Mr. David Melcon, CFO and Investor Relations Officer; and Mr. Jo o Pedro Soares Carneiro, IR Director. Now I'll turn the conference over to Mr. Jo o Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference. João Carneiro: Good morning, everyone, and welcome to Vivo's Fourth Quarter and Full Year 2025 Earnings Call. Today, our CEO, Christian Gebara, will start by commenting on Vivo's performance and connectivity and digital services as well as present our main ESG accomplishments for the year. Then David Melcon, our CFO, will walk us through Vivo's controlled cost and CapEx evolution, free cash flow generation, profitability and shareholder distribution during 2025. With that, let me turn the call over to Christian. Christian Gebara: Thank you, Jo o. Good morning, everyone, and thank you for joining us today. I'm pleased to share that Vivo's 2025 performance was remarkable. We grew above inflation in all key lines, driven by solid commercial momentum and our continuous focus on offering the best customer experience in Brazil. Starting with mobile, the postpaid segment was a major highlight. Accesses expanded 6.5% year-over-year, reaching 70.8 million customers, now representing 69% of our mobile base. In fiber, we closed 2025 with 7.8 million homes connected and a footprint that extended to 31 million homes. This advance coupled with our commitment to quality and customer satisfaction reinforced our leadership in the fiber market and allowed us to accelerate fiber mobile convergence. Turning to our financial performance. Total revenues in the fourth quarter rose 7.1%, supported by balanced growth in both mobile and fixed services. Mobile service revenue progressed 7%, while fixed services improved 5.4%, reflecting the sustained contribution of fiber and corporate solutions. EBITDA grew 8.1% versus fourth quarter 2024. Excluding the effects of the concession migration from both years, EBITDA advanced 17.7% year-over-year, reflecting the success of our day-to-day execution. Operating cash flow also showed solid expansion, up 13.4% compared to 2024, representing 26.1% of our revenues. Net income grew at a double-digit rate in 2025, totaling BRL 7.2 billion for the year, while free cash flow increased by 11.4% to BRL 9.2 billion. These strong results enabled us to fulfill our promise of paying shareholders at least 100% of our annual net income. In 2025, we paid out BRL 6.4 billion, reaching a payout ratio of 103.4%. Next, on Slide 4, we illustrate how the transformation of our top line continues to advance, driven by diversified revenue mix and the rising contribution of our new businesses. Total revenues in the quarter reached BRL 15.6 billion, supported mostly by postpaid and FTTH that grew 9% and 9.8%, respectively. Notably, this quarter delivered the strongest growth in our handsets and electronics line in 3 years, up nearly 14% year-over-year, fueled by a broader portfolio, seasonal offers and a robust demand for electronics. Our new businesses also presented another standout year. Revenues increased 27% over the last 12 months and now account for 12.1% of total revenues, an expansion of 1.9 percentage points compared to the previous year. Both B2C and B2B solutions contributed meaningfully to this evolution, reflecting the success of our strategy to diversify our portfolio and scale digital services. Moving to the next slide. We continue to see the solid momentum of our mobile businesses boosted by Vivo's differentiated network quality and customer experience. By the end of 2025, our mobile base reached 103 million accesses, a year-over-year increase of 0.7%. Postpaid, including M2M and Dongles, remain the main growth engine, expanding 6.9% and surpassing 50 million customers for the first time. Adoption of 5G is accelerating rapidly. Our 5G customer base rose to 23.1 million users across 716 cities in Brazil. This pushed our 5G take-up ratio to 27.8%, an improvement of 8.6 percentage points in 1 year. This reflects not only the strength of our network, but also the value customers perceive in transitioning to newer technologies. Postpaid churn continued stable at 1%, while ARPU grew 5.8% year-over-year. Together, these indicators highlight the effectiveness of our retention initiatives as customers adopt higher value plans and demand more data. Overall, these results reinforced the strength of our mobile platform, a combination of superior network quality, disciplined commercial execution and a customer-centric approach that drives continued sustainable growth. On Slide 6, we dive deeper into the strength of our convergent proposition and how it's setting a new benchmark for quality and retention. As our fiber footprint expands, so does our capacity to attract new customers. Over the last year, we passed an additional 1.9 million homes, bringing the total to 31 million, while our take-up ratio improved to 25.2%. FTTH accesses maintained double-digit growth, increasing 12% year-over-year and reaching 7.8 million connections. This performance is once again propelled by Vivo Total, our flagship offer that combines the best mobile and fiber, which expanded 41% compared to last year in terms of subscribers. Today, 62.7% of our entire FTTH base is already converted to postpaid, out of which 43% through Vivo Total, reinforcing customers' clear preference for integrated solutions while also demonstrating the significant upside that we still have to further scale our convergent offer and improve customer loyalty across both postpaid and fiber services. In fact, fiber churn remains on a downward trend, reaching 1.4%, the lowest level in our history. This sustained improvement reflects both the quality of our network and the stickiness of Vivo Total's value proposition. Heading to Slide 7, we show how the evolution of our B2C segment is supported by the growing relevance of services that go beyond connectivity and positively impact our customers' lifetime value. In 2025, total B2C revenues reached BRL 44.8 billion, up 5% year-over-year. This performance reflects not only the solid resilience of our connectivity services, but also the strong momentum of our new businesses that grew 20.7% and now accounts for 3.3% of total revenues. We also saw consistent improvement in revenue per RGU that hit BRL 65.8. This increase is supported by our ongoing efforts to expand customer engagement, drive cross-selling and extract higher value from our existing base. Looking specifically at new businesses, we continue to see solid performance across all lines. Video and music OTTs remains the largest contributor, advancing 18.1% year-over-year. consumer electronics delivered another standout result, growing 36%, while the health and wellness category posted remarkable momentum with revenues rising close to 70% in the year. We are also strengthening the foundation for future expansion. Through Vivo Ventures, we approved an additional BRL 150 million for new investments with a particular focus on AI-driven initiatives, bringing the total investment capacity to BRL 470 million. And through our partnership with Perplexity, we are offering customers complementary 1-year subscription to Perplexity Pro, reinforcing our commitment to delivering differentiated digital experiences. All these developments underscore how Vivo was evolving into a broader digital platform where connectivity remains at the core but is increasingly complemented by diversified ecosystem of services designed to enhance our value proposition and improve monetization. Turning to next slide. We'll provide more details on Vivo's B2B strategy and how the ongoing shift in our revenue mix is quickly gaining traction. In 2025, B2B revenues amounted to BRL 13.5 billion, up 13.7% when compared to 2024. Digital B2B was once again the main growth engine, advancing 29.5% and now representing 8.8% of Vivo's revenues. Connectivity also maintained a healthy performance, rising 5.4% in the same period. Within digital B2B, all products continue to expand at a strong pace. Cloud revenues soared 37.8% followed by IoT and messaging at 25.9%. Digital Solutions at 22% and cybersecurity at 8.4% year-over-year. B2B continues to gain relevance within our revenue mix, increasing its shares by 140 basis points year-over-year. This strong performance in 2025 marked the segment's fastest annual expansion in recent years and reflects the accelerating demand from companies undergoing digital transformation. Altogether, these results underpin Vivo's strategic goal as the trusted partner for companies seeking to modernize their operation, scale cloud and IoT adoption and strengthen their digital capabilities. On Slide 9, we reinforce our sustainability remains a cornerstone of Vivo strategy, supported by solid advances across environmental, social and governance dimensions, which is validated by our strong performance in global rankings. According to Merco's corporate reputation ranking, Vivo placed in the top 10 companies across all sectors and achieved the best position among telcos. We also achieved the fifth best performance in the sector worldwide in S&P Global's Corporate Sustainability Assessment and earned a place on the CDP A-list for the sixth consecutive year. Additionally, we were recognized by Corporate Knights as the most sustainable company in Latin America on the list of the world's 100 most sustainable companies. On the environmental front, we participated in COP 30 as a supporter for the first Planetary Science division, an initiative that brought together leading scientists to advance discussions on climate resilience and the future of life on the planet. Regarding Funda o Telef nica Vivo, which reached over 2 million beneficiaries with BRL 47 million invested in initiatives focused on education, employability and digital inclusion. In governance, we expanded the scope of our Information Security Management certification under ISO 27001, strengthening the protection of data and systems that support our operation. I invite you to check out our 2025 ESG Highlights, which compile the year's key indicators and achievements and outline the strategic priority for our ESG agenda. Now David will give you more color on our financial performance for the quarter ending. Thank you. David Sanchez-Friera: Thank you, Christian, and good morning, everyone. On Slide 10, we provide an update on the evolution of our cost structure and highlight the strong EBITDA performance in the quarter. On the left side, you will see that total costs reached BRL 8.9 billion in the quarter. When excluding the effect from the concession migration, OpEx was flat with a year-over-year evolution of 0.4%. This reflects a balanced combination of commercial momentum and disciplined operational management. Cost of services and goods sold rose 9.7%, mainly driven by the higher contribution of B2B digital solutions, continued demand for music and video over the top as well as the share of handsets and electronics. Operating costs grew 4.4% year-over-year, led by a 6.4% evolution in personnel expenses, reflecting annual salary increase and a higher headcount in strategic areas such as digital tech. Meanwhile, our largest cost line, commercial and infrastructure declined by 2.6% due mainly to some onetime infrastructure expenses registered in the same quarter last year. The results in both years were positively impacted by the effects related to the migration of our fixed voice concession to the authorization model. In the fourth quarter last year, we recognized a reversal of provision for contingencies totaling BRL 386 million. In addition to asset sales amounting to BRL 206 million. In the fourth quarter this year, we recorded BRL 96 million in copper sales and BRL 6 million in real estate sales, adding up to BRL 102 million. Excluding all these effects in both periods, our EBITDA grew 17.7% year-over-year with a margin expansion of 380 basis points, reaching 42.3%, while reported EBITDA was up 8.1% with a margin of 42.9%. Moving to Slide 11, we present the evolution of our operating cash flow for the year. CapEx amounted to BRL 9.3 billion, a modest 1.1% raise year-over-year, while our CapEx to revenues ratio reduced to 15.6%. This reflects lower capital intensity and the continued prioritization of investment with the highest return. As a result, operating cash flow before leases reached BRL 15.6 billion, an increase of 13.4% compared to last year. After leases, operating cash flow rose 17.3%, totaling BRL 10.1 billion with margins expanding to 17%. This strong performance demonstrates our enhanced ability to convert EBITDA into cash, supported by disciplined CapEx allocation and softer lease cost evolution. Going forward, we remain focused on further optimizing our tower-related expenses and improving contract efficiency. The trajectory of our operating cash flow margins underscore the strength of our return profile. On Slide 12, we highlight how our disciplined financial management continues to translate into profitability and strong cash generation. Net income for 2025 reached BRL 6.2 billion, an 11.2% increase versus the previous year. This growth was well balanced throughout the year, reinforcing the consistency of our execution and resilience of our business model. Our net cash flow position also improved, ending the year at BRL 2.3 billion compared with BRL 1.4 billion in 2024. When considering IFRS 16, net debt stands at BRL 13.1 billion, equivalent to just 0.5x EBITDA, underlying the continued strength of our balance sheet. Free cash flow rose 11.4% to BRL 9.2 billion in 2025. This performance reflects both our disciplined CapEx allocation and the healthy fundamentals of our operations. As a result, our free cash flow yield reached 8.6% and free cash flow over revenues came in at a solid 15.4%. These results reaffirm our ability to improve profitability and cash generation while maintaining a very comfortable leverage profile. Lastly, on Slide 13, we highlight our continued commitment to shareholders' remuneration. In 2025, we distributed BRL 6.4 billion to shareholders, an increase of 9.1% compared to the previous year, driven by higher share buybacks and capital reduction. Notably, we once again delivered on our guidance for the period this time with a payout of 103.4% of our net income. Looking ahead to 2026, we have already announced the distribution of BRL 7 billion, including the BRL 4 billion from capital reduction to be paid in July, and the interest on capital of BRL 3 billion declared in 2025 to be paid in April this year. We also declared an additional interest on capital in February this year that will be paid before April 2027. Moreover, our Board of Directors approved a new share buyback program of up to BRL 1 billion to be executed until February 2027. To conclude, we reaffirm our commitment to distributing at least 100% of net income in 2026, maintaining a clear and disciplined capital allocation strategy focused on value creation for shareholders. Thank you. And now, we can move to the Q&A. Operator: [Operator Instructions] Our first question comes from Leonardo Olmos from UBS. Leonardo Olmos: Congrats on the results. My question will be all centered on distributions, a little bit long, but all center on distributions. So if you could first discuss the drivers for the mix in 2026 between buybacks, interest on capital and capital reduction, which -- what makes you pick more of one than another? For example, we noticed a small reduction, potential reduction buybacks, but a huge increase in capital reduction. Could that mean you are thinking about continuing on the path of increasing potentially leverage, changing the capital structure? And still on that topic, and the last part of my question, if you could discuss net income drivers for 2026. As we noted an increase in copper sales, maybe there's upside for consensus estimates. And since you guide dividends on the back of net income, we want to know that. David Sanchez-Friera: Leonardo, thank you for the question. So the first one, we have a commitment for the last 2 years to distribute at least 100% of our net income. So this is something that we have done in the last 2 years, '24 and '25. And we always try to combine between the -- what you mentioned, capital reductions, interest on capital, also dividends and share buyback. If you look at our capital structure, we have more than BRL 60 billion capital. So we obtained 3 years ago authorization from ANATEL to distribute up to BRL 5 billion. This is something we have already done. We have already distributed BRL 3.5 billion. Now we don't need any more approval -- preapproval from ANATEL. So that's why now we have also approved that will be paid in this year for another BRL 4 billion. And the plan for 2026 is to combine and to continue. Today, we have also approved a share buyback program of BRL 1 billion that will give us flexibility to continue taking advantage of interest on capital. This is a situation unique in Brazil, together with also a capital reduction to maximize the value of shareholders. So for next year, we're expecting, of course, to deliver more than 100% of our net income. So regarding capital structure, it's something that we are always exploring potential opportunities. The leverage that we have today in Brazil is very linked to the high interest ratio that we have here in Brazil. And we expect that in the next future, the Selic will reduce. Today, it's at 15%. The market is expecting this to reduce in the next few years. So we could explore opportunities also to generate value and to maximize this opportunity. So I think this is -- this will have a very strong cash flow generation and net income for next year, which was also your second question. We are seeing a very stable. We have been growing almost every quarter, double digit. For the next year, we'll continue growing in EBITDA. We will also benefit from the reduction of the depreciation and amortization. Starting from the second quarter, we have included also on the financial statement. After July 2026, we will fully depreciate some of the legacy assets that we have in our balance sheet. And this will represent an improvement of BRL 300 million of profit before taxes, just coming out of this, plus potential benefit from interest reduction. So we are positive about the evolution of net income. Next year, we will bring additional shareholder remuneration. Operator: Our next question comes from Marcelo Santos from JPMorgan. Marcelo Santos: I want to ask questions about two key topics. The first one is CapEx. So maybe, David, could you please discuss what are the puts and takes for the CapEx outlook in 2026? And the second question will be about competitive environment, how you're seeing it, especially on mobile? And what is the outlook for passing price increases this year? Christian Gebara: Marcelo, I will take the questions. Christian here. So CapEx, we're not giving guidance. But as we said, now been stating in every call, we are working on CapEx optimization, when you consider CapEx over revenues. So as you could see, we came from 16.4% to 15.6% this year. That's a combination of all the work we are doing to be more effective in the deployment of our infrastructure. Added to that, our ability to sell more services with no CapEx. So we already reached more than 12% of revenues coming off services that now require CapEx. So that's why we have this strong evolution in operating cash flow. As we stated here now, we are increasing 13.4% year-over-year. And even when you consider operating cash flow after leases, this growth is even higher, 17.3%. So we will continue to deploy 5G. As I said, we are following our customers and the penetration of 5G is going up. So we are deploying 5G where our customers are. We've been deploying fiber and penetrating more our network. So we also saw the take-up ratio going up in the fiber business. So that's a good sign. Of course, it involves CapEx, but we are also saving in other lines. So the idea is this one, to continue to improve infrastructure keeping our leadership, but being better in the ratio CapEx over revenues. Going to competition. Can I go to the second one, Marcelo? Marcelo Santos: That's very clear. Thank you, Christian. Christian Gebara: So competition. Here, we have different strategy for the different segments. We've been very strong in prepaid. Now it's still slightly negative, but when you compare what we had in last quarter, revenues this quarter is higher than the previous one. And also when you compare the year-over-year evolution, we also have a better performance this quarter than we had in previous ones. We are increasing price according to the type of segments. So we are planning March for postpaid and hybrid. For front book, we are expecting customer base price increase in April for both hybrid and postpaid. FTTH, we had a price increase in January. We have planned a new one for June. And Vivo Total, we are planning 100% customer base price increase in April. So following the inflation ratio, giving more data and more services and also playing convergence. So that's our strategy, and that's why we are positive about the evolution of our revenues going forward. Marcelo Santos: Okay. So the back book is on April, right, for postpaid and hybrid? Is that correct? Just to be sure. Christian Gebara: Yes. Part of it is in April, the majority, and the rest is in August. Operator: Our next question comes from Rogério Araújo from Bank of America. Rogério Araújo: Congrats on the results. I have a couple here. The first one, there was a reduction in the lease expenses. If you could please provide some details on why and also expected trend. This is the first one. Christian Gebara: Please ask the two questions, Rogério. And then we'll answer both of them. What's the second one, please? Rogério, please ask the second question. I don't know if he is still in the line, so I don't know if we'll answer the question or we wait for him to come back. Operator: He shows on the line. Rogério, can you please repeat the second question? Christian Gebara: Okay. So we're going to answer only the first question, okay? David Sanchez-Friera: Okay. So Rogério, thank you for the question. The evolution of the lease depreciation and interest accrual remained consistent with previous periods. Even in both quarter and even the full year, EBITDA after leases has grown even more than EBITDA before leases. And regarding the payments, some volatility persists due to the ongoing renegotiation with the towers company that we do every quarter. And that's why you mentioned the principal and interest payments that we have this quarter amounted to BRL 1.2 billion, which is lower than the previous year, but also lower than the previous quarter that shows we are very optimistic about the potential trend of this line. To give you more light here, the current tenancy ratio that we have in Brazil is 1.4 that we discussed last quarter, which is significantly lower than other comparable countries. So we see a big opportunity to reduce the unitary costs of every tower to share more the towers and to fund the new deployment that we need to do here in Brazil to accelerate our revenues in 5G and also our coverage. So optimistic about the trend that we have started seeing this quarter. But even though we will need to continue renegotiating those contracts and this will be driving the potential acceleration of the reductions. Christian Gebara: I would add, the operating cash flow after leases, no, margin. We went from 14.6% in 2023 to 15.5% in 2024 to 17% in 2025 -- sorry '24, 15.5% in '24, 17% in '25, aligned with what David just said. Also, we are going to capture the growth of our infrastructure. We're going to renegotiate our contracts, and we're going to still generate operating cash flow after leases that has a strong margin, as you could see the evolution over the last 3 or 4 years. I don't know if Rogério to have the second question? Rogério Araújo: Yes, sorry. My line actually was dropped here on, actually. You couldn't hear me on my second one. It's about the prepaid ARPU. It has reverted a negative trend versus the first 9 months of the year, also in line with our main peer in Brazil. So if you could please clarify what do you think were the main drivers for that and what you expect in the upcoming quarters? Christian Gebara: Listen, Rogério. Prepaid has been performing better quarter-over-quarter. Of course, that's also our ability to motivate customers to top up and also to consume the money that they have in the balance. So it's part of our strategic behavior of the company, also being very able to motivate customers to higher average tickets and also the ability for us to monetize the tickets they have top up. On the other hand, we continue very strong in migrating prepaid to hybrid. So it's even quarter-over-quarter that there is a positive evolution. And so we are extremely pleased with the mobile service revenue evolution, 7% over the last quarter, growing 9% in postpaid. That's a combination of bringing new customers, but also migrating pre to hybrid or postpaid. And also the prepaid absolute number of revenues that went from the fourth quarter -- from the third quarter of '25 of 1.364 to 1.394. So -- and churn in the postpaid also in the lowest level. So that's the result of a very well segmented and thoughtful strategy for different segments that we have here in the company. Rogério Araújo: Okay. I may have a follow-up. If you could expect the prepaid ARPU to keep increasing year-over-year in upcoming quarters, if you have any color on that? Christian Gebara: Rogério, what we expect is revenue to continue to grow the way it's growing. We don't expect -- we're not giving guidance per ARPU per segment. Operator: Our next question comes from Phani Kanumuri from HSBC. Phani Kumar Kanumuri: The first question is on the total net adds and the market share in mobile. If we exclude Dongles and M2M, your number of subscribers has been coming down. Any reason for that? And your market share is down like 1 percentage point from last year. So what is -- I mean, what is driving this trend? The second thing is that if you look at your B2B strategy, it has been growing really well. What are the further steps to maintain this growth in Brazil? And how is the penetration coming in the SME segment? Christian Gebara: I don't see mobile market share changing. That's very stable. There are some corrections, maybe in prepaid. Some companies disconnect like later than we do. So we are very confident about our performance in market share, and actually in our performance in revenue growth. And also, we had -- we measure our good performance in ability to increase net adds and fourth quarter 2025 was a record number, 930,000. That's a combination of bringing in more customers, but also reducing postpaid churn from 1.3% in the fourth quarter of 2021 to the 1% that we'll be keeping at this level for the last 4 years. So that's important for us. And mobile ARPU is also going up if you compare it to what we had in the fourth quarter and what we had in the fourth quarter 2025, sorry '24 and '25, there was an improvement of 5.8%. So we are not following like a small variation in market share. Important thing is to keep attracting customers, retaining customers and growing revenues. Regarding B2B, that's a very strong quarter, as I said. We had in the year B2B as, I don't know if you're more interested in the digital service, at BRL 5.3 billion revenues, it's a 29.5% year-over-year increase. It's already know what's digital service, 8.8% of the total revenues from Vivo and is 39.1% of the B2B revenues of Vivo. So it's getting very fundamental for our strategy going forward. Penetration is growing in all segments. SMEs is where we have more challenges to penetrate more the digital services. But at the same time, we are growing a lot connectivity in the segment. We have a variety of products being offered to this segment coming from location like renting -- rental of notebooks up to cyber solutions. So that's part of our strategy. We're growing in all segments with more acceleration in the top. But at the same time, the volume that we have in the SMEs, we are very, very, very happy with the results that we are having also in these segments with a combination of connectivity plus digital services, I described it before. Phani Kumar Kanumuri: Okay, yes. So maybe on the connectivity part, right? So you've grown like 5% year-on-year. So what is driving the growth in the connectivity part? The digital solutions was more understandable, but what is driving this growth in the connectivity part? Christian Gebara: SMEs, but also in advanced data solutions for top to corporate customers, now, to going up in the pyramid. We also have other connectivity solutions up to very dedicated links. So we've been growing in all lines. Now I think we gave some color. Fiber, of course, it's B2C, B2B. But when we said that we are growing 9.8%, that also includes our great performance in SMEs. And when we grow 10.2% of Data, ICT, digital services, it's also including corporate data solutions. So it's in both. Operator: Our next question comes from Maria Clara Infantozzi from Ita BBA. Maria Infantozzi: I have two questions here. The first one, can you please provide us an update on how you perceive the competitive environment in the fiber industry and also refresh us how you see any potential M&A in these industries? And the second one, could you please share your thoughts on how you see profitability expansion going forward? Are there any specific areas of the business in which you see some potential for further efficiencies? And how should we balance future efficiencies with the expansion of B2B? Christian Gebara: Sorry, the second question is related to cost in B2B or cost in general? Maria Infantozzi: Costs in general and how you balance this with the B2B expansion as it has a lower margin? Christian Gebara: Okay. B2B doesn't have a lower margin, but we can address this. Let's go to the first one. So Maria Clara, the market is still very fragmented. If you see the performance of the fiber business in Vivo, we went from 18.8% market share at the end of 2024 to 19.3% market share in the end of 2025. So 0.5% increase in market share. Our net adds for the whole year was 834,000 customers. If you look other competitors, some of the leading ones had very strong negative net adds for the year. So it's still a very competitive environment with too much fragmentation in our opinion. If you compare, for instance, we are the leading company in fiber in Brazil. We have 19.3%. When I see the leading company in Spain has 34% of market share. When I see the leading player in France has like 39%. If I go to Japan, the leading company has 57%. So I think there is room for consolidation. I don't see any rational reason to have so many players competing in same geographies. So we have 31 million home passed. We aim to have more. We see addressable 60 million, but we don't see ourselves reaching this number, but we could reach something more closer to 45 million. We could do that building ourselves or we do have consolidating. Consolidating is still a question mark. We have to find the right target with the right pricing, we have the right network not overlapping too much with ours with the good quality. But I see that clearly, we require more consolidation in this market because it's not -- doesn't seem to be sustainable for most of the players who presented negative net adds over the last year. Regarding costs, I think we've been showing a good, very good number in cost of operations. The evolution was 4.4%. That includes all the personnel growth that we had, like because we want to be more digital in some areas. We want to expand our penetration in some commercial areas. So even increasing 6.4% in personnel, we were able to just increase 4.4% in the cost of operations because we are bringing more efficiency in different areas, especially in our customer care that the app and other initiatives that we are deploying now. Even using AI is helping us to reduce other commercial and customer care costs. So the combination of both that presented this 4.4% that is below, very well below what we presented in revenue growth. In the cost of service and cost of goods sold, both of them are very related to our sale of services. Most of this, like I can give examples of video OTTs that I said before, or goods sold that is related to everything that we've been performing so well that also presented our strong growth in this quarter in handsets and consumer electronics in general. Going forward, we're going to still focus in digitalization. And now with AI, we are very positive of bringing great results in cost efficiency. Sorry, in B2B, you stated. Now B2B, depending on the product, we have very, very positive margins. As I showed, we are growing 5.4% in connectivity. Connectivity B2B represented in the year, BRL 8.2 billion. That has a very good and positive margin. And digital B2B, it depends. We have also gone through markets in some of the services. When we say -- when we sell cloud, yes, the margin is not that high. But when I have managed services over cloud, the margin is much, much better. And the same I can tell about cyber and even IoT. So also very confident on our ability to grow. And all these services, some of them even having lower margin, they are very positive operating cash flow since they don't require CapEx. So again, we should look at the bottom of the results where operating cash flow and free cash flow, operating cash flow after leases or free cash flow, we presented a very strong positive trend. Operator: Our next question comes from Daniel Federle from Bradesco BBI. Daniel Federle: Congrats on the strong results. I just want to hear your thoughts on how important it is for a telco to have a convergence operation at the moment in Brazil. We see, Vivo focusing on the Vivo Total. It seems to be a big success. So how important is this for the whole strategy? And second, if you could just provide a little bit more information about your expectation for AI as a source of savings for costs in the upcoming years. Christian Gebara: Daniel, thank you for your initial comments. I cannot answer for all the other operators because I think we have different strategies. I can answer about convergence for Vivo. Convergence has always been our focus. And if you look at the numbers that we have today, we have 7.8 million FTTH customers, 62.7% are convergent. Out of the 7.8% in Vivo Total, we have 43.2%. So there is still this number between the 43% and the 62% that are convergent but are not in Vivo Total, and we are working to drive them to Vivo Total. Why? Because I think when you are Vivo Total, I think switching cost for customers is even high -- higher sorry, and we also have the ability to have a closer relationship with these customers and monetize even better, selling also the digital service. When you see the number that we presented of the new ventures in B2C, you see our ability to cross-sell not only mobile and fixed, but also the ability to sell video OTTs, to sell health services and also to sell smartphones plus consumer electronics, only to give you some examples. Our churn ratio is also proving that is the right decision. FTTH churn is 1.4%. If I look years ago, it was 1.6%, 1.8%. When I compare the churn rate of fiber customers that are in Vivo Total, it's 1 percentage point lower to those that are independent fiber customers. So for us, it makes a lot of sense. And also even having record addition of new customers in mobile, our churn is also in the lowest level of 1%. So our strategy continue to be the one who can have the customer with more services with people. That's why we'll also be presenting this number that we call services for RGU. So we get a customer, and we try to add all the revenues that we have in B2C, divided by the number of customers of RGU, and we see also a positive trend there. That's convergence, but it's also added to that the ability to sell the new businesses. So that's the strategy that Vivo is following. So I cannot answer for others, but I think for us, that's the right one and the one that we are going to still continue to put all our efforts. And then wanted to complement the Vivo Total, 84% of the sales that we have of fiber in our stores get out of store with 84% in Vivo Total. So it makes a lot of sense. And gross ARPU of Vivo Total in the fourth quarter was BRL 230. So that's also a great measure to follow. And the average in Vivo Total, we have one fiber connection and 1.7 postpaid connection. That also makes sense to see it that way. So it's proving the customer wants to be loyal to Vivo in all the access. AI, we are in the -- we used to have very well deployed AI here before the Gen AI. So WhatsApp was already driven by AI Vivo and was one of very important channel. We had 4 million customers interacting with us per month in WhatsApp using AI. Now with Gen AI, I think the possibilities are even higher. We are using that to optimize internal processes. For instance, when we need to go to a B2B public visitation, there was like this deep complexity to understand what was required by the operator in some of these auctions. We now have AI to understand it much closer to what we have here as inventory, and then we have a response that is much faster and our ability to participate in many more visitation than we used to do before. We're also using AI as copilot to all our call center agents and store agents. And now we are piloting AI agents to answer directly to customers. So that's a very important project that we're going to start having the first results in May this year that we are doing with partners. And also, we are doing many other things in network optimization. So it's a variety of actions that we are taking here to implement AI as core for our business. And again, answering to the second -- the first question that I had before, I think from Maria Clara, in efficiency, we also believe AI will bring a lot of efficiency for us as well. Operator: Our next question comes from Gustavo Farias from UBS. Gustavo Farias: The first one, maybe a double-click on the previous question about M&A. So we've been exploring M&A in fiber, in most of our recent notes. And Vita obviously stands out particularly now without Oi as a shareholder. So my question is, would you consider a large M&A to strengthen your fiber footprint? And the second question, we've seen stronger portability figures for Claro in the fourth quarter, mostly impacting TIM and likely related to new sales. So my question is, how are you perceiving this competition driver in mobile? And if this, by anyhow, changes your commercial strategy? Christian Gebara: Gustavo, thanks for the question. No, it doesn't change our strategy. We have competition, and it's a very competitive marketing -- market, sorry. And I cannot point out a specific player and the evolution of portability due to this player. Now I think that's the market that we face. I think there is a lot of variation of portability month-over-month. What is important that we keep growing net adds, and we keep ARPU going up because also getting more customers with ARPU decreasing is not the strategy that we are following. So if you look, we had 4.4% increase in postpaid net adds if I compare the year-over-year quarter. And also, we have a 5.8% ARPU evolution if I compare again the year-over-year ARPU, keeping churn level at 1%. So we're not going to get into this war if someone is trying to put the service in a lower value or try to use our service to acquire other services in different sectors. No, we shouldn't get to that because we are here, preserving the quality and the experience that we offer to our customers. So a positive evolution of net adds, positive evolution of ARPU and extremely positive evolution of our churn. And again, we're going to face competition of different types. And that's normal. It's a very competitive market, and telecommunications has always been very competitive in Brazil. Going to the question of -- can I go to the other one, M&A? Gustavo Farias: Yes, of course. Christian Gebara: Yes. M&A is what I said, again, Oi's still has a stake at Vita. They are in the process, but they still have a stake. I think the market is very fragmented, as I said before, I think there is room for consolidation. But in our case, it's not the size. None of the players is large enough not to allow us to integrate because, as I said, they have 19.3%. The next one has 8.2%. And I think adding the second, the third, we're still going to be below what we see as market leader in markets like Spain, France, Korea or Japan. It's more of the quality of this network, the quality of the customer base, the overlap with our network and the price. We have the ability to deploy network. And as I said before, much more of the CapEx is related to connecting the customer than passing the fiber. But we don't want to be passing fiber where we see so many players. So that's why we are open for analyzing targets. So far, we haven't been able to get to an agreement or getting to the real interest in any of the targets that we see in the market. So let's wait, Gustavo, but the trend seems positive for consolidation. Operator: The question-and-answer session is over. I would like to hand the floor back to Mr. Christian Gebara for the company final remarks. Please, Mr. Christian, the floor is yours. Christian Gebara: Okay. Thank you, everyone, for participating, and for so many questions. As I stated in the beginning, we're extremely pleased to share such a strong set of results in all dimensions of our company. And again, we are always here at disposal to answer any additional questions that you may have. Thank you so much for your participation. Operator: Vivo's conference is now closed. We thank you for your participation, and wish you a very good day.
Operator: Good morning, ladies and gentlemen, and welcome to Vivo's Fourth Quarter and Full Year 2025 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at ri.telefonica.com.br. The presentation will also be available for download. This call is also available in Portuguese. [Operator Instructions] [Foreign Language] I would like to inform you that all attendees will only be listening to the conference during the presentation, and then we will start the Q&A session when further instructions will be provided. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, operational and financial projections, and goals are the beliefs and assumptions of Vivo's Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events, and therefore, depends on circumstances that may or may not occur. Investors should be aware of events related to the macroeconomic scenario, the industry and other factors that could cause actual results to differ materially from those expressed in the respective forward-looking statements. Present at this conference, we have Mr. Christian Gebara, CEO of the company; Mr. David Melcon, CFO and Investor Relations Officer; and Mr. Jo o Pedro Soares Carneiro, IR Director. Now I'll turn the conference over to Mr. Jo o Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference. João Carneiro: Good morning, everyone, and welcome to Vivo's Fourth Quarter and Full Year 2025 Earnings Call. Today, our CEO, Christian Gebara, will start by commenting on Vivo's performance and connectivity and digital services as well as present our main ESG accomplishments for the year. Then David Melcon, our CFO, will walk us through Vivo's controlled cost and CapEx evolution, free cash flow generation, profitability and shareholder distribution during 2025. With that, let me turn the call over to Christian. Christian Gebara: Thank you, Jo o. Good morning, everyone, and thank you for joining us today. I'm pleased to share that Vivo's 2025 performance was remarkable. We grew above inflation in all key lines, driven by solid commercial momentum and our continuous focus on offering the best customer experience in Brazil. Starting with mobile, the postpaid segment was a major highlight. Accesses expanded 6.5% year-over-year, reaching 70.8 million customers, now representing 69% of our mobile base. In fiber, we closed 2025 with 7.8 million homes connected and a footprint that extended to 31 million homes. This advance coupled with our commitment to quality and customer satisfaction reinforced our leadership in the fiber market and allowed us to accelerate fiber mobile convergence. Turning to our financial performance. Total revenues in the fourth quarter rose 7.1%, supported by balanced growth in both mobile and fixed services. Mobile service revenue progressed 7%, while fixed services improved 5.4%, reflecting the sustained contribution of fiber and corporate solutions. EBITDA grew 8.1% versus fourth quarter 2024. Excluding the effects of the concession migration from both years, EBITDA advanced 17.7% year-over-year, reflecting the success of our day-to-day execution. Operating cash flow also showed solid expansion, up 13.4% compared to 2024, representing 26.1% of our revenues. Net income grew at a double-digit rate in 2025, totaling BRL 7.2 billion for the year, while free cash flow increased by 11.4% to BRL 9.2 billion. These strong results enabled us to fulfill our promise of paying shareholders at least 100% of our annual net income. In 2025, we paid out BRL 6.4 billion, reaching a payout ratio of 103.4%. Next, on Slide 4, we illustrate how the transformation of our top line continues to advance, driven by diversified revenue mix and the rising contribution of our new businesses. Total revenues in the quarter reached BRL 15.6 billion, supported mostly by postpaid and FTTH that grew 9% and 9.8%, respectively. Notably, this quarter delivered the strongest growth in our handsets and electronics line in 3 years, up nearly 14% year-over-year, fueled by a broader portfolio, seasonal offers and a robust demand for electronics. Our new businesses also presented another standout year. Revenues increased 27% over the last 12 months and now account for 12.1% of total revenues, an expansion of 1.9 percentage points compared to the previous year. Both B2C and B2B solutions contributed meaningfully to this evolution, reflecting the success of our strategy to diversify our portfolio and scale digital services. Moving to the next slide. We continue to see the solid momentum of our mobile businesses boosted by Vivo's differentiated network quality and customer experience. By the end of 2025, our mobile base reached 103 million accesses, a year-over-year increase of 0.7%. Postpaid, including M2M and Dongles, remain the main growth engine, expanding 6.9% and surpassing 50 million customers for the first time. Adoption of 5G is accelerating rapidly. Our 5G customer base rose to 23.1 million users across 716 cities in Brazil. This pushed our 5G take-up ratio to 27.8%, an improvement of 8.6 percentage points in 1 year. This reflects not only the strength of our network, but also the value customers perceive in transitioning to newer technologies. Postpaid churn continued stable at 1%, while ARPU grew 5.8% year-over-year. Together, these indicators highlight the effectiveness of our retention initiatives as customers adopt higher value plans and demand more data. Overall, these results reinforced the strength of our mobile platform, a combination of superior network quality, disciplined commercial execution and a customer-centric approach that drives continued sustainable growth. On Slide 6, we dive deeper into the strength of our convergent proposition and how it's setting a new benchmark for quality and retention. As our fiber footprint expands, so does our capacity to attract new customers. Over the last year, we passed an additional 1.9 million homes, bringing the total to 31 million, while our take-up ratio improved to 25.2%. FTTH accesses maintained double-digit growth, increasing 12% year-over-year and reaching 7.8 million connections. This performance is once again propelled by Vivo Total, our flagship offer that combines the best mobile and fiber, which expanded 41% compared to last year in terms of subscribers. Today, 62.7% of our entire FTTH base is already converted to postpaid, out of which 43% through Vivo Total, reinforcing customers' clear preference for integrated solutions while also demonstrating the significant upside that we still have to further scale our convergent offer and improve customer loyalty across both postpaid and fiber services. In fact, fiber churn remains on a downward trend, reaching 1.4%, the lowest level in our history. This sustained improvement reflects both the quality of our network and the stickiness of Vivo Total's value proposition. Heading to Slide 7, we show how the evolution of our B2C segment is supported by the growing relevance of services that go beyond connectivity and positively impact our customers' lifetime value. In 2025, total B2C revenues reached BRL 44.8 billion, up 5% year-over-year. This performance reflects not only the solid resilience of our connectivity services, but also the strong momentum of our new businesses that grew 20.7% and now accounts for 3.3% of total revenues. We also saw consistent improvement in revenue per RGU that hit BRL 65.8. This increase is supported by our ongoing efforts to expand customer engagement, drive cross-selling and extract higher value from our existing base. Looking specifically at new businesses, we continue to see solid performance across all lines. Video and music OTTs remains the largest contributor, advancing 18.1% year-over-year. consumer electronics delivered another standout result, growing 36%, while the health and wellness category posted remarkable momentum with revenues rising close to 70% in the year. We are also strengthening the foundation for future expansion. Through Vivo Ventures, we approved an additional BRL 150 million for new investments with a particular focus on AI-driven initiatives, bringing the total investment capacity to BRL 470 million. And through our partnership with Perplexity, we are offering customers complementary 1-year subscription to Perplexity Pro, reinforcing our commitment to delivering differentiated digital experiences. All these developments underscore how Vivo was evolving into a broader digital platform where connectivity remains at the core but is increasingly complemented by diversified ecosystem of services designed to enhance our value proposition and improve monetization. Turning to next slide. We'll provide more details on Vivo's B2B strategy and how the ongoing shift in our revenue mix is quickly gaining traction. In 2025, B2B revenues amounted to BRL 13.5 billion, up 13.7% when compared to 2024. Digital B2B was once again the main growth engine, advancing 29.5% and now representing 8.8% of Vivo's revenues. Connectivity also maintained a healthy performance, rising 5.4% in the same period. Within digital B2B, all products continue to expand at a strong pace. Cloud revenues soared 37.8% followed by IoT and messaging at 25.9%. Digital Solutions at 22% and cybersecurity at 8.4% year-over-year. B2B continues to gain relevance within our revenue mix, increasing its shares by 140 basis points year-over-year. This strong performance in 2025 marked the segment's fastest annual expansion in recent years and reflects the accelerating demand from companies undergoing digital transformation. Altogether, these results underpin Vivo's strategic goal as the trusted partner for companies seeking to modernize their operation, scale cloud and IoT adoption and strengthen their digital capabilities. On Slide 9, we reinforce our sustainability remains a cornerstone of Vivo strategy, supported by solid advances across environmental, social and governance dimensions, which is validated by our strong performance in global rankings. According to Merco's corporate reputation ranking, Vivo placed in the top 10 companies across all sectors and achieved the best position among telcos. We also achieved the fifth best performance in the sector worldwide in S&P Global's Corporate Sustainability Assessment and earned a place on the CDP A-list for the sixth consecutive year. Additionally, we were recognized by Corporate Knights as the most sustainable company in Latin America on the list of the world's 100 most sustainable companies. On the environmental front, we participated in COP 30 as a supporter for the first Planetary Science division, an initiative that brought together leading scientists to advance discussions on climate resilience and the future of life on the planet. Regarding Funda o Telef nica Vivo, which reached over 2 million beneficiaries with BRL 47 million invested in initiatives focused on education, employability and digital inclusion. In governance, we expanded the scope of our Information Security Management certification under ISO 27001, strengthening the protection of data and systems that support our operation. I invite you to check out our 2025 ESG Highlights, which compile the year's key indicators and achievements and outline the strategic priority for our ESG agenda. Now David will give you more color on our financial performance for the quarter ending. Thank you. David Sanchez-Friera: Thank you, Christian, and good morning, everyone. On Slide 10, we provide an update on the evolution of our cost structure and highlight the strong EBITDA performance in the quarter. On the left side, you will see that total costs reached BRL 8.9 billion in the quarter. When excluding the effect from the concession migration, OpEx was flat with a year-over-year evolution of 0.4%. This reflects a balanced combination of commercial momentum and disciplined operational management. Cost of services and goods sold rose 9.7%, mainly driven by the higher contribution of B2B digital solutions, continued demand for music and video over the top as well as the share of handsets and electronics. Operating costs grew 4.4% year-over-year, led by a 6.4% evolution in personnel expenses, reflecting annual salary increase and a higher headcount in strategic areas such as digital tech. Meanwhile, our largest cost line, commercial and infrastructure declined by 2.6% due mainly to some onetime infrastructure expenses registered in the same quarter last year. The results in both years were positively impacted by the effects related to the migration of our fixed voice concession to the authorization model. In the fourth quarter last year, we recognized a reversal of provision for contingencies totaling BRL 386 million. In addition to asset sales amounting to BRL 206 million. In the fourth quarter this year, we recorded BRL 96 million in copper sales and BRL 6 million in real estate sales, adding up to BRL 102 million. Excluding all these effects in both periods, our EBITDA grew 17.7% year-over-year with a margin expansion of 380 basis points, reaching 42.3%, while reported EBITDA was up 8.1% with a margin of 42.9%. Moving to Slide 11, we present the evolution of our operating cash flow for the year. CapEx amounted to BRL 9.3 billion, a modest 1.1% raise year-over-year, while our CapEx to revenues ratio reduced to 15.6%. This reflects lower capital intensity and the continued prioritization of investment with the highest return. As a result, operating cash flow before leases reached BRL 15.6 billion, an increase of 13.4% compared to last year. After leases, operating cash flow rose 17.3%, totaling BRL 10.1 billion with margins expanding to 17%. This strong performance demonstrates our enhanced ability to convert EBITDA into cash, supported by disciplined CapEx allocation and softer lease cost evolution. Going forward, we remain focused on further optimizing our tower-related expenses and improving contract efficiency. The trajectory of our operating cash flow margins underscore the strength of our return profile. On Slide 12, we highlight how our disciplined financial management continues to translate into profitability and strong cash generation. Net income for 2025 reached BRL 6.2 billion, an 11.2% increase versus the previous year. This growth was well balanced throughout the year, reinforcing the consistency of our execution and resilience of our business model. Our net cash flow position also improved, ending the year at BRL 2.3 billion compared with BRL 1.4 billion in 2024. When considering IFRS 16, net debt stands at BRL 13.1 billion, equivalent to just 0.5x EBITDA, underlying the continued strength of our balance sheet. Free cash flow rose 11.4% to BRL 9.2 billion in 2025. This performance reflects both our disciplined CapEx allocation and the healthy fundamentals of our operations. As a result, our free cash flow yield reached 8.6% and free cash flow over revenues came in at a solid 15.4%. These results reaffirm our ability to improve profitability and cash generation while maintaining a very comfortable leverage profile. Lastly, on Slide 13, we highlight our continued commitment to shareholders' remuneration. In 2025, we distributed BRL 6.4 billion to shareholders, an increase of 9.1% compared to the previous year, driven by higher share buybacks and capital reduction. Notably, we once again delivered on our guidance for the period this time with a payout of 103.4% of our net income. Looking ahead to 2026, we have already announced the distribution of BRL 7 billion, including the BRL 4 billion from capital reduction to be paid in July, and the interest on capital of BRL 3 billion declared in 2025 to be paid in April this year. We also declared an additional interest on capital in February this year that will be paid before April 2027. Moreover, our Board of Directors approved a new share buyback program of up to BRL 1 billion to be executed until February 2027. To conclude, we reaffirm our commitment to distributing at least 100% of net income in 2026, maintaining a clear and disciplined capital allocation strategy focused on value creation for shareholders. Thank you. And now, we can move to the Q&A. Operator: [Operator Instructions] Our first question comes from Leonardo Olmos from UBS. Leonardo Olmos: Congrats on the results. My question will be all centered on distributions, a little bit long, but all center on distributions. So if you could first discuss the drivers for the mix in 2026 between buybacks, interest on capital and capital reduction, which -- what makes you pick more of one than another? For example, we noticed a small reduction, potential reduction buybacks, but a huge increase in capital reduction. Could that mean you are thinking about continuing on the path of increasing potentially leverage, changing the capital structure? And still on that topic, and the last part of my question, if you could discuss net income drivers for 2026. As we noted an increase in copper sales, maybe there's upside for consensus estimates. And since you guide dividends on the back of net income, we want to know that. David Sanchez-Friera: Leonardo, thank you for the question. So the first one, we have a commitment for the last 2 years to distribute at least 100% of our net income. So this is something that we have done in the last 2 years, '24 and '25. And we always try to combine between the -- what you mentioned, capital reductions, interest on capital, also dividends and share buyback. If you look at our capital structure, we have more than BRL 60 billion capital. So we obtained 3 years ago authorization from ANATEL to distribute up to BRL 5 billion. This is something we have already done. We have already distributed BRL 3.5 billion. Now we don't need any more approval -- preapproval from ANATEL. So that's why now we have also approved that will be paid in this year for another BRL 4 billion. And the plan for 2026 is to combine and to continue. Today, we have also approved a share buyback program of BRL 1 billion that will give us flexibility to continue taking advantage of interest on capital. This is a situation unique in Brazil, together with also a capital reduction to maximize the value of shareholders. So for next year, we're expecting, of course, to deliver more than 100% of our net income. So regarding capital structure, it's something that we are always exploring potential opportunities. The leverage that we have today in Brazil is very linked to the high interest ratio that we have here in Brazil. And we expect that in the next future, the Selic will reduce. Today, it's at 15%. The market is expecting this to reduce in the next few years. So we could explore opportunities also to generate value and to maximize this opportunity. So I think this is -- this will have a very strong cash flow generation and net income for next year, which was also your second question. We are seeing a very stable. We have been growing almost every quarter, double digit. For the next year, we'll continue growing in EBITDA. We will also benefit from the reduction of the depreciation and amortization. Starting from the second quarter, we have included also on the financial statement. After July 2026, we will fully depreciate some of the legacy assets that we have in our balance sheet. And this will represent an improvement of BRL 300 million of profit before taxes, just coming out of this, plus potential benefit from interest reduction. So we are positive about the evolution of net income. Next year, we will bring additional shareholder remuneration. Operator: Our next question comes from Marcelo Santos from JPMorgan. Marcelo Santos: I want to ask questions about two key topics. The first one is CapEx. So maybe, David, could you please discuss what are the puts and takes for the CapEx outlook in 2026? And the second question will be about competitive environment, how you're seeing it, especially on mobile? And what is the outlook for passing price increases this year? Christian Gebara: Marcelo, I will take the questions. Christian here. So CapEx, we're not giving guidance. But as we said, now been stating in every call, we are working on CapEx optimization, when you consider CapEx over revenues. So as you could see, we came from 16.4% to 15.6% this year. That's a combination of all the work we are doing to be more effective in the deployment of our infrastructure. Added to that, our ability to sell more services with no CapEx. So we already reached more than 12% of revenues coming off services that now require CapEx. So that's why we have this strong evolution in operating cash flow. As we stated here now, we are increasing 13.4% year-over-year. And even when you consider operating cash flow after leases, this growth is even higher, 17.3%. So we will continue to deploy 5G. As I said, we are following our customers and the penetration of 5G is going up. So we are deploying 5G where our customers are. We've been deploying fiber and penetrating more our network. So we also saw the take-up ratio going up in the fiber business. So that's a good sign. Of course, it involves CapEx, but we are also saving in other lines. So the idea is this one, to continue to improve infrastructure keeping our leadership, but being better in the ratio CapEx over revenues. Going to competition. Can I go to the second one, Marcelo? Marcelo Santos: That's very clear. Thank you, Christian. Christian Gebara: So competition. Here, we have different strategy for the different segments. We've been very strong in prepaid. Now it's still slightly negative, but when you compare what we had in last quarter, revenues this quarter is higher than the previous one. And also when you compare the year-over-year evolution, we also have a better performance this quarter than we had in previous ones. We are increasing price according to the type of segments. So we are planning March for postpaid and hybrid. For front book, we are expecting customer base price increase in April for both hybrid and postpaid. FTTH, we had a price increase in January. We have planned a new one for June. And Vivo Total, we are planning 100% customer base price increase in April. So following the inflation ratio, giving more data and more services and also playing convergence. So that's our strategy, and that's why we are positive about the evolution of our revenues going forward. Marcelo Santos: Okay. So the back book is on April, right, for postpaid and hybrid? Is that correct? Just to be sure. Christian Gebara: Yes. Part of it is in April, the majority, and the rest is in August. Operator: Our next question comes from Rogério Araújo from Bank of America. Rogério Araújo: Congrats on the results. I have a couple here. The first one, there was a reduction in the lease expenses. If you could please provide some details on why and also expected trend. This is the first one. Christian Gebara: Please ask the two questions, Rogério. And then we'll answer both of them. What's the second one, please? Rogério, please ask the second question. I don't know if he is still in the line, so I don't know if we'll answer the question or we wait for him to come back. Operator: He shows on the line. Rogério, can you please repeat the second question? Christian Gebara: Okay. So we're going to answer only the first question, okay? David Sanchez-Friera: Okay. So Rogério, thank you for the question. The evolution of the lease depreciation and interest accrual remained consistent with previous periods. Even in both quarter and even the full year, EBITDA after leases has grown even more than EBITDA before leases. And regarding the payments, some volatility persists due to the ongoing renegotiation with the towers company that we do every quarter. And that's why you mentioned the principal and interest payments that we have this quarter amounted to BRL 1.2 billion, which is lower than the previous year, but also lower than the previous quarter that shows we are very optimistic about the potential trend of this line. To give you more light here, the current tenancy ratio that we have in Brazil is 1.4 that we discussed last quarter, which is significantly lower than other comparable countries. So we see a big opportunity to reduce the unitary costs of every tower to share more the towers and to fund the new deployment that we need to do here in Brazil to accelerate our revenues in 5G and also our coverage. So optimistic about the trend that we have started seeing this quarter. But even though we will need to continue renegotiating those contracts and this will be driving the potential acceleration of the reductions. Christian Gebara: I would add, the operating cash flow after leases, no, margin. We went from 14.6% in 2023 to 15.5% in 2024 to 17% in 2025 -- sorry '24, 15.5% in '24, 17% in '25, aligned with what David just said. Also, we are going to capture the growth of our infrastructure. We're going to renegotiate our contracts, and we're going to still generate operating cash flow after leases that has a strong margin, as you could see the evolution over the last 3 or 4 years. I don't know if Rogério to have the second question? Rogério Araújo: Yes, sorry. My line actually was dropped here on, actually. You couldn't hear me on my second one. It's about the prepaid ARPU. It has reverted a negative trend versus the first 9 months of the year, also in line with our main peer in Brazil. So if you could please clarify what do you think were the main drivers for that and what you expect in the upcoming quarters? Christian Gebara: Listen, Rogério. Prepaid has been performing better quarter-over-quarter. Of course, that's also our ability to motivate customers to top up and also to consume the money that they have in the balance. So it's part of our strategic behavior of the company, also being very able to motivate customers to higher average tickets and also the ability for us to monetize the tickets they have top up. On the other hand, we continue very strong in migrating prepaid to hybrid. So it's even quarter-over-quarter that there is a positive evolution. And so we are extremely pleased with the mobile service revenue evolution, 7% over the last quarter, growing 9% in postpaid. That's a combination of bringing new customers, but also migrating pre to hybrid or postpaid. And also the prepaid absolute number of revenues that went from the fourth quarter -- from the third quarter of '25 of 1.364 to 1.394. So -- and churn in the postpaid also in the lowest level. So that's the result of a very well segmented and thoughtful strategy for different segments that we have here in the company. Rogério Araújo: Okay. I may have a follow-up. If you could expect the prepaid ARPU to keep increasing year-over-year in upcoming quarters, if you have any color on that? Christian Gebara: Rogério, what we expect is revenue to continue to grow the way it's growing. We don't expect -- we're not giving guidance per ARPU per segment. Operator: Our next question comes from Phani Kanumuri from HSBC. Phani Kumar Kanumuri: The first question is on the total net adds and the market share in mobile. If we exclude Dongles and M2M, your number of subscribers has been coming down. Any reason for that? And your market share is down like 1 percentage point from last year. So what is -- I mean, what is driving this trend? The second thing is that if you look at your B2B strategy, it has been growing really well. What are the further steps to maintain this growth in Brazil? And how is the penetration coming in the SME segment? Christian Gebara: I don't see mobile market share changing. That's very stable. There are some corrections, maybe in prepaid. Some companies disconnect like later than we do. So we are very confident about our performance in market share, and actually in our performance in revenue growth. And also, we had -- we measure our good performance in ability to increase net adds and fourth quarter 2025 was a record number, 930,000. That's a combination of bringing in more customers, but also reducing postpaid churn from 1.3% in the fourth quarter of 2021 to the 1% that we'll be keeping at this level for the last 4 years. So that's important for us. And mobile ARPU is also going up if you compare it to what we had in the fourth quarter and what we had in the fourth quarter 2025, sorry '24 and '25, there was an improvement of 5.8%. So we are not following like a small variation in market share. Important thing is to keep attracting customers, retaining customers and growing revenues. Regarding B2B, that's a very strong quarter, as I said. We had in the year B2B as, I don't know if you're more interested in the digital service, at BRL 5.3 billion revenues, it's a 29.5% year-over-year increase. It's already know what's digital service, 8.8% of the total revenues from Vivo and is 39.1% of the B2B revenues of Vivo. So it's getting very fundamental for our strategy going forward. Penetration is growing in all segments. SMEs is where we have more challenges to penetrate more the digital services. But at the same time, we are growing a lot connectivity in the segment. We have a variety of products being offered to this segment coming from location like renting -- rental of notebooks up to cyber solutions. So that's part of our strategy. We're growing in all segments with more acceleration in the top. But at the same time, the volume that we have in the SMEs, we are very, very, very happy with the results that we are having also in these segments with a combination of connectivity plus digital services, I described it before. Phani Kumar Kanumuri: Okay, yes. So maybe on the connectivity part, right? So you've grown like 5% year-on-year. So what is driving the growth in the connectivity part? The digital solutions was more understandable, but what is driving this growth in the connectivity part? Christian Gebara: SMEs, but also in advanced data solutions for top to corporate customers, now, to going up in the pyramid. We also have other connectivity solutions up to very dedicated links. So we've been growing in all lines. Now I think we gave some color. Fiber, of course, it's B2C, B2B. But when we said that we are growing 9.8%, that also includes our great performance in SMEs. And when we grow 10.2% of Data, ICT, digital services, it's also including corporate data solutions. So it's in both. Operator: Our next question comes from Maria Clara Infantozzi from Ita BBA. Maria Infantozzi: I have two questions here. The first one, can you please provide us an update on how you perceive the competitive environment in the fiber industry and also refresh us how you see any potential M&A in these industries? And the second one, could you please share your thoughts on how you see profitability expansion going forward? Are there any specific areas of the business in which you see some potential for further efficiencies? And how should we balance future efficiencies with the expansion of B2B? Christian Gebara: Sorry, the second question is related to cost in B2B or cost in general? Maria Infantozzi: Costs in general and how you balance this with the B2B expansion as it has a lower margin? Christian Gebara: Okay. B2B doesn't have a lower margin, but we can address this. Let's go to the first one. So Maria Clara, the market is still very fragmented. If you see the performance of the fiber business in Vivo, we went from 18.8% market share at the end of 2024 to 19.3% market share in the end of 2025. So 0.5% increase in market share. Our net adds for the whole year was 834,000 customers. If you look other competitors, some of the leading ones had very strong negative net adds for the year. So it's still a very competitive environment with too much fragmentation in our opinion. If you compare, for instance, we are the leading company in fiber in Brazil. We have 19.3%. When I see the leading company in Spain has 34% of market share. When I see the leading player in France has like 39%. If I go to Japan, the leading company has 57%. So I think there is room for consolidation. I don't see any rational reason to have so many players competing in same geographies. So we have 31 million home passed. We aim to have more. We see addressable 60 million, but we don't see ourselves reaching this number, but we could reach something more closer to 45 million. We could do that building ourselves or we do have consolidating. Consolidating is still a question mark. We have to find the right target with the right pricing, we have the right network not overlapping too much with ours with the good quality. But I see that clearly, we require more consolidation in this market because it's not -- doesn't seem to be sustainable for most of the players who presented negative net adds over the last year. Regarding costs, I think we've been showing a good, very good number in cost of operations. The evolution was 4.4%. That includes all the personnel growth that we had, like because we want to be more digital in some areas. We want to expand our penetration in some commercial areas. So even increasing 6.4% in personnel, we were able to just increase 4.4% in the cost of operations because we are bringing more efficiency in different areas, especially in our customer care that the app and other initiatives that we are deploying now. Even using AI is helping us to reduce other commercial and customer care costs. So the combination of both that presented this 4.4% that is below, very well below what we presented in revenue growth. In the cost of service and cost of goods sold, both of them are very related to our sale of services. Most of this, like I can give examples of video OTTs that I said before, or goods sold that is related to everything that we've been performing so well that also presented our strong growth in this quarter in handsets and consumer electronics in general. Going forward, we're going to still focus in digitalization. And now with AI, we are very positive of bringing great results in cost efficiency. Sorry, in B2B, you stated. Now B2B, depending on the product, we have very, very positive margins. As I showed, we are growing 5.4% in connectivity. Connectivity B2B represented in the year, BRL 8.2 billion. That has a very good and positive margin. And digital B2B, it depends. We have also gone through markets in some of the services. When we say -- when we sell cloud, yes, the margin is not that high. But when I have managed services over cloud, the margin is much, much better. And the same I can tell about cyber and even IoT. So also very confident on our ability to grow. And all these services, some of them even having lower margin, they are very positive operating cash flow since they don't require CapEx. So again, we should look at the bottom of the results where operating cash flow and free cash flow, operating cash flow after leases or free cash flow, we presented a very strong positive trend. Operator: Our next question comes from Daniel Federle from Bradesco BBI. Daniel Federle: Congrats on the strong results. I just want to hear your thoughts on how important it is for a telco to have a convergence operation at the moment in Brazil. We see, Vivo focusing on the Vivo Total. It seems to be a big success. So how important is this for the whole strategy? And second, if you could just provide a little bit more information about your expectation for AI as a source of savings for costs in the upcoming years. Christian Gebara: Daniel, thank you for your initial comments. I cannot answer for all the other operators because I think we have different strategies. I can answer about convergence for Vivo. Convergence has always been our focus. And if you look at the numbers that we have today, we have 7.8 million FTTH customers, 62.7% are convergent. Out of the 7.8% in Vivo Total, we have 43.2%. So there is still this number between the 43% and the 62% that are convergent but are not in Vivo Total, and we are working to drive them to Vivo Total. Why? Because I think when you are Vivo Total, I think switching cost for customers is even high -- higher sorry, and we also have the ability to have a closer relationship with these customers and monetize even better, selling also the digital service. When you see the number that we presented of the new ventures in B2C, you see our ability to cross-sell not only mobile and fixed, but also the ability to sell video OTTs, to sell health services and also to sell smartphones plus consumer electronics, only to give you some examples. Our churn ratio is also proving that is the right decision. FTTH churn is 1.4%. If I look years ago, it was 1.6%, 1.8%. When I compare the churn rate of fiber customers that are in Vivo Total, it's 1 percentage point lower to those that are independent fiber customers. So for us, it makes a lot of sense. And also even having record addition of new customers in mobile, our churn is also in the lowest level of 1%. So our strategy continue to be the one who can have the customer with more services with people. That's why we'll also be presenting this number that we call services for RGU. So we get a customer, and we try to add all the revenues that we have in B2C, divided by the number of customers of RGU, and we see also a positive trend there. That's convergence, but it's also added to that the ability to sell the new businesses. So that's the strategy that Vivo is following. So I cannot answer for others, but I think for us, that's the right one and the one that we are going to still continue to put all our efforts. And then wanted to complement the Vivo Total, 84% of the sales that we have of fiber in our stores get out of store with 84% in Vivo Total. So it makes a lot of sense. And gross ARPU of Vivo Total in the fourth quarter was BRL 230. So that's also a great measure to follow. And the average in Vivo Total, we have one fiber connection and 1.7 postpaid connection. That also makes sense to see it that way. So it's proving the customer wants to be loyal to Vivo in all the access. AI, we are in the -- we used to have very well deployed AI here before the Gen AI. So WhatsApp was already driven by AI Vivo and was one of very important channel. We had 4 million customers interacting with us per month in WhatsApp using AI. Now with Gen AI, I think the possibilities are even higher. We are using that to optimize internal processes. For instance, when we need to go to a B2B public visitation, there was like this deep complexity to understand what was required by the operator in some of these auctions. We now have AI to understand it much closer to what we have here as inventory, and then we have a response that is much faster and our ability to participate in many more visitation than we used to do before. We're also using AI as copilot to all our call center agents and store agents. And now we are piloting AI agents to answer directly to customers. So that's a very important project that we're going to start having the first results in May this year that we are doing with partners. And also, we are doing many other things in network optimization. So it's a variety of actions that we are taking here to implement AI as core for our business. And again, answering to the second -- the first question that I had before, I think from Maria Clara, in efficiency, we also believe AI will bring a lot of efficiency for us as well. Operator: Our next question comes from Gustavo Farias from UBS. Gustavo Farias: The first one, maybe a double-click on the previous question about M&A. So we've been exploring M&A in fiber, in most of our recent notes. And Vita obviously stands out particularly now without Oi as a shareholder. So my question is, would you consider a large M&A to strengthen your fiber footprint? And the second question, we've seen stronger portability figures for Claro in the fourth quarter, mostly impacting TIM and likely related to new sales. So my question is, how are you perceiving this competition driver in mobile? And if this, by anyhow, changes your commercial strategy? Christian Gebara: Gustavo, thanks for the question. No, it doesn't change our strategy. We have competition, and it's a very competitive marketing -- market, sorry. And I cannot point out a specific player and the evolution of portability due to this player. Now I think that's the market that we face. I think there is a lot of variation of portability month-over-month. What is important that we keep growing net adds, and we keep ARPU going up because also getting more customers with ARPU decreasing is not the strategy that we are following. So if you look, we had 4.4% increase in postpaid net adds if I compare the year-over-year quarter. And also, we have a 5.8% ARPU evolution if I compare again the year-over-year ARPU, keeping churn level at 1%. So we're not going to get into this war if someone is trying to put the service in a lower value or try to use our service to acquire other services in different sectors. No, we shouldn't get to that because we are here, preserving the quality and the experience that we offer to our customers. So a positive evolution of net adds, positive evolution of ARPU and extremely positive evolution of our churn. And again, we're going to face competition of different types. And that's normal. It's a very competitive market, and telecommunications has always been very competitive in Brazil. Going to the question of -- can I go to the other one, M&A? Gustavo Farias: Yes, of course. Christian Gebara: Yes. M&A is what I said, again, Oi's still has a stake at Vita. They are in the process, but they still have a stake. I think the market is very fragmented, as I said before, I think there is room for consolidation. But in our case, it's not the size. None of the players is large enough not to allow us to integrate because, as I said, they have 19.3%. The next one has 8.2%. And I think adding the second, the third, we're still going to be below what we see as market leader in markets like Spain, France, Korea or Japan. It's more of the quality of this network, the quality of the customer base, the overlap with our network and the price. We have the ability to deploy network. And as I said before, much more of the CapEx is related to connecting the customer than passing the fiber. But we don't want to be passing fiber where we see so many players. So that's why we are open for analyzing targets. So far, we haven't been able to get to an agreement or getting to the real interest in any of the targets that we see in the market. So let's wait, Gustavo, but the trend seems positive for consolidation. Operator: The question-and-answer session is over. I would like to hand the floor back to Mr. Christian Gebara for the company final remarks. Please, Mr. Christian, the floor is yours. Christian Gebara: Okay. Thank you, everyone, for participating, and for so many questions. As I stated in the beginning, we're extremely pleased to share such a strong set of results in all dimensions of our company. And again, we are always here at disposal to answer any additional questions that you may have. Thank you so much for your participation. Operator: Vivo's conference is now closed. We thank you for your participation, and wish you a very good day.
Stephan Gick: Good morning, ladies and gentlemen, and welcome to BELIMO's 2025 Results Presentation. My name is Stephan Gick, Head of Investor Relations, and I have here with me Lars van der Haegen, CEO; and Markus Schürch, CFO of BELIMO. We are also pleased to have today online with us, Sarah Bencic, our new Head of Americas. Lars will start the presentation with a business and market review, then Markus will highlight the financials followed by Sarah introducing herself and BELIMO Americas. We will conclude the presentation with the outlook and take questions at the end. With that, I would like to open our presentation and hand over to Lars. The floor is yours. Lars van der Haegen: Thank you, Stephan. So good morning, everybody here at the Hotel Widder. And of course, also everybody who is here remotely. We look forward to the program today, and we conclude here then also with Q&As for everybody, also, of course, those remotely and then a reception with a light lunch, upper wish, as we call it, for those who are here, and I look forward to meeting you and talking to you this morning. Gick mentioned, we have Sarah Bencic online. Today is actually a snowstorm in the U.S. Our factory is closed today. Flights have been canceled to the U.S. those that left today from Switzerland, and -- but we still have a connection, so -- but it might be a weak connection, but yes, we will keep our fingers crossed Sarah's speech later on. 2025 was a great year for BELIMO. I start here also with a follow of our employees. We have celebrated a lot last year, 50 years, BELIMO, and that was also the reason why we thought we have to make it a strong year with great financial results because it wouldn't be fun to celebrate without good numbers. But what's really behind this result is our more than 2,700 colleagues who are working highly engaged following a purpose and a proven business model. And that's really very nice, gives me the motivation every day to -- on BELIMO and to see this company working, and it's just amazing, and therefore, we would like to dive into the details -- the summary of what happened last year in terms of financials. Our growth rate in local currencies was 23%. EBIT grew by 29% and the return on capital employed was 36%. We are proposing a dividend of CHF 10 per share. And the outlook, we expect mid-teens percentage sales growth in local currencies this year. Markus will later on deep dive a bit into this outlook. Some of the other elements will cover throughout our presentation. First, the market dynamics. Of course, a very dynamic year in terms of the data center business, obviously, we have now sales -- had sales of 17% of our total sales in the data center business. We grew slightly less than half of the growth in 2025 that the data center business was representing. From a technical standpoint, there was also more and more, of course, liquid cooling employed, but also liquid cooling at higher temperatures as it is written here, that means temperatures around 40 degrees C for a supply temperature to cool servers. That means that there is less mechanical cooling involved. So there is a so-called free cooling and mechanical cooling combined. And this is actually quite advantageous for the applications BELIMO covers because it requires more valves to handle these systems. Then the overall construction market, the nonresidential construction market was actually slightly down, minus 1% on average globally. But we've seen an uptick in retrofit opportunities, and we'll cover this later on with 2 examples. And then lastly, the overall economic environment of 2025. We had the geopolitical situation, fueled, of course, also by these tariff ideas and concepts and the negotiations now again in discussion over the weekend. And we, of course, don't know what's going to happen over the next months and years, but we know it probably will make -- keep us busy for the next 3 years talking about tariffs, managing tariffs and implementing tariffs, and Markus will actually deep dive a bit into that topic what did it mean for 2025 regarding tariffs at BELIMO. The dynamics and the markets are, of course, related to our strategy -- to our growth strategy. And we are, of course, focused long term. We have a long-term planning, a 10-year horizon on our growth strategy with our 6 initiatives. And our 6 initiatives there actually in our annual report. And remember, always -- Warren Buffet always when asked, why are you so successful. He says, well, we are reading the annual reports. And you don't have to read all our annual report. They are getting so long. But I recommend you to read Page 17. And we talk about our growth strategy there and explain the status of each of the 6 initiatives. We touched upon some of these initiatives on the data centers, in particular, I want to mention what we did last year, we actually increased our organization for data centers. We have a dedicated sales, business development organization with application consultants with product managers fully focused on data centers. We've expanded that. We built a data center application center in Singapore. And we have also designed an application center for our Danbury, Connecticut location that we are building right now, that will be inaugurated in fall. Then we have started last year, in particular, with product developments, particularly for data centers, both on the material side of valves, for instance, more that valve range is completely available in stainless steel, but also in terms of the intelligent component, the sensors and the actuation and metering, the BELIMO energy valve with special implementation of industrial automation protocols to interface and special functionality there from a software standpoint. Now our 6 growth initiatives. They are built on 3 megatrends. Always crucial that the company's success depends mainly on the underlying trends. We have 3 key trends. One is urbanization that is still -- and I checked the number again 70 million people every year we are adding to this world. So 70 million every year, we have more. And the 70 million people, 80% of them, they love to live in cities. So they are clustering in cities. And in the cities, we see that trend also that second-tier cities are developing, of course, in Asia, but also, for instance, in the U.S., cities like Austin, Nashville or Denver are growing. And you have more densities in cities, you build higher, and this requires more HVAC building automation to manage these buildings. Then climate change. That still is the single biggest challenge for us humans in the world. Every problem we have in the world gets worse, with climate change and if we do not mitigate this. And the best way to reduce CO2 is energy efficiency. Energy efficiency is the biggest fuel we have and the best way to reduce CO2. Energy efficiency measures in buildings with BELIMO components, they have 3 main advantages: Firstly, they pay for themselves. Have an example afterwards. They increase the quality of life in terms of indoor air quality, safety, and they make the building owner energy independent. So this is really very powerful, and therefore, a major trend that we are directly supporting with our business model. Then data centers. On the data centers, obviously, we have the data center trend this market segment. We have some related trends. Sarah will present afterwards, the 30 segments of the buildings, how we segment these vertical markets. Their related segments such as energy storage or semiconductors who are also benefiting from the digitalization trend and the electrification trend. And then regarding our product range. So as we integrate in building automation system, we see more decentralized application, decentralized intelligence, edge devices and so on. So it's absolutely basically playing into the BELIMO product range, the digitalization in building automation and industrial automation. And therefore, very crucial for BELIMO our platform of components, and we have launched in November, the first products built on the new digital generation. Maybe you've seen this launch video. That was -- it's a 20-minute launch video. I can recommend it on our website. And the new digital generation platform is a new platform. We have introduced the first platform in 2005, so 20 years ago. At the time, we were integrating damper actuators and Control Valves in a platform and have launched this platform and have been very successful with this. Five years ago, we invested into a new platform that, in addition to Damper Actuators, Control Valves, integrated Sensors and Meters in 1 platform and we brought the modularization level 1 degree further. So we have basically a Lego-type system here, where we have as few components as possible in the platform, and it makes us very flexible. For instance, when we integrate into a automation system, as indicated here on this depiction, we can change 1 component. Today, we have about 10 different interfaces into building automation systems. For instance, the most common used in building technologies BACnet. There is a BACnet based on a physical layer RS-485 on an IP layer and then there's BACnet Secure Connect, special cybersecurity requirements that's also on an IP level. There are 3 different interfaces. They need 3 different kind of hardware modules. And we have with this platform the opportunity to just develop 1 of these modules and put it across the whole range and put it on 20,000 components. So otherwise, if you do not have a platform, you have to make a discrete development for every component with a new PCB, a printed circuit board, and this is where it's not scalable. So this platform really makes us unique. There's no player in the market that has a platform in this area of application where we play. Furthermore, of course, the handling of our products there. It's very consistent in terms of the design. Also, the industrial design, that's important too, as we sell a lot to OEMs or original equipment manufacturers. They put our components on, for instance, an air handling unit, and we have 10 BELIMO products or an air handling unit if the industrial design looks consistent, the overall product looks better. But also, it's the same handling, how you install it, how you configure it, for instance, here with the BELIMO app, there's 1 app. There's the assistant link that's indicated here that allows Bluetooth collection. There's also NFC that's available directly on the component. So you just have a very consistent range for commissioning and, of course, for integrating. So this platform is crucial in order to, of course, supply the world with BELIMO components. We also have to invest in our capacity. So therefore, we are on track with our capacity expansion. We do follow an asset-light model. If you analyze the numbers correctly, you see that our sales per employee per FTE is CHF 445,000 per employee. Our depreciation as a percentage of sales is 2.8% so that shows the asset-light model. Also the trend is positive. So in the past, we were around over 4% of depreciation. And over the years, this came down to now under 3% and also the sales per employee increased over the years. So the trend towards this asset-light model also is positive, but we still need some buildings. So 1 that is -- in Hinwil, just to focus really on our footprint. We have now several warehouses -- external warehouses that we consolidate with the new building, we call it Nexus and that's being inaugurated end of August. And you are actually invited on September 1 for a Financial Analyst Day in Hinwil where you can visit us and we show you the new building, along with other interesting things about BELIMO. Then we inaugurated also BELIMO China, CESIM House LEED Platinum building. This I was already talking about a year ago because we inaugurated in January '25. And then we have some projects in the U.S. that Sarah will talk about. Now having a look at our growth strategy over the years. We have a growth strategy -- long-term growth target. It's always nice to look back and review that growth strategy, how did we do. And obviously, the numbers now are -- have been quite positive, but I would also look back if the numbers wouldn't be that good. We've implemented the first growth strategy in 2016 and had an average CAGR of 8.8% over the 5 years period. And then over the last 5 years, it was a 13.8% CAGR. Over the last 20 years, 10.3% CAGR in growth. So this growth strategy is working. And we actually put in the plan 2016 with the growth strategy that we would make CHF 1 billion in sales in '25, and we made it. So we are quite happy ourselves that we made this number. And we have, of course, also in our growth strategy really focusing on the growth rate long term of 9% to 11%, as communicated previously, an organic growth rate between 9% and 11%. That's the long-term growth rate, obviously, now fueled short term by some of this data center growth, but that's our long-term plan. Then important regarding the profitability, the EBIT our EBIT number. I think this chart is always good to look at because many of you are always asking and maybe later on, what will be your EBIT in 2026, and we don't know. Because you see the EBIT is going up and down that fluctuates over the year, what we see. It improved over the last 20 years from 14% to 20.8%. So that's an average of about 35 basis points. We believe that over the next years to come, we continue to improve in that range of this 30, 35 basis points over the next 5 years in midterm, long term. But of course, every year, these changes, and we have the fluctuation as, of course, indicated from the past. And I think that's a good indicator to look at also what are these fluctuations that we have on that EBIT level. Now also, I would like to point out that our growth strategy works all over the world. So looking at the top 50 countries we are selling in, it really works in more than 80% of the countries we have, the strategies work in terms for, in terms, for instance, with sensor growth, with energy valve growth and so on. The various topics that we have in our strategy work in each of these countries. And so we have really statistical evidence that it works then all over the world, and that's very powerful. Looking at the 3 markets. Markus will, afterwards, deep dive a bit into the numbers. I want to highlight some of the typical projects that we have. So our business is really widespread amongst many buildings. We still have an order size of about CHF 2,000 per order, very small. There's a lot of orders that we are processing every day, and they go into buildings, small buildings, big buildings. And here, 1 example here in EMEA, that's the Hoffmann Group in Munich. That's a new building with about 1,000 products in there. As an example, then the Embarcadero Center in San Francisco. That is a very nice case study that we actually have. There's also a link on this slide brings you to this case study on our website. There's a video. This is a 48-story Waterfront building in San Francisco, 40 years old, and it's owned by BCX. That's the formerly called the Boston properties. That's the largest listed real estate developer in the commercial building space in the U.S., and it's a great success story. They have retrofitted 6 air handling units in these buildings, large air handling units with 6 energy valves. And they are saving $130,000 per year in electricity costs that they use for -- mainly for chillers, for chilling the building, for cooling the building and so you see the investment is about -- the payback is around 6 months. The investment was around $60,000, so the $130,000 saving per year. So it's really 6 months payback. Unbelievable, great case study again. And I recommend you to watch this video that explains in detail how that works. Another project from Asia Pacific in Vietnam, Ho Chi Minh City, the second large international airport there that's being built Phase 1. There are 15,000 BELIMO field devices in that phase that we have been selling and are selling in this construction project. So that also gives you a bit an impression of an airport. There's a lot of HVAC in there and many of these BELIMO components. Here, also fully equipped from Damper Actuators, Valves, but also Sensors and Meters in this Vietnam airport. So if you have a land in Vietnam on the new airport, then think about BELIMO that makes your landing possible. Now I would like to also talk about our Building Tomorrow vision. Last year, in 2025, when we had our celebration activities, part of that was also looking into the future to '25. What will be the trends in our industry? And we conducted workshops all over the world with our customers, with industry experts to define these building trends. And these trends are in this study. We have actually them here outside. You can take a book or you can download it, of course, on the Internet. And it basically talks about technology, society, economy and the environment. And it has 3 trends for each, and then it also shows the implications for the industry. So it's very valuable, I think, in reading this as well. So if you read our Page 17 on the annual report and read this, then you really know where the journey goes for BELIMO. You know more about the business model, and you learn a lot. So I recommend you also to read that Building Tomorrow study. Then let's come to some changes on our Board of Directors. We have, first of all, our Martin Zwyssig, who is actually here today. He will be leaving aboard, unfortunately, after 15 years of service. So he is, as you know, an outstanding CFO and has contributed to BELIMO's growth from the Board level. So thank you, Martin. And we have last year, the AGM has elected his successor with Tom Hallam, the former CFO of Shimadzu. Then we have also another member of the Board who does not stand for reelection, that's Stefan Ranstrand, former CEO of TOMRA. He was also contributing over the last 6 years a lot in -- regarding actually our growth ambitions and was pushing us regarding our strategy in terms of growth and also very -- I thank him for his contributions here too from the Board level. Then we'll have a new member that we propose at the AGM. That's Karina Rigby. Karina has a strong background in engineering, strong knowledge in data centers and she is American. So a strong knowledge about the American market with our largest market and brings that experience, that diversity to the Board. She has been working with Eaton and with Siemens Energy for many years and has a great knowledge also on management and leadership experience. Also, with Karina. We will be 3 women on our Board of Directors. And of course, with Sarah Bencic, will be 3 women also in our executive committee. So we then have 6 women on our top leadership Board and Executive Committee, which is also great. And I remember 10 years ago, there were CEO on the Board and CFO on the Executive Committee, quite happy about that as well. Now let me conclude. Again, coming back to our employees, our colleagues, we've been working also a lot on over the last 18 months on our culture and our values, and we have created habits for each of the value, and we have conducted workshops actually 3-hour workshops 4 times, 3 hours discussion workshops with all our employees because it's very crucial this culture. So in our performance management process, for instance, every employee selects 1 habit and has a plan on what can he or she do with this habit to improve something, to leverage something, to take an opportunity and really work on one of these habits to improve our culture every day. Also great confirmation was this Best Employers Award from the Financial Times, Europe. There were 1,000 companies assessed. We were ranking #7, second in Switzerland, which is a great external confirmation that this cultural work works. So all we can say, good business model, good culture makes a successful company. With this, I conclude for now and would like now to -- I talked about airflows and water flows, and now we have the man who will be talking about the money flow. So I give the floor to our CFO, Markus Schürch. Markus Schürch: Thanks a lot, Lars. And also from my side, a warm welcome. It's a great honor and pleasure to be able here to present the financial results of BELIMO of last year. Lars already mentioned, 2025 was a very successful year for BELIMO. We have executed on our growth strategy and achieved a sales growth of 23.3% in local currency or 18.7% in Swiss francs, further accelerating our growth across all regions. For the first time in our history, we exceeded CHF 1 billion of sales and generated CHF 1.12 billion of turnover. A great achievement, especially in our anniversary year towards the 50th anniversary of BELIMO. With regards to the regional breakdown, the Americas has now contributed about half of the sales, EMEA 38%, and Asia Pacific 13%. If you have a closer look at the composition of this growth rate, we can see that about the majority of the growth, 19.5% is coming from volume and mix contribution. So between pure volume growth, also a lot of higher-value products like the energy valve or higher-value customer segments like the data center contributed to this strong performance. Then we had about 3.6% growth coming from price increases. That's mainly attributed to the region Americas to the U.S. where we had in-year price increases as compensation measure for the imposed tariffs. We'll come to that later on. And then lastly, the FX had a negative impact of 4.5%, leading then to this growth rate of 18.7% in Swiss francs. A bit a closer look into the various regions. This chart shows the development of our 3 regions. And you can see that all regions contributed with double-digit growth towards the overall achievement of BELIMO. First, with EMEA delivered an outstanding result with 12% growth in local currency or 10% in Swiss francs. And that is despite a very challenging market environment and key markets with a decline in construction spend, like, for example, in Germany. So focusing on retrofit or attractive segments within EMEA made this strong results possible. EMEA also benefited from a revitalizing OEM segment, and that included some restocking and supply chain buildup throughout the supply chain. Then Americas showed the strongest performance with a sales growth of 32% in local currency or 25% in Swiss francs, and that's from an already very strong basis in 2024. In there, data center accounted for about half of the absolute growth we had in the Americas, but it also means that our traditional HVAC business also grew in the high teens and showing that we have got a very broad basis of this growth. That is coming from an increasing traction also of the retrofit business and then also other high-growth verticals like high-end manufacturing in the pharmaceutical or semiconductor business and also a general very strong market environment in the Americas. Asia Pacific slightly had a growth of 29% in local currency or 23% in Swiss francs, and that's despite a very challenging market environment in key markets like China. So there, the clear focus on high-growth verticals made these strong results possible. Also, their data center was an important growth driver, including some export business in the OEM business. On this chart, we can see the development of our business -- of our 3 business lines. All business lines also grew double digit. Damper Actuator, our most traditional business line achieved sales growth of 14% in local currency or 10% in Swiss francs. And in there, the strengthening OEM was a key contributor to this overall very strong performance. Then Control Valves showed the strongest performance with a sales growth of 31% in local currency or 26% in Swiss francs. In there, obviously, the data center business was an important contributor or also the move to higher-end applications like the energy valve. Lastly, Sensors and Meters, our youngest business line showed a growth of 25% in local currency and is developing according to our plan. In '25. Sensors and Meters already contributed with 5% towards the overall sales of BELIMO and it's becoming an important business contributor for our company. This graph shows the contribution of the data center business to the overall sales of BELIMO. The data center business accounted for about 17% of the total sales in 2025 and an increasing share over the 2 half years. In the second half year, the contribution from data center was 18%. Overall, the data center business accounted for slightly less than about half of the total absolute growth we had last year. In there, obviously, the main contributor were the investments into the data center infrastructure and the high share of liquid cooling of these new applications. The high sales growth also translated into a strong EBIT performance and EBIT growth. EBIT grew by 29% to a total of CHF 233 million and that is corresponding to an EBIT margin of 20.8%, 159 basis points up from 2024. This increase was possible despite the negative effects, both from tariffs and negative FX development especially in the second half year. Tariff impact were mitigated twofold. So partly by midyear price increases we had in the Americas. And then also by supply chain flow-through, shifting about 40% of these high tariffs we had as of April -- August 1 into this year by the flow-through of the supply chain. Just if we recap a bit what happened on tariffs until April, we had a normal tariff situation like we had years ago. So we have roughly 4% tariffs for everything we import into the U.S. That was increased then in April for 1 day, to over 30% and then was reduced back to 10% plus the standard tariff. So we had then until August tariffs of about 14%. They were increased then on August 1 to 39%, plus the 4%. So we had 43% tariffs until mid-November when they were reduced back to 15% overall without the normal tariff. So that was a flat rate tariffs of 15% until last weekend and now we have got another tariff regime. So now we have got 15% plus 4%, so roughly 19%. And we will see what the future will bring. Certainly it's not the last time we'll talk about tariffs. In '25, we continued our investments into our growth initiatives. So our R&D investments totaled to CHF 76 million. That's up 3.5% from last year and corresponds to 6.7% of total turnover. Our personnel expenses increased by 11.5% to a total of CHF 295 million. Last year, we increased our workforce by 343 full-time equivalents to a total of 2,704 at the end of the year. The regional breakdown is as follows. So 59% of our workforce works in the EMEA, 26% in the Americas and 15% in Asia Pacific. The breakdown by function is 44% work in assembly and logistics; 30% in sales, marketing and distribution; 11% in research and development; and 14% in administrative and general management. This chart shows the performance of the 2 half years. Sales in local currency accelerated between the 2 half years despite a reverse seasonality due to the short December. This shows the strong momentum we have in our business. Material expenses were significantly higher in the second half year. That was impacted, first of all, by the higher tariff, but also by the FX rates that were mainly hitting in the second half year. The other effects were increasing operational expenses in line with the constant buildup of head count throughout the year. Net income increased by 24% to CHF 182 million, the foreign exchange burdened the P&L with CHF 10.4 million compared to a CHF 600,000 gain in the previous year. The strengthening of the Swiss franc against all currency, especially in the second half year was the main reason. Furthermore, we encountered a slightly higher tax rate based on higher profit outside of Switzerland. Our cash flow performance reflects the strong growth of the company. Operational cash flow amounted to CHF 185 million, absorbing a working capital increase of CHF 67 million associated with the strong growth of our company. Free cash flow, excluding the short-term deposits amounted to CHF 99 million reflecting our capacity expansion program just Lars showed that in his presentation. In the reporting period, we had a CapEx of CHF 87 million, and the main investment was obviously the building in Hinwil and the capacity expansion into the Nexus building. Looking at the balance sheet. The balance sheet is very sound. We have an equity ratio of 71% and the net liquidity of CHF 69 million. We had extremely strong capital returns, return on invested capital of 28%, a return on capital employed of 36% and the return on equity of 30%. Based on this strong performance, the Board of Directors proposing a dividend of CHF 10 per ordinary share. This is up 50 Rappen compared to the last year. This proposal corresponds to a payout ratio of roughly 68% and is sustainable, considering the growth ambition of BELIMO and the elevated investment we will face in the coming years. It's a continuation of our dividend policy of a stable and increasing dividend over year. On this chart, we can see the development of the key performance metrics over the last 5 years. All figures show a very strong development. Sales growth increased to 23% and EBIT margin constantly increased to 20.8% in 2025. Capital returns improved and achieved 27.8% measured as return on invested capital and 30.2% as return on equity. Free cash flow is impacted by the investments in growth, both on the working capital level and also on the investments into capacity. Furthermore, we continued our efforts on sustainability and our ESG performance is well on track. Our SBTi targets were approved, and we are on track with our greenhouse gas reduction path. Our Scope 1 and 2 emissions were reduced by 14% compared to our base year of 2022 and our Scope 3 emission by product solds were also reduced by 14%. And we help our customers reducing their greenhouse gas emission and continue our efforts towards their Scope 1 and 2 reduction emissions. Retrofit, as Lars already mentioned there, and showed some of the example, is a very strong example of this investment and this contribution at our customer sites. Furthermore, we also contribute with our -- with the BELIMO Climate Foundation, decarbonizing buildings of nonprofit organization and with that, compensating part of our greenhouse gas emissions. Our efforts are well recognized, and we are rated AAA by MSCI and ecovadis silver for our efforts. Let me conclude on the last year's business. So overall, 2025 was extremely successful for BELIMO. We implemented our growth strategy that paid off, and we could accelerate our sales growth to 23% in local currency. EBIT Margin expanded by 159 basis points, absorbing the negative impact both from tariffs and the FX effects. Capital returns are very high, and the balance sheet is sound. We offer an attractive dividend of CHF 10 per share to our shareholders, reflecting the investments into the future lows. Let me conclude with the calendar. So the Annual General Meeting will be held on March 23. The ex dividend date is March 25, and the dividend payment is scheduled for March 27. We will issue our half year results on July 20. And as Lars already mentioned, we will host an investor event on September 1 in Hinwil. And there you will have the opportunity to join the inauguration of our new building, and you will also get insights into building tomorrow and our new product family. With this, I will hand over to Sarah for a short introduction of herself and then an update on the Americas business. Sarah Bencic: Thank you, Markus. So as you may all have seen I joined BELIMO on October 1, and I've spent the past several months working to build a deep understanding of the organization as well as a robust plan to ensure a smooth transition with support from my predecessor, Jim Furlong; as well as the broader Americas team. And so I'm excited to formally step into my role as Head of BELIMO Americas as well as a member of the Executive Committee next week, taking on leadership of a healthy growing regional business that continues to benefit from the consistent execution of an effective multiyear growth strategy. My experience in several large global manufacturing organization spans leadership roles across multiple functions and industries, including 5 years in the HVAC building automation industry with Honeywell. And I'm looking forward to leveraging the expertise I've gained through these experiences to continue moving our strategic growth plan forward in the Americas and optimizing for growth as we continue to build scale. Similar to the global sales trajectory that Lars walked through, growth in the Americas has accelerated over the past 10 years. During that period, we experienced a 12.7%percent sales CAGR in local currency, but the acceleration grew from 6.2% CAGR in local currency over the first 5 years to 16.6% over the prior 4 years and increasingly to nearly 32% of growth in local currency year-on-year last year. The majority of our growth last year came from our core HVAC verticals, and this growth stemmed from a few different areas, increased momentum in our RetroFIT+ program, the strength of our customer support and training offerings and increased adoption of higher-value solutions as well as our Sensors and Meters business line. The remainder of our growth came from the data center vertical, which was driven both by rapidly increasing capacity and the shift to liquid cooling. And both of these increases were amplified by the approach that we've been taking to owner engagement that I'll walk through in a little bit more detail. As Markus outlined, an additional event which impacted our Americas business was the imposition of increased U.S. tariffs on imported components. And that tariff rate was changed by the U.S. government several times throughout the year, making it extremely difficult to predict the longer-term landing point, still making it challenging to predict that. However, despite the volatility of these changes, we used a more measured approach in our response. Taking a planful, single midyear price increase that was communicated to customers well in advance. And our customers appreciate us taking such a measured and planful response, which allowed us to preserve customer loyalty while still securing price growth to mitigate our tariff exposure. The growth drivers for 2025 are underscored by our general competitive advantages that we lever across the regions, including here within the Americas. We've built trust with our customers through our focus on quality and our reliable short lead times. We are viewed as experts in our market due to our global leadership position and our pure-play focus on field devices. And serving in this role as a trusted expert allows us to build and maintain the long-standing customer relationships that support sustainable growth. What's more is that we're able to leverage these competitive advantages across all of the 30 verticals that we serve. With these verticals spanning public access buildings, like education and health care, production buildings, including high purity manufacturing and data centers, infrastructure buildings, including warehousing and residential buildings, including high-rise residential as well as a variety of verticals that don't fit cleanly into any of these one specific categories. And this breadth of verticals really provides us a wide range of growth opportunities. Returning to our 2025 growth specifically, increased solution adoption and the strength of our customer value offerings played key roles across all of our core HVAC verticals. On the solutions side, our growth was a result of multiyear awareness efforts to drive adoption of more advanced technologies and our full portfolio breadth. Our energy valve is a fantastic example of one of our more advanced and higher-value solutions. And while we did see growth of the energy valve stemming from the data center vertical, we also saw increased energy valve sales coming across our core HVAC markets through our retrofit opportunities. From a breadth of portfolio perspective, we saw increased adoption of our Sensors and Meters business line, resulting from strong multiyear cross-selling efforts. We also kept a strong focus on maintaining a differentiated customer experience. Some examples of this include increasing the team by 20% year-on-year to over 720 FTEs to maintain short lead times and high customer engagement levels while accommodating our growth. In addition, we delivered over 50% more in-person training courses year-over-year to advance customer understanding, build brand and product familiarity and help our customers address the trade skills talent scarcity. As mentioned previously, RetroFIT+ also gained momentum globally and as well as here in Americas across the core verticals. We saw a 30% year-over-year increase in the number of converted projects in the region. One great example of the power of this program is the work that we've done with the Paramount Group. Paramount completed RetroFIT+ buildings and 3 RetroFIT+ projects in 3 key buildings in New York City to start preparing for upcoming local energy reduction regulations. These projects reduced energy consumption across these buildings by over 4 million-kilowatt hours annually, which translated to over USD 1 million of energy cost savings annually. In addition, these projects enabled Paramount leveraging substantial rebates from their local utility to help fund the investment in these projects. And what we're seeing as we get further from some of these initial project completions is it's opening up 2 sets of future opportunities for RetroFIT+. The first is the opportunity to complete additional RetroFIT+ projects in additional buildings at that same portfolio management group owns. And the second is that as the stakeholders that were a part of this powerful project advance their careers and move into new property management groups, they can choose to implement RetroFIT+ projects in these new organizations and creates new opportunities there as well. Within the data center vertical, our owner engagement approach has been key to our growth. The number of stakeholders and the interactions between stakeholders in the data center space is a bit complex. Data center owners and technology providers collect inputs from research organizations and mechanical and electrical consultants. And these data center owners and technology providers or hyperscalers and chip providers then influence and transact with general contracts -- general contractors who influence and transact with mechanical contractors, who influence and transact with a variety of stakeholders shown here in the dark teal that we, as BELIMO transact with directly. Over 5 years ago, we established a dedicated data center organization whose exclusive focus is to engage with these key stakeholders that ultimately influence the entire purchasing process. This team partners directly with data center owners and technology providers to inform decisions on specifications. And in addition, they participate in key research organizations to ensure that we collect insights into future application needs in this rapidly developing industry. This long-term dedicated focus on these key decision-makers has been a critical enabler for our strong adoption of BELIMO solutions and data center applications. As we shift the lens from the retrospective of 2025 to the outlook of 2026 for Americas, the focus does not change. We will continue to execute on our growth strategy. We expect continued double-digit local currency growth in 2026, and our drivers to achieve this growth remain the same. Increased adoption of higher-value solutions and strong customer value offerings like RetroFIT+ in our core HVAC verticals as well as continued capacity growth and deployment of liquid cooling in data centers. We'll need to ensure that we remain focused on maintaining operational excellence and a differentiated customer experience as we continue to scale. So we'll be making strategic investments in both capacity expansion as well as people. We've signed leases for new buildings in Sparks, Nevada as well as Stratford, Connecticut that will nearly triple our operational footprint in the U.S. from a square meters perspective. And we will -- we are planning to increase the team size by 16% to about 840 FTEs to ensure we can maintain short delivery lead times and continue to offer a differentiated customer experience. And with that, I will hand it back to Markus to share our global outlook for next year. Markus Schürch: Okay. Thanks a lot, Sarah. Let me conclude with the overall outlook for BELIMO for next year. So overall, we expect the continuation of the market environment and the positive momentum for BELIMO both in the general HVAC industry, but also specifically in the data center vertical. We expect the strong top line performance with sales growth in the mid-teens. That takes into account the favorable market environment and the strong basis of 2025. Regarding margins, our EBIT margins will remain strong and are expected to be ahead of 20%. Obviously, there are very significant risks and uncertainty. Above all, obviously, the unforeseeable tariffs going forward and also the foreign exchange volatility that can impact both top and bottom line of BELIMO. Our data center business is linked to the investments of -- into data center and the respective CapEx mainly of the hyperscaler. This has both elements, a downside element in case of a slowdown of investment but also an upside element in case of accelerated investment or especially also faster deployments of the infrastructure. Independent of the short-term development of the market, we will continue our investments into our growth strategy. So we'll continue our investments into capacity and also continue our CapEx program and likewise, we'll also build up and increase our investments into our growth initiatives going forward. With this, I conclude the presentation and hand back and open the floor for questions, and we'll hand back to Stephan for the moderation of the question-and-answer session. Stephan Gick: Thank you, Lars, Markus and Sarah for the presentation. Now it's time for Q&A. [Operator Instructions] We will now start with questions in the room. Please first introduce yourself and the institute you're representing. Patrick Laager: Patrick, Berenberg. Three questions. You said you're guiding for 9% to 11% sales growth for the midterm or long term. Now assuming 8% to 9%, but please correct me growth in building applications and your exposure for data center to increase from 17% to, let's say, I don't know, 30% in the next 3 years, 4 years and assuming a normalization of growth in data center, I get -- and this is a very reasonable number, I get 15% growth on average. And you still stick to your 9% to 11% growth? Do you have any indications that potentially growth will slow down significantly in the next 2, 3 years? This would be my first question. Markus Schürch: Yes. For sure. Thank you for the question. It actually -- if you look at the overall model now looking at 10 years, we stay with this 9% to 11% because you have, of course, an acceleration in growth over the next years, but maybe '26, '27, '28, but then, of course, these investments could also decrease then again from this very high level that we are today. We have also to remember that these are extremely high levels that we have today in this investment boom. And therefore, there will be decrease, of course, at one point of that portion of the DC business, that impacts then the number. Therefore, if you look at it, we remodeled this, then it comes down again to between 9% and 11% eventually. Patrick Laager: And then question 2 and 3 combined here. Can you provide any insights about the pricing dynamic. If I remember well, you increased prices by 8% in North America or in the U.S. and you were planning to increase prices by 8% again early this year. The question here is, did you increase prices last month in the U.S.? And what kind of price effect should we model overall for '26? This would be one question. And the last question is about U.S. tariff exposure. You said -- you explained actually in a very detailed way how tariffs have developed last year. Can you share how much was the average of your U.S. tariff exposure last year? And how much would -- you can't really expect this year, but the average for '25 would be very helpful here. Markus Schürch: Okay. So thanks for the questions. So I mean you summarized well, our pricing actions in the Americas. So we increased about 8% midyear. And that they become effective throughout the year. That was the most of this 3.5% price increase what we saw as the contribution on the overall sales. We've increased list price again by about 8% as of January 1, and they will also now gradually be implemented as there. We have got standing orders that are still conducted according to the old prices. And gradually, we'll see now these price increases. Now with regards to the impact of tariffs. So for this year, obviously, it will be in the range of 15% and 19%. So depending on what's going to happen or something completely different in 150 days from now. And then with respect to the last year, so the average number is also in this -- towards this amount as there were a season of 4% and then a season of higher of about 10%, 14% tariffs short period of very high tariffs and then going back to 15%. Tobias Fahrenholz: Tobias Fahrenholz from ODDO BHF. Staying with growth and the sales outlook, how dynamic was your start into the year, so Jan, Feb so far? And what is the rough percentage that you have put in for the data center business? That would be the first part. And the second part then maybe on M&A. Has this become more in focus now? I mean the dividend is only slightly up. Should we read something into it? And which target areas would you look for? Markus Schürch: Okay. So let me start with the business. I mean, we don't obviously share all details, but we had a very good start into the year. And that is also the basis though, is we don't see a change of the market dynamics. Obviously, we don't disclose the details of how the composition of the sales is. That is then information we'll share again with the half year results. Then with regards to M&A, it's an opportunistic topic. We are actively looking into it. And it's always an opportunity. We will see some bolt-on acquisition, especially on the technology side. There's obviously nothing to read in from a dividend policy. This roughly 70% payout ratio that is in line with the investments that we need to do. And we want to finance that based on the operational cash flow, both the working capital and also the capacity increase. Martin Flueckiger: Yes. Martin Flueckiger from Kepler Cheuvreux. I've got 3 questions, and I'll take one at a time. First one is on your elaborations markets regarding product mix. Now I understand the impact was there on the top line growth, but just wondering whether you could clarify or elaborate a little bit on the impact on the EBIT margin in 2025 and what kind of impact or contribution you're expecting for margins in 2026? Markus Schürch: I mean, as mentioned, we have got there a positive contribution from the higher-end application and that also has a positive effect on the EBIT margin and was obviously part of the higher margin that is coming also from higher-end applications. Martin Flueckiger: I understand, but could you give us a little bit of a flavor of how much that was quantitatively? Markus Schürch: No, we don't disclose the details of the buildup of the margin. Martin Flueckiger: Okay. And then the next one is on the tariffs for this year. I realize you were talking about 15% to 19% for BELIMO, but again, in terms of margin or in terms of EBIT impact, what kind of number should we plug into our EBIT models here -- EBIT bridge models? And what kind of -- that 8% you were referring to in terms of pricing, that's for the Americas only, right? Markus Schürch: Yes. And that's for the Americas. Martin Flueckiger: Right. Okay. So just the guidance on the tariffs for 2026 in terms of margin or EBIT. Markus Schürch: Well, I mean, you can assume that this price increase is compensating the effects of the tariffs that will bring us back to a plain level that we had at the beginning of last year. Martin Flueckiger: Okay. And so are you striving for compensation in terms of absolute Swiss franc numbers or in terms of margin? Markus Schürch: In terms of margin. Martin Flueckiger: Okay. And then my final question is on CapEx and net working capital. I realize both have been up as a result of your growth initiatives. Just wondering, in 2026, what should we expect or plug into our models for this year in terms of CapEx? And also, what are you going to do with network capital? Markus Schürch: I mean regarding net working capital, the assumption is that it will remain stable as a percentage of sales. So we'll increase that gradually both on the inventory and also especially on the accounts receivable side. And with regards to CapEx, we expect a similar number like last year, so an elevated CapEx also for 2026. Martin Huesler: Martin Hüsler, Zürcher Kantonalbank. I have a question on retrofit. Obviously, the economy is quite convincing. First question, what share in terms of sales is now retrofit? And do you see the same good dynamic in Europe as in the U.S.A? And generally, do you get now much more projects because you can prove and you have now the visibility that how much, I mean, payback of 6 months, that's amazing. This should result in a high demand, I expect. What do you see there in your -- maybe your project pipeline? Lars van der Haegen: Well, thanks for the question. I mean in general, retrofit new building business represents about 40% to 50% of our sales and retrofit about the rest. And this should accelerate overall. Of course, there are some studies, for instance, in the European Union that says it should be threefold the retrofit rate in order to achieve the climate objectives. And this should accelerate in general. What we do with our initiatives, we call it also business development. It really helps to sell retrofit opportunities for our customers. We are out there supporting our customers to sell these opportunities because it's, of course, also capacity problem in the market, right, because we have still lack of skilled labor. And if this labor is occupied with new buildings, then they do not have time to do the existing buildings and doing the sales in existing buildings. So there's a big potential to increase the sales in retrofit in existing buildings. That's why we have these examples. So we do that. It's actually, I would say, hard work. This is not just a market that grows even though, of course, the financials are so convinced. It's literally 1 to 2 years max payback on most of these opportunities. So everybody, all building owners, most building owners should invest in these opportunities. But we have to promote it, and that's why we have this initiative. Could I answer your question? Martin Huesler: Maybe another question on data center again. You were alluding to, I think, CHF 40 million to CHF 60 million per gigawatt. And I think we already talked about this with the sales numbers. But where do you stand -- stood in '25? And maybe also, what was the share of liquid cooling more or less in '25 and where can you grow to for you in the next couple of years? Lars van der Haegen: Yes. Maybe in share of liquid cooling, there is still -- every data center today, there's always a part air cooled and a part liquid cooled. So still, if you do liquid cooling, you have about 80% of the heat rejected. If you do with liquid cooling, about 20% is air. And because there's not everything can be captured with the liquid cooling. So this is -- the technology will increase this, but we can bring it to 90%, 95% liquid cooling, but there's still a rest that has to be air cooled. The air-cooled portion is also growing that what we see in the numbers with our Damper Actuators growth in data centers actually growing also still significantly and the air cooled comes in addition. So this has, in many areas, only started with water cool systems, liquid cool systems. So there's still a big potential there with this shift. So newly planned buildings, of course, tend to be planned liquid cooled. I would say about 60%, 70%, but there's still -- a lot of those are air cooled because, for instance, colocation, data centers and so there's high flexibility required, they still work with traditional systems as well depending also on the application, right? Then there is also a retrofitting activity there, data centers that have been built or that are in -- that have been planned so far that they are converted to liquid cooling. So that's also an aspect. So that it's kind of the low-hanging fruit in increasing the capacity for this liquid cooling applications. But there's still a lot of potential in that area for growth. Unknown Analyst: [indiscernible]. Can you disclose how much you will spend for your capital -- for your expansion plans in the U.S. and for the group totally? Markus Schürch: I mean in the U.S., it's a twofold capacity expansion program, as Sarah mentioned. So we have leased 2 buildings. So that's for the short-term planning. And then we will also build on a new building for the longer term in the U.S., but that's down the road a couple of years' time. So at the moment, we mainly have investments into the fit-out part. So that's a fraction of the overall CapEx that we now have with our own building in Switzerland. But over the medium term, we'll then also invest into an own building in the U.S. Unknown Analyst: [indiscernible]. I have 2 questions. With regard to your CapEx plans for the U.S. If I'm correct, it's mainly on warehousing. So it's on logistics. Do you plan to also have a local production there? And then with regard to your CapEx plans, you said next year, in absolute numbers, it will be roughly at the same level as '25. When will your current CapEx cycle be completed? Markus Schürch: Okay. So thanks for the question. So looking at the investments into the U.S. is not pure logistics. So it's customizing and logistics. So that's the finalization of the products. And that's not -- that has also an assembly part of it. So just making the last step of the customization of the product. We already do an assembly part in the U.S. About 30% of the assembly work for the U.S. business is done in the U.S., and that will gradually increase also in the future and that's part of the capacity expansion programs in the U.S. So short term, really focusing on customers and logistics, medium-term also shift more local manufacturing or assembly as we do mostly an assembly part in our own building. Now if you look... Unknown Analyst: Sorry to interrupt. Do you have a target for local assembly in the U.S.? So when you have 30% today, are you going to double that? Markus Schürch: I mean it's clear we also follow their strategy of a local production for the local market. And that has 2 aspects. So first of all, shifting our own work into the U.S. to have also a balancing effect both from a natural hedging perspective, but also from a supply chain security. And medium term also have more local supply base to have also there more stability and more resilience in the supply chain. Obviously, that's a multiyear project. But given the sales growth we have now in the U.S., that's clear the plan going forward. And coming to your second question. So the investment plan, what we have so building on the capacity expansion, that's a multiyear program and it will last for probably the next 3 to 5 years. Stephan Gick: Great. If there are no further questions in the room, we now move to questions via phone. Operator, please go ahead. Operator: First question on the phone is from [indiscernible]. Unknown Analyst: Can you hear me? Markus Schürch: Yes. Unknown Analyst: Okay. [indiscernible] from Baader Europe. Just a question on the data center, please. I understand that you emphasized a lot on this because it's a very big market and a growing market. So I was just wondering about the competition how you feel about the competition? Is it rising or not? And will it be enough stake, I mean, for everyone as well. Yes. If you can elaborate a bit more on this, please. And of course, you can give us some number on the addressable market as well it would be good. And the other question was on working capital. I understand that the growing business will, of course, require more and more working capital, but I was just wondering if there are any programs that are planned in terms of digitalization or AI-driven working capital management in order to gain efficiency. If you can help us on that as well, it would be helpful. Lars van der Haegen: Do you want to answer maybe the second one, Markus. The first one wasn't so clear. Maybe it was something regarding competition, but maybe you can repeat it afterwards. Let's answer first the second one, right? Markus Schürch: Yes. Let's go into details of the working capital management. So we assume about 15% of sales in inventory is our key advantage what we have. Lars mentioned and Sarah mentioned, one of our key advantage against the competitor is the very short lead time we can offer and that obviously requires a decent level of stock. Therefore, our goal is to have about 15% of sales on inventory. At the moment, we're slightly ahead of that. That is in line with, obviously, with the strong growth that we had and also the planned changeover of the products towards the new generation. So that will remain a higher level of inventory over the next 2 to 3 years and then the plan is going back to 15%. But we will never have a very small working capital level as this is a key competitive advantage, and we will maintain that. Stephan Gick: I think the first question has been about competitive situation in data centers, right, and whether there could be potential new entrants coming into it. And I think also here, I mean, Sarah already gave the answer with our strong competitive advantage generally, which are also valid for data centers, right? And obviously, we also do joint R&D together with chip manufacturers, but also with data centers, for instance, in cybersecurity. And keep also in mind, I mean, this is a highly innovative area, data centers, right? So here, you need to work together with the technology leader. And I think so these prospects also in this area are really good for us also midterm. Lars van der Haegen: And maybe also to mention that, now of course, as this is booming, so many companies would like to jump on this bandwagon. But it's not so easy to join a boom during the boom. And we have been in this industry since 2 decades that we have supplied Damper Actuators into data centers to these hyperscalers. And so our brand is really well established in this market. And then as Sarah has demonstrated, so we now make sure that we continue to provide very best service to this industry to remain the leader and to expand actually our position that we have also with the economies of scale and then also with our global footprint and a very agile organizations that we are that we can leverage to supply these data centers. As also Sarah has shown, it's sometimes quite complicated each data center project because the supply chain is -- comes from all over the world into one location. And this needs also a lot of agility by supplier by us to provide all these services during this fulfillment phase of delivering components into the final destination. Stephan Gick: Next question, please? Operator: Next question is from Chase Coughlan from Van Lanschot Kempen. Chase Coughlan: I just have 2. Maybe starting off and going back to the data center dynamics. Just based on your '26 guidance and if we assume a bit the rest of the business continues sort of growing at the same rate, it really implies the massive drop off in the growth momentum seen in that data center portion of your business. So I'm just curious if you can help me reconcile what you're expecting there. If I'm reading that right. I think most other players exposed to the same vertical are suggesting that they're seeing accelerating growth there. Sort of any more color on that data center growth expectations would be very helpful. Markus Schürch: Well, let me take this one. So I mean, we -- as I mentioned, we expect a base growth in our HVAC business and then a special growth on data center. As you mentioned there, it depends a bit on what is the investment, but especially also what is then the actual fulfillment of the project. Those are large infrastructure projects. And increasingly demanding becomes the supply of energy of electricity as they are consuming big time electricity. And that is starting to also impact the deployment rate. So it's not only a question of the investment that goes in, but also a question of how quickly this can be executed. And therefore, there's a high upside potential also if that's going to be accelerated on the deployment case and then obviously also there, a higher growth rate is possible on the data center side. Chase Coughlan: Okay. Perfect. Yes. That makes sense. And then maybe my second question, regarding the top line guidance. Do you have any kind of specific expectations around the phasing of that growth in the first half versus second half? Should it decelerate or accelerate throughout the year? Or should we expect somewhat stable? Markus Schürch: We don't expect the changing behavior of the dynamics, and therefore, no specific seasonality of the 2 half years. Stephan Gick: The next question, please. Operator: Next question is from Sebastian Vogel from UBS. Sebastian Vogel: I've got 3 questions. I ask them one by one. The first one is a quick follow-up. So to the guidance for '26, does that sort of mean your underlying growth for the non-DC business is supposed to be around like 9% to 10%, and then you have the remaining 40% to 45% for data center. Is that the right thinking? Markus Schürch: Well, that's about the right thinking exactly. Sebastian Vogel: Great. Second thing is on pricing. I mean, you elaborated a couple of times there. But nonetheless, sort of a group-wide number. If you can help us there, what sort of the net pricing you think will be feasible for you for 2026, adding up or aggregating across all regions? Is there a number that you can share with us? Markus Schürch: Look, we just can give you the general price increases. So we have got -- we've mentioned is 8% in the U.S. The U.S. is roughly 40% of the overall business. So that translates then to something like 3%, 3.5% overall. And then we have the normal price increase in the other region, which is in the range of 1% to 2%. Sebastian Vogel: Got it. And then the last question is with regard to the margin and the FX impact for 2026. Do you have some sort of like number on hand like a 10% change in U.S. dollar is having whatever basis points impact on your margins that you can share there? Markus Schürch: Yes. We can share roughly 10% weakening of the dollar has an impact of about 150 basis points on the margin. That is always assuming that all the other currencies stay stable. And then there's also an important development, how is the euro developing as a lot of the material cost is denominated in euro. So if there's also then a shift and a weakening of the euro in parallel of the dollar, there's also an offsetting effect in there. So it's a maximum effect of about 115 basis points of 10% weakening of the dollar. Stephan Gick: Next question, please. Operator: Next question is from [indiscernible] with [indiscernible] Intelligence. Unknown Analyst: I just have 1 on depreciation. Can you please help us explain what depreciation assumption you are modeling for your 2026 EBIT margin guidance? Is it reasonable to expect that we can see a step-up in depreciation and amortization expenditure as they follow the CapEx trajectory? Markus Schürch: Well, you're correct. Gradually, the depreciation rate will go up with the strong investments. But bear in mind, we are investing into building with a very long depreciation time as well. Therefore, the effect is somewhat lower than from what you would expect from the higher investments on CapEx side. We don't share an exact number for '26. Stephan Gick: Okay. Next question, please. Operator: The next question is from Fabian Piasta from Jefferies. Fabian Piasta: Can you hear me alright? Stephan Gick: Yes. Loud and clear. Fabian Piasta: Great. Okay. So you were elaborating on medium-term horizon or outlook. I understand that is 9% to 11% sales growth and between 30 and 35 bps on margin. Would you be able to define the time horizon for that medium-term growth? Are we looking at 5 years? Are we looking at 10 years? Second question would be on EBIT margin 2026. So in order to get to where consensus is, let's say, 21.5%, that would require 85 basis points year-over-year from the current margin. This looks actually durable. And obviously, markets didn't really like the cautious EBIT guidance. So where do you think are the biggest headwinds apart from tariffs and FX? And the last question maybe on the dynamic and change in data center projects. So what has really changed? I mean I remember first half of 2025 was still very air heavy. I think there's probably going to be some acceleration in liquid cooling in the second half. Do you see a major shift in, let's say, maybe from brownfield to greenfield in 2026 supporting further growth in data centers? Lars van der Haegen: In the first question maybe regarding the horizon there that's really related to our long-term strategy. That's about a 10-year horizon where we are planning our growth rates and development also of our profitability. And this is very important because when we develop new products, new applications, you have an R&D cycle and the product introduction cycle. And that, in total, takes about 7 years to become profitable right, from an idea to profitability can also be longer. And so building up a market, a new product range and on takes a decade or more. That's why we need this long-term strategy and also why we communicate that this is our ambition to have that growth level. And then the second question was then back to '26 that I give back to Markus. Markus Schürch: We look on the margin, we guided on this ahead of 20%. And as you mentioned, I think the uncertainty is extremely high this year. I mean, you've seen the tariff situation can change basically overnight. And most likely, we'll see other tariff regimes in the course of this year. Then also the impact of the FX, that's also very, very broad. The forecast where the dollar is at the end of the year are very widespread. So that's obviously also a very strong impact on top and bottom line. And the third key element is obviously the sales growth of this year. So the higher the sales growth, also the higher the operational leverage, and that also has then an effect on the EBIT margin. So overall, a very high uncertainty. And therefore, also, we are only guiding on this 20% plus. Stephan Gick: I think you had a third question on data center trends, right? Fabian Piasta: Whether you see a shift in projects. Lars van der Haegen: I mean, on data centers, there's, of course, a lot of information around. And I think obviously, there's a lot of investments that have been announced by the hyperscalers that you are likely aware of and that's very transparent that communication to some degree. And then it's also, of course, the colocators that are investing. And then there's also corporate data centers. There's all the hyperscalers, corporate data centers, corporate or government and then you have the colocators. So this is, of course, also if you go into the details, a market of many players. And so many investments are happening. So this -- last year, I think the overall investment was depending on the sources CHF 400 million to CHF 500 billion worldwide, predominantly in the U.S., about CHF 300 billion, some sources go with higher numbers. And then this year, '26, this would higher and then '27 even higher. But then again, Markus pointed out there are many constraining factors to this. Of course, the energy but also the supply chain overall, there are some components from some manufacturers that have lead times until 2030, transformers and things like this. And so that will be -- we'll find out what can be really then applied of all these investments and what the time horizon, how this will play out over the next years. Stephan Gick: Okay. Thank you. Then I think we have one final question online. Cedar. Cedar Ekblom: I have 2 questions. Can you please talk about what you're seeing from a replacement demand perspective in the U.S. in the data center vertical? I know it might be a bit early but this has been discussed as a potential growth kicker going forward. So it would be helpful to hear what you're hearing from your data center customers. And then can you talk a little bit more about your new digital generation of products. You made quite a big point of this in the presentation. So I'd like to understand what's integrated sensors into the digital offering means, how it's helpful to your customer? And then I think you also made the point that your competitors don't do this or that you are on the only player that's sort of providing this sort of harmonized digital platform. And why are your competitors not doing this? What is the barrier to them closing the gap to you? Because it does sound quite material in terms of ease of use and deployment. Lars van der Haegen: Great. These are excellent questions. So on the last one, I could talk for another 2 hours. But maybe the first one regarding data center retrofit. So there is overall with the overall increasing in the efficiency of the overall server applications from the chipset to the overall server application. Mostly, we hear there is an economic life of about 5 years of a server. And then afterwards, it makes sense to replace it simply because of the financials. They would still run longer, depending on what application it is exactly, they might still do 7 years, 8 years, 9 years. But after 5 years, mostly, it makes sense to replace them partially. That doesn't mean that the valves are necessarily replaced or the building -- the HVAC part of the system, but it could be but that's typically the situation. Then regarding the new digital generation. I mean the features overall, it's just why competitors don't do it. It's a big investment. We are the largest -- I mean, second -- or the largest competitor, I have to say, is about half the size of BELIMO in terms of sales with the same field devices and it's probably not profitable to invest in such a platform. And managing a platform is, of course, challenging, but we have decided that part of this long-term growth strategy investing also in Damper Actuators and Control Valves, that's our existing business, investing a lot in there so that we really have a new platform that gives us this, of course, cost advantages as well. But also the flexibility to build products in the future, different products to adapt to the demands from the market. And then this overall user experience. So often when you look at competitors and their product catalogs, it's kind of a mess. It's like very -- just different products. They've sourced them from different -- just not a consistent range. And at BELIMO, we have really consistent range -- consistent look and feel and that makes it unique. And I think it's very powerful, having a platform, looking also at other successful companies. I mean, talking about these hyperscalers, they are typically successful because they manage a platform and can leverage the platform. Could I answer your questions? Otherwise, I recommend also... Cedar Ekblom: Yes. That was helpful. That's good. I just wanted to follow up quickly on the replacement point. Have you heard yet from your hyperscaler customers that they would be reusing the valves? Or is it a case of it would just be simpler to replace the valve at the same time as replacing the servers and the chips? Because I think this is an important point. We know that the service might once be replaced from a sort of economic perspective. But would it be simple to just to reuse the valves? Or do you not have color on that yet, maybe? Is it too early in the process? I understand that. Lars van der Haegen: Yes, thanks. It's a good question. It depends always, it's, of course, also when you go into details of the application, it gets complicated like everywhere. And it depends if you have, for instance, a server that's like 500 kilowatts that it requires for cooling. And then the new server is also 500 kilowatts, then you could replace that without replacing the valve. But if you have then a server that has a higher capacity than you would also require -- need to replace the valve. Then also, it depends on the overall setup. Sometimes it's just more efficient to replace everything, make everything new. And sometimes it's just easier to just replace the server setup. So it really depends on the technology that's there, but also on the preferences of the investors, the engineers what they are doing. But in general, we can say it's certainly a more retrofit intense this market segment of the data centers versus Sarah presented the 30 segments. Typically, our products, they last for more than 20 years. So they are in these buildings for 20, 30 years. And here we have, of course, a much higher rate of retrofit. They're also controlled these applications in a sense, so they are monitored and so for the uptime and the reliability of the application. So it's a more critical application than in some of the other segments. Some other segments, of course, also critical thinking about pharma, semiconductors and so on. But here, we have definitely a higher retrofit rate. Stephan Gick: Great. Then thank you, everybody. This concludes today's presentation. You are now more than welcome to join us for lunch. Thank you for your attention today, and goodbye. Lars van der Haegen: Thank you all.
Stephan Gick: Good morning, ladies and gentlemen, and welcome to BELIMO's 2025 Results Presentation. My name is Stephan Gick, Head of Investor Relations, and I have here with me Lars van der Haegen, CEO; and Markus Schürch, CFO of BELIMO. We are also pleased to have today online with us, Sarah Bencic, our new Head of Americas. Lars will start the presentation with a business and market review, then Markus will highlight the financials followed by Sarah introducing herself and BELIMO Americas. We will conclude the presentation with the outlook and take questions at the end. With that, I would like to open our presentation and hand over to Lars. The floor is yours. Lars van der Haegen: Thank you, Stephan. So good morning, everybody here at the Hotel Widder. And of course, also everybody who is here remotely. We look forward to the program today, and we conclude here then also with Q&As for everybody, also, of course, those remotely and then a reception with a light lunch, upper wish, as we call it, for those who are here, and I look forward to meeting you and talking to you this morning. Gick mentioned, we have Sarah Bencic online. Today is actually a snowstorm in the U.S. Our factory is closed today. Flights have been canceled to the U.S. those that left today from Switzerland, and -- but we still have a connection, so -- but it might be a weak connection, but yes, we will keep our fingers crossed Sarah's speech later on. 2025 was a great year for BELIMO. I start here also with a follow of our employees. We have celebrated a lot last year, 50 years, BELIMO, and that was also the reason why we thought we have to make it a strong year with great financial results because it wouldn't be fun to celebrate without good numbers. But what's really behind this result is our more than 2,700 colleagues who are working highly engaged following a purpose and a proven business model. And that's really very nice, gives me the motivation every day to -- on BELIMO and to see this company working, and it's just amazing, and therefore, we would like to dive into the details -- the summary of what happened last year in terms of financials. Our growth rate in local currencies was 23%. EBIT grew by 29% and the return on capital employed was 36%. We are proposing a dividend of CHF 10 per share. And the outlook, we expect mid-teens percentage sales growth in local currencies this year. Markus will later on deep dive a bit into this outlook. Some of the other elements will cover throughout our presentation. First, the market dynamics. Of course, a very dynamic year in terms of the data center business, obviously, we have now sales -- had sales of 17% of our total sales in the data center business. We grew slightly less than half of the growth in 2025 that the data center business was representing. From a technical standpoint, there was also more and more, of course, liquid cooling employed, but also liquid cooling at higher temperatures as it is written here, that means temperatures around 40 degrees C for a supply temperature to cool servers. That means that there is less mechanical cooling involved. So there is a so-called free cooling and mechanical cooling combined. And this is actually quite advantageous for the applications BELIMO covers because it requires more valves to handle these systems. Then the overall construction market, the nonresidential construction market was actually slightly down, minus 1% on average globally. But we've seen an uptick in retrofit opportunities, and we'll cover this later on with 2 examples. And then lastly, the overall economic environment of 2025. We had the geopolitical situation, fueled, of course, also by these tariff ideas and concepts and the negotiations now again in discussion over the weekend. And we, of course, don't know what's going to happen over the next months and years, but we know it probably will make -- keep us busy for the next 3 years talking about tariffs, managing tariffs and implementing tariffs, and Markus will actually deep dive a bit into that topic what did it mean for 2025 regarding tariffs at BELIMO. The dynamics and the markets are, of course, related to our strategy -- to our growth strategy. And we are, of course, focused long term. We have a long-term planning, a 10-year horizon on our growth strategy with our 6 initiatives. And our 6 initiatives there actually in our annual report. And remember, always -- Warren Buffet always when asked, why are you so successful. He says, well, we are reading the annual reports. And you don't have to read all our annual report. They are getting so long. But I recommend you to read Page 17. And we talk about our growth strategy there and explain the status of each of the 6 initiatives. We touched upon some of these initiatives on the data centers, in particular, I want to mention what we did last year, we actually increased our organization for data centers. We have a dedicated sales, business development organization with application consultants with product managers fully focused on data centers. We've expanded that. We built a data center application center in Singapore. And we have also designed an application center for our Danbury, Connecticut location that we are building right now, that will be inaugurated in fall. Then we have started last year, in particular, with product developments, particularly for data centers, both on the material side of valves, for instance, more that valve range is completely available in stainless steel, but also in terms of the intelligent component, the sensors and the actuation and metering, the BELIMO energy valve with special implementation of industrial automation protocols to interface and special functionality there from a software standpoint. Now our 6 growth initiatives. They are built on 3 megatrends. Always crucial that the company's success depends mainly on the underlying trends. We have 3 key trends. One is urbanization that is still -- and I checked the number again 70 million people every year we are adding to this world. So 70 million every year, we have more. And the 70 million people, 80% of them, they love to live in cities. So they are clustering in cities. And in the cities, we see that trend also that second-tier cities are developing, of course, in Asia, but also, for instance, in the U.S., cities like Austin, Nashville or Denver are growing. And you have more densities in cities, you build higher, and this requires more HVAC building automation to manage these buildings. Then climate change. That still is the single biggest challenge for us humans in the world. Every problem we have in the world gets worse, with climate change and if we do not mitigate this. And the best way to reduce CO2 is energy efficiency. Energy efficiency is the biggest fuel we have and the best way to reduce CO2. Energy efficiency measures in buildings with BELIMO components, they have 3 main advantages: Firstly, they pay for themselves. Have an example afterwards. They increase the quality of life in terms of indoor air quality, safety, and they make the building owner energy independent. So this is really very powerful, and therefore, a major trend that we are directly supporting with our business model. Then data centers. On the data centers, obviously, we have the data center trend this market segment. We have some related trends. Sarah will present afterwards, the 30 segments of the buildings, how we segment these vertical markets. Their related segments such as energy storage or semiconductors who are also benefiting from the digitalization trend and the electrification trend. And then regarding our product range. So as we integrate in building automation system, we see more decentralized application, decentralized intelligence, edge devices and so on. So it's absolutely basically playing into the BELIMO product range, the digitalization in building automation and industrial automation. And therefore, very crucial for BELIMO our platform of components, and we have launched in November, the first products built on the new digital generation. Maybe you've seen this launch video. That was -- it's a 20-minute launch video. I can recommend it on our website. And the new digital generation platform is a new platform. We have introduced the first platform in 2005, so 20 years ago. At the time, we were integrating damper actuators and Control Valves in a platform and have launched this platform and have been very successful with this. Five years ago, we invested into a new platform that, in addition to Damper Actuators, Control Valves, integrated Sensors and Meters in 1 platform and we brought the modularization level 1 degree further. So we have basically a Lego-type system here, where we have as few components as possible in the platform, and it makes us very flexible. For instance, when we integrate into a automation system, as indicated here on this depiction, we can change 1 component. Today, we have about 10 different interfaces into building automation systems. For instance, the most common used in building technologies BACnet. There is a BACnet based on a physical layer RS-485 on an IP layer and then there's BACnet Secure Connect, special cybersecurity requirements that's also on an IP level. There are 3 different interfaces. They need 3 different kind of hardware modules. And we have with this platform the opportunity to just develop 1 of these modules and put it across the whole range and put it on 20,000 components. So otherwise, if you do not have a platform, you have to make a discrete development for every component with a new PCB, a printed circuit board, and this is where it's not scalable. So this platform really makes us unique. There's no player in the market that has a platform in this area of application where we play. Furthermore, of course, the handling of our products there. It's very consistent in terms of the design. Also, the industrial design, that's important too, as we sell a lot to OEMs or original equipment manufacturers. They put our components on, for instance, an air handling unit, and we have 10 BELIMO products or an air handling unit if the industrial design looks consistent, the overall product looks better. But also, it's the same handling, how you install it, how you configure it, for instance, here with the BELIMO app, there's 1 app. There's the assistant link that's indicated here that allows Bluetooth collection. There's also NFC that's available directly on the component. So you just have a very consistent range for commissioning and, of course, for integrating. So this platform is crucial in order to, of course, supply the world with BELIMO components. We also have to invest in our capacity. So therefore, we are on track with our capacity expansion. We do follow an asset-light model. If you analyze the numbers correctly, you see that our sales per employee per FTE is CHF 445,000 per employee. Our depreciation as a percentage of sales is 2.8% so that shows the asset-light model. Also the trend is positive. So in the past, we were around over 4% of depreciation. And over the years, this came down to now under 3% and also the sales per employee increased over the years. So the trend towards this asset-light model also is positive, but we still need some buildings. So 1 that is -- in Hinwil, just to focus really on our footprint. We have now several warehouses -- external warehouses that we consolidate with the new building, we call it Nexus and that's being inaugurated end of August. And you are actually invited on September 1 for a Financial Analyst Day in Hinwil where you can visit us and we show you the new building, along with other interesting things about BELIMO. Then we inaugurated also BELIMO China, CESIM House LEED Platinum building. This I was already talking about a year ago because we inaugurated in January '25. And then we have some projects in the U.S. that Sarah will talk about. Now having a look at our growth strategy over the years. We have a growth strategy -- long-term growth target. It's always nice to look back and review that growth strategy, how did we do. And obviously, the numbers now are -- have been quite positive, but I would also look back if the numbers wouldn't be that good. We've implemented the first growth strategy in 2016 and had an average CAGR of 8.8% over the 5 years period. And then over the last 5 years, it was a 13.8% CAGR. Over the last 20 years, 10.3% CAGR in growth. So this growth strategy is working. And we actually put in the plan 2016 with the growth strategy that we would make CHF 1 billion in sales in '25, and we made it. So we are quite happy ourselves that we made this number. And we have, of course, also in our growth strategy really focusing on the growth rate long term of 9% to 11%, as communicated previously, an organic growth rate between 9% and 11%. That's the long-term growth rate, obviously, now fueled short term by some of this data center growth, but that's our long-term plan. Then important regarding the profitability, the EBIT our EBIT number. I think this chart is always good to look at because many of you are always asking and maybe later on, what will be your EBIT in 2026, and we don't know. Because you see the EBIT is going up and down that fluctuates over the year, what we see. It improved over the last 20 years from 14% to 20.8%. So that's an average of about 35 basis points. We believe that over the next years to come, we continue to improve in that range of this 30, 35 basis points over the next 5 years in midterm, long term. But of course, every year, these changes, and we have the fluctuation as, of course, indicated from the past. And I think that's a good indicator to look at also what are these fluctuations that we have on that EBIT level. Now also, I would like to point out that our growth strategy works all over the world. So looking at the top 50 countries we are selling in, it really works in more than 80% of the countries we have, the strategies work in terms for, in terms, for instance, with sensor growth, with energy valve growth and so on. The various topics that we have in our strategy work in each of these countries. And so we have really statistical evidence that it works then all over the world, and that's very powerful. Looking at the 3 markets. Markus will, afterwards, deep dive a bit into the numbers. I want to highlight some of the typical projects that we have. So our business is really widespread amongst many buildings. We still have an order size of about CHF 2,000 per order, very small. There's a lot of orders that we are processing every day, and they go into buildings, small buildings, big buildings. And here, 1 example here in EMEA, that's the Hoffmann Group in Munich. That's a new building with about 1,000 products in there. As an example, then the Embarcadero Center in San Francisco. That is a very nice case study that we actually have. There's also a link on this slide brings you to this case study on our website. There's a video. This is a 48-story Waterfront building in San Francisco, 40 years old, and it's owned by BCX. That's the formerly called the Boston properties. That's the largest listed real estate developer in the commercial building space in the U.S., and it's a great success story. They have retrofitted 6 air handling units in these buildings, large air handling units with 6 energy valves. And they are saving $130,000 per year in electricity costs that they use for -- mainly for chillers, for chilling the building, for cooling the building and so you see the investment is about -- the payback is around 6 months. The investment was around $60,000, so the $130,000 saving per year. So it's really 6 months payback. Unbelievable, great case study again. And I recommend you to watch this video that explains in detail how that works. Another project from Asia Pacific in Vietnam, Ho Chi Minh City, the second large international airport there that's being built Phase 1. There are 15,000 BELIMO field devices in that phase that we have been selling and are selling in this construction project. So that also gives you a bit an impression of an airport. There's a lot of HVAC in there and many of these BELIMO components. Here, also fully equipped from Damper Actuators, Valves, but also Sensors and Meters in this Vietnam airport. So if you have a land in Vietnam on the new airport, then think about BELIMO that makes your landing possible. Now I would like to also talk about our Building Tomorrow vision. Last year, in 2025, when we had our celebration activities, part of that was also looking into the future to '25. What will be the trends in our industry? And we conducted workshops all over the world with our customers, with industry experts to define these building trends. And these trends are in this study. We have actually them here outside. You can take a book or you can download it, of course, on the Internet. And it basically talks about technology, society, economy and the environment. And it has 3 trends for each, and then it also shows the implications for the industry. So it's very valuable, I think, in reading this as well. So if you read our Page 17 on the annual report and read this, then you really know where the journey goes for BELIMO. You know more about the business model, and you learn a lot. So I recommend you also to read that Building Tomorrow study. Then let's come to some changes on our Board of Directors. We have, first of all, our Martin Zwyssig, who is actually here today. He will be leaving aboard, unfortunately, after 15 years of service. So he is, as you know, an outstanding CFO and has contributed to BELIMO's growth from the Board level. So thank you, Martin. And we have last year, the AGM has elected his successor with Tom Hallam, the former CFO of Shimadzu. Then we have also another member of the Board who does not stand for reelection, that's Stefan Ranstrand, former CEO of TOMRA. He was also contributing over the last 6 years a lot in -- regarding actually our growth ambitions and was pushing us regarding our strategy in terms of growth and also very -- I thank him for his contributions here too from the Board level. Then we'll have a new member that we propose at the AGM. That's Karina Rigby. Karina has a strong background in engineering, strong knowledge in data centers and she is American. So a strong knowledge about the American market with our largest market and brings that experience, that diversity to the Board. She has been working with Eaton and with Siemens Energy for many years and has a great knowledge also on management and leadership experience. Also, with Karina. We will be 3 women on our Board of Directors. And of course, with Sarah Bencic, will be 3 women also in our executive committee. So we then have 6 women on our top leadership Board and Executive Committee, which is also great. And I remember 10 years ago, there were CEO on the Board and CFO on the Executive Committee, quite happy about that as well. Now let me conclude. Again, coming back to our employees, our colleagues, we've been working also a lot on over the last 18 months on our culture and our values, and we have created habits for each of the value, and we have conducted workshops actually 3-hour workshops 4 times, 3 hours discussion workshops with all our employees because it's very crucial this culture. So in our performance management process, for instance, every employee selects 1 habit and has a plan on what can he or she do with this habit to improve something, to leverage something, to take an opportunity and really work on one of these habits to improve our culture every day. Also great confirmation was this Best Employers Award from the Financial Times, Europe. There were 1,000 companies assessed. We were ranking #7, second in Switzerland, which is a great external confirmation that this cultural work works. So all we can say, good business model, good culture makes a successful company. With this, I conclude for now and would like now to -- I talked about airflows and water flows, and now we have the man who will be talking about the money flow. So I give the floor to our CFO, Markus Schürch. Markus Schürch: Thanks a lot, Lars. And also from my side, a warm welcome. It's a great honor and pleasure to be able here to present the financial results of BELIMO of last year. Lars already mentioned, 2025 was a very successful year for BELIMO. We have executed on our growth strategy and achieved a sales growth of 23.3% in local currency or 18.7% in Swiss francs, further accelerating our growth across all regions. For the first time in our history, we exceeded CHF 1 billion of sales and generated CHF 1.12 billion of turnover. A great achievement, especially in our anniversary year towards the 50th anniversary of BELIMO. With regards to the regional breakdown, the Americas has now contributed about half of the sales, EMEA 38%, and Asia Pacific 13%. If you have a closer look at the composition of this growth rate, we can see that about the majority of the growth, 19.5% is coming from volume and mix contribution. So between pure volume growth, also a lot of higher-value products like the energy valve or higher-value customer segments like the data center contributed to this strong performance. Then we had about 3.6% growth coming from price increases. That's mainly attributed to the region Americas to the U.S. where we had in-year price increases as compensation measure for the imposed tariffs. We'll come to that later on. And then lastly, the FX had a negative impact of 4.5%, leading then to this growth rate of 18.7% in Swiss francs. A bit a closer look into the various regions. This chart shows the development of our 3 regions. And you can see that all regions contributed with double-digit growth towards the overall achievement of BELIMO. First, with EMEA delivered an outstanding result with 12% growth in local currency or 10% in Swiss francs. And that is despite a very challenging market environment and key markets with a decline in construction spend, like, for example, in Germany. So focusing on retrofit or attractive segments within EMEA made this strong results possible. EMEA also benefited from a revitalizing OEM segment, and that included some restocking and supply chain buildup throughout the supply chain. Then Americas showed the strongest performance with a sales growth of 32% in local currency or 25% in Swiss francs, and that's from an already very strong basis in 2024. In there, data center accounted for about half of the absolute growth we had in the Americas, but it also means that our traditional HVAC business also grew in the high teens and showing that we have got a very broad basis of this growth. That is coming from an increasing traction also of the retrofit business and then also other high-growth verticals like high-end manufacturing in the pharmaceutical or semiconductor business and also a general very strong market environment in the Americas. Asia Pacific slightly had a growth of 29% in local currency or 23% in Swiss francs, and that's despite a very challenging market environment in key markets like China. So there, the clear focus on high-growth verticals made these strong results possible. Also, their data center was an important growth driver, including some export business in the OEM business. On this chart, we can see the development of our business -- of our 3 business lines. All business lines also grew double digit. Damper Actuator, our most traditional business line achieved sales growth of 14% in local currency or 10% in Swiss francs. And in there, the strengthening OEM was a key contributor to this overall very strong performance. Then Control Valves showed the strongest performance with a sales growth of 31% in local currency or 26% in Swiss francs. In there, obviously, the data center business was an important contributor or also the move to higher-end applications like the energy valve. Lastly, Sensors and Meters, our youngest business line showed a growth of 25% in local currency and is developing according to our plan. In '25. Sensors and Meters already contributed with 5% towards the overall sales of BELIMO and it's becoming an important business contributor for our company. This graph shows the contribution of the data center business to the overall sales of BELIMO. The data center business accounted for about 17% of the total sales in 2025 and an increasing share over the 2 half years. In the second half year, the contribution from data center was 18%. Overall, the data center business accounted for slightly less than about half of the total absolute growth we had last year. In there, obviously, the main contributor were the investments into the data center infrastructure and the high share of liquid cooling of these new applications. The high sales growth also translated into a strong EBIT performance and EBIT growth. EBIT grew by 29% to a total of CHF 233 million and that is corresponding to an EBIT margin of 20.8%, 159 basis points up from 2024. This increase was possible despite the negative effects, both from tariffs and negative FX development especially in the second half year. Tariff impact were mitigated twofold. So partly by midyear price increases we had in the Americas. And then also by supply chain flow-through, shifting about 40% of these high tariffs we had as of April -- August 1 into this year by the flow-through of the supply chain. Just if we recap a bit what happened on tariffs until April, we had a normal tariff situation like we had years ago. So we have roughly 4% tariffs for everything we import into the U.S. That was increased then in April for 1 day, to over 30% and then was reduced back to 10% plus the standard tariff. So we had then until August tariffs of about 14%. They were increased then on August 1 to 39%, plus the 4%. So we had 43% tariffs until mid-November when they were reduced back to 15% overall without the normal tariff. So that was a flat rate tariffs of 15% until last weekend and now we have got another tariff regime. So now we have got 15% plus 4%, so roughly 19%. And we will see what the future will bring. Certainly it's not the last time we'll talk about tariffs. In '25, we continued our investments into our growth initiatives. So our R&D investments totaled to CHF 76 million. That's up 3.5% from last year and corresponds to 6.7% of total turnover. Our personnel expenses increased by 11.5% to a total of CHF 295 million. Last year, we increased our workforce by 343 full-time equivalents to a total of 2,704 at the end of the year. The regional breakdown is as follows. So 59% of our workforce works in the EMEA, 26% in the Americas and 15% in Asia Pacific. The breakdown by function is 44% work in assembly and logistics; 30% in sales, marketing and distribution; 11% in research and development; and 14% in administrative and general management. This chart shows the performance of the 2 half years. Sales in local currency accelerated between the 2 half years despite a reverse seasonality due to the short December. This shows the strong momentum we have in our business. Material expenses were significantly higher in the second half year. That was impacted, first of all, by the higher tariff, but also by the FX rates that were mainly hitting in the second half year. The other effects were increasing operational expenses in line with the constant buildup of head count throughout the year. Net income increased by 24% to CHF 182 million, the foreign exchange burdened the P&L with CHF 10.4 million compared to a CHF 600,000 gain in the previous year. The strengthening of the Swiss franc against all currency, especially in the second half year was the main reason. Furthermore, we encountered a slightly higher tax rate based on higher profit outside of Switzerland. Our cash flow performance reflects the strong growth of the company. Operational cash flow amounted to CHF 185 million, absorbing a working capital increase of CHF 67 million associated with the strong growth of our company. Free cash flow, excluding the short-term deposits amounted to CHF 99 million reflecting our capacity expansion program just Lars showed that in his presentation. In the reporting period, we had a CapEx of CHF 87 million, and the main investment was obviously the building in Hinwil and the capacity expansion into the Nexus building. Looking at the balance sheet. The balance sheet is very sound. We have an equity ratio of 71% and the net liquidity of CHF 69 million. We had extremely strong capital returns, return on invested capital of 28%, a return on capital employed of 36% and the return on equity of 30%. Based on this strong performance, the Board of Directors proposing a dividend of CHF 10 per ordinary share. This is up 50 Rappen compared to the last year. This proposal corresponds to a payout ratio of roughly 68% and is sustainable, considering the growth ambition of BELIMO and the elevated investment we will face in the coming years. It's a continuation of our dividend policy of a stable and increasing dividend over year. On this chart, we can see the development of the key performance metrics over the last 5 years. All figures show a very strong development. Sales growth increased to 23% and EBIT margin constantly increased to 20.8% in 2025. Capital returns improved and achieved 27.8% measured as return on invested capital and 30.2% as return on equity. Free cash flow is impacted by the investments in growth, both on the working capital level and also on the investments into capacity. Furthermore, we continued our efforts on sustainability and our ESG performance is well on track. Our SBTi targets were approved, and we are on track with our greenhouse gas reduction path. Our Scope 1 and 2 emissions were reduced by 14% compared to our base year of 2022 and our Scope 3 emission by product solds were also reduced by 14%. And we help our customers reducing their greenhouse gas emission and continue our efforts towards their Scope 1 and 2 reduction emissions. Retrofit, as Lars already mentioned there, and showed some of the example, is a very strong example of this investment and this contribution at our customer sites. Furthermore, we also contribute with our -- with the BELIMO Climate Foundation, decarbonizing buildings of nonprofit organization and with that, compensating part of our greenhouse gas emissions. Our efforts are well recognized, and we are rated AAA by MSCI and ecovadis silver for our efforts. Let me conclude on the last year's business. So overall, 2025 was extremely successful for BELIMO. We implemented our growth strategy that paid off, and we could accelerate our sales growth to 23% in local currency. EBIT Margin expanded by 159 basis points, absorbing the negative impact both from tariffs and the FX effects. Capital returns are very high, and the balance sheet is sound. We offer an attractive dividend of CHF 10 per share to our shareholders, reflecting the investments into the future lows. Let me conclude with the calendar. So the Annual General Meeting will be held on March 23. The ex dividend date is March 25, and the dividend payment is scheduled for March 27. We will issue our half year results on July 20. And as Lars already mentioned, we will host an investor event on September 1 in Hinwil. And there you will have the opportunity to join the inauguration of our new building, and you will also get insights into building tomorrow and our new product family. With this, I will hand over to Sarah for a short introduction of herself and then an update on the Americas business. Sarah Bencic: Thank you, Markus. So as you may all have seen I joined BELIMO on October 1, and I've spent the past several months working to build a deep understanding of the organization as well as a robust plan to ensure a smooth transition with support from my predecessor, Jim Furlong; as well as the broader Americas team. And so I'm excited to formally step into my role as Head of BELIMO Americas as well as a member of the Executive Committee next week, taking on leadership of a healthy growing regional business that continues to benefit from the consistent execution of an effective multiyear growth strategy. My experience in several large global manufacturing organization spans leadership roles across multiple functions and industries, including 5 years in the HVAC building automation industry with Honeywell. And I'm looking forward to leveraging the expertise I've gained through these experiences to continue moving our strategic growth plan forward in the Americas and optimizing for growth as we continue to build scale. Similar to the global sales trajectory that Lars walked through, growth in the Americas has accelerated over the past 10 years. During that period, we experienced a 12.7%percent sales CAGR in local currency, but the acceleration grew from 6.2% CAGR in local currency over the first 5 years to 16.6% over the prior 4 years and increasingly to nearly 32% of growth in local currency year-on-year last year. The majority of our growth last year came from our core HVAC verticals, and this growth stemmed from a few different areas, increased momentum in our RetroFIT+ program, the strength of our customer support and training offerings and increased adoption of higher-value solutions as well as our Sensors and Meters business line. The remainder of our growth came from the data center vertical, which was driven both by rapidly increasing capacity and the shift to liquid cooling. And both of these increases were amplified by the approach that we've been taking to owner engagement that I'll walk through in a little bit more detail. As Markus outlined, an additional event which impacted our Americas business was the imposition of increased U.S. tariffs on imported components. And that tariff rate was changed by the U.S. government several times throughout the year, making it extremely difficult to predict the longer-term landing point, still making it challenging to predict that. However, despite the volatility of these changes, we used a more measured approach in our response. Taking a planful, single midyear price increase that was communicated to customers well in advance. And our customers appreciate us taking such a measured and planful response, which allowed us to preserve customer loyalty while still securing price growth to mitigate our tariff exposure. The growth drivers for 2025 are underscored by our general competitive advantages that we lever across the regions, including here within the Americas. We've built trust with our customers through our focus on quality and our reliable short lead times. We are viewed as experts in our market due to our global leadership position and our pure-play focus on field devices. And serving in this role as a trusted expert allows us to build and maintain the long-standing customer relationships that support sustainable growth. What's more is that we're able to leverage these competitive advantages across all of the 30 verticals that we serve. With these verticals spanning public access buildings, like education and health care, production buildings, including high purity manufacturing and data centers, infrastructure buildings, including warehousing and residential buildings, including high-rise residential as well as a variety of verticals that don't fit cleanly into any of these one specific categories. And this breadth of verticals really provides us a wide range of growth opportunities. Returning to our 2025 growth specifically, increased solution adoption and the strength of our customer value offerings played key roles across all of our core HVAC verticals. On the solutions side, our growth was a result of multiyear awareness efforts to drive adoption of more advanced technologies and our full portfolio breadth. Our energy valve is a fantastic example of one of our more advanced and higher-value solutions. And while we did see growth of the energy valve stemming from the data center vertical, we also saw increased energy valve sales coming across our core HVAC markets through our retrofit opportunities. From a breadth of portfolio perspective, we saw increased adoption of our Sensors and Meters business line, resulting from strong multiyear cross-selling efforts. We also kept a strong focus on maintaining a differentiated customer experience. Some examples of this include increasing the team by 20% year-on-year to over 720 FTEs to maintain short lead times and high customer engagement levels while accommodating our growth. In addition, we delivered over 50% more in-person training courses year-over-year to advance customer understanding, build brand and product familiarity and help our customers address the trade skills talent scarcity. As mentioned previously, RetroFIT+ also gained momentum globally and as well as here in Americas across the core verticals. We saw a 30% year-over-year increase in the number of converted projects in the region. One great example of the power of this program is the work that we've done with the Paramount Group. Paramount completed RetroFIT+ buildings and 3 RetroFIT+ projects in 3 key buildings in New York City to start preparing for upcoming local energy reduction regulations. These projects reduced energy consumption across these buildings by over 4 million-kilowatt hours annually, which translated to over USD 1 million of energy cost savings annually. In addition, these projects enabled Paramount leveraging substantial rebates from their local utility to help fund the investment in these projects. And what we're seeing as we get further from some of these initial project completions is it's opening up 2 sets of future opportunities for RetroFIT+. The first is the opportunity to complete additional RetroFIT+ projects in additional buildings at that same portfolio management group owns. And the second is that as the stakeholders that were a part of this powerful project advance their careers and move into new property management groups, they can choose to implement RetroFIT+ projects in these new organizations and creates new opportunities there as well. Within the data center vertical, our owner engagement approach has been key to our growth. The number of stakeholders and the interactions between stakeholders in the data center space is a bit complex. Data center owners and technology providers collect inputs from research organizations and mechanical and electrical consultants. And these data center owners and technology providers or hyperscalers and chip providers then influence and transact with general contracts -- general contractors who influence and transact with mechanical contractors, who influence and transact with a variety of stakeholders shown here in the dark teal that we, as BELIMO transact with directly. Over 5 years ago, we established a dedicated data center organization whose exclusive focus is to engage with these key stakeholders that ultimately influence the entire purchasing process. This team partners directly with data center owners and technology providers to inform decisions on specifications. And in addition, they participate in key research organizations to ensure that we collect insights into future application needs in this rapidly developing industry. This long-term dedicated focus on these key decision-makers has been a critical enabler for our strong adoption of BELIMO solutions and data center applications. As we shift the lens from the retrospective of 2025 to the outlook of 2026 for Americas, the focus does not change. We will continue to execute on our growth strategy. We expect continued double-digit local currency growth in 2026, and our drivers to achieve this growth remain the same. Increased adoption of higher-value solutions and strong customer value offerings like RetroFIT+ in our core HVAC verticals as well as continued capacity growth and deployment of liquid cooling in data centers. We'll need to ensure that we remain focused on maintaining operational excellence and a differentiated customer experience as we continue to scale. So we'll be making strategic investments in both capacity expansion as well as people. We've signed leases for new buildings in Sparks, Nevada as well as Stratford, Connecticut that will nearly triple our operational footprint in the U.S. from a square meters perspective. And we will -- we are planning to increase the team size by 16% to about 840 FTEs to ensure we can maintain short delivery lead times and continue to offer a differentiated customer experience. And with that, I will hand it back to Markus to share our global outlook for next year. Markus Schürch: Okay. Thanks a lot, Sarah. Let me conclude with the overall outlook for BELIMO for next year. So overall, we expect the continuation of the market environment and the positive momentum for BELIMO both in the general HVAC industry, but also specifically in the data center vertical. We expect the strong top line performance with sales growth in the mid-teens. That takes into account the favorable market environment and the strong basis of 2025. Regarding margins, our EBIT margins will remain strong and are expected to be ahead of 20%. Obviously, there are very significant risks and uncertainty. Above all, obviously, the unforeseeable tariffs going forward and also the foreign exchange volatility that can impact both top and bottom line of BELIMO. Our data center business is linked to the investments of -- into data center and the respective CapEx mainly of the hyperscaler. This has both elements, a downside element in case of a slowdown of investment but also an upside element in case of accelerated investment or especially also faster deployments of the infrastructure. Independent of the short-term development of the market, we will continue our investments into our growth strategy. So we'll continue our investments into capacity and also continue our CapEx program and likewise, we'll also build up and increase our investments into our growth initiatives going forward. With this, I conclude the presentation and hand back and open the floor for questions, and we'll hand back to Stephan for the moderation of the question-and-answer session. Stephan Gick: Thank you, Lars, Markus and Sarah for the presentation. Now it's time for Q&A. [Operator Instructions] We will now start with questions in the room. Please first introduce yourself and the institute you're representing. Patrick Laager: Patrick, Berenberg. Three questions. You said you're guiding for 9% to 11% sales growth for the midterm or long term. Now assuming 8% to 9%, but please correct me growth in building applications and your exposure for data center to increase from 17% to, let's say, I don't know, 30% in the next 3 years, 4 years and assuming a normalization of growth in data center, I get -- and this is a very reasonable number, I get 15% growth on average. And you still stick to your 9% to 11% growth? Do you have any indications that potentially growth will slow down significantly in the next 2, 3 years? This would be my first question. Markus Schürch: Yes. For sure. Thank you for the question. It actually -- if you look at the overall model now looking at 10 years, we stay with this 9% to 11% because you have, of course, an acceleration in growth over the next years, but maybe '26, '27, '28, but then, of course, these investments could also decrease then again from this very high level that we are today. We have also to remember that these are extremely high levels that we have today in this investment boom. And therefore, there will be decrease, of course, at one point of that portion of the DC business, that impacts then the number. Therefore, if you look at it, we remodeled this, then it comes down again to between 9% and 11% eventually. Patrick Laager: And then question 2 and 3 combined here. Can you provide any insights about the pricing dynamic. If I remember well, you increased prices by 8% in North America or in the U.S. and you were planning to increase prices by 8% again early this year. The question here is, did you increase prices last month in the U.S.? And what kind of price effect should we model overall for '26? This would be one question. And the last question is about U.S. tariff exposure. You said -- you explained actually in a very detailed way how tariffs have developed last year. Can you share how much was the average of your U.S. tariff exposure last year? And how much would -- you can't really expect this year, but the average for '25 would be very helpful here. Markus Schürch: Okay. So thanks for the questions. So I mean you summarized well, our pricing actions in the Americas. So we increased about 8% midyear. And that they become effective throughout the year. That was the most of this 3.5% price increase what we saw as the contribution on the overall sales. We've increased list price again by about 8% as of January 1, and they will also now gradually be implemented as there. We have got standing orders that are still conducted according to the old prices. And gradually, we'll see now these price increases. Now with regards to the impact of tariffs. So for this year, obviously, it will be in the range of 15% and 19%. So depending on what's going to happen or something completely different in 150 days from now. And then with respect to the last year, so the average number is also in this -- towards this amount as there were a season of 4% and then a season of higher of about 10%, 14% tariffs short period of very high tariffs and then going back to 15%. Tobias Fahrenholz: Tobias Fahrenholz from ODDO BHF. Staying with growth and the sales outlook, how dynamic was your start into the year, so Jan, Feb so far? And what is the rough percentage that you have put in for the data center business? That would be the first part. And the second part then maybe on M&A. Has this become more in focus now? I mean the dividend is only slightly up. Should we read something into it? And which target areas would you look for? Markus Schürch: Okay. So let me start with the business. I mean, we don't obviously share all details, but we had a very good start into the year. And that is also the basis though, is we don't see a change of the market dynamics. Obviously, we don't disclose the details of how the composition of the sales is. That is then information we'll share again with the half year results. Then with regards to M&A, it's an opportunistic topic. We are actively looking into it. And it's always an opportunity. We will see some bolt-on acquisition, especially on the technology side. There's obviously nothing to read in from a dividend policy. This roughly 70% payout ratio that is in line with the investments that we need to do. And we want to finance that based on the operational cash flow, both the working capital and also the capacity increase. Martin Flueckiger: Yes. Martin Flueckiger from Kepler Cheuvreux. I've got 3 questions, and I'll take one at a time. First one is on your elaborations markets regarding product mix. Now I understand the impact was there on the top line growth, but just wondering whether you could clarify or elaborate a little bit on the impact on the EBIT margin in 2025 and what kind of impact or contribution you're expecting for margins in 2026? Markus Schürch: I mean, as mentioned, we have got there a positive contribution from the higher-end application and that also has a positive effect on the EBIT margin and was obviously part of the higher margin that is coming also from higher-end applications. Martin Flueckiger: I understand, but could you give us a little bit of a flavor of how much that was quantitatively? Markus Schürch: No, we don't disclose the details of the buildup of the margin. Martin Flueckiger: Okay. And then the next one is on the tariffs for this year. I realize you were talking about 15% to 19% for BELIMO, but again, in terms of margin or in terms of EBIT impact, what kind of number should we plug into our EBIT models here -- EBIT bridge models? And what kind of -- that 8% you were referring to in terms of pricing, that's for the Americas only, right? Markus Schürch: Yes. And that's for the Americas. Martin Flueckiger: Right. Okay. So just the guidance on the tariffs for 2026 in terms of margin or EBIT. Markus Schürch: Well, I mean, you can assume that this price increase is compensating the effects of the tariffs that will bring us back to a plain level that we had at the beginning of last year. Martin Flueckiger: Okay. And so are you striving for compensation in terms of absolute Swiss franc numbers or in terms of margin? Markus Schürch: In terms of margin. Martin Flueckiger: Okay. And then my final question is on CapEx and net working capital. I realize both have been up as a result of your growth initiatives. Just wondering, in 2026, what should we expect or plug into our models for this year in terms of CapEx? And also, what are you going to do with network capital? Markus Schürch: I mean regarding net working capital, the assumption is that it will remain stable as a percentage of sales. So we'll increase that gradually both on the inventory and also especially on the accounts receivable side. And with regards to CapEx, we expect a similar number like last year, so an elevated CapEx also for 2026. Martin Huesler: Martin Hüsler, Zürcher Kantonalbank. I have a question on retrofit. Obviously, the economy is quite convincing. First question, what share in terms of sales is now retrofit? And do you see the same good dynamic in Europe as in the U.S.A? And generally, do you get now much more projects because you can prove and you have now the visibility that how much, I mean, payback of 6 months, that's amazing. This should result in a high demand, I expect. What do you see there in your -- maybe your project pipeline? Lars van der Haegen: Well, thanks for the question. I mean in general, retrofit new building business represents about 40% to 50% of our sales and retrofit about the rest. And this should accelerate overall. Of course, there are some studies, for instance, in the European Union that says it should be threefold the retrofit rate in order to achieve the climate objectives. And this should accelerate in general. What we do with our initiatives, we call it also business development. It really helps to sell retrofit opportunities for our customers. We are out there supporting our customers to sell these opportunities because it's, of course, also capacity problem in the market, right, because we have still lack of skilled labor. And if this labor is occupied with new buildings, then they do not have time to do the existing buildings and doing the sales in existing buildings. So there's a big potential to increase the sales in retrofit in existing buildings. That's why we have these examples. So we do that. It's actually, I would say, hard work. This is not just a market that grows even though, of course, the financials are so convinced. It's literally 1 to 2 years max payback on most of these opportunities. So everybody, all building owners, most building owners should invest in these opportunities. But we have to promote it, and that's why we have this initiative. Could I answer your question? Martin Huesler: Maybe another question on data center again. You were alluding to, I think, CHF 40 million to CHF 60 million per gigawatt. And I think we already talked about this with the sales numbers. But where do you stand -- stood in '25? And maybe also, what was the share of liquid cooling more or less in '25 and where can you grow to for you in the next couple of years? Lars van der Haegen: Yes. Maybe in share of liquid cooling, there is still -- every data center today, there's always a part air cooled and a part liquid cooled. So still, if you do liquid cooling, you have about 80% of the heat rejected. If you do with liquid cooling, about 20% is air. And because there's not everything can be captured with the liquid cooling. So this is -- the technology will increase this, but we can bring it to 90%, 95% liquid cooling, but there's still a rest that has to be air cooled. The air-cooled portion is also growing that what we see in the numbers with our Damper Actuators growth in data centers actually growing also still significantly and the air cooled comes in addition. So this has, in many areas, only started with water cool systems, liquid cool systems. So there's still a big potential there with this shift. So newly planned buildings, of course, tend to be planned liquid cooled. I would say about 60%, 70%, but there's still -- a lot of those are air cooled because, for instance, colocation, data centers and so there's high flexibility required, they still work with traditional systems as well depending also on the application, right? Then there is also a retrofitting activity there, data centers that have been built or that are in -- that have been planned so far that they are converted to liquid cooling. So that's also an aspect. So that it's kind of the low-hanging fruit in increasing the capacity for this liquid cooling applications. But there's still a lot of potential in that area for growth. Unknown Analyst: [indiscernible]. Can you disclose how much you will spend for your capital -- for your expansion plans in the U.S. and for the group totally? Markus Schürch: I mean in the U.S., it's a twofold capacity expansion program, as Sarah mentioned. So we have leased 2 buildings. So that's for the short-term planning. And then we will also build on a new building for the longer term in the U.S., but that's down the road a couple of years' time. So at the moment, we mainly have investments into the fit-out part. So that's a fraction of the overall CapEx that we now have with our own building in Switzerland. But over the medium term, we'll then also invest into an own building in the U.S. Unknown Analyst: [indiscernible]. I have 2 questions. With regard to your CapEx plans for the U.S. If I'm correct, it's mainly on warehousing. So it's on logistics. Do you plan to also have a local production there? And then with regard to your CapEx plans, you said next year, in absolute numbers, it will be roughly at the same level as '25. When will your current CapEx cycle be completed? Markus Schürch: Okay. So thanks for the question. So looking at the investments into the U.S. is not pure logistics. So it's customizing and logistics. So that's the finalization of the products. And that's not -- that has also an assembly part of it. So just making the last step of the customization of the product. We already do an assembly part in the U.S. About 30% of the assembly work for the U.S. business is done in the U.S., and that will gradually increase also in the future and that's part of the capacity expansion programs in the U.S. So short term, really focusing on customers and logistics, medium-term also shift more local manufacturing or assembly as we do mostly an assembly part in our own building. Now if you look... Unknown Analyst: Sorry to interrupt. Do you have a target for local assembly in the U.S.? So when you have 30% today, are you going to double that? Markus Schürch: I mean it's clear we also follow their strategy of a local production for the local market. And that has 2 aspects. So first of all, shifting our own work into the U.S. to have also a balancing effect both from a natural hedging perspective, but also from a supply chain security. And medium term also have more local supply base to have also there more stability and more resilience in the supply chain. Obviously, that's a multiyear project. But given the sales growth we have now in the U.S., that's clear the plan going forward. And coming to your second question. So the investment plan, what we have so building on the capacity expansion, that's a multiyear program and it will last for probably the next 3 to 5 years. Stephan Gick: Great. If there are no further questions in the room, we now move to questions via phone. Operator, please go ahead. Operator: First question on the phone is from [indiscernible]. Unknown Analyst: Can you hear me? Markus Schürch: Yes. Unknown Analyst: Okay. [indiscernible] from Baader Europe. Just a question on the data center, please. I understand that you emphasized a lot on this because it's a very big market and a growing market. So I was just wondering about the competition how you feel about the competition? Is it rising or not? And will it be enough stake, I mean, for everyone as well. Yes. If you can elaborate a bit more on this, please. And of course, you can give us some number on the addressable market as well it would be good. And the other question was on working capital. I understand that the growing business will, of course, require more and more working capital, but I was just wondering if there are any programs that are planned in terms of digitalization or AI-driven working capital management in order to gain efficiency. If you can help us on that as well, it would be helpful. Lars van der Haegen: Do you want to answer maybe the second one, Markus. The first one wasn't so clear. Maybe it was something regarding competition, but maybe you can repeat it afterwards. Let's answer first the second one, right? Markus Schürch: Yes. Let's go into details of the working capital management. So we assume about 15% of sales in inventory is our key advantage what we have. Lars mentioned and Sarah mentioned, one of our key advantage against the competitor is the very short lead time we can offer and that obviously requires a decent level of stock. Therefore, our goal is to have about 15% of sales on inventory. At the moment, we're slightly ahead of that. That is in line with, obviously, with the strong growth that we had and also the planned changeover of the products towards the new generation. So that will remain a higher level of inventory over the next 2 to 3 years and then the plan is going back to 15%. But we will never have a very small working capital level as this is a key competitive advantage, and we will maintain that. Stephan Gick: I think the first question has been about competitive situation in data centers, right, and whether there could be potential new entrants coming into it. And I think also here, I mean, Sarah already gave the answer with our strong competitive advantage generally, which are also valid for data centers, right? And obviously, we also do joint R&D together with chip manufacturers, but also with data centers, for instance, in cybersecurity. And keep also in mind, I mean, this is a highly innovative area, data centers, right? So here, you need to work together with the technology leader. And I think so these prospects also in this area are really good for us also midterm. Lars van der Haegen: And maybe also to mention that, now of course, as this is booming, so many companies would like to jump on this bandwagon. But it's not so easy to join a boom during the boom. And we have been in this industry since 2 decades that we have supplied Damper Actuators into data centers to these hyperscalers. And so our brand is really well established in this market. And then as Sarah has demonstrated, so we now make sure that we continue to provide very best service to this industry to remain the leader and to expand actually our position that we have also with the economies of scale and then also with our global footprint and a very agile organizations that we are that we can leverage to supply these data centers. As also Sarah has shown, it's sometimes quite complicated each data center project because the supply chain is -- comes from all over the world into one location. And this needs also a lot of agility by supplier by us to provide all these services during this fulfillment phase of delivering components into the final destination. Stephan Gick: Next question, please? Operator: Next question is from Chase Coughlan from Van Lanschot Kempen. Chase Coughlan: I just have 2. Maybe starting off and going back to the data center dynamics. Just based on your '26 guidance and if we assume a bit the rest of the business continues sort of growing at the same rate, it really implies the massive drop off in the growth momentum seen in that data center portion of your business. So I'm just curious if you can help me reconcile what you're expecting there. If I'm reading that right. I think most other players exposed to the same vertical are suggesting that they're seeing accelerating growth there. Sort of any more color on that data center growth expectations would be very helpful. Markus Schürch: Well, let me take this one. So I mean, we -- as I mentioned, we expect a base growth in our HVAC business and then a special growth on data center. As you mentioned there, it depends a bit on what is the investment, but especially also what is then the actual fulfillment of the project. Those are large infrastructure projects. And increasingly demanding becomes the supply of energy of electricity as they are consuming big time electricity. And that is starting to also impact the deployment rate. So it's not only a question of the investment that goes in, but also a question of how quickly this can be executed. And therefore, there's a high upside potential also if that's going to be accelerated on the deployment case and then obviously also there, a higher growth rate is possible on the data center side. Chase Coughlan: Okay. Perfect. Yes. That makes sense. And then maybe my second question, regarding the top line guidance. Do you have any kind of specific expectations around the phasing of that growth in the first half versus second half? Should it decelerate or accelerate throughout the year? Or should we expect somewhat stable? Markus Schürch: We don't expect the changing behavior of the dynamics, and therefore, no specific seasonality of the 2 half years. Stephan Gick: The next question, please. Operator: Next question is from Sebastian Vogel from UBS. Sebastian Vogel: I've got 3 questions. I ask them one by one. The first one is a quick follow-up. So to the guidance for '26, does that sort of mean your underlying growth for the non-DC business is supposed to be around like 9% to 10%, and then you have the remaining 40% to 45% for data center. Is that the right thinking? Markus Schürch: Well, that's about the right thinking exactly. Sebastian Vogel: Great. Second thing is on pricing. I mean, you elaborated a couple of times there. But nonetheless, sort of a group-wide number. If you can help us there, what sort of the net pricing you think will be feasible for you for 2026, adding up or aggregating across all regions? Is there a number that you can share with us? Markus Schürch: Look, we just can give you the general price increases. So we have got -- we've mentioned is 8% in the U.S. The U.S. is roughly 40% of the overall business. So that translates then to something like 3%, 3.5% overall. And then we have the normal price increase in the other region, which is in the range of 1% to 2%. Sebastian Vogel: Got it. And then the last question is with regard to the margin and the FX impact for 2026. Do you have some sort of like number on hand like a 10% change in U.S. dollar is having whatever basis points impact on your margins that you can share there? Markus Schürch: Yes. We can share roughly 10% weakening of the dollar has an impact of about 150 basis points on the margin. That is always assuming that all the other currencies stay stable. And then there's also an important development, how is the euro developing as a lot of the material cost is denominated in euro. So if there's also then a shift and a weakening of the euro in parallel of the dollar, there's also an offsetting effect in there. So it's a maximum effect of about 115 basis points of 10% weakening of the dollar. Stephan Gick: Next question, please. Operator: Next question is from [indiscernible] with [indiscernible] Intelligence. Unknown Analyst: I just have 1 on depreciation. Can you please help us explain what depreciation assumption you are modeling for your 2026 EBIT margin guidance? Is it reasonable to expect that we can see a step-up in depreciation and amortization expenditure as they follow the CapEx trajectory? Markus Schürch: Well, you're correct. Gradually, the depreciation rate will go up with the strong investments. But bear in mind, we are investing into building with a very long depreciation time as well. Therefore, the effect is somewhat lower than from what you would expect from the higher investments on CapEx side. We don't share an exact number for '26. Stephan Gick: Okay. Next question, please. Operator: The next question is from Fabian Piasta from Jefferies. Fabian Piasta: Can you hear me alright? Stephan Gick: Yes. Loud and clear. Fabian Piasta: Great. Okay. So you were elaborating on medium-term horizon or outlook. I understand that is 9% to 11% sales growth and between 30 and 35 bps on margin. Would you be able to define the time horizon for that medium-term growth? Are we looking at 5 years? Are we looking at 10 years? Second question would be on EBIT margin 2026. So in order to get to where consensus is, let's say, 21.5%, that would require 85 basis points year-over-year from the current margin. This looks actually durable. And obviously, markets didn't really like the cautious EBIT guidance. So where do you think are the biggest headwinds apart from tariffs and FX? And the last question maybe on the dynamic and change in data center projects. So what has really changed? I mean I remember first half of 2025 was still very air heavy. I think there's probably going to be some acceleration in liquid cooling in the second half. Do you see a major shift in, let's say, maybe from brownfield to greenfield in 2026 supporting further growth in data centers? Lars van der Haegen: In the first question maybe regarding the horizon there that's really related to our long-term strategy. That's about a 10-year horizon where we are planning our growth rates and development also of our profitability. And this is very important because when we develop new products, new applications, you have an R&D cycle and the product introduction cycle. And that, in total, takes about 7 years to become profitable right, from an idea to profitability can also be longer. And so building up a market, a new product range and on takes a decade or more. That's why we need this long-term strategy and also why we communicate that this is our ambition to have that growth level. And then the second question was then back to '26 that I give back to Markus. Markus Schürch: We look on the margin, we guided on this ahead of 20%. And as you mentioned, I think the uncertainty is extremely high this year. I mean, you've seen the tariff situation can change basically overnight. And most likely, we'll see other tariff regimes in the course of this year. Then also the impact of the FX, that's also very, very broad. The forecast where the dollar is at the end of the year are very widespread. So that's obviously also a very strong impact on top and bottom line. And the third key element is obviously the sales growth of this year. So the higher the sales growth, also the higher the operational leverage, and that also has then an effect on the EBIT margin. So overall, a very high uncertainty. And therefore, also, we are only guiding on this 20% plus. Stephan Gick: I think you had a third question on data center trends, right? Fabian Piasta: Whether you see a shift in projects. Lars van der Haegen: I mean, on data centers, there's, of course, a lot of information around. And I think obviously, there's a lot of investments that have been announced by the hyperscalers that you are likely aware of and that's very transparent that communication to some degree. And then it's also, of course, the colocators that are investing. And then there's also corporate data centers. There's all the hyperscalers, corporate data centers, corporate or government and then you have the colocators. So this is, of course, also if you go into the details, a market of many players. And so many investments are happening. So this -- last year, I think the overall investment was depending on the sources CHF 400 million to CHF 500 billion worldwide, predominantly in the U.S., about CHF 300 billion, some sources go with higher numbers. And then this year, '26, this would higher and then '27 even higher. But then again, Markus pointed out there are many constraining factors to this. Of course, the energy but also the supply chain overall, there are some components from some manufacturers that have lead times until 2030, transformers and things like this. And so that will be -- we'll find out what can be really then applied of all these investments and what the time horizon, how this will play out over the next years. Stephan Gick: Okay. Thank you. Then I think we have one final question online. Cedar. Cedar Ekblom: I have 2 questions. Can you please talk about what you're seeing from a replacement demand perspective in the U.S. in the data center vertical? I know it might be a bit early but this has been discussed as a potential growth kicker going forward. So it would be helpful to hear what you're hearing from your data center customers. And then can you talk a little bit more about your new digital generation of products. You made quite a big point of this in the presentation. So I'd like to understand what's integrated sensors into the digital offering means, how it's helpful to your customer? And then I think you also made the point that your competitors don't do this or that you are on the only player that's sort of providing this sort of harmonized digital platform. And why are your competitors not doing this? What is the barrier to them closing the gap to you? Because it does sound quite material in terms of ease of use and deployment. Lars van der Haegen: Great. These are excellent questions. So on the last one, I could talk for another 2 hours. But maybe the first one regarding data center retrofit. So there is overall with the overall increasing in the efficiency of the overall server applications from the chipset to the overall server application. Mostly, we hear there is an economic life of about 5 years of a server. And then afterwards, it makes sense to replace it simply because of the financials. They would still run longer, depending on what application it is exactly, they might still do 7 years, 8 years, 9 years. But after 5 years, mostly, it makes sense to replace them partially. That doesn't mean that the valves are necessarily replaced or the building -- the HVAC part of the system, but it could be but that's typically the situation. Then regarding the new digital generation. I mean the features overall, it's just why competitors don't do it. It's a big investment. We are the largest -- I mean, second -- or the largest competitor, I have to say, is about half the size of BELIMO in terms of sales with the same field devices and it's probably not profitable to invest in such a platform. And managing a platform is, of course, challenging, but we have decided that part of this long-term growth strategy investing also in Damper Actuators and Control Valves, that's our existing business, investing a lot in there so that we really have a new platform that gives us this, of course, cost advantages as well. But also the flexibility to build products in the future, different products to adapt to the demands from the market. And then this overall user experience. So often when you look at competitors and their product catalogs, it's kind of a mess. It's like very -- just different products. They've sourced them from different -- just not a consistent range. And at BELIMO, we have really consistent range -- consistent look and feel and that makes it unique. And I think it's very powerful, having a platform, looking also at other successful companies. I mean, talking about these hyperscalers, they are typically successful because they manage a platform and can leverage the platform. Could I answer your questions? Otherwise, I recommend also... Cedar Ekblom: Yes. That was helpful. That's good. I just wanted to follow up quickly on the replacement point. Have you heard yet from your hyperscaler customers that they would be reusing the valves? Or is it a case of it would just be simpler to replace the valve at the same time as replacing the servers and the chips? Because I think this is an important point. We know that the service might once be replaced from a sort of economic perspective. But would it be simple to just to reuse the valves? Or do you not have color on that yet, maybe? Is it too early in the process? I understand that. Lars van der Haegen: Yes, thanks. It's a good question. It depends always, it's, of course, also when you go into details of the application, it gets complicated like everywhere. And it depends if you have, for instance, a server that's like 500 kilowatts that it requires for cooling. And then the new server is also 500 kilowatts, then you could replace that without replacing the valve. But if you have then a server that has a higher capacity than you would also require -- need to replace the valve. Then also, it depends on the overall setup. Sometimes it's just more efficient to replace everything, make everything new. And sometimes it's just easier to just replace the server setup. So it really depends on the technology that's there, but also on the preferences of the investors, the engineers what they are doing. But in general, we can say it's certainly a more retrofit intense this market segment of the data centers versus Sarah presented the 30 segments. Typically, our products, they last for more than 20 years. So they are in these buildings for 20, 30 years. And here we have, of course, a much higher rate of retrofit. They're also controlled these applications in a sense, so they are monitored and so for the uptime and the reliability of the application. So it's a more critical application than in some of the other segments. Some other segments, of course, also critical thinking about pharma, semiconductors and so on. But here, we have definitely a higher retrofit rate. Stephan Gick: Great. Then thank you, everybody. This concludes today's presentation. You are now more than welcome to join us for lunch. Thank you for your attention today, and goodbye. Lars van der Haegen: Thank you all.
Operator: Greetings, and welcome to the Prenetics Fourth Quarter and Full Year 2025 Earnings Conference Call. As a reminder, this call is being recorded. Your hosts today are Danny Yeung, Chief Executive Officer and Co-Founder; and Stephen Lo, Chief Financial Officer. Mr. Yeung and Mr. Lo will present results of operations for the fourth quarter and full year ended December 31st, 2025, and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of our company's website, www.prenetics.com. Before we begin the formal presentation. I would like to remind everyone that statements made on the call and webcast may include predictions, estimates and other information that might be considered forward-looking. These statements are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially and are not guarantee of future performance. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. Unless otherwise specified, all information provided on this call is as of today's date, and we undertake no duty to update such information. For a more complete discussion of these factors and other risks, you should review our annual reports and other documents and disclosures on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'll turn the call over to Prenetics' Chief Executive Officer, Danny Yeung. Please go ahead, sir. Sheng Wu Yeung: Great. Thank you. Thank you, and good morning, everyone. Welcome to our Fourth Quarter and Full Year 2025 Earnings Call. For those who have been following our story, thank you very much for your continued support. And for those new to Prenetics, you are joining us at a pivotal inflection moment. 2025 was the most transformative year in our company's history. We achieved record revenue of $92.4 million, a 480% increase year-over-year, driven by the explosive launch of IM8, our premium consumer health brand cofounded with David Beckham. In just our first year, IM8 reached a $120 million annualized revenue run rate, a trajectory that we believe is one of the fastest ever recorded in the global supplement industry. We also completed a decisive strategic pivot, divesting our noncore assets to become a pure-play consumer health leader. This has sharpened our focus, improved our margin profile and solidified our balance sheet, which now stands at approximately $171 million in total liquidity with 0 debt. Most importantly, we now have a clear road map to adjusted EBITDA profitability by Q4 of 2027, supported by strong unit economics and significant operating leverage. Today, I'll walk you through our strategic transformation and the incredible growth story of IM8. Stephen will then provide a detailed overview of our financial results, and I'll conclude with our outlook for 2026 before we open it up for Q&A. Let me begin first with the transformation that occurred in 2025 and early '26. Our goal was to streamline the company and focus all of our resources on the highest growth, highest margin opportunities. We executed this by divesting 3 noncore assets. In June 2025, we sold ACT Genomics for $72 million with $46 million in cash back to Prenetics. In January of '26, we exited the low-margin Europa business and had an all-stock $30 million deal with that. And just yesterday, we announced we sold our 35% stake in Insighta to Tencent for $70 million in cash, in which we have already received $69 million in our bank accounts. These moves have unlocked significant shareholder value, amplify -- simplify our story and fortify our financial position. As a result, our balance sheet is stronger than ever. As of February 15th, 2026, we have $171.1 million in total adjusted liquid assets, including cash, financial assets and our BTC Holdings with 0 debt. This gives us ample runway to invest in IM8's global expansion. I also want to clarify our position on Bitcoin. We seized all Bitcoin purchases as of December 4th, 2025, and we will permanently not engage in any Bitcoin or Crypto purchases in the future. We currently hold 510 BTC on our balance sheet, which provides additional financial flexibility as we scale IM8. Our focus is squarely on building IM8 into a global consumer health powerhouse. In line with this strategic focus, we recently announced a change to our Board of Directors. Andy Cheung, who joined our Board in connection with our Bitcoin strategy has resigned. At the same time, we are thrilled to welcome Dr. Darshan Shah to our Board. Dr. Darshan is a leading expert in longevity, performance optimization as well as building a network of longevity clinics in the U.S. and his expertise will be invaluable as we scale IM8 globally. Now let's turn to IM8. As everyone knows, we co-founded with David Beckham. IM8 was built on the vision of making elite science-backed nutrition accessible to everyone. This powerful combination of global influence and scientific credibility allowed us to achieve $120 million annual recurring run rate in less than 12 months. This growth trajectory has been nothing but extraordinary. We went from $6 million in Q1 to $27.4 million in Q4. This isn't just a launch spike. It's a reflection of deep product market fit with IM8 on a global basis with 40% of revenues coming from the U.S. and 60% of revenues coming internationally across 30 different markets. And we achieved this growth with exceptional capital efficiency. Our blended LTV to CAC ratio is projected to be approximately 3x across all of our products, including the premium backend stack. Our payback period for the full year of '25 was just 3.4 months, allowing us to recycle marketing capital incredibly quickly. In early 2026, we made a strategic shift to prioritize quarterly subscriptions, which was a new option for our customers. This, we believe, has been a game changer. Our blended average order value for every new customer has more than doubled from $110 in 2025 to approximately $233 in early 2026. We are intentionally acquiring higher-value customers, which strengthens our cash flow and locks in long-term predictable revenue. With an 80% new customer subscription rate, our business is built on the foundation of recurring revenue. Our brand is also validated by the best. We built an amazing Scientific Advisory Board, including leading doctors and professors from the Mayo Clinic, Cedars-Sinai and many more. And our global ambassadors, including world #1 tennis champion, Aryna Sabalenka and recently announced F1 phenom, Ollie Bearman, reinforced our credibility in the world of elite performance. Before I hand it over to Steve, I want to share some exciting news on the investor research front. We are happy to announce that both ROTH Capital and Sidoti & Company have recently initiated research coverage on Prenetics, both with buy ratings and 12-month price targets, respectively, of $36 and $30. This is a strong validation of our strategy and growth trajectory. And given our momentum and increased market cap, we also expect a few more investment banks to initiate coverage in the coming quarter as well. With that, I'll turn the call over to our CFO, Stephen Lo, to walk through the financials in more detail. Stephen? Hoi Chun Lo: Thank you, Danny, and good morning, everyone. I'll begin with our fourth quarter results. Total revenue in the fourth quarter surged 457% year-over-year to $36.6 million and increased 55% sequentially from Q3. This was driven by IM8, which contributed $27.4 million in Q4. Gross profit in Q4 grew over 800% year-over-year (sic) [ 804% ] to $21.7 million with a consolidated gross margin of 59%. Adjusted EBITDA loss for the fourth quarter was $2.3 million, a 70.4% improvement from the same period in the prior year, demonstrating the significant operating leverage in our model as we scale. For the full year 2025, total revenue was $92.4 million, up approximately 480% from 2024. Gross profit was $48.9 million, an approximately 428% increase. Full year adjusted EBITDA loss improved by 27% to $13 million. IM8 was a clear driver, generating $60.1 million in revenue for the full year 2025 at a healthy 63% gross margin. The divestiture of low-margin Europa business will further enhance our consolidated margin profile in 2026. Looking ahead, we are confidently reaffirming our 2026 guidance. We expect IM8 revenue of approximately $180 million to $200 million for full year 2026, representing nearly 300% year-over-year growth. We are targeting a gross margin of approximately 60% in full year 2026. We expect full year 2026 adjusted EBITDA loss of approximately $16 million to $20 million as we continue to invest in marketing to drive growth with a clear path to achieving adjusted EBITDA profitability by Q4 2027. With that, I'll turn it back to Danny for closing remarks. Danny? [Audio Gap] Operator: Danny, We are unable to hear you, is your line muted? Sheng Wu Yeung: Sorry about that. Yes. Thank you, Stephen. Yes, to summarize, we have successfully transformed Prenetics into a high-growth, well-capitalized consumer health leader. IM8 is on a clear path to becoming a $1 billion global brand. And even for myself in my last 20-plus years of entrepreneurial career as both an operator and investor, I have never seen such strong momentum in one brand. We have the team, the strategy and the financial strength to execute on this massive opportunity, and I'm particularly excited about what's ahead. In Q4 of this year, we plan to announce 2 new products that will enter very large total addressable markets. These launches will further diversify our portfolio and accelerate our growth trajectory. I am more confident than ever in the future of Prenetics and IM8. Thank you for joining us today. I will now turn it over to the operator for Q&A. Operator: [Operator Instructions] And our first question will come from George Kelly with ROTH Capital Partners. George Kelly: First one just on the 90-day offering. I was wondering if you could walk through the reasoning behind having that available? And when do you expect the benefit to be to your model? Sheng Wu Yeung: Yes. Great question. So we actually started quarterly subscriptions in the U.S. first in December, right? And typically, how we do this is we do a lot of testing on our website optimizations on a daily basis. So we start testing in the U.S. It was clear basically after a month of testing that consumers, number one, they really like this option. And number two, it provides benefits for both sides. So the benefits from consumer-wise, they get 3 months of product at a time. Consumers also save about $10 monthly as well, right? So from a comparison perspective, typically, a normal customer previously, they would buy a 1-month subscription for $89 monthly. And since the introduction of the quarterly subscription, it becomes $78 times 3, right? So there's basically $235 for quarterly subscription. So we get that payment upfront. And we also save on logistics cost because instead of shipping 3 monthly shipments, we ship it all at once. And so what that has done is actually has significantly increased our average order value from approximately $130 from end of Q4 to $233. So basically, if you think about every single new customer that's coming into im8health.com, on average, every new subscriber is paying us $233. So what this does is that basically it shortens our payback period or the period of time that we recoup our customer acquisition cost. So we believe this is a significant benefit. And at the same time, now for consumers, they now have 3 months of product to try the product, right? And based upon our clinical trial results after 90 days, individuals will then significantly feel the difference. For example, 95% of individuals after 90 days have felt a notably difference in higher energy levels, better sleep quality, better recovery, greater sleep, right? So we do believe the 90 days will also increase retention rates as well. So overall wise, we believe it's going to be a significant enhancement to our overall business. George Kelly: Okay. Okay. That's helpful. And then a second question, Danny, in your concluding remarks, you talked about 2 new SKUs coming this year. I understand if you don't tell us what they are at this point, but maybe if you could provide a little more information just about timing of those launches? And how should we broadly think about sort of new product opportunity? Do you expect any kind of new product, at least in the near term to be similar to what you offer now where it's a subscription and it's monthly? Or might you expand into categories where it's a sort of whole different -- there's whole different characteristics to the products? Sheng Wu Yeung: Great question. Yes. So right now, our plan is to release 2 new SKUs by the end of Q4 of this year. Now due to competitive reasons, I think we don't want to release too soon what these 2 SKUs are, but it will be in the health and performance space. And it will definitely be in the health supplement categories, right? And also, these will be very 2 large total addressable markets, which competitors already doing easily anywhere from $500 million to $1 billion annually just in terms of these SKUs. So we do believe it's going to -- it could be a significant growth driver for us. George Kelly: Okay. That's helpful. And then last question for me. With respect to the guidance you put out for IM8, the $180 million to $200 million for the year, I guess 2 questions on that. First, we're now through January and into February. I was wondering if you could help at all just the trends you've seen so far. I think January is a pretty important month for the year. So any sort of commentary there would be great. And then secondly, are the new products baked into that guide? Sheng Wu Yeung: Yes, great question, right? So I think we are still seeing continued momentum. So momentum hasn't stopped basically on a month-over-month basis, right? In terms of the 2 new products in terms of the revenue guidance, those are not baked into that $180 million to $200 million number. Operator: [Operator Instructions] And we will go next to Thomas Forte with Maxim Group. Thomas Forte: Great. So first off, Danny, congratulations on a wonderful fourth quarter and year and the breakout performance of IM8. So I have 3 questions. I'll go one at a time. So the first one is, can you talk about your customer acquisition costs and lifetime values for IM8 and how that's trended over time? Sheng Wu Yeung: Yes. So the customer acquisition cost, right, we actually laid this out in our investor deck. So we actually have an investor deck that we published on our website. A there's a link to it on the press release. So you should think about it as it's roughly about 0.8x in terms of return on ad spend. So if let's say, our blended average order last year for 2025 was $110, our CAC was $130, right? And then the key thing about this is that the payback period is roughly 3.4 months. So basically, we factor that in when we're making decisions in terms of increasing spending or not increasing spending, right? But given the short time period of 3.4 months, we believe we actually have significant flexibility to go from 3 to 6 months, right? Because in the DTC space, if you're at 3 months, it's excellent at 6 months is good. So that means we have a lots of runway, right? And your other question in terms of how that has trended. Our CAC has, of course, our average order value has increased significantly from $110 basically to $233. Equally, our CAC has increased with that at the same ratio. So we -- even from last January until now, we have not seen significant increases of CAC even as we scale, right? And also just to share is that we've been primarily focusing our marketing efforts, digital marketing efforts just on Meta and Google, roughly 85% on Meta, 15% on Google by the end of this quarter and into Q2, we're going to be diversifying our marketing channels to include YouTube, podcasts, AppLovin, TikTok. So we believe we're also getting able to diversify our marketing channels even much more in greater detail. Thomas Forte: Excellent. And then for my second question, so one of the many things you're doing that's impressed me is capitalizing on artificial intelligence. Can you talk about how you're using AI, including from a digital marketing standpoint? Sheng Wu Yeung: Yes. Great question. So I'm a big component -- I mean a big proponent of the whole entire company using the latest AI tools and systems in place for us, not just from a digital marketing perspective, but across the organization, every function, every single employee doesn't matter whatever department it is, right? So my team knows this very, very well, right? Any free time I have personally, I'm looking -- I'm studying AI like crazy, right? So for example, how we leverage AI in terms of digital marketing efforts on a weekly basis, we'll roll out anywhere from about 800 to 1,000 new ads. And we just look to algorithm decide what that works. And then only about 10% of these ads will actually work. And we call these a winning ad. And then every single week, we'll replicate basically, we'll take 10% of those that work, and we replicate another 800 ads on a weekly basis. So that gives you one example of basically how we use AI. And of course, I think if you look in the investor deck, you'll also see we launched an AI video last September with Aryna Sabalenka right before the U.S. open. And this one AI video, it basically -- it was the highest number of views of any brand on Instagram. It reached 233 million views with one AI video featuring Aryna Sabalenka. So when you get 233 million views in one video at top of funnel, you can then significantly much easier we target new other customers that have seen that video, right? So I think these are specific examples of how we're leveraging ad. We use AI in all parts of our business. Thomas Forte: Wonderful. And then last one for me. You've done a great job of divesting multiple successful businesses. You have an unbelievable balance sheet. As a result, can you talk about your strategic M&A strategy, including your decision process and when to build versus when to buy? Sheng Wu Yeung: Yes, [ Kirk ] Yes, I think 2025 was an extremely busy year, right? You can see like not only have we built a very strong business, which was from scratch, right? We built that organically, the whole brand, the playbook, all the doctors, all the scientists, all the brand ambassadors and of course, the product, right? At the same time, we executed the selling of 3 of our noncore assets because the growth of IM8 was just so unbelievable that we knew we needed to double down on that, right? And then so now we have a very strong balance sheet. I mean, the reality is we have so many options available to us. But I would say my first -- our first focus is going to be built organically because, again, we believe we already have this performance marketing flywheel behind us, unless there is a very strategic M&A potential. Right now, our main focus is just building organically because, again, that's something that we can control very well. But again, we're always open for new opportunities if it makes sense. Operator: Our next question comes from Alex Hantman with Sidoti & Company. Alex Hantman: Congrats on the quarter. Maybe we could just start on the revenue growth for this year. I know you mentioned that new products are not baked into that. Could you share a little bit more about how much of the growth is expected from customer base expansion versus like average revenue per user uplift from quarterly plans? Sheng Wu Yeung: So I would say -- so the growth is just based on come from -- majority of that growth is going to come from basically new customers. right? So if you think about it, I mean, we achieved $60 million full year revenue in our first year, and that's still a very new brand. So this year -- and while there's a lot of people that have heard about IM8, there's still a significant population around the world that hasn't heard about IM8 or hasn't tried or used the product, right? And once people try the product, they use the product, again, the product is effective, they'll stick on. So a significant part of that growth is going to come from new customers. And if you look at our breakdown in terms of our top 5 markets with the U.S. being #1, 40% of revenue. So last year, U.S. only represented $23 million of $60 million, right? So I think realistically, the U.S. market can easily support or absorb yes, $300 million to $400 million on this one product, right? So there's still lots of headways of runway to go, right? #2 market is Canada, #3 is U.K. #4 is Australia, #5, Singapore, right? So we're a truly global diversified brand. So we believe there's significant opportunity to just by acquiring new customers onto the platform. Alex Hantman: Great context. And 2 more from us. Dan, I know you just spoke about some of the international revenue opportunities. I'm curious, as you started localizing websites, what kind of revenue uplift have you seen? And what international market then are you sort of most excited about given that? Sheng Wu Yeung: Yes. Great question, right? So this is again another example of how we're in the process of leveraging AI tools specifically for international localization efforts. So by Q2 of this year, we will be localizing in at least 5 different markets in terms of our whole website, our ads, our campaigns, for example, in Germany, right? So a lot of the ads -- Germany is now, I think, #8 or #9 in terms of global top markets. So these markets, we believe the localization of our entire website will be at least a 10% to 15% increase in local markets, right? And then so again, that's something that we're going to be launching by Q2, likely by the end of this quarter, actually. Alex Hantman: Perfect. And last one from us. I know you mentioned the Q4 2027 EBITDA profitability target. Could you talk a little bit about some of the key factors to achieving that, marketing leverage, scale, product mix? And do you have an accompanying EPS target? Sheng Wu Yeung: Yes. So I think, again, as we scale and given our gross margin is at 60%, profit will come with that, right? So we're going to be able to have so much more leverage once we get to $250 million, $300 million in revenue because we have our manufacturers, our suppliers, our logistics on. So we do believe that we can even slowly increase our margins from 60% to 62%, 63% within the next 12 to 18 months as well, right? So that, coupled with the scale, will then get us to -- we believe by profitability by end of Q4 2027. It just kind of continue doing what we're doing now by a much greater scale. And of course, all the costs get absorbed, okay? Operator: And this now concludes our question-and-answer session. I would like to turn the floor back over to Danny Yeung for closing comments. Sheng Wu Yeung: Great. Thank you, everyone, for joining us this morning. Again, I can't be more excited about what the future holds. I know I've been an entrepreneur, as mentioned for 20-plus years, but this is something I'm incredibly passionate about building a global brand that's making impact to millions of people around the world. We have a lot of great support from around the world as well from highly influential athletes, doctors, professors that makes it so much fun to be able to go on this journey. So again, thank you, everyone, for being with us today. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Good morning, ladies and gentlemen. Welcome to the PostNL Q4 Full Year 2025 Results Call. [Operator Instructions] And after presentation, there will be an opportunity to ask questions. Now I would like to hand over the conference call to Ms. Inge Laudy Manager, investor Relations. Please go ahead, madam. Inge Laudy: Thank you, operator, and welcome to you all in today's conference call. We have published our Q4 and Full Year '25 results and the annual report earlier this morning, and we'll explain the set of results to you in this analyst call. With me in the room are Pim Berendsen, our CEO; and Linde Jansen, our CFO. After that presentation, Pim and Linde will take your questions. Pim, over to you. P. Berendsen: Thank you, Inge, and good morning to you all. I would like to start with a summary of the new strategy that we've presented to you on our Capital Markets Day last September. That's on Page 5. And at the top, you see our purpose, connected to deliver what drives us all forward. That is what holds everything together. Just below the purpose, you see our strategic intent. We grow our business, create sustainable value, lead through innovation and make impact that matters. Then moving from the cascade one step down again, you see the strategic objectives and ambitions of the 3 business segments. For E-commerce, it's all about shifting from volume to value through differentiated approach and smarter network utilization. For platforms, capturing international growth with asset-light models and for Mail transforming towards a future-proof postal service. We'll make these changes and those ambitions through 10 strategic priorities, ranging from compliance and workforce to network efficiency and international growth. And this should all lead to the required outcomes on 4 goals that we've set, being financial KPIs, Net Promoter Score, carbon efficiency and employee engagement. And for 2025, we've reached the objectives for all 4. Then if you look at the key takeaways for 2025, it's all about progress towards our Breakthrough 2028 ambitions that we shared with you in September too. So we're positive to be able to say that our financial and nonfinancial targets are achieved. We've reset the organizational structure and made changes in the teams. We've now reporting segments aligned with the strategy. Of course, we have secured the refinancing required to bring us to 2028, and we see early telltale that the targeted yield measures are contributing to performance and that momentum will further build into 2026. Furthermore, crucial progress has been made in the political process towards future-proof mail service. Thursday, 2 weeks ago, in Parliament, the changes are approved to get us to a D+2 by mid-2026 and a D+3 delivery for Universal Service by July 2027 at quality levels that we now deem to be feasible. So far, there's no solution for the net cost during the transition period up to the point that we are beyond the D+3 delivery, and that's why we will continue with the legal proceedings on net costs. Targeted yield measures have more than offset the organic cost increases in 2025. And overall, given performance and leverage based on dividend policy, we're able to propose a dividend per share of EUR 0.04 per share and to be proposed to the AGM in April. If we then zoom into the segments and the fourth quarter, in particular, we've seen at Parcels a very well-executed peak period underpinned by very good NPS scores, both on the consumer and on the sending customer side. Revenues up by 3.2% at flat volume development with a positive price/mix impact. And we see that the propositions that we're looking for in contract renewals are progressing as we've planned. In other words, the differentiating commercial approach is helping us to create a better value over volume, and that's what we obviously seek. We've said that it will take some time to materialize fully, but we're on the trajectory of the path that we sketched for you when we've communicated our Capital Markets Day objectives. If we then look at Mail in the Netherlands in the fourth quarter, we've seen some exceptional volume in the last part of the year, driven by pension communication as part of the pension transition in the Netherlands and some special safety kit communication from the [indiscernible] and that has led to a very robust December performance that altogether with a very successful Christmas card campaign offset the year-to-date November negative result that at that point was close to EUR 35 million and changed it to a slight positive number of EUR 2 million at full year 2025. Of course, the underlying trend of volume decline and organic cost increases is continuing. The cost savings, we have achieved what we expected to achieve. Of course, due to adjustments in the business model, the business mail is already moved to within 2 days delivery window, and that helped us save costs. There are no further options for future cost savings within the current regulatory framework, and that's why it's so important that we're now allowed to go to within 2 and later on within 3 days delivery for the universal service against reasonable quality levels later this year. Then I hand over to Linde for now. I'll be back later, and then Linde takes you through the more detailed financial performance of each segment. Linde Jansen: Yes. Thank you, Pim. As mentioned already by Pim, the fourth quarter was a good quarter with our revenues up to EUR 973 million and normalized EBIT of EUR 79 million, which is 27% compared to the quarter last year. This means that we have delivered on our full year 2025 outlook for normalized EBIT of EUR 53 million, exactly in line with 2024. Free cash flow came in at minus EUR 25 million, also midpoint of our outlook. Also, good to mention that normalized comprehensive income for the year was EUR 21 million, a base for the determination of the proposed dividend per share. Our adjusted debt is up to EUR 501 million. Not on this slide, but good to mention that the leverage ratio at year-end was 1.99x, properly financed so we can propose to the AGM the EUR 0.04 dividends per share, as mentioned. We also delivered on the targets for the key nonfinancial KPIs and made good progress on further reducing on our environmental footprint. The 50% improvement in carbon efficiency and the share of emission-free last mile delivery increased to 33% from 28% in 2024. Looking at NPS, we maintained our average #1 position in relevant markets, an important achievement in a competitive marketplace. And also employee engagement was up compared to last year. Let's move to the financial details of Parcels in the fourth quarter. Revenue amounted to EUR 691 million, which is 3.2% above last year, following volume development, price increases and mix effects. Overall, volumes were flat with a slow start of the quarter followed by increasing volumes in the peak period. Market share was slightly down as anticipated following our yield measures. With that in mind, it's good to see that the total price/mix impact was positive this quarter. Of course, this is also visible in the average price per parcel, up by EUR 0.11, supported by targeted yield measures and regular price increases. Price increases have been implemented according to plan and were only slightly offset by negative mix effects. Furthermore, it's also positive that our cross-border activities continued the trend we have been seeing for several quarters with revenues at Spring up this quarter most strongly in our intra-European activities, a promising development as international expansion is one of our strategic initiatives. In this part of our business, we see a less favorable mix. When looking at costs, it should not be a surprise that in this quarter we saw significant organic cost increases, which is mainly labor related. However, we also see EUR 14 million in cost savings in the fourth quarter, and these were delivered according to plan. To be more specific, these came from ongoing adaptive measures like, for example, rationalization of services because we stopped parcel delivery on Sunday. Next to that, our flexible operational setup proved our agility and made us achieve additional efficiency improvements in our network, so in depots, supply chain and transport to mitigate the adverse mix effects. In Spring, planned investments to capture intra-European growth put pressure on the margin. This brings us to the Parcels bridge, which shows the reconciliation of the EBIT from EUR 36 million in the fourth quarter last year to EUR 41 million in this year. Asset volumes were flat. So the revenue growth in the volume-related part of this segment is fully attributable to price and mix. To be more precise, EUR 15 million from pricing and yields, offset by only EUR 4 million due to a less favorable product and customer mix. Organic cost increases amounted to EUR 14 million following wage increases according to PostNL and sector collective labor agreements and indexation for delivery partners. Other costs were EUR 8 million better, mainly as a result of the combination of cost savings and additional efficiency improvements in depots, supply chain and transport, partly offset by higher costs related to investments in reduction of physical workforce and sustainability. In other results, I want to highlight that this is mainly applicable to Spring, where we see revenue growth being offset by mix effects. Furthermore, we again invested in international expansion, one of our strategic initiatives of the intra-European activities in Spring. We also continue to focus on further growth in Belgium. Let's move over to the results of our segment, Mail, in the Netherlands. Revenue amounted to EUR 406 million, which is EUR 18 million above last year's quarter. Volume development was almost flat, supported by election mail and other partly nonrecurring non-24-hour mail from, for example, the pension funds and governments, which Pim just mentioned. I would also like to mention the successful campaign for our December stamps and, at the same time, the underlying trend of structural volume decline continues. Also, part of revenue are price increases, and these were partly offset by an unfavorable shift in mix. Obviously, the share of non-24-hour business within the total of Mail volume increased due to the extra volumes from government and pension funds. And the shift of business mail to D+2 delivery is also part of the explanation. Looking at costs. Labor costs were up following the CLA for PostNL and the mail deliverers. When looking at illness rates, we see again an improvement compared to previous year. These cost increases were mitigated by cost savings of EUR 10 million according to plan, coming from further adjustments in our current business model such as the transition of business mail towards a standard service framework of delivery within 2 days. Altogether, this resulted in normalized EBIT of EUR 45 million. The robust December performance more than offset a deeply negative year-to-date November results. Remember that the year-to-date Q3 normalized EBIT was minus EUR 43 million, and the last quarter brought us at the full year result of just EUR 2 million, which equals a margin of 0.2%. The elements of Mail in the Netherlands I just discussed are reflected in the EBIT bridge on this slide. As said, almost flat volumes, also, of course, reflected in flat volume-dependent costs. Price increase partly offsets the less favorable mix, as just explained. Organic cost increases of EUR 10 million were due to wage increases and other inflationary pressures. And then we have the cost savings of EUR 10 million and a bit lower labor costs related to sick leave. They were more than offset by lower bilateral results, staff-related costs and one-off cost to prepare for the future Mail structure. We will tell a bit more on that in a minute. Then over to our free cash flow. Free cash flow was EUR 73 million in the fourth quarter, down compared to Q4 2025, while normalized EBIT was up. This is mainly explained by working capital development where, as expected, we see phasing with the previous year. Furthermore, interest paid is up following the changes in our debt structure. Thanks to well-executed cash and balance sheet management, full year free cash flow came in, in line with our outlook. This altogether winds up the 2025 financials. I now hand back to Pim for our strategic story going forward. P. Berendsen: Thank you, Linde. By now, we're on Slide 16. And this slide brings together the strategic objectives of each of our business segments as well as the enablers that support them. So for E-commerce, the ambition is to shift from volume to value through a differentiated approach and smart network utilization; for platforms to capture international growth through asset-light models; and for Mail to transform towards a future-proof postal service. Around them are enablers that cut across the businesses, for instance, ESG, where we take care of our people, our environment and our society; data and tech to simplify and to accelerate by embracing data and AI; and innovation beyond delivery, where we explore new opportunities by stretching our core businesses. Together, this framework connects our ambitions to the actions that will deliver Breakthrough 2028 results. If we then look at the E-commerce story, then you all know it's all about moving from volume to value. And we do that through 4 levers on our margin engine. First, we are strengthening our commercial engine. That means a more differentiated customer approach, tiered propositions and moving slightly away from next day only to also best day delivery options to smooth flows and to reduce costs. That doesn't take huge changes, but just gradual moving a bit of the volume towards best day helps to create better network utilization and, through leverage, creates material impact on margin. Secondly, we aim to be distinctive where it matters most, giving consumers control, improving the critical I receive journeys and deploying digital tools to enhance their experience. And that's also why we're very happy about the fact that Net Promoter Scores on the consumer side have been increased also during the peak period last year. Thirdly, we stay comparative on cost. Smarter depot operations, better alignment of resources and targeted investments in technology will help us to run the network even more efficiently and will reduce the cost price per item, which strengthens our competitive position as well. And finally, we do take a step-up in steering and teaming, active revenue capacity management in new departments that we've introduced, supported by a strong organizational foundation, for which we've made changes in the beginning of this year, gives us even better control about customer value, yields and margins. And this is how we build a more balanced, more profitable, more value-enhancing e-commerce business. If we then look at the actions that we've planned for 2026. It's really about monetizing capacity by optimizing customer and product mix better. Contract renewals that have been agreed bring a better balance between margin and volume already. Focus on cost control, so we plan to take out EUR 40 million to EUR 50 million of costs in the e-commerce space, partially because of the benefit from implementation of our out-of-home strategy, but also lean on more efficient operating model in our first and middle-mile operations. Further optimization and digitalization, robotics and planning optimization tools helped by AI developments will help realize those savings as part of a program that we've launched to reduce the cost price per item. And as said, that will help to strengthen our competitive position even more. Clearly, to be distinctive where it matters, we just discussed why that's so important. Then maybe to our assumptions for 2026. We do assume continuous growth of Dutch households consumption of around 2.2% to 2.4%. And with an online penetration of 0.5% increase, we still assume because of our push for value, that we'll continue to lose a little bit of market share. And that's why, at the end of the day, we expect volume growth to be 1% to 3% for 2026. If we then move over to platforms. And Linde already talked about the investments that we are making there impacting the 2025 results and will continue to impact 2026 results too. There, we invest in the acceleration of international flows, and the asset-light models will allow us to expand routes quickly and capture new customer portfolios without heavy investments. Secondly, we strengthened our Dutch domestic leadership by keeping export flows and international volume in PostNL's network and by improving customer stickiness and to protect our own market. Thirdly, we build a smarter, leaner network, a shared platform infrastructure, strong partner models, and automation through APIs drive efficiency and scalability in that platform space. In short, these asset models give us the flexibility, the option to scale and to gradually, over time, improve profitability on the back of that revenue growth that we seek. If we then look at the actions for platforms in 2026, then it's really about empowering that European sales function. We have been investing in expanding that sales function, including the intelligence tools that it needs. We are growing the network. So we've added many different trade lanes and line haul expansion to the European business. And we're gradually filling that network capacity that will, over time, then will result in an increase in marginality on the platform side of things. Of course, we have for quite a while already a very strong market position in Hong Kong, China. And we're expanding that base to also other areas within Asia that can also fuel the import flows to Europe. If we then go to the Mail side. There's, of course, been very relevant developments over the last couple of weeks. So the adjustments of the universal service are approved by the House of Representatives 2 weeks ago, which is a crucial step towards future-proof postal service. So we'll go to a within 2 days delivery model for the USO for July 2026 and to within 3 days for July 2027, which is a deviation from the trajectory that we've painted on the Capital Markets Day because there only D+3 was expected to be there for January 1, 2028. The quality requirements have also come down to 90% for 2026, D+2 and 92% for a within 3-day delivery. So far, there's no solution yet for the remaining substantial net costs on universal service. And that's also why we'll continue with the legal steps to go after that net cost compensation. Because as we estimated in the beginning of the year, we did expect roughly EUR 30 million of net cost related to the USO obligations. I think it will be slightly more than EUR 30 million. And of course, also in '26 and '27, we will still be looking at material net costs that impact the profitability of the company that does impact the competitiveness of the group and limits our ability to invest in innovation, in new propositions, in labor conditions and labor circumstances. And that's why we'll continue to push for compensation or to be relieved from the obligations that drive those net costs. What you cannot underestimate is the impact these changes will have on our organization. And that's why we're really committed and busy with the preparation of those changes for July, which basically means that on the delivery and preparation side, a lot of the schedules need to change. All the delivery routes will be redefined. And we're taking those changes step by step. That also means that we'll deliver the letterbox parcels that are required to be delivered next day through the e-commerce infrastructure. That also impacts Mail's result in 2026 quite significantly, but also impacts the Parcels bridge. And Linde will talk you through those elements a little bit later on. So yes, I think great progress on Mail for 2025. But still a lot to do to make it happen operationally and a lot to continue to discuss with the new Minister of Economic Affairs as to how we want to organize mail delivery in the Netherlands going forward and also in relation to the question, who should pick up the bill for the net costs related to the universal service obligation. Slide 22 basically paints the picture as to why we believe that, over time, we're able to manage the Mail business within a bandwidth of results to give you a bit of predictability as to how we can do this. These lines are, with the exception of 2025, the lines that we've presented also at Capital Markets Day. So later on, you'll see that the 2026 expectations for Mail will not be as low as the orange line, but it indicates roughly the phasing of those steps over time. And the blue line also includes potential upsides on financial contribution that, of course, so far, we've not been taking into account in our outlook. But it's still reinforcing the message that we expect to be able to manage the Mail business with those changes within this bandwidth of results. And of course, there are some sensitivities around it that relate to the volume decline expectations and the timeliness of the execution of the steps that we plan to make in this road map. That is the Mail side of things. Then if we go to our enablers. The first one is ESG. That is clearly not a separate track but a foundation for everything we do, taking care of our people, environment and society. Further reductions of emissions to improve our footprint is high on our agenda. That's also why we expand our own fleet of electric vans by 50% last year, and we'll continue to stimulate delivery partners to switch to electric vans as well. As shared, emission-free kilometers was up and is now at 33%. With that, we also had a positive impact on urban liveability. On the right-hand side, you see our efforts to invest in engaged and healthy workforce because that will also drive employee engagement, will also drive Net Promoter Scores. We've introduced programs to reduce the absenteeism and invested quite materially in innovation to reduce the physical workload in our depots. And the examples that you see there is the implementation of tilters to reduce manual lifting in the depots, the use of smart electronic tugs for internal transport of roll cages, but also adjusted customer requirements for how they fill the roll cages before they're dropped off at our depots. So serious investments are being undertaken to improve the workplace safety to unlock cost efficiency and to create a better environment for our staff. Then if we talk to the other enablers, data tech and innovation beyond delivery. We're simplifying and accelerating by embracing data and AI, both in our meta channel contact strategies of our digital and human interactions, but as well on our supply chain and commercial engines, where we do apply AI as much as we can to drive NPS and improve efficiency and will contribute to the execution of our strategy. We keep on exploring new opportunities by stretching our core and are investigating the development of charging hubs for truck transport, where we aim to develop charging hubs initially for our own trucks, but over time, also make these hubs accessible for other carriers. Then let's go to the financial paragraph of 2026 and look at the outlook that we've set for this year. Linde, back to you. Linde Jansen: Yes. Thank you, Pim. So then we are on Slide 26, and let me start with a recap of our capital allocation. First and foremost, we will invest in our organic growth, including investments in our network, our out-of-home ambition and IT capabilities. Next, we will invest in inorganic growth opportunities in line with our strategic criteria. The focus for this will be on partnerships in our growth areas rather than acquisitions to limit the size of the required capital. The remaining cash flow should be sufficient to pay dividend in line with our business performance and dividend policy and to optimize our financing structure. For 2025, as said, we will propose a dividend of EUR 0.04 per share to the AGM -- at the AGM to be held in April. To be clear, this is based on the old dividend policy that was applicable for book year 2025. The payout ratio is 80% of normalized comprehensive income. As communicated during the Capital Markets Day in September 2025, as of 2026, we will slightly adjust this policy. Dividends will be based on normalized profit instead of normalized comprehensive income, and we will no longer have interim dividend. So the full dividend is to be paid in one payment in May. Let's move to Slide 27. This slide is in the deck to help you to reconcile the 2025 actuals to the new reporting structure that is aligned with this new strategy and as explained by Pim. As of January 1, 2026, we will report along the segments E-commerce, Platforms and Mail. In short, in E-commerce, we will report all parcel activities in, from and to the Netherlands and Belgium, including internal revenue from platforms and a transfer from PostNL Other being the digital activities. Platform comprises Spring and MyParcel and other international activities. Mail does not need further explanation. Let's have a look forward to our full year expectations for 2026, which will be the year of inflection in the execution of our strategy. I will start with sharing our outlook for the main financial KPIs and will then dive a bit deeper to the drivers and assume development per segment. For normalized EBIT, our outlook is between EUR 40 million and EUR 70 million, and we expect that to translate into a free cash flow of between 0 and minus EUR 30 million. That outlook is based on an expected total revenue growth of between 5% and 7%. And I will come back to that on the next slide. In 2026, we continue to invest in our strategic focus areas with CapEx expected to be up to around EUR 125 million while lease payments will be at the same level as in 2025. Organic cost increases remain high. We expect around EUR 140 million cost increases, mainly labor-related, following wage inflation and other inflationary pressure. Price increase will be more than sufficient to mitigate this. And our focus will continue to be on strong cost control and further efficiency improvements, building on our proven efforts to reduce costs. Please note that the outlook of 2026 assumes limited impact from changes in treatment of de minimis thresholds in the EU and U.S. or in related customs handling and clearance fee structures. The scope and timing could evolve during the year and could impact performance. The graph on the left side indicates the assumed development of normalized EBIT per segment, but let me explain a bit more on that. This Slide 29 shows the assumptions for the drivers of the expected 5% to 7% revenue growth. At the segment E-commerce, revenue will grow on the back of 1% to 3% volume growth compared to the number of parcels as shown in the segment Parcels for full year 2025, which is EUR 376 million. As targeted yield measures will come into effect gradually, these will also contribute to revenue growth. And then in the E-commerce segment, you see the impact of the transfer of letterbox parcels of D+1 to the network of e-commerce. Pim already touched on this. And on the next slide, I will show you more background. Good to keep in mind that this letterbox parcel revenue in E-commerce is internal revenue and, as such, will be eliminated at group level. Looking at Platforms. For Platforms, it's expected to show double-digit revenue, accelerating its speed of growth following our strategic initiatives to expand our intra-European growth at Spring and MyParcel and growth from the Asian platforms. For Mail, the main drivers are the continuation of the structural decline in volumes between 8% and 10% assumed for 2026 and price increases. Altogether, that brings us to the assumed revenue growth of between 5% and 7%. As said, let me provide a bit more background on the letterbox parcels. So as of mid-2026, we will start delivering the letterbox parcels D+1 through our e-commerce network, so no longer through the Mail network. As Pim explained, this is a necessary step to enable the transition to D+3 for all mail in 2027 and results in a step-up in costs for 2026, in line with the road map towards a future-proof postal service. Apart from the extensive impact on processes and people, it will also bring some financial consequences for segment reporting. These are summarized on this slide to help you understand the development in performance. Let me start with E-commerce. The transfer will bring between 50 million and 60 million items in the network, so around 30 million in 2026. As shown on the previous slide, this adds revenue for the E-commerce segment. Again, this is internal revenue. Good to understand that the price of letterbox parcels is below the current average price per parcel, which is visible in the price/mix development in the e-commerce performance. Extra volumes, of course, bring extra volume-dependent costs and, for 2026, limited one-off transition costs. Overall, the impact from the transfer on normalized EBIT for e-commerce is limited and then expected to become margin accretive as of 2027. Then moving to the Mail side. At Mail, you see some additional revenue as delivery of the letterbox parcels via the E-commerce network comes with better service and quality. It also brings cost savings as we can adjust the prices in Mail. Around EUR 20 million of the cost savings for 2026 relates to the transfer. On the other side, the transfer comes with additional cost as, in the end, the infrastructure of e-commerce is more expensive than the Mail structure. Combined, this leads for the Mail segment an expected net negative impact of around EUR 12 million, fully in line with the road map towards a future-proof postal service. Let's move over to the e-commerce bridge. On this slide, you see the main drivers and its contribution to the assumed step-up in e-commerce performance in 2026, a step-up in revenue from a 1% to 3% underlying volume growth and the impact from the transfer of letterbox parcels. For price/mix, I want to emphasize that regular price increases and the targeted yield measures are more than offsetting organic cost increases. And yes, in the bridge, we will see negative mix effects, but these are almost fully related to the transfer of letterbox parcels. As explained on the previous slide, the price for letterbox parcels is below the average price for parcel, and that is driving the majority of the negative mix effect. Remaining mix effects within and between channels and countries is expected to be in line with Q4 2025 performance. Then you see indicatively an increase in volume-dependent costs as we have more volume and organic cost increases. We expect to achieve the EUR 40 million to EUR 50 million in cost savings, investments in our out-of-home sustainability and reduction of physical workload and the earlier mentioned one-off costs to enable the transfer of letterbox parcels to e-commerce. Then moving on to Platforms. The bridge clearly shows the impact from the assumed double-digit revenue growth, predominantly attributable to the expansion of activities. Positive pricing sufficient to cover organic cost increases, though offset by negative mix effects coming from a less favorable mix of destination and weight. Again, additional volumes come with additional costs, and that's also shown in the volume-dependent costs. And of course, specifically in this asset-light segment, on the cost side, you see the impact of investments in international expansion, for example, due to a step-up in costs related to sales and marketing and IT. So really investing in future growth. And then moving over to the last segment, the Mail segment. The impact from organic cost increases and an assumed 8% to 10% volume decline is mitigated by price increases and a favorable mix effect and the decline in volume-dependent costs. And then we expect to achieve EUR 30 million to EUR 40 million in cost savings, largely related to the transfer of letterbox parcels to e-commerce, offset by higher costs as explained and cost increase mainly related to preparations for the future-proof postal networks. Please take in mind that this bridge represents the full segment Mail, which is more than the USO. As mentioned by Pim, without any doubt, also in 2026, there will be net cost for the USO. In that regard, let me reiterate that we will continue our legal proceedings. That being said, let me hand over back to Pim to close the presentation with the concluding. P. Berendsen: Thank you, Linde. Well, if we look at 2026, that will be the year in which we expect to reach the inflection point in the execution of our strategy towards our Breakthrough 2028 ambitions. The outlook that we've said of normalized EBIT between EUR 40 million and EUR 70 million and free cash flow between 0 and minus EUR 30 million is in line with the trajectory that we need to get to the 2028 results. For E-commerce, we'll focus on a continued and disciplined path towards sustainable value creation. At Platforms, we'll focus at further investments to capture and to facilitate to accelerate international growth. And in Mail, it will be a very heavy transitional year in which we need to make the changes for a D+2 USO delivery network and to continue to work on the future-proof postal network that we need as well. So all in all, satisfied with the 2025 results, particularly in the fourth quarter. We're on track towards our Breakthrough 2028 ambitions. And we're connected to deliver what drives us all forward. So thank you for now, and let's open up for questions. Inge Laudy: Operator, could you please explain the procedure to ask questions, please. Operator: [Operator Instructions] We will take our first question. Your question comes from Michiel Declercq from KBCS. Michiel Declercq: My first question would be on Mail, where you reported very nice results. Could you maybe remind me on the fourth quarter what the impact was of the nonrecurring elements? And then if I adjust for that, I would assume that the Mail volumes, they were also quite strong. You mentioned the positive impact from the holiday cards. Is that what has mainly been driving the strong margin? And then also looking a bit into 2026, the revenue bridge that you show on Slide 29. You basically expect the full volume to be offset by price increases and mix effect. Can you maybe elaborate a bit more on this, I mean, the price increases for USO have been announced? But yes, maybe diving a bit deeper into these mix effects as well. Is that maybe the absence of the government and the election mail? So that would be my first question. And then secondly -- second, on the CapEx, you guide for EUR 125 million this year, which is a bit lower than what you shared during the Capital Markets Day. Is this mainly a timing effect? Or is this the new run rate also for 2027? Or how should we look at this? Linde Jansen: Yes. Thanks, Michiel, for your questions. Let me start with the first question on the volume development of Mail in the last quarter. Yes. So indeed, the volume in the last quarter has been impacted or positively impacted by those nonrecurring volumes coming from governmental side. So the pension funds, which had a special communication on changes in pension funds, but also the emergency kit, which was distributed in the last quarter. And of course, you had the election mail. Those -- that volume is not recurring because we will not have that every year. And looking at the campaign, the campaign for the Christmas stamps, which this year we did together with the Efteling cooperation and that was successfully perceived by the consumers as such, that was contributing to the positive volume development as well. Then the revenue bridge mix effect, you were referring to the revenue bridge you were referring to the Mail specifically, right? Michiel Declercq: Yes. Yes, correct, the Mail only. Linde Jansen: Yes. What you see there is that the underlying volume trend, which we actually also have this year, the 8% to 10%, that is on the volume side. And on the other side, you will see also that from a price increases point of view, we will increase our prices also to ensure that we outweigh or more than outweigh our organic cost increases. And that is contributing to the overall performance in the revenue side. Then on your last question on CapEx of EUR 125 million. Well, I'm not saying is it timing, yes or no. I think over time, yes, we will expand our CapEx to further invest in the growth areas. For now, we have targeted at EUR 125 million. It's mostly important that we continue our trajectory on the growth initiatives, which is obviously out-of-home, but also investments in ESG and in our IT capabilities. And that is with EUR 125 million on trajectory towards our 2028 ambition as well. P. Berendsen: One addition, Michiel, from my side, just to clarify a point. In the volume development of the fourth quarter, where kind of the total volumes for Mail were roughly flat, you still have double-digit volume decline in single items and Christmas cards compared to last year, but then made up by slightly more bulk Mail volume than the same quarter last year, driven by the elements that Linde just explained. Michiel Declercq: Okay. That's clear. If I could maybe ask a small follow-up about the margins in Mail in the fourth quarter. Is it possible to quantify roughly what the EBIT impact was of these nonrecurring items? I know it's low margin, but is it -- can you give us some degree of what the margin impact was from this? P. Berendsen: Not per line item. What I've indicated in my story is that as of -- well, you know the year-to-date performance at the end of Q3, I've kind of given you a marker where we were at the end of [ P 11 ] being still significantly down roughly around the EUR 35 million loss, and it turned into a EUR 2 million positive for the full year. So then you have the contribution of the combination of the additional volume in December as well as the contribution of the Christmas card campaign that has, let's say, in those last weeks of the year, turned a significant loss into a slightly positive profit for the entire year. Operator: Your next question comes from the line of Frank Claassen from Degroof Petercam. Frank Claassen: Two questions, please. First of all, on your growth assumption for the parcels or e-commerce, roughly 1% to 3% for '26. Could you roughly indicate how much you think it will be from the domestic side and how much from international? So will international still be growing much faster in your assumption? That's my first question. And then secondly, you're targeting quite a few cost savings in '26. Do you also expect to see restructuring charges related to these cost savings? Linde Jansen: Yes. Thanks, Frank. Regarding your first questions on the 1% to 3%, no, we cannot comment on the specific division between domestic versus international. What is important that we will -- that this growth is, of course, continued and based on our targeted yield measures and change from volume to value strategy. So as said, the pattern which we were on for 2025 is also what we will continue for 2026. Though, of course, for the international growth, there, we had a different base to grow from. On the cost savings side and the potential redundancies, what you're referring to, no, this is really a cost savings program where we want to significantly reduce the cost price per parcel. We do not, at forehand, have predefined or planned layoffs. It's really an integral part to make sure that the commercial initiatives, the elements we take into commercial initiatives, we also derisk on the side on the competitiveness of our cost price per parcel so that we ensure that on both angles, we steer for the next. Operator: [Operator Instructions] Your next question comes from the line of Marco Limite from Barclays. Marco Limite: I've got three questions. So the first one is on the recent news flow we have heard last week on Sandd, where again, ACM looks to be -- well, the court seems to be against the Sandd acquisition. So yes, if you could clarify what's your view there, what's happening? It feels like, yes, quite a few years have passed now. Second question is on your Slide 31, where you are showing the expected margin evolution throughout the years until 2028. And I mean, in 2027, according to your chart, we should expect a big step-up in margins. In my view, looks a bit -- the step-up in '27 looks a bit higher compared to what you showed the CMD in September. So can you just remind us what is going to drive this fairly big jump in margins in '27 in the E-commerce division? And then maybe my third question, just a clarification on the letterbox parcels slide, so Slide 30. Just a clarification there. So you're saying that in '26, you don't expect any impact on your E-commerce EBIT. But then in Mail, you're saying minus EUR 12 million. So can you just confirm that this is going to be net negative at group level? -- between Mail and E-commerce? Or I'm getting that wrong? And if you could also clarify, you're mentioning EUR 50 million to EUR 60 million extra volumes on a full run rate. Can you quantify that also in terms of revenues? So it's easier for us to model that? P. Berendsen: Thank you, Marco. I'll take the first and third question and leave the second one for Linde to clarify. I think you're referring on point one to the conclusion of what the -- say we felt about the acquisition of Sandd. Clearly, our view there is that we've done that acquisition on the back of a permit that was given. And since that time, we've adhered to the conditions of that permit. So we really believe there's no legal obligation nor a necessity at the level of PostNL to mitigate anything here. So that is our position. Of course, we've seen that ACM plans or intends to start an investigation. We're uncertain about the scope, the approach or the legal grounds for that investigation. So we'll just wait and see there. The more general point that we make there is that over the last couple of years, there have been numerous investigations and research done also by external parties on how the mail market should develop. All of those led to the same conclusion being it's a market in structural decline and the current set of regulatory constraints are not fit for purpose anymore. So we'll wait and see, but I don't expect material outcome from those elements. And as I said, it's now 6 years, 7 years after the integration of Sandd that cannot be revoked, although we continue to adhere to the conditions of the permit. So that is point one. And three, I think there's a couple of elements to your question. So if you talk about EUR 50 million to EUR 60 million, that's a full year number, not a half year number because we only migrate those parcels, letterbox parcels halfway through the year. And yes, net for the group, this is a negative. Linde said that it will not have a material impact within the E-commerce space, but it will have an impact of a couple of million negative for 2026 within E-commerce being a function of the transition cost, the implementation cost to make this work and will be accretive as of 2027. And within Mail, we indeed expect a net of minus EUR 12 million. So in excess of the minus EUR 12 million, you've got a couple of million more that makes it the net consequence of this change in 2026. And then you could argue why doing this, in the first place with this negative impact on 2026. And that's because it's necessary to be able to make the move towards delivery within 3 days to take out the letterbox parcels within the mail network. So it's a fundamental step that we have to take to be able to make the changes halfway 2027 to go to a D+3 model. Linde, can you take the second question of Marco? Linde Jansen: Yes. Well, as you refer to the Slide 31 and your question on the margin. So actually, the 2026 margin development and also towards 2027 margin development is in line with what we have said during the Capital Markets Day, also starting with current year with our 2025 story year. We will see a step-up in margin versus 2025 performance, and that further increases over time to 2027. And in that sense, it's not different from the story which we explained during the Capital Markets Day. But as also explained by Pim, we -- clearly the plan for 2025 and 2026, you see now also investments being made or, for instance, this step-up or change of the letterbox parcels. Those elements are all contributing and ensuring future growth, and that is why you see those effects as expected in 2025 and 2026, not only in E-commerce, but also in Mail, and that is on the trajectory towards our ambition of 2028. Marco Limite: Okay. And if you could help us quantifying the revenues shipped from Mail into Parcels coming from... Linde Jansen: No, we can't give you that specification. Operator: [Operator Instructions] We will take our next question, and the question comes from the line of Henk Slotboom from The Idea. Henk Slotboom: I've got three questions equally divided on the Mail, E-commerce and on Platforms. First one is an easy one. On your guidance with regard to mail volumes, 8% to 10% expected drop in volumes in this year. It seems a little bit conservative in my view. If I look at the first 3 quarters of this year, it was minus 6.9%, minus 8.3%, minus 5.0%. And then in the last quarter, there was, of course, the elections. We had the government bill, the emergency package, which is maybe 8 million or so, the number of households in the Netherlands. And the pensions reform is still taking place. So I expect that you will have extra mailings on pensions again by the end of this year. As far as the election is concerned, we have municipal elections in the first quarter. So there's a bit of a timing difference. What exactly makes you so, call it, conservative when it comes to Mail volumes? P. Berendsen: Do you want to take them one by one, Henk, or do you want to share your other questions already? Henk Slotboom: No, no. Can we do it one by one? P. Berendsen: Yes, that's fine. That's fine. Look, here, we've just taken the longer-term view that we've consistently seen in the market. Those volume expectations are also clearly a function of the conversations that we've had with our bigger customers, including [ SDN ] [Foreign Language] and the renewal of a few bigger customers as well. So on the back of those insights, we have set the expectation around that 8% to 10% mark. Well, let's wait and see. It could be on the conservative side. But that's based on the insights that we've gotten from the conversations around those bigger senders of mail, whilst renegotiating the terms for 2026. Henk Slotboom: Okay. And the second one is on Platforms. If I look at the pro forma divisional breakdown you gave at the Capital Markets Day, I see revenue of EUR 724 million in 2024 with a profit normalized EBIT of EUR 19 million, EUR 19 million. '25, we see a nice growth in the revenue line to EUR 786 million, but a steep fall in the normalized EBIT. Can you explain what exactly is this? It's an asset-light model. I understand that if you want to grow in this business, you need to invest upfront. And if I look at the chart at Slide 32, your main goal in E-commerce is from volume to value. If I look at Platforms, then I see volume, but the volume in terms of price/mix is 0. How can I connect this? Is this the way to get into this market? Or maybe you can give some more -- shed some more light on this, please? P. Berendsen: Yes. Of course. Clearly, we've set different strategic objectives for the business segments. So here, particularly in '25, '26, you see materially investments in the Platforms space in terms of building line haul capacity That is not fully utilized at day 1. It is expanding our sales capability throughout Europe. It's investing in some IT functionalities that will allow you to be competitive on that asset-light playing field. Those elements together -- also, if you were to look at 2026, really are already clarifying, I would say, around EUR 5 million to EUR 10 million of additional costs in the P&L that over time will turn into a contribution. Second part is that, as said -- so also, if you look at the last quarter of 2025, we did have more volume than we originally expected in Europe, which caused us to take additional line haul carriers in. And we've decided to prioritize customer experience over short-term margins here, because we truly believe it will help our competitive position and will accelerate the flywheel going forward. Next to that, this is also the domain. where you will see the consequences of tariffs, particularly also from the U.S. trade lane side also in 2025. And also the uncertainty about the implications on what handling fees will do with consumer spending and choices consumers will make in 2026 is in part, an explanation also for the 2026 development because -- although Linde has said that we've taken into limited sensitivities that still millions and millions of lower profits based on the assumed scenarios that we've taken as the baseline for the handling fee situation. So those 3 elements explain the temporary step down in margin profile within Platforms. Henk Slotboom: Okay. And then my final question is that, well, bridges basically a little bit Platforms with the E-commerce division. We've seen quite a lot of noise from the Chinese CRO is active in -- on the intercontinental routes from China to, for example, the EU, they have a close cooperation with GOFO, which has become active in the Netherlands. Earlier last week, we saw reports about JD.com, which is becoming active in the last mile as well, and they do it in a slightly different way with [ Chinese ] [ Winkler.org ] guarantees and selling real products like Apple and that sort of things. How do you look at this development? Because it looks as if the Chinese logistics companies are piggybacking on what we see from the side of the Chinese platforms, which are coming to Europe. What's your view on that? P. Berendsen: Well, as you know, I've said before, it was already quite a competitive marketplace to begin with. And we certainly see those new models and new businesses coming up. It's not that difficult to sort 100,000 parcels or sort a couple of million. But this is, of course, can you do this at a convenience level, at a quality level structurally throughout the year so that you can accommodate your clients to facilitate their growth ambitions. And I think there, our view on strategy is exactly the same as prior to those. We need to be best in the customer journeys that matter most. We need to be best in terms of Net Promoter Score, and we need to stick to a model where we strive to get value from volume and not volume per se. And we see the right telltales there. We also see slight indications that other marketplaces are at least following suit in terms of trying to get value distribution more equally divided within the chain. And that's what we'll continue to push for. And we'll follow and monitor these parties closely. They have different operating models. They have so far not agreed any working conditions or collective labor agreements. So the question is also going to be how will they develop their business model to make it sustainable going forward. We talk with them, but we stick to the strategy that I've just explained. Henk Slotboom: Is labor a constraint for them? We heard you in the past mentioning before, there's a high churn amongst parcel deliveries and that sort of thing. It's difficult to get enough people there. Would it hypothetically mean an additional push towards out-of-home? And if so, could you benefit from it because you already have how many 1,200, 1,300 of these locations? P. Berendsen: Yes, and accelerating. So that's kind of more the general development there where we truly believe that a bigger portion of parcels will go to out-of-home delivery towards lockers and still the vast majority will go at home. I will definitely expect those other players to also -- it will kind of -- the labor market is the labor market in the Netherlands. It stands anyway. Their model is much more focused on pay per item, where also different parties might have their own view on. I would say all regulatory elements that relate to safe working conditions apply to all in the Netherlands, so also to them. So yes, there are some limitations to, I would say, their ability to scale this existing model. In the meantime, of course, they can make choices against price points that could lead to some volume going their way. But as I said, we will stick to the plan to create value from volume. And that's also still why we do expect a little bit of market share loss in 2026. We're happy with the progress that we're making on the rollout of our out-of-home network. We're accelerating there, not only in the number of locations, but also on the number of lockers per location. Of course, we truly believe that, that acceleration can help us on both sides to create competitive edge, to create best possible consumer experiences and will make the network more efficient. Operator: Thank you. This concludes today's question-and-answer session. I will now hand back for closing remarks. Inge Laudy: Thank you all for joining this call, and speak to you on April 28. Thanks. P. Berendsen: Thank you. Linde Jansen: Thank you all. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to the PostNL Q4 Full Year 2025 Results Call. [Operator Instructions] And after presentation, there will be an opportunity to ask questions. Now I would like to hand over the conference call to Ms. Inge Laudy Manager, investor Relations. Please go ahead, madam. Inge Laudy: Thank you, operator, and welcome to you all in today's conference call. We have published our Q4 and Full Year '25 results and the annual report earlier this morning, and we'll explain the set of results to you in this analyst call. With me in the room are Pim Berendsen, our CEO; and Linde Jansen, our CFO. After that presentation, Pim and Linde will take your questions. Pim, over to you. P. Berendsen: Thank you, Inge, and good morning to you all. I would like to start with a summary of the new strategy that we've presented to you on our Capital Markets Day last September. That's on Page 5. And at the top, you see our purpose, connected to deliver what drives us all forward. That is what holds everything together. Just below the purpose, you see our strategic intent. We grow our business, create sustainable value, lead through innovation and make impact that matters. Then moving from the cascade one step down again, you see the strategic objectives and ambitions of the 3 business segments. For E-commerce, it's all about shifting from volume to value through differentiated approach and smarter network utilization. For platforms, capturing international growth with asset-light models and for Mail transforming towards a future-proof postal service. We'll make these changes and those ambitions through 10 strategic priorities, ranging from compliance and workforce to network efficiency and international growth. And this should all lead to the required outcomes on 4 goals that we've set, being financial KPIs, Net Promoter Score, carbon efficiency and employee engagement. And for 2025, we've reached the objectives for all 4. Then if you look at the key takeaways for 2025, it's all about progress towards our Breakthrough 2028 ambitions that we shared with you in September too. So we're positive to be able to say that our financial and nonfinancial targets are achieved. We've reset the organizational structure and made changes in the teams. We've now reporting segments aligned with the strategy. Of course, we have secured the refinancing required to bring us to 2028, and we see early telltale that the targeted yield measures are contributing to performance and that momentum will further build into 2026. Furthermore, crucial progress has been made in the political process towards future-proof mail service. Thursday, 2 weeks ago, in Parliament, the changes are approved to get us to a D+2 by mid-2026 and a D+3 delivery for Universal Service by July 2027 at quality levels that we now deem to be feasible. So far, there's no solution for the net cost during the transition period up to the point that we are beyond the D+3 delivery, and that's why we will continue with the legal proceedings on net costs. Targeted yield measures have more than offset the organic cost increases in 2025. And overall, given performance and leverage based on dividend policy, we're able to propose a dividend per share of EUR 0.04 per share and to be proposed to the AGM in April. If we then zoom into the segments and the fourth quarter, in particular, we've seen at Parcels a very well-executed peak period underpinned by very good NPS scores, both on the consumer and on the sending customer side. Revenues up by 3.2% at flat volume development with a positive price/mix impact. And we see that the propositions that we're looking for in contract renewals are progressing as we've planned. In other words, the differentiating commercial approach is helping us to create a better value over volume, and that's what we obviously seek. We've said that it will take some time to materialize fully, but we're on the trajectory of the path that we sketched for you when we've communicated our Capital Markets Day objectives. If we then look at Mail in the Netherlands in the fourth quarter, we've seen some exceptional volume in the last part of the year, driven by pension communication as part of the pension transition in the Netherlands and some special safety kit communication from the [indiscernible] and that has led to a very robust December performance that altogether with a very successful Christmas card campaign offset the year-to-date November negative result that at that point was close to EUR 35 million and changed it to a slight positive number of EUR 2 million at full year 2025. Of course, the underlying trend of volume decline and organic cost increases is continuing. The cost savings, we have achieved what we expected to achieve. Of course, due to adjustments in the business model, the business mail is already moved to within 2 days delivery window, and that helped us save costs. There are no further options for future cost savings within the current regulatory framework, and that's why it's so important that we're now allowed to go to within 2 and later on within 3 days delivery for the universal service against reasonable quality levels later this year. Then I hand over to Linde for now. I'll be back later, and then Linde takes you through the more detailed financial performance of each segment. Linde Jansen: Yes. Thank you, Pim. As mentioned already by Pim, the fourth quarter was a good quarter with our revenues up to EUR 973 million and normalized EBIT of EUR 79 million, which is 27% compared to the quarter last year. This means that we have delivered on our full year 2025 outlook for normalized EBIT of EUR 53 million, exactly in line with 2024. Free cash flow came in at minus EUR 25 million, also midpoint of our outlook. Also, good to mention that normalized comprehensive income for the year was EUR 21 million, a base for the determination of the proposed dividend per share. Our adjusted debt is up to EUR 501 million. Not on this slide, but good to mention that the leverage ratio at year-end was 1.99x, properly financed so we can propose to the AGM the EUR 0.04 dividends per share, as mentioned. We also delivered on the targets for the key nonfinancial KPIs and made good progress on further reducing on our environmental footprint. The 50% improvement in carbon efficiency and the share of emission-free last mile delivery increased to 33% from 28% in 2024. Looking at NPS, we maintained our average #1 position in relevant markets, an important achievement in a competitive marketplace. And also employee engagement was up compared to last year. Let's move to the financial details of Parcels in the fourth quarter. Revenue amounted to EUR 691 million, which is 3.2% above last year, following volume development, price increases and mix effects. Overall, volumes were flat with a slow start of the quarter followed by increasing volumes in the peak period. Market share was slightly down as anticipated following our yield measures. With that in mind, it's good to see that the total price/mix impact was positive this quarter. Of course, this is also visible in the average price per parcel, up by EUR 0.11, supported by targeted yield measures and regular price increases. Price increases have been implemented according to plan and were only slightly offset by negative mix effects. Furthermore, it's also positive that our cross-border activities continued the trend we have been seeing for several quarters with revenues at Spring up this quarter most strongly in our intra-European activities, a promising development as international expansion is one of our strategic initiatives. In this part of our business, we see a less favorable mix. When looking at costs, it should not be a surprise that in this quarter we saw significant organic cost increases, which is mainly labor related. However, we also see EUR 14 million in cost savings in the fourth quarter, and these were delivered according to plan. To be more specific, these came from ongoing adaptive measures like, for example, rationalization of services because we stopped parcel delivery on Sunday. Next to that, our flexible operational setup proved our agility and made us achieve additional efficiency improvements in our network, so in depots, supply chain and transport to mitigate the adverse mix effects. In Spring, planned investments to capture intra-European growth put pressure on the margin. This brings us to the Parcels bridge, which shows the reconciliation of the EBIT from EUR 36 million in the fourth quarter last year to EUR 41 million in this year. Asset volumes were flat. So the revenue growth in the volume-related part of this segment is fully attributable to price and mix. To be more precise, EUR 15 million from pricing and yields, offset by only EUR 4 million due to a less favorable product and customer mix. Organic cost increases amounted to EUR 14 million following wage increases according to PostNL and sector collective labor agreements and indexation for delivery partners. Other costs were EUR 8 million better, mainly as a result of the combination of cost savings and additional efficiency improvements in depots, supply chain and transport, partly offset by higher costs related to investments in reduction of physical workforce and sustainability. In other results, I want to highlight that this is mainly applicable to Spring, where we see revenue growth being offset by mix effects. Furthermore, we again invested in international expansion, one of our strategic initiatives of the intra-European activities in Spring. We also continue to focus on further growth in Belgium. Let's move over to the results of our segment, Mail, in the Netherlands. Revenue amounted to EUR 406 million, which is EUR 18 million above last year's quarter. Volume development was almost flat, supported by election mail and other partly nonrecurring non-24-hour mail from, for example, the pension funds and governments, which Pim just mentioned. I would also like to mention the successful campaign for our December stamps and, at the same time, the underlying trend of structural volume decline continues. Also, part of revenue are price increases, and these were partly offset by an unfavorable shift in mix. Obviously, the share of non-24-hour business within the total of Mail volume increased due to the extra volumes from government and pension funds. And the shift of business mail to D+2 delivery is also part of the explanation. Looking at costs. Labor costs were up following the CLA for PostNL and the mail deliverers. When looking at illness rates, we see again an improvement compared to previous year. These cost increases were mitigated by cost savings of EUR 10 million according to plan, coming from further adjustments in our current business model such as the transition of business mail towards a standard service framework of delivery within 2 days. Altogether, this resulted in normalized EBIT of EUR 45 million. The robust December performance more than offset a deeply negative year-to-date November results. Remember that the year-to-date Q3 normalized EBIT was minus EUR 43 million, and the last quarter brought us at the full year result of just EUR 2 million, which equals a margin of 0.2%. The elements of Mail in the Netherlands I just discussed are reflected in the EBIT bridge on this slide. As said, almost flat volumes, also, of course, reflected in flat volume-dependent costs. Price increase partly offsets the less favorable mix, as just explained. Organic cost increases of EUR 10 million were due to wage increases and other inflationary pressures. And then we have the cost savings of EUR 10 million and a bit lower labor costs related to sick leave. They were more than offset by lower bilateral results, staff-related costs and one-off cost to prepare for the future Mail structure. We will tell a bit more on that in a minute. Then over to our free cash flow. Free cash flow was EUR 73 million in the fourth quarter, down compared to Q4 2025, while normalized EBIT was up. This is mainly explained by working capital development where, as expected, we see phasing with the previous year. Furthermore, interest paid is up following the changes in our debt structure. Thanks to well-executed cash and balance sheet management, full year free cash flow came in, in line with our outlook. This altogether winds up the 2025 financials. I now hand back to Pim for our strategic story going forward. P. Berendsen: Thank you, Linde. By now, we're on Slide 16. And this slide brings together the strategic objectives of each of our business segments as well as the enablers that support them. So for E-commerce, the ambition is to shift from volume to value through a differentiated approach and smart network utilization; for platforms to capture international growth through asset-light models; and for Mail to transform towards a future-proof postal service. Around them are enablers that cut across the businesses, for instance, ESG, where we take care of our people, our environment and our society; data and tech to simplify and to accelerate by embracing data and AI; and innovation beyond delivery, where we explore new opportunities by stretching our core businesses. Together, this framework connects our ambitions to the actions that will deliver Breakthrough 2028 results. If we then look at the E-commerce story, then you all know it's all about moving from volume to value. And we do that through 4 levers on our margin engine. First, we are strengthening our commercial engine. That means a more differentiated customer approach, tiered propositions and moving slightly away from next day only to also best day delivery options to smooth flows and to reduce costs. That doesn't take huge changes, but just gradual moving a bit of the volume towards best day helps to create better network utilization and, through leverage, creates material impact on margin. Secondly, we aim to be distinctive where it matters most, giving consumers control, improving the critical I receive journeys and deploying digital tools to enhance their experience. And that's also why we're very happy about the fact that Net Promoter Scores on the consumer side have been increased also during the peak period last year. Thirdly, we stay comparative on cost. Smarter depot operations, better alignment of resources and targeted investments in technology will help us to run the network even more efficiently and will reduce the cost price per item, which strengthens our competitive position as well. And finally, we do take a step-up in steering and teaming, active revenue capacity management in new departments that we've introduced, supported by a strong organizational foundation, for which we've made changes in the beginning of this year, gives us even better control about customer value, yields and margins. And this is how we build a more balanced, more profitable, more value-enhancing e-commerce business. If we then look at the actions that we've planned for 2026. It's really about monetizing capacity by optimizing customer and product mix better. Contract renewals that have been agreed bring a better balance between margin and volume already. Focus on cost control, so we plan to take out EUR 40 million to EUR 50 million of costs in the e-commerce space, partially because of the benefit from implementation of our out-of-home strategy, but also lean on more efficient operating model in our first and middle-mile operations. Further optimization and digitalization, robotics and planning optimization tools helped by AI developments will help realize those savings as part of a program that we've launched to reduce the cost price per item. And as said, that will help to strengthen our competitive position even more. Clearly, to be distinctive where it matters, we just discussed why that's so important. Then maybe to our assumptions for 2026. We do assume continuous growth of Dutch households consumption of around 2.2% to 2.4%. And with an online penetration of 0.5% increase, we still assume because of our push for value, that we'll continue to lose a little bit of market share. And that's why, at the end of the day, we expect volume growth to be 1% to 3% for 2026. If we then move over to platforms. And Linde already talked about the investments that we are making there impacting the 2025 results and will continue to impact 2026 results too. There, we invest in the acceleration of international flows, and the asset-light models will allow us to expand routes quickly and capture new customer portfolios without heavy investments. Secondly, we strengthened our Dutch domestic leadership by keeping export flows and international volume in PostNL's network and by improving customer stickiness and to protect our own market. Thirdly, we build a smarter, leaner network, a shared platform infrastructure, strong partner models, and automation through APIs drive efficiency and scalability in that platform space. In short, these asset models give us the flexibility, the option to scale and to gradually, over time, improve profitability on the back of that revenue growth that we seek. If we then look at the actions for platforms in 2026, then it's really about empowering that European sales function. We have been investing in expanding that sales function, including the intelligence tools that it needs. We are growing the network. So we've added many different trade lanes and line haul expansion to the European business. And we're gradually filling that network capacity that will, over time, then will result in an increase in marginality on the platform side of things. Of course, we have for quite a while already a very strong market position in Hong Kong, China. And we're expanding that base to also other areas within Asia that can also fuel the import flows to Europe. If we then go to the Mail side. There's, of course, been very relevant developments over the last couple of weeks. So the adjustments of the universal service are approved by the House of Representatives 2 weeks ago, which is a crucial step towards future-proof postal service. So we'll go to a within 2 days delivery model for the USO for July 2026 and to within 3 days for July 2027, which is a deviation from the trajectory that we've painted on the Capital Markets Day because there only D+3 was expected to be there for January 1, 2028. The quality requirements have also come down to 90% for 2026, D+2 and 92% for a within 3-day delivery. So far, there's no solution yet for the remaining substantial net costs on universal service. And that's also why we'll continue with the legal steps to go after that net cost compensation. Because as we estimated in the beginning of the year, we did expect roughly EUR 30 million of net cost related to the USO obligations. I think it will be slightly more than EUR 30 million. And of course, also in '26 and '27, we will still be looking at material net costs that impact the profitability of the company that does impact the competitiveness of the group and limits our ability to invest in innovation, in new propositions, in labor conditions and labor circumstances. And that's why we'll continue to push for compensation or to be relieved from the obligations that drive those net costs. What you cannot underestimate is the impact these changes will have on our organization. And that's why we're really committed and busy with the preparation of those changes for July, which basically means that on the delivery and preparation side, a lot of the schedules need to change. All the delivery routes will be redefined. And we're taking those changes step by step. That also means that we'll deliver the letterbox parcels that are required to be delivered next day through the e-commerce infrastructure. That also impacts Mail's result in 2026 quite significantly, but also impacts the Parcels bridge. And Linde will talk you through those elements a little bit later on. So yes, I think great progress on Mail for 2025. But still a lot to do to make it happen operationally and a lot to continue to discuss with the new Minister of Economic Affairs as to how we want to organize mail delivery in the Netherlands going forward and also in relation to the question, who should pick up the bill for the net costs related to the universal service obligation. Slide 22 basically paints the picture as to why we believe that, over time, we're able to manage the Mail business within a bandwidth of results to give you a bit of predictability as to how we can do this. These lines are, with the exception of 2025, the lines that we've presented also at Capital Markets Day. So later on, you'll see that the 2026 expectations for Mail will not be as low as the orange line, but it indicates roughly the phasing of those steps over time. And the blue line also includes potential upsides on financial contribution that, of course, so far, we've not been taking into account in our outlook. But it's still reinforcing the message that we expect to be able to manage the Mail business with those changes within this bandwidth of results. And of course, there are some sensitivities around it that relate to the volume decline expectations and the timeliness of the execution of the steps that we plan to make in this road map. That is the Mail side of things. Then if we go to our enablers. The first one is ESG. That is clearly not a separate track but a foundation for everything we do, taking care of our people, environment and society. Further reductions of emissions to improve our footprint is high on our agenda. That's also why we expand our own fleet of electric vans by 50% last year, and we'll continue to stimulate delivery partners to switch to electric vans as well. As shared, emission-free kilometers was up and is now at 33%. With that, we also had a positive impact on urban liveability. On the right-hand side, you see our efforts to invest in engaged and healthy workforce because that will also drive employee engagement, will also drive Net Promoter Scores. We've introduced programs to reduce the absenteeism and invested quite materially in innovation to reduce the physical workload in our depots. And the examples that you see there is the implementation of tilters to reduce manual lifting in the depots, the use of smart electronic tugs for internal transport of roll cages, but also adjusted customer requirements for how they fill the roll cages before they're dropped off at our depots. So serious investments are being undertaken to improve the workplace safety to unlock cost efficiency and to create a better environment for our staff. Then if we talk to the other enablers, data tech and innovation beyond delivery. We're simplifying and accelerating by embracing data and AI, both in our meta channel contact strategies of our digital and human interactions, but as well on our supply chain and commercial engines, where we do apply AI as much as we can to drive NPS and improve efficiency and will contribute to the execution of our strategy. We keep on exploring new opportunities by stretching our core and are investigating the development of charging hubs for truck transport, where we aim to develop charging hubs initially for our own trucks, but over time, also make these hubs accessible for other carriers. Then let's go to the financial paragraph of 2026 and look at the outlook that we've set for this year. Linde, back to you. Linde Jansen: Yes. Thank you, Pim. So then we are on Slide 26, and let me start with a recap of our capital allocation. First and foremost, we will invest in our organic growth, including investments in our network, our out-of-home ambition and IT capabilities. Next, we will invest in inorganic growth opportunities in line with our strategic criteria. The focus for this will be on partnerships in our growth areas rather than acquisitions to limit the size of the required capital. The remaining cash flow should be sufficient to pay dividend in line with our business performance and dividend policy and to optimize our financing structure. For 2025, as said, we will propose a dividend of EUR 0.04 per share to the AGM -- at the AGM to be held in April. To be clear, this is based on the old dividend policy that was applicable for book year 2025. The payout ratio is 80% of normalized comprehensive income. As communicated during the Capital Markets Day in September 2025, as of 2026, we will slightly adjust this policy. Dividends will be based on normalized profit instead of normalized comprehensive income, and we will no longer have interim dividend. So the full dividend is to be paid in one payment in May. Let's move to Slide 27. This slide is in the deck to help you to reconcile the 2025 actuals to the new reporting structure that is aligned with this new strategy and as explained by Pim. As of January 1, 2026, we will report along the segments E-commerce, Platforms and Mail. In short, in E-commerce, we will report all parcel activities in, from and to the Netherlands and Belgium, including internal revenue from platforms and a transfer from PostNL Other being the digital activities. Platform comprises Spring and MyParcel and other international activities. Mail does not need further explanation. Let's have a look forward to our full year expectations for 2026, which will be the year of inflection in the execution of our strategy. I will start with sharing our outlook for the main financial KPIs and will then dive a bit deeper to the drivers and assume development per segment. For normalized EBIT, our outlook is between EUR 40 million and EUR 70 million, and we expect that to translate into a free cash flow of between 0 and minus EUR 30 million. That outlook is based on an expected total revenue growth of between 5% and 7%. And I will come back to that on the next slide. In 2026, we continue to invest in our strategic focus areas with CapEx expected to be up to around EUR 125 million while lease payments will be at the same level as in 2025. Organic cost increases remain high. We expect around EUR 140 million cost increases, mainly labor-related, following wage inflation and other inflationary pressure. Price increase will be more than sufficient to mitigate this. And our focus will continue to be on strong cost control and further efficiency improvements, building on our proven efforts to reduce costs. Please note that the outlook of 2026 assumes limited impact from changes in treatment of de minimis thresholds in the EU and U.S. or in related customs handling and clearance fee structures. The scope and timing could evolve during the year and could impact performance. The graph on the left side indicates the assumed development of normalized EBIT per segment, but let me explain a bit more on that. This Slide 29 shows the assumptions for the drivers of the expected 5% to 7% revenue growth. At the segment E-commerce, revenue will grow on the back of 1% to 3% volume growth compared to the number of parcels as shown in the segment Parcels for full year 2025, which is EUR 376 million. As targeted yield measures will come into effect gradually, these will also contribute to revenue growth. And then in the E-commerce segment, you see the impact of the transfer of letterbox parcels of D+1 to the network of e-commerce. Pim already touched on this. And on the next slide, I will show you more background. Good to keep in mind that this letterbox parcel revenue in E-commerce is internal revenue and, as such, will be eliminated at group level. Looking at Platforms. For Platforms, it's expected to show double-digit revenue, accelerating its speed of growth following our strategic initiatives to expand our intra-European growth at Spring and MyParcel and growth from the Asian platforms. For Mail, the main drivers are the continuation of the structural decline in volumes between 8% and 10% assumed for 2026 and price increases. Altogether, that brings us to the assumed revenue growth of between 5% and 7%. As said, let me provide a bit more background on the letterbox parcels. So as of mid-2026, we will start delivering the letterbox parcels D+1 through our e-commerce network, so no longer through the Mail network. As Pim explained, this is a necessary step to enable the transition to D+3 for all mail in 2027 and results in a step-up in costs for 2026, in line with the road map towards a future-proof postal service. Apart from the extensive impact on processes and people, it will also bring some financial consequences for segment reporting. These are summarized on this slide to help you understand the development in performance. Let me start with E-commerce. The transfer will bring between 50 million and 60 million items in the network, so around 30 million in 2026. As shown on the previous slide, this adds revenue for the E-commerce segment. Again, this is internal revenue. Good to understand that the price of letterbox parcels is below the current average price per parcel, which is visible in the price/mix development in the e-commerce performance. Extra volumes, of course, bring extra volume-dependent costs and, for 2026, limited one-off transition costs. Overall, the impact from the transfer on normalized EBIT for e-commerce is limited and then expected to become margin accretive as of 2027. Then moving to the Mail side. At Mail, you see some additional revenue as delivery of the letterbox parcels via the E-commerce network comes with better service and quality. It also brings cost savings as we can adjust the prices in Mail. Around EUR 20 million of the cost savings for 2026 relates to the transfer. On the other side, the transfer comes with additional cost as, in the end, the infrastructure of e-commerce is more expensive than the Mail structure. Combined, this leads for the Mail segment an expected net negative impact of around EUR 12 million, fully in line with the road map towards a future-proof postal service. Let's move over to the e-commerce bridge. On this slide, you see the main drivers and its contribution to the assumed step-up in e-commerce performance in 2026, a step-up in revenue from a 1% to 3% underlying volume growth and the impact from the transfer of letterbox parcels. For price/mix, I want to emphasize that regular price increases and the targeted yield measures are more than offsetting organic cost increases. And yes, in the bridge, we will see negative mix effects, but these are almost fully related to the transfer of letterbox parcels. As explained on the previous slide, the price for letterbox parcels is below the average price for parcel, and that is driving the majority of the negative mix effect. Remaining mix effects within and between channels and countries is expected to be in line with Q4 2025 performance. Then you see indicatively an increase in volume-dependent costs as we have more volume and organic cost increases. We expect to achieve the EUR 40 million to EUR 50 million in cost savings, investments in our out-of-home sustainability and reduction of physical workload and the earlier mentioned one-off costs to enable the transfer of letterbox parcels to e-commerce. Then moving on to Platforms. The bridge clearly shows the impact from the assumed double-digit revenue growth, predominantly attributable to the expansion of activities. Positive pricing sufficient to cover organic cost increases, though offset by negative mix effects coming from a less favorable mix of destination and weight. Again, additional volumes come with additional costs, and that's also shown in the volume-dependent costs. And of course, specifically in this asset-light segment, on the cost side, you see the impact of investments in international expansion, for example, due to a step-up in costs related to sales and marketing and IT. So really investing in future growth. And then moving over to the last segment, the Mail segment. The impact from organic cost increases and an assumed 8% to 10% volume decline is mitigated by price increases and a favorable mix effect and the decline in volume-dependent costs. And then we expect to achieve EUR 30 million to EUR 40 million in cost savings, largely related to the transfer of letterbox parcels to e-commerce, offset by higher costs as explained and cost increase mainly related to preparations for the future-proof postal networks. Please take in mind that this bridge represents the full segment Mail, which is more than the USO. As mentioned by Pim, without any doubt, also in 2026, there will be net cost for the USO. In that regard, let me reiterate that we will continue our legal proceedings. That being said, let me hand over back to Pim to close the presentation with the concluding. P. Berendsen: Thank you, Linde. Well, if we look at 2026, that will be the year in which we expect to reach the inflection point in the execution of our strategy towards our Breakthrough 2028 ambitions. The outlook that we've said of normalized EBIT between EUR 40 million and EUR 70 million and free cash flow between 0 and minus EUR 30 million is in line with the trajectory that we need to get to the 2028 results. For E-commerce, we'll focus on a continued and disciplined path towards sustainable value creation. At Platforms, we'll focus at further investments to capture and to facilitate to accelerate international growth. And in Mail, it will be a very heavy transitional year in which we need to make the changes for a D+2 USO delivery network and to continue to work on the future-proof postal network that we need as well. So all in all, satisfied with the 2025 results, particularly in the fourth quarter. We're on track towards our Breakthrough 2028 ambitions. And we're connected to deliver what drives us all forward. So thank you for now, and let's open up for questions. Inge Laudy: Operator, could you please explain the procedure to ask questions, please. Operator: [Operator Instructions] We will take our first question. Your question comes from Michiel Declercq from KBCS. Michiel Declercq: My first question would be on Mail, where you reported very nice results. Could you maybe remind me on the fourth quarter what the impact was of the nonrecurring elements? And then if I adjust for that, I would assume that the Mail volumes, they were also quite strong. You mentioned the positive impact from the holiday cards. Is that what has mainly been driving the strong margin? And then also looking a bit into 2026, the revenue bridge that you show on Slide 29. You basically expect the full volume to be offset by price increases and mix effect. Can you maybe elaborate a bit more on this, I mean, the price increases for USO have been announced? But yes, maybe diving a bit deeper into these mix effects as well. Is that maybe the absence of the government and the election mail? So that would be my first question. And then secondly -- second, on the CapEx, you guide for EUR 125 million this year, which is a bit lower than what you shared during the Capital Markets Day. Is this mainly a timing effect? Or is this the new run rate also for 2027? Or how should we look at this? Linde Jansen: Yes. Thanks, Michiel, for your questions. Let me start with the first question on the volume development of Mail in the last quarter. Yes. So indeed, the volume in the last quarter has been impacted or positively impacted by those nonrecurring volumes coming from governmental side. So the pension funds, which had a special communication on changes in pension funds, but also the emergency kit, which was distributed in the last quarter. And of course, you had the election mail. Those -- that volume is not recurring because we will not have that every year. And looking at the campaign, the campaign for the Christmas stamps, which this year we did together with the Efteling cooperation and that was successfully perceived by the consumers as such, that was contributing to the positive volume development as well. Then the revenue bridge mix effect, you were referring to the revenue bridge you were referring to the Mail specifically, right? Michiel Declercq: Yes. Yes, correct, the Mail only. Linde Jansen: Yes. What you see there is that the underlying volume trend, which we actually also have this year, the 8% to 10%, that is on the volume side. And on the other side, you will see also that from a price increases point of view, we will increase our prices also to ensure that we outweigh or more than outweigh our organic cost increases. And that is contributing to the overall performance in the revenue side. Then on your last question on CapEx of EUR 125 million. Well, I'm not saying is it timing, yes or no. I think over time, yes, we will expand our CapEx to further invest in the growth areas. For now, we have targeted at EUR 125 million. It's mostly important that we continue our trajectory on the growth initiatives, which is obviously out-of-home, but also investments in ESG and in our IT capabilities. And that is with EUR 125 million on trajectory towards our 2028 ambition as well. P. Berendsen: One addition, Michiel, from my side, just to clarify a point. In the volume development of the fourth quarter, where kind of the total volumes for Mail were roughly flat, you still have double-digit volume decline in single items and Christmas cards compared to last year, but then made up by slightly more bulk Mail volume than the same quarter last year, driven by the elements that Linde just explained. Michiel Declercq: Okay. That's clear. If I could maybe ask a small follow-up about the margins in Mail in the fourth quarter. Is it possible to quantify roughly what the EBIT impact was of these nonrecurring items? I know it's low margin, but is it -- can you give us some degree of what the margin impact was from this? P. Berendsen: Not per line item. What I've indicated in my story is that as of -- well, you know the year-to-date performance at the end of Q3, I've kind of given you a marker where we were at the end of [ P 11 ] being still significantly down roughly around the EUR 35 million loss, and it turned into a EUR 2 million positive for the full year. So then you have the contribution of the combination of the additional volume in December as well as the contribution of the Christmas card campaign that has, let's say, in those last weeks of the year, turned a significant loss into a slightly positive profit for the entire year. Operator: Your next question comes from the line of Frank Claassen from Degroof Petercam. Frank Claassen: Two questions, please. First of all, on your growth assumption for the parcels or e-commerce, roughly 1% to 3% for '26. Could you roughly indicate how much you think it will be from the domestic side and how much from international? So will international still be growing much faster in your assumption? That's my first question. And then secondly, you're targeting quite a few cost savings in '26. Do you also expect to see restructuring charges related to these cost savings? Linde Jansen: Yes. Thanks, Frank. Regarding your first questions on the 1% to 3%, no, we cannot comment on the specific division between domestic versus international. What is important that we will -- that this growth is, of course, continued and based on our targeted yield measures and change from volume to value strategy. So as said, the pattern which we were on for 2025 is also what we will continue for 2026. Though, of course, for the international growth, there, we had a different base to grow from. On the cost savings side and the potential redundancies, what you're referring to, no, this is really a cost savings program where we want to significantly reduce the cost price per parcel. We do not, at forehand, have predefined or planned layoffs. It's really an integral part to make sure that the commercial initiatives, the elements we take into commercial initiatives, we also derisk on the side on the competitiveness of our cost price per parcel so that we ensure that on both angles, we steer for the next. Operator: [Operator Instructions] Your next question comes from the line of Marco Limite from Barclays. Marco Limite: I've got three questions. So the first one is on the recent news flow we have heard last week on Sandd, where again, ACM looks to be -- well, the court seems to be against the Sandd acquisition. So yes, if you could clarify what's your view there, what's happening? It feels like, yes, quite a few years have passed now. Second question is on your Slide 31, where you are showing the expected margin evolution throughout the years until 2028. And I mean, in 2027, according to your chart, we should expect a big step-up in margins. In my view, looks a bit -- the step-up in '27 looks a bit higher compared to what you showed the CMD in September. So can you just remind us what is going to drive this fairly big jump in margins in '27 in the E-commerce division? And then maybe my third question, just a clarification on the letterbox parcels slide, so Slide 30. Just a clarification there. So you're saying that in '26, you don't expect any impact on your E-commerce EBIT. But then in Mail, you're saying minus EUR 12 million. So can you just confirm that this is going to be net negative at group level? -- between Mail and E-commerce? Or I'm getting that wrong? And if you could also clarify, you're mentioning EUR 50 million to EUR 60 million extra volumes on a full run rate. Can you quantify that also in terms of revenues? So it's easier for us to model that? P. Berendsen: Thank you, Marco. I'll take the first and third question and leave the second one for Linde to clarify. I think you're referring on point one to the conclusion of what the -- say we felt about the acquisition of Sandd. Clearly, our view there is that we've done that acquisition on the back of a permit that was given. And since that time, we've adhered to the conditions of that permit. So we really believe there's no legal obligation nor a necessity at the level of PostNL to mitigate anything here. So that is our position. Of course, we've seen that ACM plans or intends to start an investigation. We're uncertain about the scope, the approach or the legal grounds for that investigation. So we'll just wait and see there. The more general point that we make there is that over the last couple of years, there have been numerous investigations and research done also by external parties on how the mail market should develop. All of those led to the same conclusion being it's a market in structural decline and the current set of regulatory constraints are not fit for purpose anymore. So we'll wait and see, but I don't expect material outcome from those elements. And as I said, it's now 6 years, 7 years after the integration of Sandd that cannot be revoked, although we continue to adhere to the conditions of the permit. So that is point one. And three, I think there's a couple of elements to your question. So if you talk about EUR 50 million to EUR 60 million, that's a full year number, not a half year number because we only migrate those parcels, letterbox parcels halfway through the year. And yes, net for the group, this is a negative. Linde said that it will not have a material impact within the E-commerce space, but it will have an impact of a couple of million negative for 2026 within E-commerce being a function of the transition cost, the implementation cost to make this work and will be accretive as of 2027. And within Mail, we indeed expect a net of minus EUR 12 million. So in excess of the minus EUR 12 million, you've got a couple of million more that makes it the net consequence of this change in 2026. And then you could argue why doing this, in the first place with this negative impact on 2026. And that's because it's necessary to be able to make the move towards delivery within 3 days to take out the letterbox parcels within the mail network. So it's a fundamental step that we have to take to be able to make the changes halfway 2027 to go to a D+3 model. Linde, can you take the second question of Marco? Linde Jansen: Yes. Well, as you refer to the Slide 31 and your question on the margin. So actually, the 2026 margin development and also towards 2027 margin development is in line with what we have said during the Capital Markets Day, also starting with current year with our 2025 story year. We will see a step-up in margin versus 2025 performance, and that further increases over time to 2027. And in that sense, it's not different from the story which we explained during the Capital Markets Day. But as also explained by Pim, we -- clearly the plan for 2025 and 2026, you see now also investments being made or, for instance, this step-up or change of the letterbox parcels. Those elements are all contributing and ensuring future growth, and that is why you see those effects as expected in 2025 and 2026, not only in E-commerce, but also in Mail, and that is on the trajectory towards our ambition of 2028. Marco Limite: Okay. And if you could help us quantifying the revenues shipped from Mail into Parcels coming from... Linde Jansen: No, we can't give you that specification. Operator: [Operator Instructions] We will take our next question, and the question comes from the line of Henk Slotboom from The Idea. Henk Slotboom: I've got three questions equally divided on the Mail, E-commerce and on Platforms. First one is an easy one. On your guidance with regard to mail volumes, 8% to 10% expected drop in volumes in this year. It seems a little bit conservative in my view. If I look at the first 3 quarters of this year, it was minus 6.9%, minus 8.3%, minus 5.0%. And then in the last quarter, there was, of course, the elections. We had the government bill, the emergency package, which is maybe 8 million or so, the number of households in the Netherlands. And the pensions reform is still taking place. So I expect that you will have extra mailings on pensions again by the end of this year. As far as the election is concerned, we have municipal elections in the first quarter. So there's a bit of a timing difference. What exactly makes you so, call it, conservative when it comes to Mail volumes? P. Berendsen: Do you want to take them one by one, Henk, or do you want to share your other questions already? Henk Slotboom: No, no. Can we do it one by one? P. Berendsen: Yes, that's fine. That's fine. Look, here, we've just taken the longer-term view that we've consistently seen in the market. Those volume expectations are also clearly a function of the conversations that we've had with our bigger customers, including [ SDN ] [Foreign Language] and the renewal of a few bigger customers as well. So on the back of those insights, we have set the expectation around that 8% to 10% mark. Well, let's wait and see. It could be on the conservative side. But that's based on the insights that we've gotten from the conversations around those bigger senders of mail, whilst renegotiating the terms for 2026. Henk Slotboom: Okay. And the second one is on Platforms. If I look at the pro forma divisional breakdown you gave at the Capital Markets Day, I see revenue of EUR 724 million in 2024 with a profit normalized EBIT of EUR 19 million, EUR 19 million. '25, we see a nice growth in the revenue line to EUR 786 million, but a steep fall in the normalized EBIT. Can you explain what exactly is this? It's an asset-light model. I understand that if you want to grow in this business, you need to invest upfront. And if I look at the chart at Slide 32, your main goal in E-commerce is from volume to value. If I look at Platforms, then I see volume, but the volume in terms of price/mix is 0. How can I connect this? Is this the way to get into this market? Or maybe you can give some more -- shed some more light on this, please? P. Berendsen: Yes. Of course. Clearly, we've set different strategic objectives for the business segments. So here, particularly in '25, '26, you see materially investments in the Platforms space in terms of building line haul capacity That is not fully utilized at day 1. It is expanding our sales capability throughout Europe. It's investing in some IT functionalities that will allow you to be competitive on that asset-light playing field. Those elements together -- also, if you were to look at 2026, really are already clarifying, I would say, around EUR 5 million to EUR 10 million of additional costs in the P&L that over time will turn into a contribution. Second part is that, as said -- so also, if you look at the last quarter of 2025, we did have more volume than we originally expected in Europe, which caused us to take additional line haul carriers in. And we've decided to prioritize customer experience over short-term margins here, because we truly believe it will help our competitive position and will accelerate the flywheel going forward. Next to that, this is also the domain. where you will see the consequences of tariffs, particularly also from the U.S. trade lane side also in 2025. And also the uncertainty about the implications on what handling fees will do with consumer spending and choices consumers will make in 2026 is in part, an explanation also for the 2026 development because -- although Linde has said that we've taken into limited sensitivities that still millions and millions of lower profits based on the assumed scenarios that we've taken as the baseline for the handling fee situation. So those 3 elements explain the temporary step down in margin profile within Platforms. Henk Slotboom: Okay. And then my final question is that, well, bridges basically a little bit Platforms with the E-commerce division. We've seen quite a lot of noise from the Chinese CRO is active in -- on the intercontinental routes from China to, for example, the EU, they have a close cooperation with GOFO, which has become active in the Netherlands. Earlier last week, we saw reports about JD.com, which is becoming active in the last mile as well, and they do it in a slightly different way with [ Chinese ] [ Winkler.org ] guarantees and selling real products like Apple and that sort of things. How do you look at this development? Because it looks as if the Chinese logistics companies are piggybacking on what we see from the side of the Chinese platforms, which are coming to Europe. What's your view on that? P. Berendsen: Well, as you know, I've said before, it was already quite a competitive marketplace to begin with. And we certainly see those new models and new businesses coming up. It's not that difficult to sort 100,000 parcels or sort a couple of million. But this is, of course, can you do this at a convenience level, at a quality level structurally throughout the year so that you can accommodate your clients to facilitate their growth ambitions. And I think there, our view on strategy is exactly the same as prior to those. We need to be best in the customer journeys that matter most. We need to be best in terms of Net Promoter Score, and we need to stick to a model where we strive to get value from volume and not volume per se. And we see the right telltales there. We also see slight indications that other marketplaces are at least following suit in terms of trying to get value distribution more equally divided within the chain. And that's what we'll continue to push for. And we'll follow and monitor these parties closely. They have different operating models. They have so far not agreed any working conditions or collective labor agreements. So the question is also going to be how will they develop their business model to make it sustainable going forward. We talk with them, but we stick to the strategy that I've just explained. Henk Slotboom: Is labor a constraint for them? We heard you in the past mentioning before, there's a high churn amongst parcel deliveries and that sort of thing. It's difficult to get enough people there. Would it hypothetically mean an additional push towards out-of-home? And if so, could you benefit from it because you already have how many 1,200, 1,300 of these locations? P. Berendsen: Yes, and accelerating. So that's kind of more the general development there where we truly believe that a bigger portion of parcels will go to out-of-home delivery towards lockers and still the vast majority will go at home. I will definitely expect those other players to also -- it will kind of -- the labor market is the labor market in the Netherlands. It stands anyway. Their model is much more focused on pay per item, where also different parties might have their own view on. I would say all regulatory elements that relate to safe working conditions apply to all in the Netherlands, so also to them. So yes, there are some limitations to, I would say, their ability to scale this existing model. In the meantime, of course, they can make choices against price points that could lead to some volume going their way. But as I said, we will stick to the plan to create value from volume. And that's also still why we do expect a little bit of market share loss in 2026. We're happy with the progress that we're making on the rollout of our out-of-home network. We're accelerating there, not only in the number of locations, but also on the number of lockers per location. Of course, we truly believe that, that acceleration can help us on both sides to create competitive edge, to create best possible consumer experiences and will make the network more efficient. Operator: Thank you. This concludes today's question-and-answer session. I will now hand back for closing remarks. Inge Laudy: Thank you all for joining this call, and speak to you on April 28. Thanks. P. Berendsen: Thank you. Linde Jansen: Thank you all. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help you. Please stand by. Your program is about to begin. Welcome to the Dominion Energy, Inc. fourth quarter 2025 Earnings Conference Call. At this time, each of your lines is in a listen-only mode. Instructions will be given for the procedure to follow if you would like to ask a question. I would now like to turn the call over to David McFarland, Vice President, Investor Relations and Treasurer. David McFarland: Good morning, and thank you for joining Dominion Energy, Inc.'s fourth quarter 2025 earnings call. Earnings materials, including today's prepared remarks, contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings, including our most recent annual report on Form 10-Ks and our quarterly reports on Form 10-Q for a discussion of factors that may cause results to differ from management's estimates and expectations. This morning, we will discuss some measures of our company's performance that differ from those recognized by GAAP. Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures, which we can calculate, are contained in the earnings release kit. I encourage you to visit our Investor Relations website to review webcast slides as well as the earnings release kit. Joining today's call are Robert M. Blue, Chair, President and Chief Executive Officer, Steven D. Ridge, Executive Vice President and Chief Financial Officer, and other members of senior management. I will now turn the call over to Steven. Steven D. Ridge: Thank you, David, and good morning, everyone. Over the last twenty-four months since the conclusion of our business review, we have consistently reiterated our focus on three principal priorities. First, consistent achievement of our financial commitments. Second, continued achievement of major construction milestones for the Coastal Virginia wind project. And third, constructive achievement of regulatory outcomes that demonstrate our ability to work cooperatively with regulators and stakeholders to benefit both customers and shareholders. Looking back on 2025, we successfully executed against these guiding priorities. And our focus for 2026 is unchanged. As we execute, we empower our employees to provide the reliable, affordable, and increasingly clean energy that powers our customers every day, and we position ourselves to continue to deliver on the commitments we made at the conclusion of the business review. Turning first to 2025 results as shown on slide five. As the first full year post business review, 2025 was a critical year for demonstrating our ability to produce high-quality earnings and robust credit results consistent with our original guidance. Therefore, I am pleased to report that we successfully delivered with full-year 2025 operating earnings of $3.42 per share, and operating earnings excluding RNG 45Z credits of $3.33 per share, both above the midpoint of our guidance. I would also note that full-year 2025 GAAP earnings of $3.45 per share were higher than operating EPS. As always, please refer to Schedules 2 and 4 of the earnings release kit for more details. Continuing that theme, we delivered equally strong credit results. Of particular note is our estimate of Moody's full-year CFO pre-working-capital to debt, which is both nearly 100 basis points above our downgrade threshold and the highest result we have reported for this metric since 2012. Balance sheet strength is critical given the substantial need for regulated capital investment across our system to meet our customers' growth over the next several years, and our robust 2025 credit results position us well for that future. Turning now to 2026 guidance on slide six. We expect 2026 operating earnings per share, excluding RNG 45Z credit income, to be between $3.40 and $3.60 per share with a midpoint of $3.50. As is our standard practice, we are using a range to account for variations from normal weather in our utility service territories. The midpoint represents a 6.1% increase relative to our comparable 2025 guidance midpoint of $3.30, despite 2026 being a double outage year at Millstone, driven by continued strength in sales and higher regulated investment. Our expectations for RNG 45Z income, which we continue to report separately, reflect updated credit scoring and lower production assumptions, which we have been highlighting for a while now. We continue to await final 45Z regulations, but we believe that the guidance incorporates the range of likely outcomes. Of course, we will update our disclosures if and as needed. Taken together, total operating earnings guidance at the midpoint is $3.57 per share. We are also showing credit and dividend guidance for 2026, which are consistent with our previous long-term guidance. As a reminder, we will revisit our dividend per share growth rate when we achieve a peer-aligned payout ratio. Before turning it over to Bob, let me hit on a few final related topics from our long-term financial outlook. First, electric demand growth, which for Virginia is illustrated on slide seven. Bob will cover specific drivers in his prepared remarks, including the differentiated high quality and low risk nature of our data center pipeline. We are continuing to observe tangible data points that underscore the real-time nature of this accelerating demand trend. For instance, in 2025, weather-normal sales in the Dominion Energy Virginia LSE increased 5.4% and all of the top 20 peak demand days in the Dominion Zone have occurred in the last fourteen months. As a result, we are seeing the need for incremental investment across our system to ensure continued reliability amid continually growing demand in our service areas. Which leads me to our updated capital investment forecast as shown on slide eight. As we roll forward our outlook, we are increasing our five-year total capital estimate from $50 billion to approximately $65 billion, representing a 30% increase. We are providing comprehensive and detailed disclosures in the appendix of today's material, so I will summarize a few key points here. First, much of this increase, over 90%, is happening at Dominion Energy Virginia, our largest utility operating company and home to the largest data center market in the world. Second, nearly two-thirds of the updated capital spend will be eligible for recovery, subject to regulatory approval under rider mechanisms, and third, we have updated the compounded annual growth rate of our investment base to approximately 10%. This capital investment growth is happening across a diverse portfolio of well-developed projects as shown on slide nine. We are seeing continued strength in electric transmission and distribution and a notable increase in generation. Consistent with our most recent integrated resource plans, on gas generation, which includes two CTs and three CCGTs, we have secured our turbine slots for each project, and we will provide updates on development and permitting as they progress. The CCGT projects have projected in-service dates of 2032 through 2034. I would also note that our share of the remaining spend on CVOW represents less than 2% of the updated capital plan. Outside of today's update, we continue to see for additional investment across the value chain, biased towards the early 2030s and beyond. We will include those opportunities in future updates as warranted by their development status. A capital update of this size requires a thoughtful approach to both customer affordability and financing. Bob will review our efforts around the former in his prepared remarks. I will address financing presently. As shown on slide 10, nearly 60% of our five-year investing cash flows and projected dividends will be satisfied by internally generated operating cash flows. About 10% will come from net hybrid issuance, which keeps us well below the credit agency prescribed maximums. 10% or so will come from common equity issued via our standing DRIP and ATM programs. We view this level of programmatic equity as appropriate given our sizable capital investment plan and our commitment to strong investment grade ratings. And the final roughly 20% will come from long- and short-term debt. I should note that this financing plan will support our robust credit expectations and credit rating targets consistent with our prior guidance as shown on slide 11. Finally, the combination of updated sales growth, capital investment, rate base growth, and financing plans leads to our long-term operating earnings per share guidance as shown on slide 12. Please recall that given the existing legislative sunset for 45Z credits at the end of 2029, we have always broken RNG 45Z credits out separately, a practice we continue here. As a result, we continue to provide long-term earnings growth guidance on an x45Z basis. With all that said, we are reaffirming our existing long-term operating earnings per share guidance of 5% to 7% annually off of the original 2025 guidance midpoint of $3.30 per share. As we have highlighted before, no change to our expectation of variation within that range year to year to account for years in which our Millstone nuclear power station experiences refueling outages at both units. This occurs once every three years and normally reduces operating EPS by between 8¢ and 10¢ due to lower sales and higher O&M expenses. We have previously communicated that through our five-year outlook, we expect annual growth to average around the midpoint of the growth rate range or 6%. However, given improved business fundamentals, which includes more regulated investment, partially offset by headwinds, including lower RNG production, lower future day rate assumptions for our Jones Act compliant wind turbine installation vessel Charybdis, and higher financing costs, we now expect to achieve the upper half of the 5% to 7% growth rate range starting in 2028. Executing on this updated growth bias will require successful regulatory and construction execution, stable financing markets, and a thoughtful approach to customer affordability, among other drivers for which we feel well positioned. In anticipation of the question, let me explain the drivers of the difference between three to four percent between our updated rate base and long-term earnings growth guidance. First, approximately 250 points is caused by equity dilution. Even with attractive regulatory recovery mechanisms in place, the scale of our capital program requires us to issue on average roughly 2.5% of our market cap annually to fund growth. We view this level of steady equity issuance under existing programs as prudent and EPS accretive and, given the magnitude of our capital spending, appropriate to keep our consolidated credit metrics well within the guidelines for our strong credit ratings category. Another driver is increased parent-level interest-related expense, which reflects today's interest rate outlook and increased financing in support of the higher capital plan. And finally, we have reflected the impact of long lead projects, primarily gas generation, in the rate base growth through 2030, but we do not get the full cash flow of those projects until they enter service in the early 2030s, which is when we begin to collect depreciation and rates, thus stepping up cash flow and actualizing the projects' full earnings potential. Before I hand it back to Bob, I will note that while we are pleased with our 2025 financial performance, it is really all about how we execute going forward. Since the business review, we have seen tailwinds, and we have seen some headwinds. But what has not changed is our confidence in the plan which has been built to be appropriately but also not unreasonably conservative. And with that, I will turn the call over to Bob. Thank you, Steven. I will begin with safety on slide 14. Robert M. Blue: Our OSHA recordable rate of 0.26 in 2025 was a record for the company, continuing the positive trend from the last three years. We also broke a record with our company's lowest lost day restricted duty rate, which is a safety metric that tends to reflect more serious injuries. But we know that safety is ultimately about people, not numbers. Continuing to focus relentlessly on improving our safety performance is one way we can honor the memory of our colleague, Ryan Barwick, who we lost in an accident last year. I will start our business update with the Coastal Virginia Offshore Wind project. Notably, we are now over 70% complete. We continue to be on track for the delivery of first power to the grid by March. That will represent a remarkable project milestone. General fabrication and installation have gone exceptionally well. Let me provide a few quick examples. We completed installation of the 176 monopiles more quickly than expected. We are ahead of schedule on transition pieces as well, with over 70% installed and the remainder at the Portsmouth Marine Terminal. The third and final offshore substation was installed this past Saturday. Commissioning is proceeding as planned. Inter-array cable installation is on track. Deepwater export cables are now installed and inter-array cable fabrication is complete. All of the remaining cabling is now fabricated, and a majority is landed in Virginia. And onshore work to accept first power is complete. The project budget stands at $11.5 billion, including unused contingency of $155 million. On January 30, we filed our quarterly status report with the State Corporation Commission as well as provided a comprehensive and detailed update on the project's cost and timeline on our Investor Relations website. No change to those materials, we have included them in the appendix of today's material. We have continued to provide an update to our potential tariff exposure across discrete tariff categories and illustrative durations. We are showing the impact of country-specific tariffs through March 2026, and the impact of steel tariffs through completion of project construction in early 2027. Please note, we are reviewing Friday's Supreme Court tariff ruling. We will update the budget in the future as appropriate. Finally, let me talk about wind turbine generator progress and timing. We are making excellent progress on fabrication. Around 70% of towers and nacelles and 30% of blades have been fabricated. This progress tracks well relative to our schedule. With regard to installation, a few comments. First, successful completion of the first turbine in January marked a major milestone for CVOW as we demonstrated our ability to safely complete each of the major elements of the overall project. Second, during the first few iterations, we are deliberately moving more slowly in order to ensure we figuratively measure twice and cut once. We view this as prudent construction management, aligned with the lessons we have learned over years of large project construction. Third, since we recommenced turbine installation upon receipt of the preliminary injunction on January 16, we have been navigating winter weather, which has accounted for over a week of downtime. Fourth, we needed to pause installation occasionally to refine procedures and equipment as is typical during first-time stages of any construction project. Let me provide one meaningful example. After successfully installing the third blade of the first turbine, a human performance error, which was unrelated to Charybdis operations, resulted in damage to the affixed blade. That required us to assess the damage, remove the blade, replace it with a new blade, and immediately return to port to offload the damaged blade and reload a new one. That iteration took almost two weeks. We will, of course, learn from this experience, and do not expect to see this type of delay repeat itself. Therefore, I would simply caution against making any conclusive predictions on the project's expected timeline solely based on the first iterations of this process. Please note that current project budget includes turbine installation schedule contingency for weather delays through July 2027 as needed, including Charybdis charter costs. As a general rule of thumb, if the project extends beyond that for some reason, and we do not expect it will, we estimate that each additional quarter to complete turbine installation would add between $150 million and $200 million to the project cost, a portion of which would be allocated to our financing partner. We will include data from additional installation iterations in future quarterly updates. Turning to slide 16. As Steven previewed, we view customer affordability as central to our public service obligation. And, accordingly, we have a long record of maintaining competitive rates which compare favorably to the national average. Our current customer rates at both DEV and DESC continue to be lower than the national average, 4% and 12%, respectively. And going forward, we expect to see typical residential rates increasing by a compound annual growth rate of around 2.6%–2.8% at DEV and DESC, respectively. Additionally, as shown on slide 17, DEV and DESC's average residential electric customer bills as a percentage of median household income have improved by 7% and 29% more than the national utility average, respectively, since 2014. We recognize, though, that customers are feeling the pressure of higher costs for housing, groceries, and other essentials, including their electric bill. We have a number of programs designed to help our customers manage their electric bill including budget billing, energy savings programs, and financial assistance programs such as EnergyShare. Late last year, we also launched a new online platform to put all of our programs in one place so customers can more easily find the best options to meet their needs. Furthermore, our recently approved large load provisions ensure that our smaller customers are not at risk of subsidizing our largest customer classes. We also work continuously to improve the efficiency of our operations while meeting high customer service standards and reliability needs. In recent years, we have driven out cost through improved processes, innovative use of technology, and other best practice initiatives. As shown on slide 18, based on the most recent data filed with FERC, we have a proven track record of being one of the most efficient companies for the benefit of our customers in the industry. We are focused on continuing to drive down O&M costs across all of our segments. Looking ahead, we are intently focused on ensuring our service is not just reliable, but that it remains affordable as well. Now we will turn to business updates. Steven provided a brief overview of sales growth trends. Let me offer some specific comments on our data center customers. On slide 19, we have updated our typical disclosure around the data center pipeline. We now have over 48 gigawatts in various stages of contracting as of December 2025, which compares to around 47 gigawatts as of September, an increase of approximately 1.4 gigawatts or 3%. As a reminder, these contracts are broken into substation engineering letters of authorization, construction letters of authorization, and electrical service agreements. As customers move from the first to the last, the cost commitment and obligation by the customer increase. Starting in January 2027, large load customers with demand of 25 megawatts or greater will be subject to minimum demand charges. And a customer that signs a new ESA will also be subject to firm contract terms with exit fees and enhanced collateral requirements. We believe that we have a differentiated opportunity around our data center customers. Our projected demand growth is high quality, as shown on slide 20, because the forecasts that drive our planned capital spend are based on insights gained from over a decade of meter-level historical data, long-term working relationships with some of the largest and most sophisticated technology companies in the world, and validation from 20-plus gigawatts of signed ESA and CLOA contracts. The vast majority of our demand growth is driven by steady and consistent batches of cloud and inference data center modules, which we view as lower risk and produce consistent results over time. This strategy has worked well for us for years and helps limit our reliance on any single project or customer. Let me spend a few minutes on slide 21 because I want to make sure everyone understands its significance. As the slide shows, our forecasted data center demand through 2045 is more than covered by existing signed ESAs and CLOAs. That means we do not forecast demand based on SELOAs. That also means that by working diligently through the existing backlog and connecting the existing projects under construction, we would achieve our demand forecast for the next approximately twenty years. Again, we believe this makes our data center market less risky and highly realistic. All that said, we are, of course, working as quickly as possible to work through our queue because we know these investments are of vital importance to our data center customers. We welcome them to our system and recognize the important contribution they make to national, state, and community success. We are developing resources across distribution, transmission, and generation to ensure we meet this critical need on a timely basis, while also taking active steps to safeguard all of our customers from the risk of paying more than their fair share for reliable and affordable electric service. In Virginia specifically, residential rates have averaged 9% below the national average, even as data center load has grown at a 20% CAGR since 2016, as shown on slide 22. Data center demand should and can be a win-win for our state, our customers, and our company. And while just one data point, it is worth noting that for the ninth consecutive year, our economic development team has been recognized as a top utility for economic development. Two projects were highlighted, including Eli Lilly and Hampton Lumber. In September 2025, Eli Lilly and Company announced plans for a $5 billion state-of-the-art manufacturing facility that will generate 650 high-wage jobs and 1,800 construction jobs in Virginia. In addition, Allendale, South Carolina welcomed Hampton Lumber in July, when the company established its first East Coast sawmill, bringing more than 125 new jobs to the region. We are proud to contribute to these outcomes. Projects we supported in the last year alone will create more than 3,600 jobs and attract $7.4 billion in new capital investment, delivering lasting value and strong community growth across our service territory. Finally, let me share a few additional business updates as shown on slide 23. First, on November 25, the Virginia State Corporation Commission published its final order in the 2025 biennial review proceeding. The Commission's order approved the large load provisions I discussed earlier, designed to ensure continued fair allocation of costs among customers to mitigate the risk of stranded assets. Also on November 25, the Virginia SEC approved the certificate of public convenience and necessity and rider for the Chesterfield Energy Reliability Center, an approximately one-gigawatt gas-fired electric generating facility expected to cost approximately $1.5 billion and be placed in service in 2029. In its order, the Commission highlighted that the project addresses an imminent reliability threat in accordance with the public interest. On February 12, the Commission affirmed their order and denied a petition for reconsideration. On February 13, PJM announced its final selections in the latest transmission open window process, awarding us a portfolio of projects totaling over $5 billion with various in-service dates through 2032. This represents the largest proposed investment by Dominion Energy Virginia since PJM began its open window process. Next, in South Carolina, DESC filed a rate case application and testimony with the Public Service Commission of South Carolina on January 2 to support the $1.4 billion invested in the South Carolina electric system since 2023 and ensure that we can continue meeting customer demand safely, reliably, and efficiently. We expect a decision in June with rates effective in July. Finally, on Millstone, the facility continues to provide over 90% of Connecticut's carbon-free electricity, and 55% of its output is under a fixed-price contract through late 2029. The remaining output continues to be significantly derisked by our hedging program, which we have updated in the appendix of today's materials. During 2025, Millstone performed well and achieved a capacity factor of over 91%, aligning with our expectations of exemplary performance, and reflecting our unwavering commitment to safety and best-in-class operations. In January, the Connecticut Department of Energy and Environmental Protection issued a zero-carbon energy request for proposals for which Millstone is eligible. Bids are due in the RFP in March. Now the Connecticut RFP process also intends to coordinate bid evaluation in conjunction with other New England states. In addition to state-sponsored procurement, we continue to evaluate the prospect of supporting incremental data center activity as well. We feel strongly that any data center option needs to be pursued in a collaborative fashion with stakeholders in Connecticut. We remain focused on achieving a constructive outcome for the facility, and we will continue to provide updates as things develop. With that, let me summarize our remarks on slide 24. We achieved record-setting safety performance as measured by both OSHA and LDRD rates last year. We achieved 2025 operating earnings above the midpoint of our guidance and delivered our strongest credit results in the last several years. We initiated our 2026 operating earnings guidance range and reaffirmed our existing long-term operating earnings per share growth rate of 5% to 7%, with a bias to the upper half of that range 2028 to 2030. We reaffirmed our credit and dividend guidance. In collaboration with our policymakers, regulators, and stakeholders, we continue to make the necessary investments to provide the reliable, affordable, increasingly clean energy that powers our customers every day, which has resulted in an approximately 30% increase in our five-year capital plan. And CVOW continues to progress well in construction with robust cost sharing that protects customers and shareholders. We are 100% focused on execution. We know we must continue to deliver and we will. With that, we are ready to take your questions. Operator: At this time, we will open the floor for questions. If you would like to ask a question, please press the star key followed by the one key on your touch-tone phone now. If at any time you would like to remove yourself from the question queue, please press star 2. Again, to ask a question at this time, please press star 1. We will take our first question from Shahriar Pourreza with Wells Fargo. Please go ahead. Your line is now open. Shahriar Pourreza: Good morning. Just quickly, just a quick question on the 2026 and 2027 EPS. Just the CapEx is up about $3 billion in those years versus the previous guide and rate base Virginia is considerably higher. Can you just maybe talk about some of the puts and takes that get you to a 6% growth rate in those years versus the upper half of the range? I mean, the updated trajectory is kind of modestly below consensus, I guess. Where is there conservatism in plan? Anything to call out? I think Millstone comes to mind there, but just a little bit more details. Thanks. David McFarland: Yes. Shahriar, there is a couple of things there. So let me hit on them, and if I miss anything, let me know. You mentioned a little bit about consensus. We are aware of that thought. Keep in mind, prior consensus would have included 10¢ for 45Z credit. We have reduced that to seven, which I think on 2028 basis accounts for about half of the 6¢ delta, and we have always broken 45Z out. If you look at the sum of the parts, folks are generally ascribing a fairly insignificant amount of value to that. And the reason we have done that since the beginning of the review is because we view it, a, as having a legislative sunset and, b, not truly indicative of the core operating earnings power of the base utility business. So today, we announced a 6% increase year-over-year on that base business. We increased the longer-term guidance to the upper half in 2028–2030. I think it should be interpreted very much as a bullish message. And with regard to Millstone, we will not today be giving any sort of specific color around what we have assumed in that upper half guidance as it relates to the pricing on Millstone post expiration of the PPA in August '29. But as we have always approached our financial planning subsequent to the business review, I would just say we have been appropriately conservative. And we expect to have some clarity around the outcome of the RFP towards the back half end of this year. And at that point, we can give people a little bit more information around the ultimate trajectory of Millstone and if and whether that will change the trajectory towards the back half of our plan. And then I think finally, starting with or ending with what you started, which is the trajectory look, we see most of these tailwinds manifesting most strongly towards the back end of our plan. That has been the consistent message we have delivered to investors for the last several months. That has not changed. We see rate-based investment certainly in capital over the five-year plan, but we get the stronger value for that towards the back end. And so I would just say, we are very comfortable with maintaining sort of original guidance 2028–2030. Our motto is to underpromise and overdeliver, and that is what we anticipate to continue to do going forward. Shahriar Pourreza: Got it. That is actually super helpful. I appreciate that. And then just lastly, as we are thinking about the data center ramp with the updated slides like on '21, with the ESAs and the higher CapEx outlook, are you assuming sort of minimum take-or-pays in the current plan? If the data center customer ramps quicker and consumes more than the minimum over time, would that be accretive to the current plan? Just want to get a sense there too. Thanks. Robert M. Blue: Yes, Shahriar. I mean, data expectations are based on years of experience. I think as we have described, we are not forecasting based on load letters, or inquiries. We are actually showing precisely what we expect coincident demand to be. And as we made clear in our opening remarks, that is being driven by our current ESAs out for a decade, and then, you know, you start getting the CLOAs, get you above our current projections by 2045. If they ramp faster, then we will address that, obviously. But we have a lot of experience with the rate at which these companies ramp and, you know, we think it is smart to make our forecast based on what we are confident of rather than, you know, projecting some sort of capital allocation based on a letter that we got that may or may not show up. And Shahriar, I would just add that, you know, the name of the game for us is sales, yes. Shahriar Pourreza: That is very positive. But, really, it is the investment across the low-risk regulated business that supports that sales, which ultimately is going to be driving the long-term earnings growth and credit strength in the name. As you know, we forecast forward in our base biennial in Virginia that includes sales volumes. We do it in our riders as well. So for us, we assume they are going to ramp based on historical performance that is largely above the minimums, of course. But for us, the big picture driver is the ability to deploy capital on behalf of our customers, which ultimately will drive the long-term financial performance. Shahriar Pourreza: Got it. Super comprehensive. Thank you both. Steven Fleishman: Thanks, Shahriar. Operator: Thank you. We will take our next question from Nicholas Joseph Campanella with Barclays. Please go ahead. Your line is now open. Nicholas Joseph Campanella: Hey. Good morning. Thanks for taking my question. Good morning, Nick. I just wanted to follow up on the CVOW update. Appreciate all the updates you gave there, especially on the turbine installation progress. Just you gave this kind of per quarter sensitivity on cost, I believe, it goes past to July '27, timeline that you brought up. Just how many maybe kind of clearly delineate how many turbines per quarter you are trying to, you know, install here to make that, and then my question on that is, you know, if you do have upside risk to the budget, did your financing partners already indicate that they participate alongside you? Thanks. Robert M. Blue: Yes. I am sorry, Nick. I missed the first part of the question. It had to do with turbine installation cadence, but I was not exactly the a word blurred out for me there. How many how many turbines do you need to install per quarter to make the July 2027 timeline that you laid out? Yes. I would answer it this way. I mean, our expectation is we get the majority in 2026, and then some into 2027. And as we think about it, we are looking at, you know, sort of a 2.25 days per installation. That is over a period of time. When the weather is worse, like in the winter, it is going to be slower than that. But that is what we would look at in order to hit the schedule that we have laid out. And then on the second part of the question, yes, Stonepeak has been a great partner with us, and, you know, we have got the contractual provisions on how we would move forward if it extends into that longer period, which, as I mentioned, we do not expect. Nicholas Joseph Campanella: Okay. And then one one last one there. If the timeline is going past July '27, is the overall COD, you think, still kind of intact then? And then I know that you kind of bring these on in strings, so the earnings cadence is less material to that COD. Could you just remind folks of how that works? David McFarland: Yes, Nick. I think you are hitting on absolutely the right point, which is given the way the regulatory recovery works, the amount of capital to be recovered in rate base is at this point effectively fixed. It is at the cap of what was allowed to be socialized to customers. And so, installation will largely be EPS neutral in the form of deferrals if we over- or under-recover in a certain rate year. There should be some cash impacts associated with that, but that is exactly why we maintain in our internal models a very robust cushion to our existing credit downgrade thresholds is so that if in the event something like that happens, and this is just one example, we are well positioned to absorb it and still stay above the downgrade threshold. And then I think with regard to your first question, was that with regard to Stonepeak? Did I understand the first part of your question correctly? Nicholas Joseph Campanella: This is project COD slipping to the right if you are moving installation past July '27. Robert M. Blue: The way to think about COD is just as the turbines come on. This is not like a combined cycle, where there is a COD date for the end. We bring, as you said in the question, we bring turbines on in strings. And they go in that way. Nicholas Joseph Campanella: I will get back in the queue. Thank you. David McFarland: Sorry about that, Nick. I tried to make that even more complicated question than I think you were actually asking. Operator: Thank you. We will take our next question from Steven Fleishman with Wolfe Research. Please go ahead. Your line is now open. Steven Fleishman: Yes. Hi. Good morning. Thanks. So just on the utility capital plan, is the PJM transmission that you noted, the open season, is that I assume that is is that in the plan? Robert M. Blue: Yes. Oh, yes. A lot of it. Some of it extends beyond 2030, Steve. It is sort of a portfolio approach. So we have a number of those awarded projects that ultimately are seven or eight years in duration. So we have captured all of what has been awarded through '23 in the updated plan. Steven Fleishman: Okay. Is there any current projects you have identified that are not in the plan during the that would be in the period, and you are just waiting for some approvals, or is pretty much everything that is kind of planned right now for the five years in there? David McFarland: Yes. I mean, everything that we feel, you know, confident in executing to the five years is in the plan. As we have noted in today's script and in prior scripts, we continue to see opportunities for incremental capital to support the customer growth across our systems. And so we will reflect that as appropriate in future updates. But this is a good snapshot of sort of where we see it today. Steven Fleishman: Okay. And then just on two other questions. Just you mentioned the dividend payout and kind of considering it as you look relative to peers. I think peers have been generally kind of been reducing their payout targets in recent quarters and the like. Is that is that something that thus, we would kind of apply to kind of your thinking on the timing of resuming dividend growth? David McFarland: Yes. We have not we have not sort of made a final financial decision as it relates to the payout ratio. We are certainly aware of the trend you are describing, which is folks bringing the payout ratio as a source of funding for their enlarged capital plan. And that is something certainly we will take into consideration when we get to that point. You can do the math around the EPS growth rate and the current dividend and probably get a sense that we might be a little bit of we have a little bit of time to make a final determination as to when and how much we start growing the dividend. Steven Fleishman: Okay. And then lastly, going back you were talking about making a decision on kind of nuclear technology preference, maybe by the end of last year. Is there any update on that? And and then just how much is in the plan over the five years for a new nuclear? Robert M. Blue: Yes. Steve, we are still in the final stages of evaluating technology. We have got, I believe, as you know, authorization in Virginia through a rider to recover costs for small modular reactor development up to a certain point. And we do not have capital in the plan, this five-year plan, for an SMR. If you look at our integrated resource plan, we are still a ways away from when we would expect to be deploying SMRs. As we have discussed before, Virginia is a very pro-nuclear state. We want to make sure that we support that, but we also want to make sure we do it in a way that is respectful of our customers and our balance sheet. Steven Fleishman: Okay. Understood. Thank you. Operator: Thank you. We will take our next question from Steven D'Ambrosi with RBC Capital Markets. Please go ahead. Your line is now open. Steven D'Ambrosi: Just had a quick one. Or maybe two. Just in terms of 2026 and kind of following on Shahriar's question, you know, you are able to guide to 6% EPS growth on the operating business for '26 with the inclusion of the Millstone double outage. And can you just talk a little bit about, like, effectively what are the positives that are enabling you to grow 6% and then just, like, effectively why maybe those do not recur in '27, or why it takes a little bit longer to get there. David McFarland: Yes. Steve, let me let me try that again and see if I can be more responsive. In '26, we are getting the benefit of a couple of sort of helpful items. One is the full impact of the biennial rate increase in Virginia. And second is a half-year impact associated with South Carolina rate case. So think of it as '26 as sort of a catch-up year because in those jurisdictions, prior to going in for those rate reliefs, we would have been under-earning. And then because we do not typically we do not typically go in the next year for additional rate relief, you can see that lag sort of catching up with us a little bit. And it is less pronounced in Virginia, of course, because of the forward-looking rates, but we have that in South Carolina. So that is kind of why you see that cadence between 2026 and 2027. 2027, even though you have 8¢ to 10¢ from the lack of a double outage year, you are sort of gearing up for that next rate case, and you would see the potentially the impacts of that later in '28. Does that help? Steven D'Ambrosi: Yes. That is perfect. That is that is kind of what I figured. I just wanted to clarify. And then just on the 45Z credits, you know, I totally understand changing the assumptions or being more conservative, I guess. But just you did book 9¢ in '25. Is there a reason why that falls into like, outer years? Is that just, like, changes in, I do not know, I guess, CI scores or something, or what is what is driving that? David McFarland: It is exactly that. It is a change in CI scores. So one of the changes that happened is that a new GREET model was published in '26. The ultimate RNG 45Z model for '26 and beyond will be based on that. That initial GREET model suggests to us a little bit of degradation in CI relative to what we booked. Now that does not mean that '25 is at risk. It is not a backward-looking model in our view. We had the rules in '25. We booked this according to the rules that were in place in '25. But because of the view we have now based on the most recent model in '26 and beyond, we have sort of effectively adjusted our CI scoring to reflect that, which is why we put a 5¢ to 9¢ range around that 7¢. We see the outcome of that sort of ultimate CI score somewhere in that 5¢ to 9¢. Steven D'Ambrosi: Okay. That makes sense. Thanks very much for the time. Appreciate it, guys. Operator: Thank you. We will take our next question from Anthony Crowdell with Mizuho. Please go ahead. Your line is open. Anthony Crowdell: Hey, good morning. Just two quick ones. On a follow-up from Steve's question, what is the lag you are assuming in your Virginia and South Carolina jurisdictions? I know you said there is a catch up on the rate the timing of the rate case benefit this year. But could you tell us maybe what you are assuming in 2026 for lag and in 2027? David McFarland: Yes. That is a great question, Anthony. So there the majority of the lag we see in the composite Virginia earned ROE is related to our North Carolina segment of the business, which is quite small. But it is much more we do not go in as frequently for rate cases, and it is more traditionally back-looking for us. So that is a driver of, we will call it, the majority of the driver of something like a 30 to 40 basis point lower than the 10.4, so weighted average allowed that we have, and then we have another non-jurisdictional customer that kind of follows that exact same trend. So those are the drivers of it in Virginia. And in South Carolina, obviously, before we get rate relief, we have talked about at the lowest under-earning part of the South Carolina cycle, we under-earn by as much as 150 to 200 basis points. And so I would expect us to sort of be on that in the front half of the year. And then by the end of the year, once we get relief, we will start closing the gap on that. And then as we look forward, we are encouraged by legislative activity like the RSA that would potentially allow us to be in a more frequent sort of formulaic rate cases. Still backward-looking, but more frequent, which would allow us to, as we have said in the past, try and abate that run rate of 150 to 200 basis points to something closer to 75 to 100 on a go-forward basis. Anthony Crowdell: Great. And then just one follow-up. You had mentioned legislative I am thinking about in Virginia, and I do not know if it was proposed yesterday. I wonder if you would comment on it. There is a, I guess, proposal in the Senate of maybe eliminating a data center tax benefit or a tax shield going on. Just thoughts if you could comment on that thoughts of maybe that impacting your forecast for load growth, and that is it. Robert M. Blue: Yes. As is always the case on our fourth quarter call, the Virginia General Assembly is ongoing. And so it is difficult to predict any kind of an outcome. I just say that in our view, data centers are very beneficial to the state and local economies. We look forward to continuing to serve them for some time and you can see the kind of growth we are expecting off of them. We expect that to continue. Operator: Thank you. We will take our next question from Carly S. Davenport with Goldman Sachs. Please go ahead. Your line is open. Carly S. Davenport: Hey. Good morning. Thanks for taking my question. Maybe just as we think about the equity plans, you have the explicit guidance for '26. Just any color you can provide on how to think about the cadence of the remainder of the common equity issuance? And then are there any other levers on the funding side you might consider outside of the hybrid minority interest sales? David McFarland: Yes. That is a great question. So we think about the cadence of equity. About a third of that total five-year equity, we expect between '26, '27, and '28, and about two-thirds in '29 and '30, which is when we see the most substantial capital increases in the business, and particularly around some of that gas generation spend, which as I mentioned before, is less cash converting at least initially relative to some of the other portfolios, distribution and transmission, that we have got. And then with regard to alternative funding sources, we think the hybrid is such a really it is a really good product. I mean, the market for that has been super strong. The sort of plus or so percent we can get for 50 at 50% equity credit is very attractive. As I mentioned, we are well below the prescribed maximums at both Moody's and S&P as it relates to that even with what we have in our current plan. We will always, as you know, consider alternative sources of financing to the extent that they are more attractive than what we have sort of laid out. So we will maintain any. But right now, we feel really good about the sort of plan we have laid out. We think it is balanced. It is achievable. And it is appropriate for our credit metrics. Carly S. Davenport: Great. Okay. That is super helpful. And then maybe just there have been a couple comments in the last few weeks from the administration on appealing the preliminary injunctions that were granted for a number of wind projects, including CVOW. Just curious if you if you do see any incremental litigation risk or headline risk on the project from sort of external involvement. Robert M. Blue: Carly, we continue to see CVOW as the fastest way to get a significant amount of electricity at a low-cost way on for our customers who are leading the AI race, who are building ships for the Navy. And so we continue to believe it just makes sense for this project to be allowed to continue. Slowing it down, as was demonstrated with the last stop work order, adds costs. And adding costs and delays in the data center capital of the world, we think that does not make sense. Carly S. Davenport: Great. Thank you so much for the time. Operator: Thank you. We will take our next question from Jeremy Tonet with JPMorgan. Please go ahead. Your line is open. Jeremy Tonet: Hi. Good morning. Want to come back, I guess, to some of the earlier points with the turbine installation too. And just want to make sure it is clear. When you say early 2027, does that mean, like, a January, or does it mean a first quarter? And can you just walk through the differences between the early 2027, how that is different than the July '27 that you are referencing before? Just want to make sure we were clear. Robert M. Blue: Yes. Hey, Jeremy. Early means early. We did not put a specific date around it. And so what we wanted to do was just give some sort of guideposts for people who can sort of think about the way this goes going forward. So if weather delays us out to July, that is all in the current budget of $11.05. And then if for some reason we are delayed beyond that, we have given you that benchmark of $150 to $200 million a quarter. The reason we are sort of talking this way is we are early in the installation process. And if you would ask me, you know, two weeks into monopiles, I would have said, we are not tracking with what we expect in order to hit our schedule. And by the way, remember with monopiles, we had seasonal restrictions. So the cadence was really important to be able to hit your day. And then, of course, as we went along, we ended up finishing a month or a couple months early. Similarly, with transition pieces, we started slower, and then we picked up. And so, we will update on the cadence of turbine installation. But given early stages, given that it is the worst weather time of the year, it just does not make sense to be drawing any sort of conclusions. We still feel good about the schedule. Jeremy Tonet: Got it. Thank you for that. And if I could just pivot a little bit here, if you would be able to update us on how CVOW potentially faces, you know, potentially facing reduced energy deliverability until, you know, the PJM identified transmission upgrades, you know, hit completion there. Just wondering impacts on Dominion, if you could just update us your latest thoughts there. Robert M. Blue: Yes. Look. CVOW is a really important project. It is just a few months away from delivering electricity to our customers. We asked PJM to do an interim deliverability study to determine if there are going to be any limits on the project's ability to deliver its full output. We will do that study every year. And so we have been saying that some network upgrades that may not be done when CVOW is finished. But we will continue to work through making sure the project can deliver as much as safely as possible. So we have assumed 50% deliverability for this rider, and we will update it if that assumption turns out to be needed to be adjusted. Jeremy Tonet: Got it. Thanks. One last one, if I could. Just 7% of the capital plan is focused on nuclear. I see the relicensing in there. So just wondering if you could help us unpack a little bit more about what that might be, is in that bucket. David McFarland: Yes. Jeremy, the lion's share or a good chunk of that is fuel. We categorize nuclear fuels as capital. So it is SLR, and it is fuel. And then some maintenance. Jeremy Tonet: Got it. Thank you very much. Operator: Thank you. We will take our next question from David Arcaro with Morgan Stanley. David Arcaro: Morning. I was wondering, you know, another positive update here on the data center activity and contracting front. But I was wondering are you seeing data center, you know, requests to interconnect? Is that crowding out any other customer activity, whether it would be, you know, large industrial or commercial projects? How do those interact? And is there still room on your system for other large customers to connect in? Robert M. Blue: The answer is there is absolutely room for other large customers to connect in, and they are not being crowded out. A good example, we mentioned it actually in the prepared remarks, is that Eli Lilly facility just west of Richmond. You know, large load, lots of jobs, aggressive time schedule, which we were able to meet. So we are able to meet the needs of our customers. As we mentioned in the prepared remarks, we have a great economic development team. We continue to see exciting possibilities outside of data centers as well. David Arcaro: Yep. Got it. Got it. Thanks for that. And then just one other quick one. I was just curious. When might the next iteration be of your generation outlook in Virginia in terms of the next slice at the IRP and when you might reassess the generation needs? Robert M. Blue: We do our IRPs every two years with an update in between. So you can see continue to update the IRP annually. David Arcaro: Okay. Great. Thanks so much. Operator: Thank you. This concludes our question and answer session. So I will turn it back to Bob Blue for closing remarks. Robert M. Blue: Thanks, everybody, for taking the time to join the call today. Please enjoy the rest of your day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2025 Lincoln Educational Services Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Michael Polyviou, please go ahead. Michael Polyviou: Thank you, Michelle. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued new to recording financial results for the fourth quarter and full year ended December 31, 2025, as well as recent corporate developments. . The release is available on the Investor Relations portion of the company's corporate website at www.lincolntech.edu. Joining us today on the call are Scott Shaw, CEO and President; and Brian Meyers, Chief Financial Officer and Executive Vice President. Today's call will be recorded and is being broadcast live on the company's website, and a replay of the call will be archived on the company's website as well. Statements made by Lincoln's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as the term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate and continue as well as similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of us performance. The company cautions you that these statements reflect certain expectations about the company's future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond the company's control, and they influence the accuracy of the statement and projection upon which the segmented savings are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward-looking statements are qualified in their entirety by this cautionary statement, and Lincoln undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, after the date thereof. One other housekeeping matter. [Operator Instructions] Now I'd like to turn the call over to Scott Shaw, CEO and President. Scott, please go ahead. Scott Shaw: Thank you, Michael, and good morning, everyone. Thank you for joining us today to recap our exceptional fourth quarter and full year operating and financial performance as well as introduce our guidance for 2026. Lincoln Tech is riding the building interest across America and skilled trades training as employer demand for skilled workers continues to exceed supply and the public's questioning of the value of the traditional 4-year college education continues to grow. In addition, concerns about the negative impact of artificial intelligence on white collar jobs, the growing awareness of the robust salaries that solidly bring you into the middle class and ever-increasing employer opportunities have fostered demand for training in the skilled trades. While we read about tens of thousands of jobs being eliminated by major corporations around the country, the placement of Lincoln Tech graduates in rewarding long-term careers like HVAC, electrical, automotive technician Welding and health care has hit recent highs and shows no signs of letting up. At Lincoln, we have focused our strategies on maximizing our opportunities in this increasingly receptive environment. The successful execution of these strategies has resulted in solid growth throughout our core operations while new programs at existing campuses and new greenfield campuses have expanded our growth. Together, these factors led us to exceed our financial guidance for 2025 and have set the stage for consistent long-term growth and shareholder returns in the years ahead. During the fourth quarter of 2025, we achieved 15.7% student start growth, and we have now grown student starts for 13 consecutive quarters. While the new campus openings and program replications at existing campuses meaningfully contributed to the overall increase student starts at our programs operating for more than 1 year, grew by 4% on a same campus and same program basis. This core growth was a major contributor to our near doubling of net income and a 51.7% increase in adjusted EBITDA during the fourth quarter. We also generated double-digit increases in total student population and total revenue over last year's fourth quarter. During 2025, we completed the most ambitious expansion in our company's recent history. We relocated our Nashville, Tennessee campus, which has been operating for more than 100 years to a new state-of-the-art facility at Tapa Hill over -- looking the city. Once our existing automotive technician and welding programs were relocated to the new campus, we introduced our HVAC and electrical programs to the Nashville market and renamed the campus, the Nashville Auto-Diesel College. This impressive facility will host our upcoming Investor Day in less than a month on March 19. We also relocated our Philadelphia campus and its highly successful automotive technician program to a new facility in Levittown, Pennsylvania, which is just as impressive as our Nashville campus. This 90,000 square foot building now houses newly opened HVAC electrical and welding programs as well as the automotive program and provides Lincoln Tech with ample space to grow over the coming years to help Pennsylvania employers meet demand for skilled workers. Ten days ago, we celebrated the campuses initial success in classes with a grand opening attended by local and regional government and corporate leaders. Our third campus opening during 2025 occurred in our newest market, Houston, Texas, where facility matching those in Nashville and Levittown began classes in late September. The Houston campus is our second greenfield expansion during the past decade and adds to our presence in the Texas market where some 240,000 new jobs demanding skilled trades training are expected to be created over the next 6 years. We held the grand opening of the Houston campus last Wednesday, and like all the campuses opened in 2025, the initial enrollments are meeting or exceeding expectations and are expected to be a major contributor to our continued start growth in 2026. Our new campus development efforts were expanded during 2025, and we now aim to initiate 2 new campus projects each year. In 2026, we are focusing on developing new campuses in Hicksville, New York and Roulette, Texas. Hicksville is on schedule to open during the fourth quarter of this year, while Roulette is expected to begin classes in the first quarter of 2027. Both campuses will provide HVAC, electrical, automotive technician and welding training programs and expand Lincoln's presence in growing metropolitan locations. In the case of Hicksville, it's Metropolitan New York where we have a very successful automotive technician and electrical program in Queens. In the case of Rallette, it's Metropolitan Dallas, where our Grand Prairie campus has been one of our most successful operations. The adding of a second campus in an underserved growing metropolitan market has been a most successful strategy for Lincoln, first executed at our East Point campus in Atlanta, which opened in 2024. The demand for our programs at East Point exceeded our initial expectations. And in 2025, we signed a lease to build out an additional 10,000 square feet of space at that facility. We expect to complete this expansion in 2026. In addition to new campuses, we have successfully executed the bulk of our program replication strategy at existing campuses. However, in January 2026, we opened an electrical program at our Plainfield, New Jersey campus, which was the 12th replication at an existing campus during the past 2 years. Like new campuses, these replications are significant contributors to our 15% start growth during 2025 and our outlook for continued start growth in 2026. However, I want to emphasize that our core business is also very strong with approximately half of this year's growth coming from campuses and programs that have been open for more than a year. We believe our Lincoln 10.0 hybrid teaching platform is also playing a major role in this growth by providing flexibility to our students who often need to balance work in life while earning their certificate or degree. We have achieved this flexibility by combining hands-on learning at campus facilities with a component of classroom work delivered through online instruction which reduces the time needed to complete many of our curriculums and accelerates our graduates to their highly rewarding careers. We have realized instructional efficiencies and organizational productivity through Lincoln 10.0 and anticipate this trend continuing during 2026. Meanwhile, we continue to evaluate opportunities to expand into other underserved U.S. markets and build on our core operations growth. For instance, we've expanded investments in targeted high school initiatives that are leading to greater interest among students, parents and school districts. At the same time and further reflecting the shift in mindset, high schools are reaching out to us to explore how to offer our skilled trades programs to their students under what we call our high school share program, students attend Lincoln classes during their junior and senior year of high school, and then continue after high school to gain their certificate in less time, which accelerates their entry into a rewarding career. Our corporate partnerships are also important sources of additional profitability and hiring opportunities for our students. A couple of weeks ago, we signed an agreement with New Jersey Transit under which our workforce Link division will provide diesel and electrical systems training to New Jersey transit technicians at New Jersey maintenance facilities. In addition, we expanded our highly successful partnership with Johnson Controls, with a new initiative that will provide technicians for their growing data center AI business and container Maintenance Corporation also reached out to expand training to even more of their workforce. Landing new accounts while expanding existing relationships clearly demonstrates Lincoln Tech's ability to deliver high ROI training to employers desperate to grow their workforce. The opportunity ahead for our workforce link division is to effectively communicate the value proposition that we provide so we can meaningfully capture more business. Our 2026 guidance illustrates our confidence in continuing the growth trends at both existing and recently launched operations going forward. We now believe we could approach the $600 million revenue level for the full year. We have made great strides during 2025 at reducing our bad debt levels. This progress, along with our other operating efficiencies being realized throughout our operations presents the opportunity to build on the exceptional adjusted EBITDA growth we experienced during the past year while further enhancing the Lincoln student experience. We have established a standard of excellence within our programs that meet or exceed all regulatory standards, and we've continued to build our student placement rate in rewarding long-term careers. Our outlook for the year ahead is robust, and we look forward to presenting a full 5-year road map during our Investor Day at our new Nashville campus on March 19. For nearly 80 years, Lincoln has remained focused on delivering high-quality life-changing career education and no one else has our combination of longevity, scale and proven experience. By continuing to execute our strategies to expand our network of schools and replicating our most in-demand programs at our existing campuses, we are well positioned to help America close its chronic and severe skills gap by meeting the growing demand for more talented men and women to enter the skilled trades. Finally, I'd like to note aside from the Investor Day on March 19, we will be continuing our investor outreach efforts and continue to attend conferences and do non-deal road shows with our covering analysts. Now I'll turn the call over to Brian Meyers, so he can review the financial highlights for the fourth quarter and full year 2025 and our 2026 guidance. Brian? Brian Meyers: Thank you, Scott, and good morning, everyone. From a financial perspective, Lincoln achieved many milestones during 2025. Our performance has positioned the company to achieve strong growth and increasing profitability as reflected in our 2026 guidance in our long-term outlook. As Scott said in his remarks, we had an excellent finish to an already strong year we outperformed our most recent guidance for revenue, net income and adjusted EBITDA while meeting start guidance with 15.2% growth year-over-year. I'll provide more detail on these results, but first, I'll start with our fourth quarter performance. As a reminder, comparisons to the prior year will exclude the Transitional segment, which consists of our former [ Summerlin ] Las Vegas campus sold in late 2024. We Fourth quarter revenue grew by $25.2 million or 21.4% and to $142.9 million. This growth was driven by a 17% increase in average student population and a 3.7% increase in revenue per student. We enrolled nearly 4,000 new students during Q4, representing stock growth of 15.7% and extending our track record of consistent year-over-year growth to 13 consecutive quarters. An important contributor to our overall stock growth in the quarter and throughout the year was our organic growth in starts, which accounted for approximately 4% of the growth. This excludes new campuses and program expansions launched in 2024 and 2025 and highlights the strong demand for our existing programs. Average student population grew 17% and year-end population increased nearly 15% to 17,000, representing over 2,200 more students than the prior year. This is one of several factors positioning us for another strong year of growth in 2026. Diving into the quarter's stock growth. Transportation and Skilled Trades, which represents about 80% of our STAR population generated stock growth of 23.4%, including strong organic growth of approximately 7.5%. Healthcare and other professions represents approximately 20% of our population, and we saw our thoughts in this programs declined 2%, which was in line with our expectations. This reflects our strategic decision to exit our culinary program in December of 2024. We are pleased to report that enrollments for nursing students at Paramus resumed last month the ported new nursing starts at Paramus was another main factor, reducing starts in the HOPS programs last year. Excluding the culinary program, Hotstar showed moderate growth as we continue to focus on strengthening our core offerings. Turning to expenses. Total operating expenses were $125.1 million, up $19 million, in line with expectations, reflecting higher costs to support our largest student population and growth initiatives. Depreciation expense increased $3.5 million due to our recent high level of growth-related capital investments in campus facilities. Excluding depreciation, Education service and facility expenses improved to 33% of revenue from 34.7%, reflecting instructional efficiencies from a hybrid teaching model. SG&A expenses also demonstrated operating leverage improving to 49.8% of revenue from 51.6%. This improvement was supported in part by lower bad debt expense as a percentage of revenue, which declined to 10.9% from 13.1%, reflecting enhancements to our financial process and stronger collections. Adjusted EBITDA increased 51.2% to $29.1 million including the Transitional segment. This growth demonstrates the strong operating leverage we are building with EBITDA margin expanding more than 400 basis points to 20.4%. Lastly, net income increased over 70% up to $12.7 million or $0.40 per diluted share adjusted net income increased to $15.8 million or $0.50 per diluted share on 31.4 million diluted shares outstanding. Now our full year results. Revenue grew 19.7% to $518.2 million, driven by a 17.9% growth in average student population. Total starts grew to approximately $21,000, up 15.2% with organic stock growth accounting for more than half of this increase. Adjusted EBITDA rose 60% to $67.1 million, including the Transitional segment and adjusted net income increased 64% to $28.4 million. Consistent with our seasonality, the fourth quarter was our strongest cash-generating quarter. Operating cash flow totaled $59.3 million, more than double the prior year. We ended the year with nearly $29 million in cash and approximately $90 million in total liquidity with no debt outstanding. Capital expenditures for 2025 totaled $88 million, of which $86.6 million is reflected on the statement of cash flow. Approximately 70% of total CapEx related to growth initiatives. We exceeded our CapEx guidance due to opportunities to accelerate construction activity at campuses under development, shifting spend from 2026 into 2025 while maintaining original campus opening time lines and budgets. As part of our CapEx growth projects, we completed 2 campus relocations, which included the launch of a total of 5 new programs additionally completed 2 program expansions and added 4 new programs at our existing campuses. Within 3 years, we expect each of these programs to generate on average around $1 million in incremental EBITDA, contributing significantly to future profitability. Looking ahead, based on our current trends and visibility we are providing the following guidance for 2026, revenue of $580 million to $590 million adjusted EBITDA of $72 million to $76 million; net income, $20 million to $23 million, diluted EPS $0.64 to $0.74 student stock growth of 8% to 13%, capital expenditures ranging from $70 million to $75 million. Let me provide some additional context around our guidance. Historically, we excluded preopening costs as well as net operating losses during the first year of operations from new campuses as well as prelaunch expenses from program replications from adjusted EBITDA. Beginning in 2026, we will no longer make those adjustments. Adjusted EBITDA will reflect only the add-back of noncash stock-based compensation. Historically, these excluded expenses totaled approximately $10 million in both 2024 and 2025. And we estimate to incur a similar amount of $10 million of expenses related to new campuses and program development in 2026 as we continue to invest in our growth initiatives especially our new campus openings in Hicksville, Long Island and Rolet, Texas. While we will no longer exclude these investment expenses from our calculation of adjusted EBITDA, we will continue to provide investors with our expected levels of these expenses along with the actual amounts incurred each quarter. We believe this added transparency will help investors better understanding our operating results and the profitability of our active campuses. All of our key financial metrics are expected to grow at a healthy pace in 2026. Revenue is expected to grow approximately 13% following the same seasonality as 2025. Starts are expected to generate high single-digit to low double-digit growth over the prior year period in each quarter. Adjusted EBITDA growth is expected to be approximately 30% for 2026. Consistent with our seasonality, project to generate the highest adjusted EBITDA in the fourth quarter. The higher growth rate for adjusted EBITDA compared to our projected revenue growth reflects the operating leverage of our business model. Net income is projected to grow a little bit, a little more modestly by approximately 7.5% year-over-year trailing adjusted EBITDA growth due to significant increases in depreciation expense. Depreciation is projected to increase to $33 million from $20.8 million in 2025. We anticipate total depreciation expense to be fairly even each quarter through the year. This increase reflects capital investments made in recent years reflect related to new campuses, campus relocations, new programs and program expansions -- over the past 3 years, these initiatives have accounted for the vast majority of our $185 million in net capital expenditures. As new campus open and program scale, these investments will mature and begin generating returns, allowing net income growth to more closely align with our adjusted EBITDA performance. For the full year, we expect net income in the first half of the year to be comparable or slightly down from the prior year, mostly due to depreciation with growth in the second half of the year. We anticipate the fourth quarter to be our strongest quarter of the year, a majority of our overall improvement. Regarding capital expenditures, we expect the majority of spend to occur in the first half of the year with approximately 70% allocated to growth initiatives, including new campuses and program expansions the remaining capital will be focused on enhancing our facilities, classrooms and training equipment to further improve the student experience. While capital spending will remain at a robust level of $70 million to $75 million in 2026 and is now comparable to our adjusted EBITDA and operating cash flow, both of which have grown significantly. As a result, although we expect to utilize our credit facility during the year, based on our current announced campus expansion plans to date, we anticipate finished 2026 with no debt outstanding once again. Net interest expense is expected to be approximately $5 million, primarily driven by increased borrowings. In terms of timing, we anticipate expenses to be relatively evenly distributed throughout the year with slightly higher levels in the second and third quarters. Our income tax provision is expected to be approximately 29% of pretax income. Lastly, we forecast our diluted weighted average common shares outstanding to range from $31.1 million to $31.4 million for the quarter and approximately $31.2 million for the year. In closing, we are proud of our 2025 performance and enter 2026 with strong momentum and confidence in our continued strength of our business. As Scott mentioned, we will be sharing our 5-year outlook at our Investor Day on March 19, our newly relocated Nashville, Tennessee campus. I want to thank our Lincoln team for their dedication and commitment to delivering exceptional education while creating long-term value for both students and shareholders. Now I'll turn the call over to the operator for questions. Operator? Operator: [Operator Instructions] And our first question will come from Alex Perez with Barrington Research. Unknown Analyst: Congrats on the strong finish to the year. Looking forward to Investor Day and the 5-year targets. Scott Shaw: Thanks, Alex. So are we. . Unknown Analyst: Great. I'll focus my questions on demand, which continues to be very strong across the board from organic growth to new campuses and program replications. You made some allusion in your overall -- your prepared comments about increased investment in your high school initiatives. Can you maybe go over that with us a little bit? Scott Shaw: Sure. Historically, we've been getting about 20% of our students from the high school market. And even though we've been doing that, but there have always been high schools that have been, I'll say, hesitant to let us in to talk to their students. . And over the last 24 months, that has been changing. And so as the market is being far more receptive and as we're hearing more comments from high school parents and guidance counselors, that the trades really are important to them and their students. We're basically investing and putting more talent out there to go out to more high schools to recruit more high school students. I think it's the right time. The mood is right, and we're going to lean into that as much as possible. And I'm anticipating that we'll start getting more growth. We did grow our high school business this year. It will grow again next year. But I think the real kickers will come, frankly, in 2027 and 2028. Building high school teams is a long-term investment play -- as you know, you're meeting with students, you're meeting with guidance counselors in the fall and the spring and waiting for those students to then start in the summer. And we've already made good progress, and we've established some new relationships but I really anticipate that, that's going to really ramp up much more so, as I said, 12 months and 24 months from now. Unknown Analyst: That makes sense, and that's great color. I appreciate that. And then my follow-up question, I guess, would be just looking at the results by program, as you said in the prepared comments, transportation and skilled trades were up 23% in the quarter and the year, down in the quarter and the year for health care and other professions. I think you called out culinary program in 2024, which was eliminated and Paramus wasn't able to enroll new nursing students for a while. Maybe just a little bit more color on health care and other professions. If you exclude those 2, what is the balance of the health care and other professional business doing right now? Scott Shaw: Yes. Thanks, Alex. And good points. So yes, well, first of all, in 2026, we expect that the health care sector will be growing as you mentioned, we are able to now reenroll at our Paramus campus. So we'll be able to grow and enroll students at all 7 of our LPN campuses and kind of somewhat put that in perspective. We closed out 2025 with maybe 40 students in our LPN program at Paramus. And before we were stopped from enrolling students there, we had over 250 students at that campus. So I'm anticipating that, that's going to start ramping up again, which is going to help us grow our health care sector. Also, as you mentioned, we did exit -- we've been exiting over the last couple of years. Programs that we know just don't provide the strongest ROI. And so we exited well, everything basically in the hospitality area, which includes culinary. While we had great employers, as I've said in the past, whether it's Disney, Marriott, in various chains coming to hire are chefs. They just don't pay a lot. And the recent data that came out from the department in January that kind of highlighted it's their version of gainful employment. I'm happy to say that all of our programs clearly passed the threshold, and that's due to the fact that, frankly, we just exited those programs that didn't do well, such as cosmetology and culinary but we're really poised for more growth. We've taken all the right moves, so it puts us in a good position. And like I said, we're leaning into high school, we're also going to continue to lead into the skilled trades in automotive. We just continue to see interest in demand from employers and students in both of those areas. Unknown Analyst: That's great. If I were to have a third question, that would have been my last one, the earnings test. And you said, just to be clear, that all your programs pass the threshold? Scott Shaw: That is correct. That is correct. . Operator: Our next question will come from Luke Horton with Northland Capital. Lucas John Horton: Congrats on a really, really strong end of the year here. Just wanted to start with sort of the 2026 outlook. If you could dive into some of the some of the puts and takes or assumptions baked into that guide from an organic perspective versus new campuses, continued hybrid learning rollout? Just kind of your thoughts around the 26 guide? . Scott Shaw: Sure. I'll start off, Brian, then you can fill in anything. We expect to see continued trends that we've experienced, as we mentioned, in 2025, about half of our growth was from organic business. So that's growing existing programs at our existing campuses. I anticipate that, that's going to continue, maybe not at the same level that it did this year, just as the numbers keep getting bigger and bigger, but it will be meaningful. And then second of all, we do see the prospect of all the programs that we've put in place and the new campuses that we're opening. So that really gives us the confidence to give you this guidance for starts. And I'm anticipating that trends continue, we'll certainly be at the middle to the high end of that range. And then as you know, that's what drives everything else. It drives the revenue. And given the efficiencies we have with our hybrid model and given where we are with the number of students in the classroom as we continue to increase those student teacher ratios as we continue to increase the density at our campuses, those additional dollars do drop to the bottom line. And so we're using about a 30% number of additional revenue dropping to the bottom line, and that's what gives you the profitability. And that just flows through the income statement. I don't know, Brian, anything else? Brian Meyers: Yes, you just about covered everything. The only thing I'll add is for the new campus is, let's say, Houston as well as our long -- our new Long Island campus that's come in the fourth quarter. Revenue for them is about 10%. And as I mentioned in my prepared remarks, they are anticipated to have losses that and some new programs of approximately about $10 million. So it's really not for 2026, adding to our profitability. Lucas John Horton: Okay. Got it. That's very helpful. And then just my follow-up would be on last call, you had mentioned that the East Point campus after outperforming expectations, you announced that incremental like 15,000 square foot expansion which could add about 500 student capacity. I guess any update on that time line? And I guess, are you guys seeing any other opportunities to do this with existing campuses or -- or is there any relocation opportunities like you've done with Nashville and Philadelphia? Scott Shaw: Sure. I'll take that. So the new space will open up later this year. So we'll start getting incremental bodies, students from that. So that's really going to help maybe a little bit in the fourth quarter of this year, but really more so in 2027 for the East Point campus. I'll also just tell you that at both the Houston campus and the Leverton campus that we opened up in both of those facilities, we have about 10,000 to 15,000 square feet of space that we haven't yet built out so we can see what resonates in those markets to either grow our existing programs or to add new programs down the line. As I mentioned last time at our Melrose campus, we did close out our collision program, which opened up space. Our collision program at that time had maybe 60 students or so in it. and we were able to close that down at 40 more welding booths to that location at an HVAC program as well as our third Tesla training center. I can tell you that we are looking at doing a similar type of operation like that at our Grande Prairie campus, where we're going to scale back our collision program there to open up more space frankly, to continue to grow our electrical program. So there are select opportunities out there, and we just constantly just kind of look at the marketplace and see where the demand is, and we'll make adjustments accordingly. If that helps you. Lucas John Horton: Yes. No, super helpful. Makes sense. And looking forward to that Investor Day here next month. Look forward to seeing you there. Operator: And the next question is going to come from Eric Martinuzzi with Lake Street. Eric Martinuzzi: Yes. I wanted to dive a little deeper on the CapEx spend here in 2027. You mentioned that it was essentially a pull forward of some of the spend that was planned for 2020. And was wondering if that was due to just sort of conservatism on the construction plans that you guys had in place or maybe a more favorable, more responsive regulatory approvals? Scott Shaw: Yes. It'd be on the former side, I mean sometimes it's tough to gauge when certain things are going to get done and when certain permits are coming in. But the good news is that construction is moving along quite well. And yes, some of the expenses that we were thinking were going to happen this year occurred in 2025. And that sets our -- frankly, our Hicksville campus up to be in a good position to help contribute to us in the fourth quarter of this year. Eric Martinuzzi: Okay. And you talked about the employer demand being healthy, specifically calling out New Jersey Transit and Johnson Controls. Just curious if you had any other anecdotes from recent conversations with employers as far as incremental demand versus, say, 6 months ago? Scott Shaw: Yes. No. Well, I would just say kind of across the board, Eric. Our career services people are out there all the time. We've actually also brought on a gentleman to help us build more national relationships and all I can say is that people are seeing more opportunity and not less as we continue to penetrate each market and get deeper into it. And so that really is very encouraging to us. because at the end of the day, as you know, our students are coming to us as they want to get a good solid career. And from everything that we're seeing, it's certainly not abating in any which way. Eric Martinuzzi: Got it. Operator: And the next question will come from Steven Frankel with Rosenblatt. Steven Frankel: Could you start by giving us the metrics for graduation rate and placement rate for 2025? Scott Shaw: Sure. So our graduation rate, as we track it did decline by about 200 basis points to about 67.5%, if I'm not mistaken, and our placement rate increased by about 250 basis points to 82.8%, if I'm not mistaken. Steven Frankel: Yes. Okay. Two quick questions there. One, in '25, what percentage of the incoming students came from high school? And where do you think these initiatives will take it? And then you talked about an interesting high school share program? How many locations is that currently ongoing today? . Scott Shaw: Sure, Stephen. So again, about 20% of 2025 students basically came right out of high school and came to our schools where that's going to go. I know it's going to go higher. I don't have specific numbers because we're also going to be increasing our base. But I wouldn't be surprised if we start seeing it, let's say, in the mid- depending on how successful we are, but also is reflective of how much we continue to grow our adult market, which remains very robust for us. with regard to the high school share program. Right now, it's a -- I'll say this. We have about let's say, about 150 students in that program, and that's mainly in New Jersey since we have strong relationships there. However, we did bring on someone to help us grow this. And I can tell you that we literally have interest from dozens and dozens of school districts around the country as to what will materialize. It's hard to say. These school districts are very difficult to, I'll say, work with, and they're not necessarily quick to work with us. but we love the idea because as you probably know or may know, 20% of people in community colleges are in high school. They're doing dual enrollment. So we said, well, why can't we do the same thing with the trades and so for the students that we're serving today, if they start with us in -- I'm sorry, in their junior year they'll graduate having completed more than 50% of our program, which means if they were to enroll with us, they can continue their education, graduate in half the time with half the debt. It's kind of a win-win situation. So it's a wonderful opportunity. It's still in its infancy, but we're certainly going to push it as much as we can because I think it's a win-win for everyone. Operator: [Operator Instructions] Our next question will come from Griffin Boss with B. Riley Securities. Griffin Boss: Very solid results and guidance, and I appreciate the level of detail you provided today. So just 1 for me, I want to jump back to build on what Luke asked earlier regarding the guidance. Can you just kind of dig into how you're thinking about the revenue guide? Because if you look at the low end of the revenue guide implies about 12% year-over-year growth, really, really solid. But then you look at starts and you got that wide 8% to 13% range. So kind of what are the puts and takes there in terms of, let's say, you hit the low end of the revenue guide 580, you got 12% growth and starts or 8% or something, what's accounting for the delta there? I mean, are you anticipating 3% tuition increase for the year, which makes up that other 3% to 4% kind of? Scott Shaw: Well, as we said in the past, we raised our tuition around 1% to 3% a year. We definitely want to stay at that level and not raise it more. If you look at our average revenue, that can fluctuate a little bit more than that, again, somewhat depending on program mix, but overall, I mean, you kind of -- you obviously did the math, you look at the numbers. There will be -- we feel very good about what we anticipate we'll be able to achieve -- we put numbers out there that we think are very achievable for us. And I think as far as the starts go, certainly 8%, I'll say this, I'd be very disappointed if we end up at that level. But the world is never fully certain as you look to the future. But it's certainly given where we are today, that certainly seems like that would be something meaningful without the change for us to be at that low level. I don't know, Brian, anything else you want to say. Brian Meyers: The only thing I'll add, Griffin, is our -- we have a very robust carrying population that we're getting really good benefits from. I think it was like in my remarks, 2,200 more students were signed a year. So that really sets us up for a very strong -- but also, we're also looking at scholarships. Scholarships, when we give us our internal scholarships out, they do start at a higher rate we might be looking to reduce that a little bit as well that we should get a boost from revenue as well. Griffin Boss: Got it. Okay. Great color. Scott. And again, really pleased to see the solid results and looking forward to continuable in March has. Operator: And the next question comes from Rajiv Sharma with Texas Capital. Rajiv Sharma: Congratulations on a strong beat. And yes, also a really good guidance. Now my question is, you continue to grow your enrollments exceeding competitors in the space, the starts growth. Can you give us any color on how the starts are faring geographically and also across auto, industrial or health care, sort of are you seeing a consistent growth pattern here? And do you expect to see that going on? Scott Shaw: Yes. So I mean, good question. Certainly, geographically, we see opportunity kind of across the map. Certainly, our map, I can't say there's one area that's consistently better than another. So that's good for us. As far as programs go, there's certainly a stronger interest, I'll say, in the skilled trades in automotive than for us in the health care side of our business. But we're just -- I mean I don't know Raj, how to explain it, but all I can say is we've narrowed our focus to really be in about 9 different programs. Our goal is to really be the best in each of those programs. I think as we continue to concentrate and focus both from an academic standpoint, a curriculum development standpoint. It's giving us, I believe, short term and I'm hoping even long-term success and I hope that, that's going to also help frankly, our whole operation. It builds, we believe, stronger relationships and opportunities with the employers. That helps our students. It could help us, as I mentioned, with our workforce link division. But we're trying to be very thoughtful, very concentrated focused on quality, focused on ensuring students have the skills that they need and making the learning environment as attractive as possible. I will tell you, we had good growth in our student recommend rate for telling their friends, why don't you come to Lincoln. That's the best form of advertising we could have. And those are things that we're going to continue to foster because, a, we want to be the best and b, it helps our business thrive. Rajiv Sharma: Yes. Great. And then just sort of bigger picture, the EBITDA growth has been fantastic. And you're getting about 13% EBITDA margins. Where overall, where can you expect those to trend to, and are those being held back, held down by your nursing health care-related I guess, promise and x of that, is that -- how do you see those trending? . Scott Shaw: Well, as in our guidance and how we see things operating, I mean, I would anticipate that our EBITDA margins should continue to grow at the 150 to 250 basis points a year as we continue to grow our business. We get great operating leverage kind of across the board. We obviously have a lot of fixed costs. But once you have that faculty member, once you have that classroom, and as long as you have additional capacity, driving more people into it is what drives those margins, and we still have a lot of room for growth. We're probably about around 60% of capacity utilization. And as I've said to people in the past, that doesn't assume that we open up more capacity by doing weekends or other shifts that could add more capacity. So I anticipate the margins to continue to grow -- and I forget there was maybe another part to your question, but that's kind of the exciting part about where we see our future. revenue strong operating performance is strong and we anticipate our business is going to grow meaningfully at the top line, but even faster at the bottom line. Rajiv Sharma: Great. Yes. And then just lastly, really looking forward to seeing you all at the Nashville campus. Would it be too much to expect Nashville campus performance to match what you guys did at East Point. Scott Shaw: Well, I think that -- the difference is this, the East Point campus is truly a local serving campus. So it's all adults in high school students from that geography. Our Nashville camp is our most unique campus in that. It is certainly serving the local market, but it will also serve a much larger universe. So it enroll students from, I believe, it's 9 or 11 neighboring states. And so that campus is much more focused on the high school market. And that is one of the areas that we're going to be really growing our high school market. So I anticipate that the national campus can become certainly as profitable as the East Point campus but the pace at which that happens will be a little bit different because as we've mentioned with the high school program, you do a lot of work, you grow it in the summer, you do a lot of work, and then you grow it again in the next summer. Versus the East Point every month as we enroll new students, we're able to constantly build that population base. So I hope that helps you there. Rajiv Sharma: Yes. Great. I'll end it there and again, congratulations on fantastic results. Operator: Thank you I am showing no further questions at this time. I would now like to turn the call back over to Scott Shaw for closing remarks. Scott Shaw: Thank you, operator, and thank you all for joining us today as we reviewed our continued progress and set forth financial guidance for 2026. Lincoln is benefiting from both macro operating environment trends, changes in public policy and our own consistent execution of growth initiatives at our existing campuses and new facilities. Our investments in our operations, our students and our organization creates numerous opportunities to generate increasing levels of shareholder returns over several years. Our success is only made possible by the commitment and dedication of our faculty and staff and the success of our students. I'd like to thank our shareholders for their support and our entire team for their dedication to achieving our goals. And I hope to see our analysts and investors at our Investor Day on March 19. Thank you all again, and have a great day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings. Welcome to the Easterly Government Properties, Inc. Fourth Quarter 2025 Earnings 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 between the company's research analysts and the Easterly Government Properties, Inc. management team. They will then hear an automated message advising their hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Cole Barterwell, Director of Investor Relations. Please go ahead. Good morning. Before the call begins, please note that certain statements made during this Cole Barterwell: conference call may include statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes that its expectations as reflected in any forward-looking statements are reasonable, it can give no assurance that these expectations will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, without limitation, those contained in the company's most recent Form 10-K filed with the SEC and in its other SEC filings. The company assumes no obligation to update publicly any forward-looking statements. Additionally, on this conference call, the company may refer to certain non-GAAP financial measures, such as funds from operations, core funds from operations, and cash available for distribution. You can find a tabular reconciliation of these non-GAAP financial measures to the most comparable current GAAP numbers in the company's earnings release and separate supplemental information package on the Investor Relations page of the company's website at ir.easterlyreit.com. I would now like to turn the conference call over to Darrell William Crate, President and CEO of Easterly Government Properties, Inc. Thank you, Cole, and good morning, everyone. Darrell William Crate: on our stated strategy. This year represents another year of delivering 2% to 3% core FFO per share growth, reinforcing that our strategy is not only durable but repeatable. Over the past two years, we have remained focused on steady earnings growth, driven by our government-related cash flows, disciplined capital allocation, and additional diversification, while facing difficult external conditions. Importantly, this momentum extends beyond 2025. The midpoint of our current 2026 guidance reflects our third year in a row of at least 2% to 3% core FFO per share growth, demonstrating both the embedded growth in our portfolio and the visibility created by our long-term leases and high credit quality. As we enter 2026, our strategic priorities remain unchanged and continue to guide our approach to disciplined growth and portfolio enhancement. One, core FFO growth per share of 2% to 3% annually, Number two, increasing same-store performance through thoughtful in the state, local, and high credit government-adjacent tenancy. And three, executing value-creating development opportunities into high credit stabilized assets. This strategy is designed to balance growth and durability and build a portfolio that performs consistently regardless of the economic or policy backdrop. Easterly Government Properties, Inc.'s portfolio is comprised of mission-critical government facilities, including courthouses, public health laboratories, law enforcement offices, and secure administrative buildings. These assets are purpose-built, long-term leased, and integral to the ongoing operations of federal, state, and municipal agencies. The durability of our tenant's mission, independent of political or economic cycles, supports stable, predictable cash flows and underpins our ability to generate consistent long-term earnings growth. As demand for secure, modern government facilities continues to increase across all levels of government, we believe our portfolio and our platform are well positioned to meet the demand. We recently visited our Veterans Affairs and Federal Law Enforcement facilities in Florida. And it was powerful to see firsthand how busy these buildings are as they truly support mission-critical work. From Homeland Security investigation teams to the doctors and staff caring for our nation's veterans, the level of activity underscores the essential role our properties play. It reinforces our commitment to providing high-quality environments that support these dedicated public servants and the important missions they carry on. Turning to specifics of the quarter. We continue to demonstrate the durability of our platform, anchored by high portfolio occupancy and strong long-standing relationships across a broad range of government agencies. Demand for our mission-critical facilities remains resilient, supporting stable cash flows and predictable operating performance. We remain highly disciplined in our capital allocation, maintaining a strong balance sheet and a significant financial flexibility while prioritizing investments that enhance long-term value. Our portfolio continues to perform at a very high level, with occupancy near historical highs at 97% and weighted average lease terms of roughly a decade. This performance reflects the durability of our tenant base and reinforces the strength of our mission-critical strategy. On the acquisition front, I am pleased to share that subsequent to quarter end, we completed the acquisition of a three-asset portfolio by the Commonwealth of Virginia. The long-term nature of the leases and built-in rent growth add another layer of durable cash flow to the portfolio, and Allison will walk through the details in her remarks. We like partnering with state agencies because the credit quality is comparable to federal tenants, given the essential nature of the services they provide and the stability of their funding. State leases often include contractual rent escalations, which provides built-in growth and enhances long-term cash flow visibility. Our development pipeline remains active, with key projects progressing well. We continue to see accretive opportunities that meet our standards for credit quality, mission alignment, and durable returns. Looking ahead to 2026, recent federal developments, specifically Doge, are in the rearview mirror and did not change how our portfolio performs or how we operate the business. At the midpoint, we are guiding to approximately 3% core FFO per share growth in 2026. Ongoing federal real estate discussions continue to highlight a long-standing reality. Many government agencies are best served by focusing their time, their resources, and their expertise on mission execution rather than real estate ownership. Managing and modernizing specialized facilities can be complex and requires consistent attention. We excel at both of these capabilities. Easterly Government Properties, Inc. was built to support agencies in addressing this need. As a private sector partner, we deploy capital to provide modern mission-critical infrastructure that supports agency operations, allowing our tenants to remain focused on their core missions. Importantly, this dynamic continues to drive a strong and expanding growth pipeline for Easterly Government Properties, Inc., as agencies increasingly look to us to be their long-term partner to recapitalize and modernize essential facilities at scale. Against this backdrop, our acquisitions team has built a high-quality, robust pipeline that supports consistent capital deployment at returns in excess of 100 basis points over our weighted average cost of capital. This disciplined approach to underwriting and execution underpins durable long-term growth. We continue to focus on improving our cost of capital, with leverage an important part of that effort. Cash leverage trending lower again this quarter, as we move to a more conventional profile with a medium-term objective of approximately six times. We believe this will structurally support lower funding costs while preserving our ability to pursue accretive growth in excess of our target range. To wrap up, we are delivering on the strategy we laid out. Delivering long-term core FFO growth of 2% to 3%, advancing a robust acquisition and development pipeline, while deepening our relationships across federal, state, and local agencies that we serve and strengthening the balance sheet as we move forward toward our medium-term leverage objective without sacrificing growth. All while staying true to our mission of providing modern, mission-critical facilities for the agencies we serve. I want to thank the entire Easterly team for their continued focus, discipline, and commitment to execution, which underpins everything we deliver to our tenants and our shareholders. We also appreciate the trust and partnership of our tenants and investors as we move forward with confidence, with clear visibility into our goals. At our core, we are built to support the mission, ensuring the essential work of our tenants can continue seamlessly today and for years to come. Now I would also like to take a moment to applaud the appointment of Ed Forst as Administrator of the GSA. Ed was recently confirmed by the Senate, and Ed brings decades of private sector experience and first-class business acumen to the position, having held meaningful senior leadership roles at both Cushman & Wakefield and Goldman Sachs. We look forward to working with the new Administrator, who we believe is the right person to take on the important responsibilities of GSA. We are looking forward to collaborating with Mr. Forst and his team, as we seek to maximize value for both our shareholders and the American people. And with that, I will turn the call over to Allison E. Marino, our Chief Financial Officer. Allison E. Marino: Thanks, Darrell, and good morning, everyone. I'm pleased to report the financial results for the fourth quarter and full year 2025. For the quarter, both on a fully diluted basis, net income per share was $0.10 and core FFO per share grew by nearly 6% year-over-year to $0.77. Our cash available for distribution was $29,100,000, reflecting steady operational performance. For the year, both on a fully diluted basis, net income per share was $0.29, and core FFO per share grew by nearly 3% year-over-year to $2.99. Our full-year cash available for distribution was $118,000,000. As Darrell highlighted, these results demonstrate continued execution on our stated strategy, including delivering 2% to 3% core FFO per share growth, advancing our leverage and capital structure objectives. During the quarter, we successfully extended the lease at FBI and subsequent to quarter end, we executed a long-term renewal on FBI San Antonio. With the majority of our 2026 renewals already completed, we have begun to shift our focus towards 2027. As of 12/31/2025, we have renewed 38 leases since our IPO. Of that 38, 27 are renewals for which there was no associated renewal TI work, or renewal TI work has been completed and accepted by the government. The other 11 are renewals with pending TI projects. This combined 2,600,000 square feet across 38 renewals includes PTO Arlington, IRS Fresno, and various smaller leases in Buffalo. When we exclude these assets, the average rent spread achieved on the remaining renewals is to be 14%, including an estimated amount of $37.14 a square foot of TI utilized by the government. The weighted average total renewal term for these leases was 15.7 years. While we have shared specific details, we believe this is a good proxy for how we think about renewals going forward. Our development portfolio also continues to progress in line with expectations. We broke ground in the third quarter on the State Crime Lab in Fort Myers, Florida, and construction is advancing as planned with delivery targeted for 2026. Our U.S. Courthouse project in Flagstaff, Arizona is currently under construction and progressing well, with delivery expected in 2027. In addition, we commenced construction in the fourth quarter on the previously announced U.S. Courthouse in Medford, Oregon, which is scheduled for delivery in 2027. All three represent 200,000 rentable square feet that will deliver high credit cash flows. Our largest project to date, the FDA Atlanta facility, was completed and formally delivered to the government on December 15. As of 12/31/2025, we had received $138,100,000 in lump sum reimbursements relating to the project. Since then, we have received an additional $12,600,000 earlier this week and expect approximately another $3,000,000 in the next few months. Our current net debt to annualized quarterly EBITDA, which we refer to as cash leverage, stands at 7.5x. We expect remaining reimbursements to drive additional improvement, bringing cash leverage below this level. As Darrell noted, this represents an important step in our continued progress towards our medium-term leverage objectives and reflects disciplined execution across both development and balance sheet management. We think this is an important step as we continue to work toward additional investment grade ratings, which we believe will position us to attractively access well-priced debt capital and unlock pipeline value over the medium term. On the acquisition front, we completed the acquisition of a three-asset portfolio in Virginia for $44,500,000, totaling approximately 298,000 square feet. The Commonwealth of Virginia occupies the majority of the portfolio, under long-dated leases with 2.5% annual rent escalations and a weighted average lease term of seven and a half years. Full stats supports stable and growing cash flows. This acquisition was completed at a going-in cash cap rate of approximately 11%, which is in of our cost of capital and immediately accretive. The high cap rate is largely attributable to a motivated seller seeking to redeploy capital, creating an opportunity to acquire the assets at an attractive yield, despite the strong tenancy. Our all-cash bid and ability to execute also really swung in our favor. Given where our cost of capital is, our acquisitions team is tasked with sorting through many deals to find high-quality assets that meet our underwriting criteria and return objectives. They have proudly risen to the challenge with this asset. As Darrell mentioned, we continue to favor partnerships with state governments, given their strong credit profiles, often comparable to the federal government, and lease structures that typically include built-in rent growth, providing long-term visibility into cash flows. Overall, this transaction reflects our disciplined approach to capital allocation, deploying capital where we see attractive risk-adjusted returns, and supports our ability to drive consistent long-term growth. Turning to guidance. We are maintaining our full-year core FFO share guidance range for 2026 of $3.05 to $3.12. This comes out to approximately 3% core FFO per share growth at the midpoint, which is just above the higher end of our stated 2% to 3% core FFO per share growth target. Our growth rate in 2026 is supported by the delivery of FDA Atlanta, successes on our 2025 and 2026 renewal execution, sustained operational efficiencies, and our Cox Road acquisition. At the midpoint, the guidance assumes we will have $50,000,000 to $100,000,000 of gross development-related investment during the year, and $50,000,000 in wholly owned acquisitions. While our acquisition guidance remains unchanged, given our $1,000,000,000 pipeline, we are monitoring the market for attractive opportunities where we can acquire it or spread to our cost of capital. We remain focused on disciplined capital management, tenant retention, and execution across our development pipeline. And we continue to deliver across the strategic objectives we have outlined. Together, these fundamentals underpin Easterly Government Properties, Inc.'s ability to generate stable, growing cash flows, which we believe will translate to increasing shareholder value. Thank you for your time this morning. We appreciate your partnership and look forward to updating you on our progress. With that, I will now turn the call back to Cole. Operator: Thank you. As a reminder to the analyst, to ask a question, you will need to press Our first question is from Seth Bergey of Citi. Please proceed with your question. Seth Eugene Bergey: I guess just to start off on the acquisitions guidance, it would remain kind of unchanged doing the bridging after doing the bridging acquisition. Can you just kind of touch on the $1,500,000,000 pipeline that you see and kind of touch on if anything kind of in that pipeline is more near term or where you are in various stages and evaluating those opportunities? Darrell William Crate: Yeah. Thanks for the question. As we look to '26, we have a level of optimism, but early in the year. And, you know, as Allison said, you know, our team, again, is sorting through, you know, a significant number of transactions in our pipeline. I think the market is in a place where, you know, buyers with our reliability and quality have an edge. And so we are going to be searching for assets that, again, you know, give us a strong, a strong spread to our cost of capital. And, we do not want to be speculating as we get to the beginning of the year. But, again, I feel from the company's perspective that we have our balance sheet in great shape, that our acquisitions and development teams are moving at full speed, and we are really excited to see how this year comes forward. Particularly as we focus all of our energy on 2027, you know, in an opportunity to continue to deliver the growth that we are that we are bringing forward. Seth Eugene Bergey: Thanks. And then maybe just a follow-up. You know, I know one of your strategic objectives is to kind of continue to grow same-store NOI growth. With the confirmation of the new GSA, any conversations around, you know, I think some of their stated objectives are around just increasing, you know, government efficiency with owning versus leasing. Have you had any conversations about the way they think about leases in terms of changing kind of any of the lease structures that would make it, you know, potentially, you know, more attractive relative to kind of the state and local agency kind of partnerships that you are looking at as you think about acquisitions? Darrell William Crate: Yeah. I think that is an insightful observation. Again, the new Administrator just joined. We did get an opportunity to spend a little time with him. And I believe that the government, as they look forward, thinks about efficiency and also understanding cost in the capital markets and understanding public-private partnership. So I am excited to see how that evolves as we move through this year and next. Seth Eugene Bergey: Great. Thank you. Operator: Thank you. Our next question is from Michael Lewis of Truist Securities. Please proceed with your question. Michael Lewis: Thanks. My first question is about the Virginia acquisition, right? So obviously, a high cap rate. I saw there is at least one lease expiration in 2027. I do not know if maybe that increased the risk profile. Could you talk about the expiration schedule a little bit? Kind of a little bit more about the assets. Allison E. Marino: Sure. So the Commonwealth of Virginia is the largest tenant across two different buildings. Combined, it is over 50% of the asset in total, and those have an expiration of 2034 and 2036. So those are very long-dated in terms of the overall asset profile. The 2027 expiration that you see is just, like, 2,000 feet, so it is very immaterial. It is on there for our disclosure purposes, but we are not worried about that at all. Michael Lewis: Okay. Gotcha. And then you talked a lot about the leasing successes you have had. At the end of 3Q 2025, the portfolio was 97% leased. I was wondering if that is still the case. And we expect that that will still be the case at the '26, or do you have any known move-outs or move-ins? Allison E. Marino: I would say we are with what we have always shared, which we expect mid, like, mid-90s occupancy rates. That is our goal. In terms of the 2027 expirations, particularly, they have just kicked off procurement. As you can imagine, they started about 18 to 24 months in advance. But those are progressing nicely, and we have no concerns. Michael Lewis: Okay. And then just lastly for me, this is more of a big picture maybe for Darrell. You know, you mentioned about putting Doge in the rearview mirror. You know, now I think we could talk about the budgets and the funding. So I will blame Copilot or Google. I just went quickly through a bunch of your tenants to look for funding changes. Right? So the VA is your largest tenant. Obviously going to have a big increase, which is great. As I went through more, right, the FBI, a $1,000,000,000 cut, the DEA, $200,000,000 cut. ICE we could put aside. Maybe talk about separately. The FDA, a small cut. The IRS, $1,000,000,000, the EPA, $4,000,000,000, the Forest Service, $2,000,000,000, Department of Agriculture, $6,000,000,000. Right? So, you know, maybe it is not Doge or maybe it is a remnant from Doge, but it, you know, some of these surprised me, and it sounded like a lot of cuts across agencies. I just wondered if there was a, you know, a bigger picture thing to talk about here with what is going on. I know you are shifting your tenant profile a little bit to where the opportunities are, but anything to say about the, you know, the budget and what, you know, maybe what the government's priorities are? Darrell William Crate: Yeah. No. No. I think it is a really great question. And, you know, I would sort of echo back some of our comments when Doge began. Which is the more efficient government is, the more government from top to bottom sees that real estate ownership is a public-private partnership. And that absolutely favors us. You know, as a as an you know, I was not trying to gloss anything in the prior quarters. I mean, Doge is a tailwind for the company in the medium to long term. In the short term, we have had these headline risks. You know, the oh, what is Doge going to mean? Or, you know, government shutdown. Are you going to get your rent? You know, these are these are headlines, but the durability quality of our portfolio and underwriting to mission-critical assets is an enduring strategy. And each of those cuts that I think that you see are where there is waste, and, in some cases, fraud. And when we look at the priorities around real estate, what we are supporting is mission-critical work. The government in every building that we have been visiting for the last bunch of months is seeing employees return to work. They are there is attrition. They are letting folks leave. They are finding and using technology to create greater efficiency. And you see every agency that we are close with looking around and, again, trying not not cutting mission, but very focused on delivering mission more efficiently for the American people. They want to cut the deficit, and believe me, there is plenty of fat in government for them to find. And I think they are doing a pretty darn good job, you know, at moving that forward. So for us, it is an exciting time. And with each of our agencies, they look at our buildings, how they are maintained, and how they support the mission, and we have incredibly happy tenants on the ground, and they, of course, share that with Washington. I think also with the size of our balance sheet relative to, you know, some of the mom-and-pop owners of these buildings, we are able to act with clarity and confidence, fight obsolescence, and if the government continues to want to build partnerships and create efficiency, we are incredibly well positioned to do exactly that. So that is that is really the backdrop for the observation. Michael Lewis: K. Thank you. Appreciate it. Operator: Thank you. I would now like to turn the back to Darrell William Crate, President and CEO of Easterly Government Properties, Inc. for closing remarks. Darrell William Crate: Great. Well, thanks everyone for joining the Easterly Government Properties, Inc. call here for the fourth quarter. We are very excited about 2026. We appreciate your confidence, your trust of focusing on the company, and we are very excited the developments in the quarters to come. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Anat Earon-Heilborn: Hello, and welcome to Freightos Q4 2025 Earnings Conference Call. A press release with detailed financial results was released earlier today and is available on the Investor Relations section of our website, freightos.com/investors. My name is Anat Earon-Heilborn, and I'm joined today by Pablo Pinillos, Freightos' CFO and Interim CEO; and Ian Arroyo, Chief Strategy Officer. We are also joined today by Dr. Udo Lange, Chairman of the Board, to share brief remarks. Following the prepared remarks, we'll open the call for questions. We are sharing slides during the call and using video, so we recommend using Zoom on a computer rather than dialing in by phone. The slides as well as a recording of this earnings call will be available on our website shortly after the call. Please be aware that today's discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors. Please refer to today's press release and our SEC filings for more information on risk factors and other factors, which could impact forward-looking statements. Copies of these reports are available online. In discussion of -- in discussing the results of our operations, we'll be providing and referring to certain non-IFRS financial measures. You can find reconciliations to the most directly comparable IFRS financial measures, along with additional information regarding those non-IFRS financial measures in the press release on our website at freightos.com/investors. The company undertakes no obligation to update any information discussed in this call at any time. Today's earnings call will begin with brief remarks from our Chairman, Dr. Udo Lange. We will then hear a business overview and outlook by Pablo, followed by Ian, who will deep dive into our strategy. Next, Pablo will present the financial results and the guidance for Q1 and full year 2026. We will conclude with Q&A. [Operator Instructions]. Udo, please go ahead. Udo Lange: Yes. Thank you, Anat. Good morning, everyone, and thank you all for joining us. I joined the call today to frame where we are headed and how we are going to get there and to express firsthand the Board's conviction in the company's vision and success. Let me start by saying that in 2026, we are prioritizing profitability and disciplined growth. We remain committed to reaching breakeven by the end of the year. We also remain committed to our long-term ambition of digitalizing the global freight ecosystem with a deliberate strategy that sets out specific step priorities. Freightos has built a leading position in digital air bookings, connecting carriers, shippers and forwarders on a platform that enhances billions of dollars of global trade flows. This progress has been achieved through times of challenging global macro and trade environment. The Board is convinced there's a significant long-term opportunity to digitalize and modernize global freight. Management and the Board continuously reflect on what the company needs in terms of governance and leadership in order to succeed as a scaled public business. Last year, the Board separated the roles of Chair and CEO. This was a natural evolution as the company entered a more mature phase. We also added 2 external directors with deep logistics and technology experience, Michael Schaecher and Rotem Hershko and established a product, AI and technology committee in order for the Board to bring greater focus on product priorities, capital allocation and long-term growth drivers. The previously announced CEO transition reflects the shared view that Freightos is entering a stage where operational discipline and execution focus must increasingly complement our strong foundation. On that note, the transition from a founder-led to a professional CEO-led organization is orderly and progressing. The Board is considering both internal and external candidates and expect to appoint a new CEO before the next earnings release. Of course, the Board is fully supportive of the management team aligned on priorities and appreciative of their efforts. Turning briefly to financial discipline. Breakeven has been a long-standing objective for the company. The Board is confident the company is on track to achieve this goal. We view breakeven as a milestone towards becoming a self-sustaining growth company with attractive margins and strategic flexibility. In 2026, we are focused on strengthening and expanding our comprehensive solution suite while continuing to drive transaction growth across the platform. Looking ahead to 2027 and beyond, the objective is to build on the operational discipline established in 2026 and accelerate profitable growth from a stronger financial and strategic foundation, including a solid cash balance. To sum up, I and the Board see Freightos as a company with a strong platform and a meaningful market opportunity and the foundation to deliver on its commitments and vision. Now over to you, Pablo. Pablo Pinillos: Thank you, Udo, for the Board's ongoing support, and good morning, everyone. I want to walk you through our priorities before discussing performance. As interim CEO, my priority is disciplined execution and delivering on our short-term commitments while positioning us for a long-term growth. Over the past months, I have worked closely with the leadership team to establish a focused plan of a strong execution and improved predictability, especially our commitment to reach breakeven adjusted EBITDA in Q4 this year as a forcing function for discipline. It requires prioritization, accountability and a focus on initiatives that strengthen unit economics and durable growth in the short term. We are concentrating our efforts in 3 areas: go-to-market execution, a solution first focus and even sharper cost discipline and operating efficiency. We are in parallel preparing for our next phase of growth and validating the initiatives that can drive durable acceleration in 2027 and beyond. This work is focused on areas where we see clear product market fit, a strong return of investments and repeatable sales motion. The goal is to enter 2027 with initiatives that are already tested and measurable, all while supporting our expansion from supporting spot bookings at a scale towards both contracts and tenders as well as ocean. Let me walk through our fourth quarter and full year performance, and then I will return to our 2026 priorities. We delivered results in line with guidance, demonstrating our dedication to executing to our commitments. Full year 2025 revenue grew 24%. Despite a volatile global trade environment, transactions and GBV continued to grow year-over-year. Solutions growth was comparatively softer as we have discussed during the year, and that informs our priorities for 2026. As I will share later, I believe we have a strong potential here to grow. In Q4, we delivered our 24th consecutive quarter of record transactions. That's already 6 years, reaching 445,000 bookings, up 27% year-over-year and modestly above expectations. Our active carrier network remained at a record of 77 carriers, unchanged from Q3 and up from 67 in Q4 2024. More carriers are in the integration phase. We are now integrated to airlines that represent around 80% of global carrier capacity, but continue to see upside. That said, new carrier logos are just one driver of transactions growth. Another meaningful driver is increased utilization, existing carriers adding lines, expanding capacity distribution, new services and organic like-for-like growth. Just for context, over 95% of the new unique lines that were booked in 2025 were added by carriers that had joined us before 2025. Gross booking value reached $357 million in Q4, up 27% year-over-year. Even though the majority of our transactions are monetized on a flat fee basis and not directly tied to GBV, it remains as an indicator of ecosystem liquidity and the growing strategic relevance of the platform within digital freight workflows. On the solution side, during the quarter, two of the largest global freight forwarders selected Freightos Solutions on a global level for new or expanded services following rigorous evaluations and pilot phases. Beyond our air solution, one of these also selected our ocean rate management and quoting solution as part of their deployment. We also have seen ongoing expansions from our forwarders customers that are using us for procurement. In general, we are seeing broader value emerging from the full extent of our stack, spanning procurement, tender management, rate management, quoting, booking and sales. as well as our deep integrations. For enterprise shippers as well as our expansion of our procurement and intelligence offerings for forwarders, the value proposition of our solutions is straightforward, enabling better and faster sourcing decisions and running procurement end-to-end in a single workflow supported by trusted market data. As a reminder, Procure is our enterprise tender management solution and Terminal is our market intelligence and benchmarking data solution. In Q4, we advanced our value proposition by embedding Terminal [indiscernible] benchmark directly into Procure. This allows customers to compare carriers bids against independent market benchmarks within the same tender workflow and without leaving the interface. An equivalent solution for air procurement is currently in development. This integration improves transparency and reduce friction in the tender process while increasing the strategic relevance of our solution procurement teams. That said, solutions momentum was softer than we anticipated going into the year. As we said on prior earnings calls, enterprise sales cycles increased in 2025 with budget cautions pushing decisions out. This environment also highlighted areas where we must tighten execution. Those are in product delivery and in the go-to-market. We are segmenting 2026 as a solution first year, concentrating our efforts on solutions, adoption and product quality, which will allow the platform to grow more organically in the near term. What we found is that investing more in our solutions business is the best way to both improve and retain sustainable revenue while also improving our long-term transaction growth and its monetization. Across the portfolio, investments are being evaluated through a more strict filter of customer impact, delivery, reliability and return of invested capital. We are concentrated on making strong product integrations and moving from individual tools to a more coherent end-to-end workflow. As our solutions become more deeply embedded in customers' daily operations, the economic value speaks for itself and decision cycles become more straightforward. On the go-to-market, in 2026, we are adopting an even more disciplined model focused on driving more consistent expansion within our base. We believe that we can generate more sales and do so more efficiently by better leveraging our full solutions and platform ecosystem. This includes both expanding shares of wallet from our existing enterprise customers with better cross-sells of the full range of offerings we have as well as leveraging cross network effects so that, for example, shippers introduce us to more forwarders who then introduce us to more shippers. With that in mind, we have revamped our sales and go-to-market approach based on a deep customer research and an expanded commitment to quality and innovation and to the maximum value to our customers. The objective is clear: increase sales productivity, accelerate new sales and acquisitions of new logos and drive more reliable renewals and upsell performance. Let me pass it on to Ian to discuss our strategy in more detail, including our belief that a more rigorous focus on solutions is the best long-term driver of both transactions and sustainable revenue growth. Ian Arroyo: Thanks, Pablo, and good morning, everyone. Our strategy is to build durable workflow ownership based on a foundation of SaaS solutions that create sustained tangible value for shippers, carriers and forwarders throughout their procurement, pricing, booking and sales life cycle. When we deliver that value, we've seen firsthand how it improves transaction growth at scale, and it also improves our pricing power and operating leverage over time. We've proven this model in digital air cargo as we built an industry-first digital infrastructure layer that drove adoption by supporting forwarder workflows. This directly led to reliable transaction volume. Solutions supported business processes. Those processes created liquidity and liquidity created scale. We're now extending that same playbook in 2 directions, expanding to ocean as a new mode as well as expanding to tendering, which represents the lion's share of freight booked. We're doing this by expanding carrier connectivity, integrating procurement and data tools to support end-to-end workflows and leveraging our network of forwarders and global shippers to drive adoption across both sides of the marketplace. This shift to a solutions-first strategy is supported by a modular API-driven architecture designed to integrate into existing freight workflows rather than replace them. Our solutions are built as independent components that are already natively embedded into TMS platforms, ERPs, procurement systems, execution layers and carrier tools, allowing our customers to adopt functionality incrementally and at scale. We are increasingly leveraging AI-enabled automation to support decision-making and execution within these workflows, but always in a way that enhances reliability and control. This approach ensures our software remains flexible, scalable and aligned with how our customers are modernizing their operations. You can think of this as 3 strategic pillars. The first is Air, where we have already established market leadership. We estimate our global share of air bookings is in the low to mid-teens. In 2026, the focus is on adding contract rates, again, supported by our procurement solution, deepening penetration with large forwarders through integrations and expansions and selectively expanding monetization as usage continues to scale and where we provide more value like in payments. The second is Ocean, which is earlier in the cycle, much like where our air product was 6 years ago. We launched Ocean rate and quote towards the end of 2025, and the priority now is making it a daily operating system for forwarders. As workflow adoption increases and carrier connectivity deepens, real-time bookings will follow. We expect booking flow to begin in '26, but to become truly meaningful in 2028. The third trajectory is tendering and procurement. With the acquisition of Shipsta and integration of Shipsta, we added the procurement layer to our platform. In 2026, we're strengthening procure and scaling adoption with enterprise customers. The objective is to connect awarded tenders directly into execution, linking contract sourcing to transactional flow. This closes the loop between planning and booking and expands the surface area for customer value and, of course, monetization. Both ocean and tender represent markets structurally larger than air, which significantly increases the long-term upside of this SaaS to booking model. All 3 trajectories are united by a single integrated value cycle. By expanding our offering to forwarders across air, ocean and procurement workflows, we deepen our role in their operating processes and strengthen customer retention and expansion. That drives transaction flow, while the data further improves the intelligence and value we deliver to shippers and forwarders. This approach also improves unit economics over time by embedding workflows, strengthening retention and lowering marginal CAC as we scale. So this is not 3 parallel initiatives. It is an interconnected strategy designed to deepen order workflow ownership, improve shipper decision support and build a scalable transaction engine. With that, I'll hand it back over to Pablo to walk us through the numbers. Pablo Pinillos: Thanks, Ian. And now let's take a view on the numbers. Revenue for the quarter was $7.4 million, up 12% year-over-year. Platform revenue was up 13% and solutions revenue was up 12% year-on-year. Revenue for the full year was $29.5 million, up 24% year-over-year. Platform revenue grew 18% and solutions revenue was up 27% from 2024. As noted earlier, solutions and platform are tightly linked. Solutions growth drives higher platform activity and monetization over time. Our cohort analysis illustrates the utilization point I made earlier. This is a view of platform bookings in Q4 2025 by selecting forwarders being touched and carriers being touched. It shows how transaction growth is driven by deeper engagement within the existing network, not only by adding new logos. Gross margins were within our target range of 70% to 80%. In Q4, non-IFRS gross margin was 72.7%, down from 74.3% in Q4 2024. This is a result of both product mix and foreign exchange effect. For the full year, the non-IFRS gross margin of 73.7% was up 130 basis points compared to 2024, thanks to the operating leverage and customer service automation. Adjusted EBITDA was negative $2.7 million in Q4 2025 and negative $11.2 million for the full year. As we discussed in previous quarters, operational gains were made, but they continue to be masked by the currency headwinds. A stronger euro and Israeli shekel versus the U.S. dollar reduced the gain in adjusted EBITDA compared to our operating performance. We closed the quarter with $27.9 million in cash and short-term bank deposits, slightly better than our expectations. Now let's discuss guidance. Transactions and GBV growth for the first quarter of 2026 as well as for the full year will continue to be strong, but around the low end of our long-term model, reflecting our priorities for the year. Our expectations for revenue growth in 2026 are directly affected by the solution softness we experienced throughout 2025. While retention remains solid, the longer sales cycles left a shortfall in new bookings, which is expected to affect near-term solutions revenue growth. So for the first quarter of 2026, we are expecting high single-digit revenue growth. For the full year, we expect 6% to 12% with higher growth rates for platform and solutions. We intend to continue our focus on cost discipline and operating efficiency in order to deliver profitability improvements that will enable us to achieve adjusted EBITDA breakeven by Q4 this year. Reaching breakeven does not mean stopping investments, it means investing deliberately. We are aligning our cost structure with the scale of the business today, while preserving the ability to accelerate growth once execution fundamentals are firmly in place. Reaching breakeven in Q4 is expected to be driven roughly half by operating leverage from revenue growth and about the other half from structural cost discipline. We expect this to leave us with a cash balance of approximately $20 million at the end of 2026. Our objective is simple: keep our commitment on breakeven, improve execution reliability and position Freightos to scale from a position of strength. Thank you for your attention. We are now open to questions. Anat Earon-Heilborn: Thanks, Pablo. So we will start the Q&A session. The first question will come from the line of Jason Helfstein. Jason Helfstein: So yes, so completely agree that the strategy around solutions makes a lot of sense. That's where kind of you could argue the durable SaaS nature is. I guess, has there been like a fundamental change in view of, let's say, now versus a year ago as to how you need to go to market to grow that business? And I guess were there decisions made at some point in 2025 around cash flow that may have changed your strategy. So I guess just unpack like, I think you kind of talked about how you want to go to market now. How has that changed versus a year ago? And then I've got a follow-up. Pablo Pinillos: Sure. And thank you for the question. So the go-to-market change is not a drastic change. It's a slight change. As Ian said, we are customer-led go-to-market based on the deep voice of customer work. We drive solution first workflow embedded across air, ocean, procurement and tighter integrations and network effects. So that's the focus that we want to drive, as we have said in the call. With that, we also want to focus in projects and priorities that are -- that we believe the return is much better and deprioritize the ones that we believe is not getting us to where we want to be right now. So that would be really the shift in the go-to-market. Jason Helfstein: And has there been any kind of changes on the -- I guess, on the headcount side? Or like can you maybe detail any operational changes you've made to kind of pursue, I guess, a more selective strategy as it sounds like as to which clients you're focusing on deeper? Pablo Pinillos: So we are going to focus on the fewer ICP, higher ICV from focused targets and overall execution improvements on go-to-market. Jason Helfstein: Okay. And then just a follow-up. Platform take rate did come down a little bit in the quarter, like 10 basis points or 7 basis points. Is there any dynamic there that we need to be paying attention to? Or is that just kind of like quarterly noise? Pablo Pinillos: Well, I would say it's quarterly noise, first. And second, something that we have always been repeating in the different calls. The take rate, if you take the take rate from the GBV, is not directly aligned with one with the other. Our -- majority of our revenue from transactions comes from a fixed fee on transactions. And then depending on the volume of the transactions that has a higher or lower fee is where -- why you feel -- it does feel if you do it mathematically, just GBV per the number of revenue and transactions, it seems it's lower. But I can tell you that our take rate has not decreased in any single one of our lines. Jason Helfstein: Got it. And maybe last question. I mean just obviously, every question is getting asked how they're thinking about agentic and LLM tools. I guess, give us your take on how you're thinking about like deploying large language models within your business? And is there some kind of productivity improvement, both either kind of from a growth or a cost standpoint that could be achieved if you're able to deploy some of those tools? Pablo Pinillos: So in order to do that, we are driving an AI agentic strategy, as you said. And we are going to be -- we are the disruptors here. We are not the ones to be disrupted here. Our API-driven architecture is designed to integrate modularly with the different elements, TMS, ERPs, as Ian said before. So we aim to get leverage from that in the short terms and getting operational efficiencies in the long term. Anat Earon-Heilborn: Okay. So the next question from the line of George Sutton. George Sutton: Ian, you mentioned improving unit economics over time. I wondered if you could go into more detail on what your plans are there. Ian Arroyo: Pablo, I'll let you speak to the unit economics. Pablo Pinillos: Okay, as it was directed to you. But anyway, so the unit economics that we want to drive is that we get a better return for every single project that we drive in, meaning that the projects that we will prioritize are the ones that those unit economics from a CAC perspective, from a short-term revenue perspective and more expanding our network and our capabilities will be the ones that we'll be focused on. George Sutton: So the move is to a solutions first focus. That's also been the area that's been more challenging for you to build out. I'm just curious what you're seeing to suggest that, that is the area to really focus. Pablo Pinillos: Ian explained it really well. And go ahead, Ian. I was going to ask you to jump in. Ian Arroyo: Yes. It's a great question. A couple of things. One is, if you look at our historical, our vast majority of our solutions revenue has come from the air side of our business. And if you look at the transaction growth, you can see that as our solutions business grew, our transactions grew, right? So transactions were a lagging indicator of the value that the SaaS was providing on the air side. Last year, we announced the growth into ocean and 1.5 years ago, we announced the acquisition of Shipsta from a procure and tendering perspective and bringing a multimodal solution to bear, so air and ocean combined for our forwarder clients, including all 20 of the top 20 and another 2,500 beyond that, plus the procurement solution as well as the tendering solution all combined together to allow Freightos to work alongside our clients to provide procure and tendering, which is like pre-operations, the actual operations of quoting, booking and execution and then the market intelligence which is the Freightos terminal, providing that as an integrated suite as well as a modular capability allows us to go deeper into the relationship with our clients from a workflow, day-to-day workflow perspective, which then as ocean liners come online from an e-bookings perspective, allows us to then be ready to help those ocean carriers grow their e-booking portfolio because we already have the demand fully integrated into our solutions base. So we believe that solutions first with a broader capability than air, ocean, air plus procurement tendering and market intelligence really allows us to support the direction that our clients are headed into the future, as Pablo said, based on deep customer relationship knowledge and being customer-led. And as the ocean carriers and other air carriers are beginning to bring on contract volume and ocean carriers are bringing on their volume, then we believe that the next logical step, just like it was in air e-bookings will be ocean e-bookings, which is about twice as big, if not a little bit bigger than that than air today. George Sutton: Finally, for Pablo, you mentioned a quarter ago a pretty aggressive 100% likelihood of achieving EBITDA breakeven in '26. I'm just curious a quarter later, are you still comfortable with those percentages? Pablo Pinillos: Well, we are intending to continue our focus on cost discipline and operating efficiency, and that will enable us to achieve adjusted EBITDA breakeven by Q4 this year. Anat Earon-Heilborn: Okay. I will read a couple of questions from the chat. First one is transactions and GBV continue to grow at about 20%, while revenue guidance for 2026 is only 6% to 12%. Can you explain what is driving this gap and how we should think about take rate trends going forward? Pablo Pinillos: Sure. Let me take this one. So first of all, take rate trends going forward. As I explained before in a previous question, take rates will continue to improve. The difference on the overall mix between the different flat fee for the different transactions is what you could make look not that way. But I'm telling you that the take rates will continue to improve over time and in the next -- in this year for sure. The second thing about transactions growth and the revenue gap. So first, transactions revenue represents 1/3 of our total revenue and solutions revenue represents 2/3 of our total revenue. Solutions revenue, you have -- it is a recurring revenue business where you have to build up the snowball in order to be able to maximize in that revenue in the following periods. As I said in the call, and we've been saying for the last 3 earnings calls, the solutions business has suffered from the volatility of the market with delays on the sales cycles due to the uncertainty and the budget constraints that it has. So we have had that gap. And that's the reason why there is that gap between the transactions and GBV growing at 20% and overall revenue growing between 6% and 12%. Anat Earon-Heilborn: Okay. The second question is for Udo. Can you elaborate on Dr. Schreiber's decision to step down from the Board? Is this part of a planned governance transition? Or should we view it as connected to a broader leadership change? Udo Lange: Look, as we all know, founder transitions are hard. And when we made the announcement about the CEO transition, Zvi was planning to remain a Board member. So stepping from the Board was not planned, and this decision was really entirely Zvi's. And we are sorry about his decision, but respect it and wish him all the best in the next chapter. And we are really privileged to have an incredibly strong Board and management team with expertise that spans logistics, technology and strong governance. So -- and of course, I will not speak for Zvi today. We are really grateful for his contributions and are committed to his long-term vision. The Board and management team are aligned on the strategy Pablo and Ian just outlined, solutions first, breakeven this year and executing for durable, accelerated and profitable growth. And we believe that this is the best path forward for Freightos. Anat Earon-Heilborn: Okay. So the next question, Pablo, will you be willing to discuss when you expect to get to GAAP profitability? Pablo Pinillos: Well, just not to expect on GAAP profitability. What we have said is that we are aiming to reach adjusted breakeven by the end of the year. Cash flow, it usually has a delay of 1 or 2 months -- 1 or 2 quarters after you reach breakeven. So from that point, we will be looking at how to get to GAAP profitability at that time. Anat Earon-Heilborn: Okay. We have no more questions. So thank you, everyone. Have a good day. Pablo Pinillos: Thank you.
Tiffany Sydow: Good morning, and welcome to Sasol's Interim Results Presentation for Financial Year 2026. My name is Tiffany Sydow from Investor Relations. And on behalf of the Sasol executive management team, we are pleased that you could join us today. With me is Simon Baloyi, our President and CEO of Sasol; and Walt Bruns, the Chief Financial Officer. The group executive management team is also present and will join for the market call, which follows directly after the presentations. A reminder that the presentation and all supporting financial materials are available on our website. Turning to the agenda for today. A reminder that our strategy follows a two-pillar approach. Firstly, to strengthen our foundation business, where Simon will begin today's presentation with our business overview, then followed by Walt, who will take us through the financial performance for the half year. The second pillar addresses our pathway to grow and transform the business in the long term, where Simon will conclude and provide an update on our progress. A market call will then follow immediately after the presentation where you can submit your questions via the webcast or join in the teleconference facilities. A reminder that the presentation contains some forward-looking statements and more detail is reflected on the slide in front of you. I would now like to hand over to Simon to commence his presentation. Thank you. Simon Baloyi: Good day, everyone. Thank you for joining us today. We value your time. The business environment remains volatile and the challenges are here. Our priorities are clear, and our execution is improving. Our strategy shared at Capital Markets Day in May 2025 remains unchanged to strengthen our foundation business while positioning Sasol to grow and transform. Today, I'll take you through the progress we are making on the journey, the areas where we're seeing traction and where our focus lies for the second half of the financial year. Let me start by framing the key themes for today. Firstly, safety. Nothing is more important than ensuring that every employee and every service provider returns home safely to their loved ones. While we are seeing encouraging improvements in leading indicators, the tragic fatality in September is a stark reminder that we are not yet where we need to be. Secondly, operational delivery in Southern Africa. Our focus on coal quality, reliability and disciplined maintenance is starting to restore stability across the entire value chain. Thirdly, International Chemicals. The reset is progressing. Markets are, however, tougher than we anticipated, but the action within our control are delivering structural cost improvements and positioning the business for recovery. Fourthly, cash flow and balance sheet resilience. Despite challenging macros, we generated positive free cash flow by executing on the levers within our control. And finally, we continue to advance our Grow and Transform strategy in a pragmatic value-accretive manner, which I'll cover towards the end of the presentation. At Capital Markets Day, we made clear commitments to strengthen the foundation business. What matters now is delivery. I am pleased to say that we are delivering against most of those commitments. The destoning plant reached beneficial operation in December on plan and is already improving coal quality and supporting more stable operations at Secunda. Our Southern Africa value chain cash breakeven price ended around USD 53 per barrel, ahead of our full year target range of USD 60 to USD 55 per barrel. This reflects higher production and sales volume together with disciplined cost and capital management. Given softer chemical pricing and a stronger rent outlook, we are maintaining our guidance range. In International Chemicals, adjusted EBITDA improved year-on-year despite challenging markets, supported by early benefits from self-help measures. While our self-help measures are progressing and will ramp up in the second half, we have revised our full year adjusted EBITDA and margin guidance, which I'll talk through in more detail shortly. Net debt ended at USD 3.8 billion, and our continued focus on cash generation and cash flow resilience remains central to our deleveraging pathway. Walt will unpack the key drivers in more detail. Finally, supporting the Grow and Transform pillar, we secured an additional 300 megawatts of renewable energy, bringing the total to more than 1.2 gigawatts on the path to 2 gigawatts by 2030. This reinforces an important point. We are focused on the value drivers. We understand the challenges, and we are executing with purpose. Turning to safety. The fatality in September 2025 was unacceptable and deeply regrettable. Our investigation into this incident identified some gaps in risk awareness and inconsistent adherence to safety rules. In response, we have taken decisive action. This includes strengthening both leadership and personal accountability, reinforcing standards, intensifying our focus on high-risk activities and finally, improving service provider safety management. These actions are strengthening competence, rigor and ownership where it matters most at the front line. While there's no room for complacency, we are encouraged by improvements in leading indicators, including fewer hospitalization and lost workday cases, lower injury severity and most importantly, no major process safety incidents over the past 18 months. Safety is the foundation of everything we do. We will continue to embody the learnings, strengthen our safety culture and hold ourselves and our partners accountable to ensure that every person returns home safely every day. I'll now touch on a few highlights of our financial performance. Despite a challenging macro environment, overall, team Sasol delivered a robust performance in the areas within our control. We improved margin realization, reduced cash fixed cost and optimize capital spend, whilst protecting reliability and integrity. Adjusted EBITDA for the group was lower year-on-year, reflecting weaker macro conditions. However, our cash flow levers were effective and free cash flow ended positive. This is exactly what we mean by disciplined delivery in a very challenging environment. Turning to the business updates. Let me first start with mining. As mentioned, the destoning plant reached beneficial operation on schedule and within budget. We are already seeing improvements in coal quality with average things now around 12%. External coal purchases remained elevated in the first half during the destoning plant ramp-up. While coal purchases will continue in the second half to supplement our own production, it is expected to be lower than the first half and to normalize in financial year '27. The focus is now on firmly increasing our own production volumes, reducing external purchases and improving cost competitiveness in support of a more resilient value chain. Gas is an important part of the Southern Africa value chain and broader regional economy. The plateau extension projects are progressing well and remain on track to ensure a stable supply profile to financial year '28. In Mozambique, start-up delays at the CTT gas-to-power project have affected the timing of the PSA volumes. To manage this, approved sub gas arrangements are ensuring continued gas flows to South Africa while the CTT project progresses. Total gas volumes are unchanged. However, a revised gas production profile has deferred gas monetization. Together with a stronger rand-U.S. dollar exchange rate, this has resulted in a PSA impairment. We are working on optimizing the gas production profile through ongoing performance testing and potential infrastructure improvements in the coming months. Sasol's methane-rich gas bridging solution remains on track, while past applications for the period FY '27 to FY '30 submitted to NERSA for approval. At the same time, we are developing longer-term gas optionality through LNG. We are working closely with our strategic partners to advance gas to power options. We are managing our gas portfolio deliberately, protecting near-term supply while keeping value-accretive options open to sustain profitability over time. Across our Southern African business, we are seeing tangible progress in restoring performance. Secunda production increased by 10% year-on-year, supported by the absence of a phase shutdown, improved coal quality and gasifier availability. At Natref, operational performance also improved and the commissioning of the last low-carbon boiler supports reliability while advancing our emissions objectives. Commercially, we will continue to prioritize higher-margin fuel channels. Following Prax SA interim business rescue, we stepped into the capacity and maintained stable Natref operations. This is to ensure that there is reliable supply to South Africa and our Tambo Airport. Our priorities for the second half are clear: sustained reliability at our operations through disciplined maintenance and stable operation and leverage the increased capacity at Natref to optimize product placement and maximize value for the group. In Chemicals Africa, our focus is to ramp up sales supported by stronger production performance, while maintaining benchmark price levels in a softer global market. International Chemicals continues to execute on our recent priorities outlined at Capital Markets Day. As previously stated, EBITDA increased by 10% year-on-year despite challenging markets. Our margins came under pressure due to a softer global demand, higher feedstock costs and persistently elevated European energy prices. These conditions have weighed across the entire industry. However, delivery on the actions within our control is progressing well. Cash fixed costs declined by 6% year-on-year or 10% when normalized for exchange rates. Asset optimization and variable cost initiatives are starting to deliver benefits with most boring actions completed or nearing completion across the portfolio. Commercial excellence initiatives, including continued focus on value over volume are underway. While this takes time to flow through our earnings, we expect benefits to increase in the second half. Given the weaker-than-expected market conditions and unplanned JV ethylene cracker outage at the end of the last year, we have revised our full year adjusted EBITDA guidance from USD 375 million to USD 450 million. We also revised our margin outlook to a range between 8% to 10%. Importantly, our reset phase extends beyond financial year '26. Innovation across the value chain and broader portfolio optimization initiatives are being assessed. These are aimed at further improving competitiveness. This, together with our current actions support our FY '28 target of USD 750 million to USD 850 million EBITDA. Sasol continues to make a meaningful contribution to society and the communities where we operate. In the past 6 months, we invested about ZAR 200 million in social programs aimed at uplifting communities across various sectors and regions where we operate. We invest in multiple education initiatives to address the shortages of critical skills needed in the workplace. We spent around ZAR 75 million on batteries, skills development and education initiatives. We continue to invest in community infrastructure in our neighboring communities. For example, the upgrade to the Doane and Pande Health Centers in Mozambique will help delivery, benefiting over 25,000 community members. In South Africa, we've also supported the successful B20 and G20 events during 2025 with sponsorship and embedding resources to support the execution of the events. These initiatives reflect our belief that long-term value creation for shareholders is inseparable from positive social impact. With that, I'll now hand over to Walt, who will unpack our financial performance. Walt Bruns: Thank you, Simon. Good morning, ladies and gentlemen, and thank you for joining us today. I will take you through the financial performance for the first half of FY '26 and how it reflects tangible delivery against the commitments as we set out in our Capital Markets Day. The macroeconomic environment remains challenging and the earnings reflect the external pressures. What is important is that we respond on the levers that we control, tighter cost control, disciplined capital allocation and better operational execution across the portfolio is strengthening our foundation business and showing up in improved cash flow generation in support of our deleveraging pathway. Turning to the macroeconomic environment. Volatility and uncertainty persisted through the first half of FY '26. The Brent crude oil price was down 14% year-on-year and together with a stronger rand exchange rate resulted in a 17% decline in the rand oil price. The oil market remains in surplus with supply growth and inventory builds outpacing demand. Given ongoing geopolitical uncertainty, we expect oil price volatility to persist in the near term. The strengthened rand against the U.S. dollar weighed on earnings given the dollar-linked nature of much of our pricing. While this created pressure on the income statement, the stronger closing rate provided balance sheet support by reducing the rand value of our U.S. dollar-denominated debt. Refining margins were a notable positive, supported by improved diesel differentials and stronger operational performance at Natref, helping to offset some of the oil price pressure in the fuels business. Chemicals remain the more challenging part of our portfolio with continued global overcapacity, softer demand and tariff uncertainty weighing on pricing and margins. While conditions remain subdued, the pace of decline is slowing. Selective end markets are stabilizing and industry rationalization is accelerating, offering cautious optimism for recovery rather than near-term rebound. Against this backdrop of continued macro pressure, our focus remains firmly on the levers within our control. Starting with volumes. We delivered 3% higher sales volumes in the first half of FY '26, supported by improved production, while a better sales mix into higher-margin channels improved price realization. In the second half, the focus remains on sustaining volume delivery, while continuing to optimize channel mix as markets evolve. On costs, we have not only contained inflation, but reduced overall cash fixed cost by 2%, driven by lower labor cost and reduced external spend. We will continue the strict cost control into the second half, while also reducing external feedstock purchases. Capital expenditure was 43% lower than year-on-year, mainly due to the absence of a Secunda phase shutdown in the period, lower PSA spend in Mozambique and reduced environmental compliance capital as these programs near completion. We are also optimizing our capital spend without compromising on safety or asset integrity. As a result, we have revised our full year capital guidance ZAR 2 billion lower to ZAR 22 billion to ZAR 24 billion for the year. Importantly, the ZAR 2 billion is not a deferral and not rolling over into later years. We saw a temporary increase in net working capital in the first half of FY '26 due to a timing lag between the higher production and sales with opportunities available to reduce working capital prior to financial year-end. On the balance sheet, liquidity headroom remains robust with more than USD 4 billion available. We will continue to actively manage our balance sheet, including our debt maturity profile as we prioritize sustainable deleveraging. Finally, we have and will continue to execute our hedging program, which I will unpack further on the next slide. Hedging remains a key component of Sasol's approach to managing macroeconomic volatility. We have completed the FY '26 hedging program with the FY '27 program underway. Given prevailing market conditions, we have utilized a broader range of instruments to maintain appropriate downside protection while being mindful of cost and retaining upside participation. During the first half of FY '26, foreign exchange losses, translation losses were largely offset by gains on derivative instruments, demonstrating that our hedging program is working as intended, especially in a stronger rand environment. For the second half of FY '26, the oil price risk is hedged at an effective hedge cover ratio of 55% to 60% and an average floor of approximately $59 per barrel. On the exchange rate, 25% to 30% of our rand-U.S. dollar exposure has been secured primarily through zero-cost collar structures within a range of approximately ZAR 18 to ZAR 22. We plan to complete our FY '27 hedging program by the end of FY '26. All the self-help measures that I've mentioned play into our deleveraging pathway, which remains our primary focus. We have made good progress in reducing both gross and net debt over the last 18 months, supported by a disciplined capital allocation framework with gross debt ending 9% lower compared to the prior year. We also improved the regional mix of our debt to better match the underlying cash generation of our assets with the rand for U.S. dollar bond issuance in July. For the first half of FY '26, we ended with a net debt of USD 3.8 billion. While slightly above our full year target, we remain on track to achieve net debt below USD 3.7 billion by year-end with second half cash generation expected to be higher through the management actions I mentioned earlier. We remain committed to the debt reduction trajectory as set out at CMD, which showed us reaching the net debt target and associated dividend trigger of USD 3 billion between FY '27 and '28 under different macro assumptions. Given the current macro outlook, the net debt target will likely be achieved in FY '28. That said, given the progress we've already made and the head start we have created, we will continue to press and expand on the levers within our control to mitigate the macro headwinds and achieve the target as soon as possible. Turning to more details on the group financial results. The key highlight is the positive free cash flow as defined in our capital allocation framework in the first half of a financial year for the first time in 4 years and a more than 100% improvement from the prior period. The absolute amount will continue to increase as we further progress the implementation of our plans. Gross margin declined by 6%, reflecting the impact of a 17% lower rand oil price and continued pressure in chemicals pricing as well as higher variable cost. This was partly offset by stronger refining margins and higher sales volumes. Earnings before interest and tax decreased by 52%, mainly impacted by non-cash remeasurement items. This related to impairments of ZAR 7.8 billion compared to ZAR 5.7 billion in the prior year. The current period includes an impairment of ZAR 3 billion on the Secunda liquid fuels refinery, CGU, which remains fully impaired. The recoverable amount of the CGU did improve through management actions, but was negatively impacted by lower forecast price assumptions and a stronger exchange rate. As a reminder, the overall Secunda complex, including the Secunda Chemical CGUs, continue to have significant headroom when comparing the total recoverable amount to the net book value. On the Mozambique and PSA gas development, we recorded an impairment of ZAR 3.9 billion, reflecting the revised gas production profile as outlined by Simon, and the impact of the stronger rand-dollar exchange rate. Furthermore, a delay in the start-up of the CTT gas-to-power project in Mozambique and the higher end-of-job cost estimate resulted in the full impairment of Sasol's equity accounted investment of ZAR 0.5 billion. Looking at adjusted EBITDA by segment. Performance across the portfolio reflects different market and pricing conditions but also highlights the benefit of diversification. Starting with the Southern Africa value chain, Mining EBITDA was lower, mainly due to the phaseout of export coal sales during the period. This was partly offset by redirecting volumes to Secunda operations, which benefits the broader SA value chain. We also realized additional income from leasing our Richards Bay Coal Terminal capacity. Gas EBITDA declined due to lower volumes as well as the stronger rand-U.S. dollar exchange rate. We expect higher sales volumes in the second half of FY '26 as the PSA ramps up. Fuels EBITDA increased, supported by higher refining margins and product differentials. This was further supported by higher sales volumes on the back of improved operational performance at Secunda and increased utilization at Natref. In Chemicals, both Africa and America EBITDA generation remains under pressure, reflecting lower prices, weaker margins and soft demand in global chemical markets. Eurasia saw margin improvement, reflecting the benefits of our value over volume strategy and higher palm kernel oil pricing. Overall, the portfolio supported by targeted strategic initiatives seeks to balance earnings across sectors and geographies, further improving our resilience in an ever-changing global landscape. In closing, our financial priorities for Sasol are clear and unchanged. We are focused on improving sustainable cash generation, disciplined capital allocation, deleveraging the balance sheet and proactive risk management. These priorities have been translated into plans with the key financial metrics for FY '26 included in this slide and largely unchanged versus what we told you before. We aim to deliver on our volume targets that Simon shared, keep cash fixed cost increases below inflation, maintain first order capital within the revised target of ZAR 22 billion to ZAR 24 billion and manage net working capital between 15.5% and 16.5% as guided at CMD. We remain committed to reducing net debt to below USD 3.7 billion by the end of the year despite the uncertainties in the macroeconomic environment, while continuing to manage risk proactively through the completion of the FY '27 hedging program. Ultimately, credibility comes from delivering what we say. We started the journey of delivery at the end of FY '25 and built on that momentum in the first half of FY '26. We cannot control the macroeconomic environment that we operate in, but we can control how we respond with decisiveness, discipline and a clear bias for action. This is our commitment to you and underpins how we will continue to create sustainable value for our stakeholders. With that, I will now hand back to Simon for his closing remarks and look forward to engaging in the Q&A session later. Thank you. Simon Baloyi: Thank you, Walt. Let us now turn to a brief update on our Grow and Transform strategic agenda and the key progress made in the last few months. Our approach to decarbonization remains pragmatic and value accretive, reducing emissions while safeguarding energy security and affordability. The principle remain, we will scale solution in line with market demand, leverage our existing assets and only pursue pathways that are value accretive for Sasol and the shareholders. Since Capital Markets Day, we have made good progress across renewables, carbon offsets and sustainable fuels, all aligned with clear commercial logic. In renewable energy, we have now secured more than 1.2 gigawatts in South Africa, moving steadily towards our 2-gigawatt target by the end of 2030. We have now contracted approximately 9 million tonnes of carbon offsets over the next 3 years, securing around 60% of our offset requirements. Following the piloting of renewable diesel at our Natref facility, certification is nearing completion and is planned for the second half. These position us well to compete in this market. Renewable energy is a good example of moving from strategy to delivery. As mentioned, we've now secured more than 1.2 gigawatts of renewable energy in South Africa. This was achieved by securing a further 300 megawatts of renewable energy being a solar and battery storage project that reached financial close this month and is expected to be online in 2028. Execution is also progressing well with 180 megawatts already operational and 740 megawatts under construction. In December 2025, we received our renewable energy trading license from NERSA. This trading license will enable us to manage excess generation and with flexibility to use the supply where it exceeds our own demand. As the portfolio scales, we can, therefore, progressively build a stand-alone power business. Commercially, since launching Ampli Energy with Discovery Green, demand has been strong and the offering has been oversubscribed. Overall, renewable energy is already lowering our cost base, reducing emissions and creating a scalable platform that opens access to new markets over time. Looking beyond 2030, our focus is on sustaining value across the group and ensuring the business remains resilient over the long term. Our priority is to protect the strength of our existing businesses, maintain flexibility as markets and policies evolve, develop new sources of value where there is clear commercial logic. Across our energy and feedstock platforms, long-term supply options are progressing. These alongside initiatives in the Gas value chain that extend optionality and support continued market participation. From a carbon regulatory perspective, allowances are in place through 2030. The proposal for carbon tax recycling has been submitted and engagements continue. This will help us to manage transition costs and support value-accretive reinvestment in South Africa. In International Chemicals, the business is being reset to improve competitiveness and profitability, unlocking future value. At the same time, we are building new businesses, sustainable businesses, including renewable energy trading and sustainable fuels chemicals, creating additional pathways for growth and value creation over time. In January, a EUR 350 million Grant was secured by Zaffra, our joint venture with Topsoe for an e-SAF project in Germany. This disciplined approach supports a business that remains resilient through the cycle and capable of delivering long-term shareholder value. To close, I'm confident that we are on the right path. We are strengthening the foundation, executing with discipline. We are laying the groundwork for future growth. There's still work to do, but we have the right strategy, we have the right focus and the right people to deliver on our commitments. My executive team and I look forward to further engagement in the Q&A sessions. Thank you. [Break] Tiffany Sydow: Thank you, and welcome back to the Q&A session where you'll have an opportunity to direct your questions to Simon, Walt and the rest of the executive management team. Joining us on stage today, to my left, we have Victor Bester joining us, he's the EVP of Operations and Projects in Southern Africa; Antje Gerber, the EVP of International Chemicals; and to my immediate left, Sandile Siyaya, who's the EVP of our Mining business. In addition, we also have other GSE members present in the room today for support to our Q&A. Vuyo Kahla is our EVP of Commercial and Legal; Christian Herrmann is our EVP of Marketing and Sales for Energy and Chemicals Southern Africa; Sarushen Pillay ,who's the EVP of Business Building, Strategy and Technology; and Thabile Makgala, the EVP of People, SHE, Risk and Corporate Affairs. We urge you to please submit your questions via the online Q&A platform on the right-hand side of your screen. Alternatively you may also dial-in via our Chorus Call link, where you will have the opportunity to voice over your questions. I will alternate between the two platforms to ensure a fair participation of all. Thank you. We'll begin now. If I could turn over to Chorus Call, please first two callers who are queued. Operator: First question comes from Gerhard Engelbrecht of Absa CIB. Tiffany Sydow: Gerhard, could you hear us? Can you voice over your questions? [Technical Difficulty] Operator: Unfortunately, we're not getting any response from Gerhard's line. Going on to the next question, which comes from Adrian Hammond of SBG Securities. Adrian Hammond: I have three questions, if I may. Firstly, for either Simon or Victor. Let's talk about your Secunda volumes, if I may. And looking towards the next financial year, you've achieved annualized run rate in the second quarter of about 7.6 million tonnes. Notwithstanding you'll have maintenance scheduled next year again, it looks like that you might achieve your top end guidance sooner than expected. Could you comment on that? And perhaps Victor can elaborate with some progress on the refurbishments of the gasifiers. And then secondly, just your view on this carbon tax suspension that's been proposed by the minister and whether you think that will play out or not? And then lastly, on the MRG pricing submission, does this pricing that you've submitted preserve revenue and EBITDA as it currently is for this gas business? And perhaps you can elaborate on how many years this bridge gap will be in place for and how much the CapEx may be for that? Tiffany Sydow: Thank you, Adrian, for the questions. Simon, would you like to kick off? Simon Baloyi: Yes. Let me start then I will hand over to Victor on the guidance of Secunda. Then I mean, I'll deal with the carbon tax and I mean, I'll also deal with the MRG. I mean, firstly, on the Secunda volumes, I mean, you're right. If you check where we ended at H1 and you multiply it by 2, I mean, you will get a number, I mean, that's, I mean, on the high end of our market guidance. I mean, however, Victor will go into the details. I mean, for us, it's a combination of both, I mean, coal quality and gas fire maintenance, and Victor can explain the intricacies of how those two work. And we have to go through that program before we can, I mean, give any indication contrary to the guidance that we've given. So Victor will go into those details. On carbon tax, yes, we've seen -- I mean, the newspaper articles on the minister's view, I mean, on carbon tax, I mean, maybe not his view, but what other people said, I mean, they were proposed out to scrap it. From a Sasol point of view, I mean, I just wanted to step back a bit and remember that carbon tax was instituted in South Africa to deal with the CBAM, because if you don't have carbon tax in your country, then you import into Europe, I mean, CBAM will then takes you there unless you have a carbon tax in your own country. So our country, I mean, I think correctly moved in that direction to protect themselves. However, the implementation, and that's where Sasol is coming from. I mean, our focus in how this must be implemented and our firm belief is that carbon tax has to be implemented with the ability -- with a correct mechanism rather than a stick, so it shouldn't be a punitive tax. And to that end, not only us, but us and the entire business community in South Africa, we are proposing a carbon tax recycle mechanism where the carbon tax is recycled and it allows us and others like us who are busy with the transition to put that money into transitioning, I mean, the fossil fuel sector because in the long time, I mean, 15, 20 years, that work needs to be done, and we'd rather use the carbon tax now for that transition work. Your final question was on the MRG. I mean, firstly, from the -- I mean, pricing point of view, I mean, that we've submitted our pricing with NERSA. I think that should become, I mean, public soon. I mean, you'll see that, yes, I mean, MRG based on the input cost is -- I mean, will be slightly more expensive than the current gas, but that's a NERSA process. And I would just like to allow NERSA to continue with that. And the CapEx for the bridging solution for MRG is not significant, and all of it is included in our CapEx profile. So Victor, maybe you can go deeper into why we're not adjusting the guidance yet. Victor Bester: Well, thank you, Simon. I guess, Adrian, it's -- we are quite optimistic about our performance and our results that we are seeing at Secunda. But we need to look at it with a bit of moderation. And as I said in CMD, we're following a specific ramp-up curve towards FY '28. And just to give you a sense, the gasifier restoration program is going well. To date, we have seen 25% of the fleet, and we hope to see 40% of the fleet by the end of this financial year. And until we've seen the entire fleet, it would be, I would say, a bit of a guess in terms of just multiplying our year-to-date performance to get to a sustainable number. We really want to be sure that we understand the scope of the work and the restoration that needs to be done in our gasifiers. But the results year-to-date in terms of the 25% that we have seen is really promising. And we've also reduced our geo durations from the high numbers that we have seen in the previous financial year to the numbers that we are seeing this time around. So I can confidently say that we are well on track in terms of achieving our ramp-up towards FY '28. Tiffany Sydow: Thank you, Adrian. Moving to the next caller, please. Operator: And we've been rejoined by Gerhard Engelbrecht of Absa CIB. Gerhard Engelbrecht: Sorry about earlier. I hope you can hear me now. Tiffany Sydow: We can hear you. Go ahead, Gerhard. Gerhard Engelbrecht: I just have a question around your degearing guidance. Firstly, you say you're looking to reduce net debt by the end of the financial year. We're sitting in an environment in the second half where the rand is already much stronger, refining margins have come down, chemical prices are lower. You're guiding CapEx much higher in the second half. If I look at your guidance range and what you've spent, and then there's the uncertainty around volumes that Victor has just spoken about. So I guess my question is how do you then [indiscernible] I have a second question just around CapEx. You say you haven't deferred any CapEx that's used. But does this impact your longer-term CapEx guidance as well? Do you expect to revise that lower? And just looking at the numbers, your guidance points to second half CapEx almost 60% higher than the first half and 30% higher than the second half of last year. How should I interpret that? And then maybe just lastly, I see you posted some medium-term notes. I would have thought now is a good time to buy dollars to prepare for debt repayment. What was your thinking around the repayment of the notes? And may I just say, I was pleasantly surprised by your cost as was the case last year. Tiffany Sydow: Sorry, Gerhard, we lost you a little bit on the last part of your question. Could you repeat the third question that you had around the -- I think it was around the medium-term notes? Gerhard Engelbrecht: Yes, I'm sorry. I was just going to say, I just thought that now with the rand is strong, a good idea to rather buy dollars and to prepare for the debt repayments that are on the horizon with the rand so strong. So I was just curious as to why you decided to repay the medium term notes? Tiffany Sydow: Okay. Thank you. Thank you for those questions. Simon, would you like to kick us off before we head into the financial questions? Would you like Walt to take all of them? Simon Baloyi: Yes. So, on CapEx -- I mean, all these questions are financial. But let me -- maybe, I mean, just say on CapEx overall, I mean, in terms of the deferral, Gerhard, I mean, the big delta between the two is because we didn't have a phase shutdown. And we also saw the end of, I mean, the major programs like the PSA coming to an end. And I mean, our own, I mean, capital efficiency levers that we've pulled, I mean, towards the end of last year financial year, then coming into H1. So that's where we are on CapEx. I mean we're using a risk-based approach to make sure that, I mean, the integrity and stability of our assets can be maintained. I think with that, Walt, you can just deal with the three financial questions. Walt Bruns: Yes, sure. Thanks, Gerhard, for the questions. I'll try and there were quite a few in there. So let me go through them kind of systematically. On the degearing guidance, yes, so we are guiding that we will still be below USD 3.7 billion by the end of the year on net debt. So that obviously implies that we will generate free cash flow in the second half of the year. Pricing does remain a bit of a wildcard. I mean, if you look at the current oil prices, and there's a wide range of estimates out there and at times it by the current exchange rate, I see the rand oil pretty similar to what we've had for the first half. But there is a scenario that plays out that it does reduce. I think from my side, volumes will be slightly higher. We did have a bit of inventory build over the first half of the year. So you'll see some working capital unwind as we better match the sales and production to that. I think we'll continue to keep our cost discipline. And then CapEx, we do see an increase in the second half of the year. There are some projects that are -- we're in front-end loading that are now will progress through the gates in the second half, particularly in our mining space as we continue to invest there to ensure that we can increase own production and reduce the external purchases. There's also some non-phase kind of shutdown capital in Secunda, but we will look to continue to optimize that spend. I think Victor and the team and the projects and engineering team are doing a lot of work to analyze our capital spend and not just the scope of the work that we do, but to reduce the absolute cost. In terms of the CapEx for the RCF, we're not adjusting the guidance for -- at this point in time. But the important message there wasn't to say this ZAR 2 billion rolls over into next financial year. So the guidance that we gave of around -- I think it was ZAR 28 million to ZAR 30 million in terms of the first order, excluding the selective growth, we'll retain that. But we are looking to see whether or not we can reduce that further, but I'd rather do that as we get closer to FY '27 and we finish some of the scoping work. On the dollar, we did buy quite a lot of dollars. You would have seen in the first half of the year, we bought almost $0.5 billion and paid that into the RCF. So that was from the issuance that we did, the bond, the ZAR for U.S. dollar bond issuance we did in July. And then we moved some excess cash into the RCF in the first half, too. On the DMTN, it was a relatively small around ZAR 800 million that was maturing. So we decided to make that payment. But we'll continue to optimize on that capital structure. I mean, I think there'll probably be a lot of questions around our -- what are we going to do with the '26s and '27s that are maturing. We take a very proactive kind of disciplined approach to our capital structure. We like the Eurobonds. We still think they are an option that's available. But at least we have options available now. We've got a lot of liquidity, more than USD 4 billion sitting there. And we did the deal in July. And so that just gives us options to manage those immediate maturities. And now we're looking more at kind of the medium-term refinancing and just assessing all of our options. Tiffany Sydow: Thank you, Gerhard. Thanks for that set of questions. Also just want to echo a similar question from Sashank Lanka from Bank of America around the driver for the second half uplift in capital. So I think you've addressed that. Thank you, Walt. I'm going to move to the online questions now. There's quite a number of questions around the balance sheet and capital allocation. If we can start with those, I'll maybe take two or three at a time and then move on. Starting with a question from Lorenzo Parisi from JPMorgan -- sorry, that question has also been addressed around the repayments. A question from Stella Cridge at Barclays. Do you see the current cost of borrowing in the U.S. dollar bond market as more attractive than prior? And then I think a follow-on question from Kay Hope from Bank of America. Do you have any FX targets for your debt going forward? For instance, are you looking to increase local currency debt and decrease USD-euro obligations, which you've partly addressed earlier? Well, but I think what is the proportion of euro and dollar debt today? And how does this compare to your revenues? I think the last question, I'll just end off with on CapEx. The CapEx expenditure classification policy as the CapEx appears to be more like repairs and maintenance. If classified as an expense, the EBITDA number will reflect the realistic performance. And that's a question from [ Heinrich. ] I'm not sure what company he represents. I think we'll take that set to start off with. Walt Bruns: Okay. So I think -- thanks, Stella, for the question. I do see -- I think the current cost of borrowing in the U.S. dollar bond market is more attractive than maybe where it was 6 to 12 months ago. Almost all of our longer bonds are trading at a yield below -- I mean, below 9%. And so that does -- that is more attractive than some of the numbers we were seeing earlier. We would, however, have to continue to look to see how we optimize that cost. I mean, if you look at some of the bonds that are maturing at sort of a much lower cost of borrowing, so there is a differential, but we do see the current cost is more attractive than it was before. I think let me answer Kay's question then around the FX targets for debt going forward. I think, Kay, the size of the South African market and the amount of debt that we need to refinance, it's just not able to absorb that type of issuance. You would have seen we've increased it to just over 12% now our ZAR debt as a function of the total debt. We'll continue to look for opportunities to do that. Currently, if I look at the mix, just -- and we had that on one of my slides with regard to the EBITDA delivery per region, you would have seen 84% of our earnings still comes from our Southern Africa business and 16% from the International business. That has improved over time. That split was probably closer to 90-10. This time last year, it was 87-13. So we continue to see an increase in the contribution from our International business. And so doing -- try to better match the debt and the earnings across the portfolio. I think the question on the CapEx classification policy. So we follow IFRS standard IAS 16. So we look at our significant components. If we modify or replace them, we would capitalize them, and that's what we continue to do. Obviously, if it's not significant on smaller components, that's when we would expense it through the income statement under the repairs and maintenance expense. Tiffany Sydow: Thank you, Walt. Before I let you go, there are two more questions on capital guidance. A question from Anton from Nolo. For the lower capital guidance, how much of a factor was the stronger rand in reducing equipment import costs? And then another question from Lorenzo Parisi from JPMorgan. How are you thinking about refinancing the longer-dated notes from 2028 in terms of timing? Walt Bruns: Okay. Yes. So I think no doubt, I mean, the stronger rand, and I think that's the balance at Sasol, the stronger rand hurts us on the income statement, but does help us on the balance sheet. I would say the low CapEx guidance, there was a portion of it related to the stronger rand, but it's not a material portion or significant. So it's really around looking at our cost and how do we optimize scope and spend. And then on the longer-dated bonds, as I mentioned, we continue to take a proactive approach to this. We are looking outside the window and at the maturities of our different bonds, and we'll assess our options as the market develops. And as we go on this roadshow, too. I think we're spending some time also in Miami with some of our debt investors, and we'd like to understand from them how they see our credit going forward, too. Tiffany Sydow: Great. Thank you, Walt. I'm going to move on to International Chemicals business. There are two questions from -- the first one from [ Tabo Pato from Katalyst Partners. ] More and more chemical plants in Europe, especially Germany, are closing down due to the high energy costs and unsupportive operating environment. What is Sasol's view on its operations in Europe? And the second question from Sashank Lanka from Bank of America. Is there a risk to your FY '28 EBITDA guidance of $750 million to $850 million provided at the CMD given that the EBITDA guidance is cut for this financial year '26? Simon Baloyi: Yes. Thank you, Tiffany. Let me start, and I'll ask Antje to weigh in. Firstly, on the EBITDA guidance, you remember at CMD, Sashank, we indicated three buckets across which we said there must be, improvement for us to meet our target. I mean the first one was, as I said, of the uplift we said should be coming from a market. Then third was, I mean, on cost, I mean, optimization. And the last, third, was the commercial excellence or the value over volume approach and the renegotiation of contracts. So that was broadly how we framed, how we are going to uplift that business. And I mean, if you go through our results, you will see that, I mean, on the factors within our control, we've done well. However, I mean, what we've seen playing out in the market was, I mean, not as to our expectations. So for now, we will double down on what we need to do, and that is why we're keeping -- I mean, that guidance, but we will keep on watching the market. And I think the same goes for Tabo, I mean, your question in terms of -- I mean, other people are closing, but our focus is on what we can do to improve the business. And with that, I want to hand over to Antje. Antje Gerber: Yes. Thank you, Simon, and thank you, Tabo and Sashank, for the good questions. Maybe starting, first of all, with the chemical plants or the situation of the chemical industry in Europe, which is in a tough spot at the moment. So it remains a challenging operating environment in Europe, given the structurally weak demand, overcapacity, high and also volatile energy costs and the increased regulatory complexity. Our strategy at Sasol does not assume a fast recovery of these issues. We are operating on, as Simon has said, value over volume basis in Europe. And while we do that, we actively optimize as well our portfolio, our portfolio of our offerings, products, but also how we operate in Europe. And while we focus more on specialty and contracted positions and volumes, we can also then earn acceptable returns, and you've seen that in our current results. On the other hand, where the assets do not meet our hurdle rates, we will also continue to take decisive actions and Europe must perform on its own merits. So we do not invest in hope. And that goes as well to the guidance of fiscal year '28. And to your question, Sashank, we are still confident that we can meet that guidance, which we have laid out on the CMD because 2/3 of those deliverables will come from our self-help measures. And we are here executing on identified actions and not aspirational growth assumptions going forward. 2/3, as I've said, are self-help measures. And I mean, some of the turnaround actions you can see already bearing some fruits. And we are very clear that they kind of here will also accelerate going forward in the next 2 years. We are just in year 1 of our turnaround. Tiffany Sydow: Thank you, Antje, Simon. If we could move back to Chorus Call, there are two more callers. Could we get the questions, please, operator? Operator: Next question comes from Chris Nicholson of RMB Morgan Stanley. Christopher Nicholson: Yes, I've got two questions. Just the first question is, could you just go into a little bit more detail on what's happening with the Gas from the PSA? You've downgraded guidance for Gas this year. Obviously, we understand the PPA assets is just rolling off. But you downgraded guidance and you've also put through this impairment of lower expected volumes from the PSA asset. Is that an absolute volume? Or is there something around the link to the amount of volumes that are kind of capped into the CTG gas to power plant? So a little bit on that. And then could you also just talk to the agreement that you've managed to strike with Prax and the current business liquidation there? How long are you able to utilize their share of the Natref refinery? And do you share the full 33% of those benefits? Or does that all flow to your bottom line? Tiffany Sydow: Thank you, Chris for those questions. Simon, would you like to start this one? Simon Baloyi: Yes. Let me start on Prax and the PSA. And Victor, you can just, I mean, close it out if I leave anything out. Yes, firstly, on Prax, I mean, Chris, they're under business rescue, so we can utilize, I mean, that portion of the volume, I mean, as long as the situation remains. We -- there is -- I mean, however, someone is running an M&A process, which means, I mean, by December. So we'll see how long that process takes. There might be a new owner that comes in and then, I mean, takes over that 33%. I mean, we'll see how those mechanisms, I mean, play out. But in the meantime, we've got access to it. Of course, we're not running the whole 33%. I mean, the refinery can go to 620, 650. We're running around 500 mark, 480 to 500 depending on our ability to place those volumes. So that then flows, I mean, directly to us. But of course, it does have working capital considerations because now we must carry, I mean, the crude for the finished products or components for the entire refinery. The PSA or the gas from Mozambique, I mean, we -- like we said, the volumes are intact. I mean, what you've seen in the impairment, the impairment was driven primarily by two key factors. The first one was the rand-dollar exchange rate, which is about 40% of what you see in that number of 3.9, which means if -- I mean, if we go back to the assumptions, you could easily reverse that. And the second one was due to the fact that you couldn't flow all the gas. So the volumes are there, but you couldn't flow all the gas because we do have a swap gas arrangement. So it's the timing of when you can get the gas. We're working at doing high performance test runs and we might do a small mode to enable that flowing of the gas. So that's where we are on the PSA. I think, Victor, maybe you can handle the final question in terms of why we revised our guidance of gas volumes down, but it might have to do with the fact that the CTT is not running. So there was also a component of gas that was supposed to go there. Victor Bester: Thank you, Simon. I think perhaps just to add to what you've said, Simon, I think the impairment is basically linked to two components. The CTT power plant is delayed. That has implications in terms of the impairment. Then secondly, Chris, as you would know, we commissioned and achieved RFO, ready for operations, on the PSA asset in the second quarter of this year. And as we are running the unit, I think we realized certain physical restrictions in the unit that limits the unit in terms of its throughput of excess gas to South Africa. The unit is still subject to a performance test run that will be done. And that performance test run will give us an indication of what options we have in terms of removing that physical restriction. What that simply means is in terms of the impairment, it's a delay in the gas profile that we can process through the unit. And we believe that post this particular high load test run, we will have a view in terms of what needs to be done. And we suspect it will likely be low or no capital solutions that we will deploy to basically increase the unit's capacity to process the gas. And we will have a review on that later in the financial year. In terms of the revision of the gas guidance, it's really linked to demand. And there are three components to it really or maybe two. It's our external customers, lower demand, as well as Secunda operations producing more gas, pure gas from our gasifiers also displaces natural gas. And that -- those two factors have basically contributed to lowering our guidance. And maybe there's a third one. I think, the floods in Mozambique, recent floods in Mozambique, but also the performance of our wells in Mozambique, where we need to do some work related to making sure that the licensing gets done in time and these wells are commissioned as the PSA comes on stream. Tiffany Sydow: Thank you, Chris, for your questions. We can go to the next caller, please. Operator: Next question comes from Alex Comer of JPMorgan. Alex Comer: Can you hear me? Tiffany Sydow: Yes. Go ahead, please, Alex. Alex Comer: Yes. Just a couple of quick things. Just in terms of the grant for the project in Germany, what volume of e-SAF is that designed to produce, that $350 million? (sic) [ EUR 350 million? ] Maybe give an explanation. Is that a CapEx grant? What exactly is that for and volumes do you intend to get out of that? And so timing of when you expect volumes to be produced? Tiffany Sydow: Is that your only question, Alex? Alex Comer: Yes. And then just a little bit of how I get from the EBITDA to the cash generated from operational -- from operations? There seems to be quite a big gap there. Tiffany Sydow: Great. Thank you. Thank you for that. Simon? Simon Baloyi: Yes. I think on the grant, I mean, as for the project development, I mean, Sarushen, you can add more. I mean, just to remind the audience, Zaffra is a joint venture between us and Topsoe to develop SAF, especially in the EU. So we are pleased with the award of this grant, I mean, which will then allow us to study this. Of course, it will ultimately be anchored by offtakes before you take an FID. But Sarushen, you can give more color on the timing and the CapEx for the project. Sarushen Pillay: Thanks, Simon. So the plant, Alex, it's a small plant. I mean, we're looking at about 2,000 barrels a day. That translates to about 40,000 tonnes of SAF. And as Simon said, we will now move into feed or the detailed feasibility and then feed, but it will be anchored on offtake, right, before we take FID. But if all goes according to plan, we expect first production around 2030 for that plant. Simon Baloyi: All right. Thanks. I mean, Walt, you can take the EBITDA. Walt Bruns: Yes. I think -- I mean, Alex, I think the team have sent you a reconciliation showing the movement between the adjusted EBITDA and the cash. I think just -- it's safe to say there are some non-cash movements in the numbers, and we welcome to share that. I think they've cross referenced it to the different parts of our analyst book and also on the interim financials. So I think we'd rather take that offline. Tiffany Sydow: Great. Thank you, Alex, for your questions. I think if we can move to the -- sorry, also just to acknowledge a question from Sashank Lanka, similarly on the Prax timing and opportunity set there, which we've already covered in the previous question. If we can move to some of the questions on the SA ops. The first one coming from [ Tabo Pato from Katalyst Partners. ] Stripping out the absence of the shutdown in Secunda, how does this production compared to 1 half '25? And in addition, it has been 2 months since coal destoning has reached BO. At what percentage capacity is the plant operating? And are you seeing an improvement in the production, which we should expect to come through in the Q3 results? I think then coming back to the Natref agreement, a question from [ Jesse Armstrong from Fairtree. ] How much of the total net working capital build in the first half was related to funding with Prax working capital? And how much Chem Africa volumes already produced but not sold may roll over into the second half? Is the lower sales volumes versus production more logistics driven or demand or U.S. tariff based? I think I'll pause there. Simon Baloyi: Yes. I mean, thank you for the questions. The Secunda one, the impact of a shutdown is between 80 and 100 kilo tonnes. So I think you can just subtract that from our number, then you can compare with last year's number. Then the destoning plant it is done and it's running, it's up to speed. Sandile, you can give more color on that. I mean, Sandile is with the Mining operations. You can give more color on where we are on the destoning plant. But I think it's all done. And then, all that's remaining now is exactly what Victor has said. I mean, the first step was coal quality, then it was progressive step to repair our gasifier fleet of 84 gasifiers and we've done 25% of the gasifiers. But Sandile, you can give more color on the destoning plant. Sandile Siyaya: Thank you, Simon. And just the response to Tabo's question. So, as Simon has indicated, the destoning plant is done. And as you recall, with the CMD commitments, we had committed that the output from the destoning plant, we will be looking at supplying coal at below 12% to SO. However, for this year, we committed that it will be between 12% and 14%, and we are achieving those numbers. In terms of capacity, we are at full capacity. We will, however, continue to optimize the operation of that [ STP ] plant. Simon Baloyi: Thanks, Walt. You can deal with the working capital. Walt Bruns: Yes. So thanks, Jesse. So it's about ZAR 1 billion impact in the first half of the year related to the Prax working capital and how we're managing that. [indiscernible] also Simon cover on chemicals. Yes. And then on the Chemical side, I would say it's not a demand. We can still place the products. We have seen some demand weakness in some -- in certain products, but it's not broad-based. So I think it's a case of more timing, the logistics, to be fair, to transmit. We are seeing improved performance vis-a-vis the base that we were on. But we're filling up the supply chain. We're sending our product regularly via Richards Bay and Durban to our different customer locations. And now it's just a case of converting those volumes into sales sooner rather than later. And so that's part of what we see supporting our second half kind of improved earnings and cash flow generation is that unwind of some of that inventory into sales. I'll leave it at that. Tiffany Sydow: I think a follow-up question also on South African ops from Gustavo Campos at Jefferies. Do you expect the EBITDA in South African value chain to continue to decline in the second half? Do you expect the stronger rand in the second half to have no impact on your profitability given the hedging program? And you also achieved that SA oil breakeven of $53 per barrel. Where do you expect this to be in second half '26? And then I think going -- following on from the hedging element, there is a question from [ Siam Bata ] at Old Mutual. And she wants to know a little bit more about the hedging strategy for crude and the exchange rate? And can we talk through some thoughts on using puts only versus zero cost collars as well? So I think we'll start with the SA ops question first on the EBITDA performance and then move to hedging, if that's okay. Walt Bruns: Yes. So I do -- I mean, we -- I wouldn't say we expect a significant decrease in EBITDA in the South African business. As I mentioned, I mean, the pricing will come under pressure depending on what rand oil exchange -- rand oil price that you use. But we do see the volumes -- the sales volumes improving. I think in terms of -- it's difficult to say we don't expect any impact of -- on profitability from the stronger rand. I mean, we hedged 25% to 30% of our rand-dollar exposure on the income statement. So you will see some impact of the stronger rand, particularly when you look at how you translate your chemical prices back into rands. But we do try and manage that as much as possible through a combination of the instruments I mentioned earlier, but also the foreign exchange contracts that we take out on a more transactional level. On the breakeven of SA, I mean, $53 a barrel, we're very happy with the trajectory of that. But I wouldn't say that's the new sustainable level. If you look at the Secunda phase shutdown, we didn't have that in this year. And so that's probably about a $4 per barrel impact on an annual basis. So we will continue to reduce that amount, but I don't want to set that as the new base. And I think that's why we also haven't adjusted the guidance for FY '26 from the $55 to $60. Obviously, we think it will be closer to the lower end of that range, but a lot of that depends on the exchange rate, which does have an impact on how we calculate this. In terms of -- sorry, Tiffany, I'm just trying to -- was that the main one or... Tiffany Sydow: Yes. On the breakeven price, I think you've covered that and then the hedging instruments and what and which [indiscernible] Walt Bruns: Yes. On the comments on the hedging instruments, so historically, we've used just puts or vanilla puts on oil and zero cost collars on the exchange rate. The challenge for us right now is just getting them at the levels that we would like. So ideally, oil at a puts of $59 per barrel, you're going to pay north of $4 to $5 per barrel premium. That's quite rich, especially if we're trying to hedge out 22 million, 23 million barrels. So what we've done is expanded the instruments. So we use a combination of put spreads. So we limit the downside, but we don't protect 100% of the downside, and that's in a range of around $59 to $40 per barrel. And then we've also introduced some butterflies, which means that we can get the hedge floor of $59, but we give up a little bit between a certain cap on the upper end, and that we try and limit that range as much as possible. So I think my comment in my script around managing the risk, but also finding an optimal level between cost while retaining some upside participation. And then we've done something similar on the rand. I think we extended our hedging program this time last year. Normally, we hedge just 12 months out. We extended it to 18 months in January of last year. And right now, obviously feel very comfortable because we've got zero cost collars between ZAR 18 and ZAR 22 for this period. So we're certainly in the money at the moment on our hedges, given the rand is trading close to ZAR 16. Moving forward, we've had to expand our instruments there because we try to target a slightly higher floor price of where we currently are at ZAR 16, and that's where you'll see some more butterflies being introduced there or potentially some put spreads. But we'll continue to look at it, trying to manage cost risk and upside participation. Tiffany Sydow: Thank you for the question. Thank you, Walt. Just a reminder, if you have any further questions, please submit them online. If you'd like to ask any more, please submit them. Just want to check with the Chorus Call operator, are there any further people queued on Chorus Call? Operator: At this stage, we don't have any further questions from the lines. Tiffany Sydow: We have one follow-up question on International Chemicals. from Jesse Armstrong at Fairtree. Are you still confident on bringing fixed costs down by 15% by '28 versus FY '24? And what percentage of restructure costs, mothballing and SAP implementation has been completed? Or do you foresee this to be completed or rolling over into FY '27? Simon Baloyi: Yes. I mean we -- I mean, Jesse, thank you for your question. We -- yes, we are confident. I mean, you remember, we already started with the piloting of the SAP, I mean, in Italy, and that was completed. And in 1 July, we will start with the implementation. Around 1 July, we will start with the implementation in Germany, and then we'll follow on through that and follow our program to do the U.S. one. So that will allow us to, I mean, further reduce our cost for International Chemicals. So that program is ongoing. You can see the progress that we've made. And yes, we're confident that we'll be able to do that. I mean, if you ask about the percentage between restructure, mothballing and I mean, if you put SAP in there, I'll say, I mean, SAP cost, it does drive especially the restructure costs. I mean, it's the lion's share of that, maybe around 60%, I mean, 40% to 60% and then the balance will be the other ones. Tiffany Sydow: Great. Thank you. I think there's one final question from Thobela Bixa at Nedbank. How much did you receive from leasing your RBCT allowance? And was this leased to one or multiple operators that's in terms of coal exports? Walt Bruns: Yes. So it's more than ZAR 1 billion on the export side, and it's about ZAR 0.5 billion, give or take, on the leasing entitlement. Tiffany Sydow: Great. Thank you. Just want to double check if there are any more questions. Operator: Confirmed, there are no further questions from the telephone lines. Thank you. Tiffany Sydow: One last question from Gustavo Campos at Jefferies. What is the nature of the short-term and long-term financial assets? Why are they not included in net debt calculations? And why not liquidate them to reduce the leverage further? Walt Bruns: I'll take that. So there are a combination of different items. Some of them relate to also our insurance captive that we have offshore. We've historically not included -- and then we've also got some embedded derivative assets relating to our oxygen supply contract with Air Liquide. I think -- and some restricted use. So we don't have the full availability to access these, and therefore, we don't include them in our net debt calculation. Tiffany Sydow: Great. I think there are no further questions online. No further questions from Chorus Call. So that wraps up our Q&A for today. Thank you very much to all who have joined and participated, and we wish you well and a pleasant day forward. Thank you.
Tiffany Sydow: Good morning, and welcome to Sasol's Interim Results Presentation for Financial Year 2026. My name is Tiffany Sydow from Investor Relations. And on behalf of the Sasol executive management team, we are pleased that you could join us today. With me is Simon Baloyi, our President and CEO of Sasol; and Walt Bruns, the Chief Financial Officer. The group executive management team is also present and will join for the market call, which follows directly after the presentations. A reminder that the presentation and all supporting financial materials are available on our website. Turning to the agenda for today. A reminder that our strategy follows a two-pillar approach. Firstly, to strengthen our foundation business, where Simon will begin today's presentation with our business overview, then followed by Walt, who will take us through the financial performance for the half year. The second pillar addresses our pathway to grow and transform the business in the long term, where Simon will conclude and provide an update on our progress. A market call will then follow immediately after the presentation where you can submit your questions via the webcast or join in the teleconference facilities. A reminder that the presentation contains some forward-looking statements and more detail is reflected on the slide in front of you. I would now like to hand over to Simon to commence his presentation. Thank you. Simon Baloyi: Good day, everyone. Thank you for joining us today. We value your time. The business environment remains volatile and the challenges are here. Our priorities are clear, and our execution is improving. Our strategy shared at Capital Markets Day in May 2025 remains unchanged to strengthen our foundation business while positioning Sasol to grow and transform. Today, I'll take you through the progress we are making on the journey, the areas where we're seeing traction and where our focus lies for the second half of the financial year. Let me start by framing the key themes for today. Firstly, safety. Nothing is more important than ensuring that every employee and every service provider returns home safely to their loved ones. While we are seeing encouraging improvements in leading indicators, the tragic fatality in September is a stark reminder that we are not yet where we need to be. Secondly, operational delivery in Southern Africa. Our focus on coal quality, reliability and disciplined maintenance is starting to restore stability across the entire value chain. Thirdly, International Chemicals. The reset is progressing. Markets are, however, tougher than we anticipated, but the action within our control are delivering structural cost improvements and positioning the business for recovery. Fourthly, cash flow and balance sheet resilience. Despite challenging macros, we generated positive free cash flow by executing on the levers within our control. And finally, we continue to advance our Grow and Transform strategy in a pragmatic value-accretive manner, which I'll cover towards the end of the presentation. At Capital Markets Day, we made clear commitments to strengthen the foundation business. What matters now is delivery. I am pleased to say that we are delivering against most of those commitments. The destoning plant reached beneficial operation in December on plan and is already improving coal quality and supporting more stable operations at Secunda. Our Southern Africa value chain cash breakeven price ended around USD 53 per barrel, ahead of our full year target range of USD 60 to USD 55 per barrel. This reflects higher production and sales volume together with disciplined cost and capital management. Given softer chemical pricing and a stronger rent outlook, we are maintaining our guidance range. In International Chemicals, adjusted EBITDA improved year-on-year despite challenging markets, supported by early benefits from self-help measures. While our self-help measures are progressing and will ramp up in the second half, we have revised our full year adjusted EBITDA and margin guidance, which I'll talk through in more detail shortly. Net debt ended at USD 3.8 billion, and our continued focus on cash generation and cash flow resilience remains central to our deleveraging pathway. Walt will unpack the key drivers in more detail. Finally, supporting the Grow and Transform pillar, we secured an additional 300 megawatts of renewable energy, bringing the total to more than 1.2 gigawatts on the path to 2 gigawatts by 2030. This reinforces an important point. We are focused on the value drivers. We understand the challenges, and we are executing with purpose. Turning to safety. The fatality in September 2025 was unacceptable and deeply regrettable. Our investigation into this incident identified some gaps in risk awareness and inconsistent adherence to safety rules. In response, we have taken decisive action. This includes strengthening both leadership and personal accountability, reinforcing standards, intensifying our focus on high-risk activities and finally, improving service provider safety management. These actions are strengthening competence, rigor and ownership where it matters most at the front line. While there's no room for complacency, we are encouraged by improvements in leading indicators, including fewer hospitalization and lost workday cases, lower injury severity and most importantly, no major process safety incidents over the past 18 months. Safety is the foundation of everything we do. We will continue to embody the learnings, strengthen our safety culture and hold ourselves and our partners accountable to ensure that every person returns home safely every day. I'll now touch on a few highlights of our financial performance. Despite a challenging macro environment, overall, team Sasol delivered a robust performance in the areas within our control. We improved margin realization, reduced cash fixed cost and optimize capital spend, whilst protecting reliability and integrity. Adjusted EBITDA for the group was lower year-on-year, reflecting weaker macro conditions. However, our cash flow levers were effective and free cash flow ended positive. This is exactly what we mean by disciplined delivery in a very challenging environment. Turning to the business updates. Let me first start with mining. As mentioned, the destoning plant reached beneficial operation on schedule and within budget. We are already seeing improvements in coal quality with average things now around 12%. External coal purchases remained elevated in the first half during the destoning plant ramp-up. While coal purchases will continue in the second half to supplement our own production, it is expected to be lower than the first half and to normalize in financial year '27. The focus is now on firmly increasing our own production volumes, reducing external purchases and improving cost competitiveness in support of a more resilient value chain. Gas is an important part of the Southern Africa value chain and broader regional economy. The plateau extension projects are progressing well and remain on track to ensure a stable supply profile to financial year '28. In Mozambique, start-up delays at the CTT gas-to-power project have affected the timing of the PSA volumes. To manage this, approved sub gas arrangements are ensuring continued gas flows to South Africa while the CTT project progresses. Total gas volumes are unchanged. However, a revised gas production profile has deferred gas monetization. Together with a stronger rand-U.S. dollar exchange rate, this has resulted in a PSA impairment. We are working on optimizing the gas production profile through ongoing performance testing and potential infrastructure improvements in the coming months. Sasol's methane-rich gas bridging solution remains on track, while past applications for the period FY '27 to FY '30 submitted to NERSA for approval. At the same time, we are developing longer-term gas optionality through LNG. We are working closely with our strategic partners to advance gas to power options. We are managing our gas portfolio deliberately, protecting near-term supply while keeping value-accretive options open to sustain profitability over time. Across our Southern African business, we are seeing tangible progress in restoring performance. Secunda production increased by 10% year-on-year, supported by the absence of a phase shutdown, improved coal quality and gasifier availability. At Natref, operational performance also improved and the commissioning of the last low-carbon boiler supports reliability while advancing our emissions objectives. Commercially, we will continue to prioritize higher-margin fuel channels. Following Prax SA interim business rescue, we stepped into the capacity and maintained stable Natref operations. This is to ensure that there is reliable supply to South Africa and our Tambo Airport. Our priorities for the second half are clear: sustained reliability at our operations through disciplined maintenance and stable operation and leverage the increased capacity at Natref to optimize product placement and maximize value for the group. In Chemicals Africa, our focus is to ramp up sales supported by stronger production performance, while maintaining benchmark price levels in a softer global market. International Chemicals continues to execute on our recent priorities outlined at Capital Markets Day. As previously stated, EBITDA increased by 10% year-on-year despite challenging markets. Our margins came under pressure due to a softer global demand, higher feedstock costs and persistently elevated European energy prices. These conditions have weighed across the entire industry. However, delivery on the actions within our control is progressing well. Cash fixed costs declined by 6% year-on-year or 10% when normalized for exchange rates. Asset optimization and variable cost initiatives are starting to deliver benefits with most boring actions completed or nearing completion across the portfolio. Commercial excellence initiatives, including continued focus on value over volume are underway. While this takes time to flow through our earnings, we expect benefits to increase in the second half. Given the weaker-than-expected market conditions and unplanned JV ethylene cracker outage at the end of the last year, we have revised our full year adjusted EBITDA guidance from USD 375 million to USD 450 million. We also revised our margin outlook to a range between 8% to 10%. Importantly, our reset phase extends beyond financial year '26. Innovation across the value chain and broader portfolio optimization initiatives are being assessed. These are aimed at further improving competitiveness. This, together with our current actions support our FY '28 target of USD 750 million to USD 850 million EBITDA. Sasol continues to make a meaningful contribution to society and the communities where we operate. In the past 6 months, we invested about ZAR 200 million in social programs aimed at uplifting communities across various sectors and regions where we operate. We invest in multiple education initiatives to address the shortages of critical skills needed in the workplace. We spent around ZAR 75 million on batteries, skills development and education initiatives. We continue to invest in community infrastructure in our neighboring communities. For example, the upgrade to the Doane and Pande Health Centers in Mozambique will help delivery, benefiting over 25,000 community members. In South Africa, we've also supported the successful B20 and G20 events during 2025 with sponsorship and embedding resources to support the execution of the events. These initiatives reflect our belief that long-term value creation for shareholders is inseparable from positive social impact. With that, I'll now hand over to Walt, who will unpack our financial performance. Walt Bruns: Thank you, Simon. Good morning, ladies and gentlemen, and thank you for joining us today. I will take you through the financial performance for the first half of FY '26 and how it reflects tangible delivery against the commitments as we set out in our Capital Markets Day. The macroeconomic environment remains challenging and the earnings reflect the external pressures. What is important is that we respond on the levers that we control, tighter cost control, disciplined capital allocation and better operational execution across the portfolio is strengthening our foundation business and showing up in improved cash flow generation in support of our deleveraging pathway. Turning to the macroeconomic environment. Volatility and uncertainty persisted through the first half of FY '26. The Brent crude oil price was down 14% year-on-year and together with a stronger rand exchange rate resulted in a 17% decline in the rand oil price. The oil market remains in surplus with supply growth and inventory builds outpacing demand. Given ongoing geopolitical uncertainty, we expect oil price volatility to persist in the near term. The strengthened rand against the U.S. dollar weighed on earnings given the dollar-linked nature of much of our pricing. While this created pressure on the income statement, the stronger closing rate provided balance sheet support by reducing the rand value of our U.S. dollar-denominated debt. Refining margins were a notable positive, supported by improved diesel differentials and stronger operational performance at Natref, helping to offset some of the oil price pressure in the fuels business. Chemicals remain the more challenging part of our portfolio with continued global overcapacity, softer demand and tariff uncertainty weighing on pricing and margins. While conditions remain subdued, the pace of decline is slowing. Selective end markets are stabilizing and industry rationalization is accelerating, offering cautious optimism for recovery rather than near-term rebound. Against this backdrop of continued macro pressure, our focus remains firmly on the levers within our control. Starting with volumes. We delivered 3% higher sales volumes in the first half of FY '26, supported by improved production, while a better sales mix into higher-margin channels improved price realization. In the second half, the focus remains on sustaining volume delivery, while continuing to optimize channel mix as markets evolve. On costs, we have not only contained inflation, but reduced overall cash fixed cost by 2%, driven by lower labor cost and reduced external spend. We will continue the strict cost control into the second half, while also reducing external feedstock purchases. Capital expenditure was 43% lower than year-on-year, mainly due to the absence of a Secunda phase shutdown in the period, lower PSA spend in Mozambique and reduced environmental compliance capital as these programs near completion. We are also optimizing our capital spend without compromising on safety or asset integrity. As a result, we have revised our full year capital guidance ZAR 2 billion lower to ZAR 22 billion to ZAR 24 billion for the year. Importantly, the ZAR 2 billion is not a deferral and not rolling over into later years. We saw a temporary increase in net working capital in the first half of FY '26 due to a timing lag between the higher production and sales with opportunities available to reduce working capital prior to financial year-end. On the balance sheet, liquidity headroom remains robust with more than USD 4 billion available. We will continue to actively manage our balance sheet, including our debt maturity profile as we prioritize sustainable deleveraging. Finally, we have and will continue to execute our hedging program, which I will unpack further on the next slide. Hedging remains a key component of Sasol's approach to managing macroeconomic volatility. We have completed the FY '26 hedging program with the FY '27 program underway. Given prevailing market conditions, we have utilized a broader range of instruments to maintain appropriate downside protection while being mindful of cost and retaining upside participation. During the first half of FY '26, foreign exchange losses, translation losses were largely offset by gains on derivative instruments, demonstrating that our hedging program is working as intended, especially in a stronger rand environment. For the second half of FY '26, the oil price risk is hedged at an effective hedge cover ratio of 55% to 60% and an average floor of approximately $59 per barrel. On the exchange rate, 25% to 30% of our rand-U.S. dollar exposure has been secured primarily through zero-cost collar structures within a range of approximately ZAR 18 to ZAR 22. We plan to complete our FY '27 hedging program by the end of FY '26. All the self-help measures that I've mentioned play into our deleveraging pathway, which remains our primary focus. We have made good progress in reducing both gross and net debt over the last 18 months, supported by a disciplined capital allocation framework with gross debt ending 9% lower compared to the prior year. We also improved the regional mix of our debt to better match the underlying cash generation of our assets with the rand for U.S. dollar bond issuance in July. For the first half of FY '26, we ended with a net debt of USD 3.8 billion. While slightly above our full year target, we remain on track to achieve net debt below USD 3.7 billion by year-end with second half cash generation expected to be higher through the management actions I mentioned earlier. We remain committed to the debt reduction trajectory as set out at CMD, which showed us reaching the net debt target and associated dividend trigger of USD 3 billion between FY '27 and '28 under different macro assumptions. Given the current macro outlook, the net debt target will likely be achieved in FY '28. That said, given the progress we've already made and the head start we have created, we will continue to press and expand on the levers within our control to mitigate the macro headwinds and achieve the target as soon as possible. Turning to more details on the group financial results. The key highlight is the positive free cash flow as defined in our capital allocation framework in the first half of a financial year for the first time in 4 years and a more than 100% improvement from the prior period. The absolute amount will continue to increase as we further progress the implementation of our plans. Gross margin declined by 6%, reflecting the impact of a 17% lower rand oil price and continued pressure in chemicals pricing as well as higher variable cost. This was partly offset by stronger refining margins and higher sales volumes. Earnings before interest and tax decreased by 52%, mainly impacted by non-cash remeasurement items. This related to impairments of ZAR 7.8 billion compared to ZAR 5.7 billion in the prior year. The current period includes an impairment of ZAR 3 billion on the Secunda liquid fuels refinery, CGU, which remains fully impaired. The recoverable amount of the CGU did improve through management actions, but was negatively impacted by lower forecast price assumptions and a stronger exchange rate. As a reminder, the overall Secunda complex, including the Secunda Chemical CGUs, continue to have significant headroom when comparing the total recoverable amount to the net book value. On the Mozambique and PSA gas development, we recorded an impairment of ZAR 3.9 billion, reflecting the revised gas production profile as outlined by Simon, and the impact of the stronger rand-dollar exchange rate. Furthermore, a delay in the start-up of the CTT gas-to-power project in Mozambique and the higher end-of-job cost estimate resulted in the full impairment of Sasol's equity accounted investment of ZAR 0.5 billion. Looking at adjusted EBITDA by segment. Performance across the portfolio reflects different market and pricing conditions but also highlights the benefit of diversification. Starting with the Southern Africa value chain, Mining EBITDA was lower, mainly due to the phaseout of export coal sales during the period. This was partly offset by redirecting volumes to Secunda operations, which benefits the broader SA value chain. We also realized additional income from leasing our Richards Bay Coal Terminal capacity. Gas EBITDA declined due to lower volumes as well as the stronger rand-U.S. dollar exchange rate. We expect higher sales volumes in the second half of FY '26 as the PSA ramps up. Fuels EBITDA increased, supported by higher refining margins and product differentials. This was further supported by higher sales volumes on the back of improved operational performance at Secunda and increased utilization at Natref. In Chemicals, both Africa and America EBITDA generation remains under pressure, reflecting lower prices, weaker margins and soft demand in global chemical markets. Eurasia saw margin improvement, reflecting the benefits of our value over volume strategy and higher palm kernel oil pricing. Overall, the portfolio supported by targeted strategic initiatives seeks to balance earnings across sectors and geographies, further improving our resilience in an ever-changing global landscape. In closing, our financial priorities for Sasol are clear and unchanged. We are focused on improving sustainable cash generation, disciplined capital allocation, deleveraging the balance sheet and proactive risk management. These priorities have been translated into plans with the key financial metrics for FY '26 included in this slide and largely unchanged versus what we told you before. We aim to deliver on our volume targets that Simon shared, keep cash fixed cost increases below inflation, maintain first order capital within the revised target of ZAR 22 billion to ZAR 24 billion and manage net working capital between 15.5% and 16.5% as guided at CMD. We remain committed to reducing net debt to below USD 3.7 billion by the end of the year despite the uncertainties in the macroeconomic environment, while continuing to manage risk proactively through the completion of the FY '27 hedging program. Ultimately, credibility comes from delivering what we say. We started the journey of delivery at the end of FY '25 and built on that momentum in the first half of FY '26. We cannot control the macroeconomic environment that we operate in, but we can control how we respond with decisiveness, discipline and a clear bias for action. This is our commitment to you and underpins how we will continue to create sustainable value for our stakeholders. With that, I will now hand back to Simon for his closing remarks and look forward to engaging in the Q&A session later. Thank you. Simon Baloyi: Thank you, Walt. Let us now turn to a brief update on our Grow and Transform strategic agenda and the key progress made in the last few months. Our approach to decarbonization remains pragmatic and value accretive, reducing emissions while safeguarding energy security and affordability. The principle remain, we will scale solution in line with market demand, leverage our existing assets and only pursue pathways that are value accretive for Sasol and the shareholders. Since Capital Markets Day, we have made good progress across renewables, carbon offsets and sustainable fuels, all aligned with clear commercial logic. In renewable energy, we have now secured more than 1.2 gigawatts in South Africa, moving steadily towards our 2-gigawatt target by the end of 2030. We have now contracted approximately 9 million tonnes of carbon offsets over the next 3 years, securing around 60% of our offset requirements. Following the piloting of renewable diesel at our Natref facility, certification is nearing completion and is planned for the second half. These position us well to compete in this market. Renewable energy is a good example of moving from strategy to delivery. As mentioned, we've now secured more than 1.2 gigawatts of renewable energy in South Africa. This was achieved by securing a further 300 megawatts of renewable energy being a solar and battery storage project that reached financial close this month and is expected to be online in 2028. Execution is also progressing well with 180 megawatts already operational and 740 megawatts under construction. In December 2025, we received our renewable energy trading license from NERSA. This trading license will enable us to manage excess generation and with flexibility to use the supply where it exceeds our own demand. As the portfolio scales, we can, therefore, progressively build a stand-alone power business. Commercially, since launching Ampli Energy with Discovery Green, demand has been strong and the offering has been oversubscribed. Overall, renewable energy is already lowering our cost base, reducing emissions and creating a scalable platform that opens access to new markets over time. Looking beyond 2030, our focus is on sustaining value across the group and ensuring the business remains resilient over the long term. Our priority is to protect the strength of our existing businesses, maintain flexibility as markets and policies evolve, develop new sources of value where there is clear commercial logic. Across our energy and feedstock platforms, long-term supply options are progressing. These alongside initiatives in the Gas value chain that extend optionality and support continued market participation. From a carbon regulatory perspective, allowances are in place through 2030. The proposal for carbon tax recycling has been submitted and engagements continue. This will help us to manage transition costs and support value-accretive reinvestment in South Africa. In International Chemicals, the business is being reset to improve competitiveness and profitability, unlocking future value. At the same time, we are building new businesses, sustainable businesses, including renewable energy trading and sustainable fuels chemicals, creating additional pathways for growth and value creation over time. In January, a EUR 350 million Grant was secured by Zaffra, our joint venture with Topsoe for an e-SAF project in Germany. This disciplined approach supports a business that remains resilient through the cycle and capable of delivering long-term shareholder value. To close, I'm confident that we are on the right path. We are strengthening the foundation, executing with discipline. We are laying the groundwork for future growth. There's still work to do, but we have the right strategy, we have the right focus and the right people to deliver on our commitments. My executive team and I look forward to further engagement in the Q&A sessions. Thank you. [Break] Tiffany Sydow: Thank you, and welcome back to the Q&A session where you'll have an opportunity to direct your questions to Simon, Walt and the rest of the executive management team. Joining us on stage today, to my left, we have Victor Bester joining us, he's the EVP of Operations and Projects in Southern Africa; Antje Gerber, the EVP of International Chemicals; and to my immediate left, Sandile Siyaya, who's the EVP of our Mining business. In addition, we also have other GSE members present in the room today for support to our Q&A. Vuyo Kahla is our EVP of Commercial and Legal; Christian Herrmann is our EVP of Marketing and Sales for Energy and Chemicals Southern Africa; Sarushen Pillay ,who's the EVP of Business Building, Strategy and Technology; and Thabile Makgala, the EVP of People, SHE, Risk and Corporate Affairs. We urge you to please submit your questions via the online Q&A platform on the right-hand side of your screen. Alternatively you may also dial-in via our Chorus Call link, where you will have the opportunity to voice over your questions. I will alternate between the two platforms to ensure a fair participation of all. Thank you. We'll begin now. If I could turn over to Chorus Call, please first two callers who are queued. Operator: First question comes from Gerhard Engelbrecht of Absa CIB. Tiffany Sydow: Gerhard, could you hear us? Can you voice over your questions? [Technical Difficulty] Operator: Unfortunately, we're not getting any response from Gerhard's line. Going on to the next question, which comes from Adrian Hammond of SBG Securities. Adrian Hammond: I have three questions, if I may. Firstly, for either Simon or Victor. Let's talk about your Secunda volumes, if I may. And looking towards the next financial year, you've achieved annualized run rate in the second quarter of about 7.6 million tonnes. Notwithstanding you'll have maintenance scheduled next year again, it looks like that you might achieve your top end guidance sooner than expected. Could you comment on that? And perhaps Victor can elaborate with some progress on the refurbishments of the gasifiers. And then secondly, just your view on this carbon tax suspension that's been proposed by the minister and whether you think that will play out or not? And then lastly, on the MRG pricing submission, does this pricing that you've submitted preserve revenue and EBITDA as it currently is for this gas business? And perhaps you can elaborate on how many years this bridge gap will be in place for and how much the CapEx may be for that? Tiffany Sydow: Thank you, Adrian, for the questions. Simon, would you like to kick off? Simon Baloyi: Yes. Let me start then I will hand over to Victor on the guidance of Secunda. Then I mean, I'll deal with the carbon tax and I mean, I'll also deal with the MRG. I mean, firstly, on the Secunda volumes, I mean, you're right. If you check where we ended at H1 and you multiply it by 2, I mean, you will get a number, I mean, that's, I mean, on the high end of our market guidance. I mean, however, Victor will go into the details. I mean, for us, it's a combination of both, I mean, coal quality and gas fire maintenance, and Victor can explain the intricacies of how those two work. And we have to go through that program before we can, I mean, give any indication contrary to the guidance that we've given. So Victor will go into those details. On carbon tax, yes, we've seen -- I mean, the newspaper articles on the minister's view, I mean, on carbon tax, I mean, maybe not his view, but what other people said, I mean, they were proposed out to scrap it. From a Sasol point of view, I mean, I just wanted to step back a bit and remember that carbon tax was instituted in South Africa to deal with the CBAM, because if you don't have carbon tax in your country, then you import into Europe, I mean, CBAM will then takes you there unless you have a carbon tax in your own country. So our country, I mean, I think correctly moved in that direction to protect themselves. However, the implementation, and that's where Sasol is coming from. I mean, our focus in how this must be implemented and our firm belief is that carbon tax has to be implemented with the ability -- with a correct mechanism rather than a stick, so it shouldn't be a punitive tax. And to that end, not only us, but us and the entire business community in South Africa, we are proposing a carbon tax recycle mechanism where the carbon tax is recycled and it allows us and others like us who are busy with the transition to put that money into transitioning, I mean, the fossil fuel sector because in the long time, I mean, 15, 20 years, that work needs to be done, and we'd rather use the carbon tax now for that transition work. Your final question was on the MRG. I mean, firstly, from the -- I mean, pricing point of view, I mean, that we've submitted our pricing with NERSA. I think that should become, I mean, public soon. I mean, you'll see that, yes, I mean, MRG based on the input cost is -- I mean, will be slightly more expensive than the current gas, but that's a NERSA process. And I would just like to allow NERSA to continue with that. And the CapEx for the bridging solution for MRG is not significant, and all of it is included in our CapEx profile. So Victor, maybe you can go deeper into why we're not adjusting the guidance yet. Victor Bester: Well, thank you, Simon. I guess, Adrian, it's -- we are quite optimistic about our performance and our results that we are seeing at Secunda. But we need to look at it with a bit of moderation. And as I said in CMD, we're following a specific ramp-up curve towards FY '28. And just to give you a sense, the gasifier restoration program is going well. To date, we have seen 25% of the fleet, and we hope to see 40% of the fleet by the end of this financial year. And until we've seen the entire fleet, it would be, I would say, a bit of a guess in terms of just multiplying our year-to-date performance to get to a sustainable number. We really want to be sure that we understand the scope of the work and the restoration that needs to be done in our gasifiers. But the results year-to-date in terms of the 25% that we have seen is really promising. And we've also reduced our geo durations from the high numbers that we have seen in the previous financial year to the numbers that we are seeing this time around. So I can confidently say that we are well on track in terms of achieving our ramp-up towards FY '28. Tiffany Sydow: Thank you, Adrian. Moving to the next caller, please. Operator: And we've been rejoined by Gerhard Engelbrecht of Absa CIB. Gerhard Engelbrecht: Sorry about earlier. I hope you can hear me now. Tiffany Sydow: We can hear you. Go ahead, Gerhard. Gerhard Engelbrecht: I just have a question around your degearing guidance. Firstly, you say you're looking to reduce net debt by the end of the financial year. We're sitting in an environment in the second half where the rand is already much stronger, refining margins have come down, chemical prices are lower. You're guiding CapEx much higher in the second half. If I look at your guidance range and what you've spent, and then there's the uncertainty around volumes that Victor has just spoken about. So I guess my question is how do you then [indiscernible] I have a second question just around CapEx. You say you haven't deferred any CapEx that's used. But does this impact your longer-term CapEx guidance as well? Do you expect to revise that lower? And just looking at the numbers, your guidance points to second half CapEx almost 60% higher than the first half and 30% higher than the second half of last year. How should I interpret that? And then maybe just lastly, I see you posted some medium-term notes. I would have thought now is a good time to buy dollars to prepare for debt repayment. What was your thinking around the repayment of the notes? And may I just say, I was pleasantly surprised by your cost as was the case last year. Tiffany Sydow: Sorry, Gerhard, we lost you a little bit on the last part of your question. Could you repeat the third question that you had around the -- I think it was around the medium-term notes? Gerhard Engelbrecht: Yes, I'm sorry. I was just going to say, I just thought that now with the rand is strong, a good idea to rather buy dollars and to prepare for the debt repayments that are on the horizon with the rand so strong. So I was just curious as to why you decided to repay the medium term notes? Tiffany Sydow: Okay. Thank you. Thank you for those questions. Simon, would you like to kick us off before we head into the financial questions? Would you like Walt to take all of them? Simon Baloyi: Yes. So, on CapEx -- I mean, all these questions are financial. But let me -- maybe, I mean, just say on CapEx overall, I mean, in terms of the deferral, Gerhard, I mean, the big delta between the two is because we didn't have a phase shutdown. And we also saw the end of, I mean, the major programs like the PSA coming to an end. And I mean, our own, I mean, capital efficiency levers that we've pulled, I mean, towards the end of last year financial year, then coming into H1. So that's where we are on CapEx. I mean we're using a risk-based approach to make sure that, I mean, the integrity and stability of our assets can be maintained. I think with that, Walt, you can just deal with the three financial questions. Walt Bruns: Yes, sure. Thanks, Gerhard, for the questions. I'll try and there were quite a few in there. So let me go through them kind of systematically. On the degearing guidance, yes, so we are guiding that we will still be below USD 3.7 billion by the end of the year on net debt. So that obviously implies that we will generate free cash flow in the second half of the year. Pricing does remain a bit of a wildcard. I mean, if you look at the current oil prices, and there's a wide range of estimates out there and at times it by the current exchange rate, I see the rand oil pretty similar to what we've had for the first half. But there is a scenario that plays out that it does reduce. I think from my side, volumes will be slightly higher. We did have a bit of inventory build over the first half of the year. So you'll see some working capital unwind as we better match the sales and production to that. I think we'll continue to keep our cost discipline. And then CapEx, we do see an increase in the second half of the year. There are some projects that are -- we're in front-end loading that are now will progress through the gates in the second half, particularly in our mining space as we continue to invest there to ensure that we can increase own production and reduce the external purchases. There's also some non-phase kind of shutdown capital in Secunda, but we will look to continue to optimize that spend. I think Victor and the team and the projects and engineering team are doing a lot of work to analyze our capital spend and not just the scope of the work that we do, but to reduce the absolute cost. In terms of the CapEx for the RCF, we're not adjusting the guidance for -- at this point in time. But the important message there wasn't to say this ZAR 2 billion rolls over into next financial year. So the guidance that we gave of around -- I think it was ZAR 28 million to ZAR 30 million in terms of the first order, excluding the selective growth, we'll retain that. But we are looking to see whether or not we can reduce that further, but I'd rather do that as we get closer to FY '27 and we finish some of the scoping work. On the dollar, we did buy quite a lot of dollars. You would have seen in the first half of the year, we bought almost $0.5 billion and paid that into the RCF. So that was from the issuance that we did, the bond, the ZAR for U.S. dollar bond issuance we did in July. And then we moved some excess cash into the RCF in the first half, too. On the DMTN, it was a relatively small around ZAR 800 million that was maturing. So we decided to make that payment. But we'll continue to optimize on that capital structure. I mean, I think there'll probably be a lot of questions around our -- what are we going to do with the '26s and '27s that are maturing. We take a very proactive kind of disciplined approach to our capital structure. We like the Eurobonds. We still think they are an option that's available. But at least we have options available now. We've got a lot of liquidity, more than USD 4 billion sitting there. And we did the deal in July. And so that just gives us options to manage those immediate maturities. And now we're looking more at kind of the medium-term refinancing and just assessing all of our options. Tiffany Sydow: Thank you, Gerhard. Thanks for that set of questions. Also just want to echo a similar question from Sashank Lanka from Bank of America around the driver for the second half uplift in capital. So I think you've addressed that. Thank you, Walt. I'm going to move to the online questions now. There's quite a number of questions around the balance sheet and capital allocation. If we can start with those, I'll maybe take two or three at a time and then move on. Starting with a question from Lorenzo Parisi from JPMorgan -- sorry, that question has also been addressed around the repayments. A question from Stella Cridge at Barclays. Do you see the current cost of borrowing in the U.S. dollar bond market as more attractive than prior? And then I think a follow-on question from Kay Hope from Bank of America. Do you have any FX targets for your debt going forward? For instance, are you looking to increase local currency debt and decrease USD-euro obligations, which you've partly addressed earlier? Well, but I think what is the proportion of euro and dollar debt today? And how does this compare to your revenues? I think the last question, I'll just end off with on CapEx. The CapEx expenditure classification policy as the CapEx appears to be more like repairs and maintenance. If classified as an expense, the EBITDA number will reflect the realistic performance. And that's a question from [ Heinrich. ] I'm not sure what company he represents. I think we'll take that set to start off with. Walt Bruns: Okay. So I think -- thanks, Stella, for the question. I do see -- I think the current cost of borrowing in the U.S. dollar bond market is more attractive than maybe where it was 6 to 12 months ago. Almost all of our longer bonds are trading at a yield below -- I mean, below 9%. And so that does -- that is more attractive than some of the numbers we were seeing earlier. We would, however, have to continue to look to see how we optimize that cost. I mean, if you look at some of the bonds that are maturing at sort of a much lower cost of borrowing, so there is a differential, but we do see the current cost is more attractive than it was before. I think let me answer Kay's question then around the FX targets for debt going forward. I think, Kay, the size of the South African market and the amount of debt that we need to refinance, it's just not able to absorb that type of issuance. You would have seen we've increased it to just over 12% now our ZAR debt as a function of the total debt. We'll continue to look for opportunities to do that. Currently, if I look at the mix, just -- and we had that on one of my slides with regard to the EBITDA delivery per region, you would have seen 84% of our earnings still comes from our Southern Africa business and 16% from the International business. That has improved over time. That split was probably closer to 90-10. This time last year, it was 87-13. So we continue to see an increase in the contribution from our International business. And so doing -- try to better match the debt and the earnings across the portfolio. I think the question on the CapEx classification policy. So we follow IFRS standard IAS 16. So we look at our significant components. If we modify or replace them, we would capitalize them, and that's what we continue to do. Obviously, if it's not significant on smaller components, that's when we would expense it through the income statement under the repairs and maintenance expense. Tiffany Sydow: Thank you, Walt. Before I let you go, there are two more questions on capital guidance. A question from Anton from Nolo. For the lower capital guidance, how much of a factor was the stronger rand in reducing equipment import costs? And then another question from Lorenzo Parisi from JPMorgan. How are you thinking about refinancing the longer-dated notes from 2028 in terms of timing? Walt Bruns: Okay. Yes. So I think no doubt, I mean, the stronger rand, and I think that's the balance at Sasol, the stronger rand hurts us on the income statement, but does help us on the balance sheet. I would say the low CapEx guidance, there was a portion of it related to the stronger rand, but it's not a material portion or significant. So it's really around looking at our cost and how do we optimize scope and spend. And then on the longer-dated bonds, as I mentioned, we continue to take a proactive approach to this. We are looking outside the window and at the maturities of our different bonds, and we'll assess our options as the market develops. And as we go on this roadshow, too. I think we're spending some time also in Miami with some of our debt investors, and we'd like to understand from them how they see our credit going forward, too. Tiffany Sydow: Great. Thank you, Walt. I'm going to move on to International Chemicals business. There are two questions from -- the first one from [ Tabo Pato from Katalyst Partners. ] More and more chemical plants in Europe, especially Germany, are closing down due to the high energy costs and unsupportive operating environment. What is Sasol's view on its operations in Europe? And the second question from Sashank Lanka from Bank of America. Is there a risk to your FY '28 EBITDA guidance of $750 million to $850 million provided at the CMD given that the EBITDA guidance is cut for this financial year '26? Simon Baloyi: Yes. Thank you, Tiffany. Let me start, and I'll ask Antje to weigh in. Firstly, on the EBITDA guidance, you remember at CMD, Sashank, we indicated three buckets across which we said there must be, improvement for us to meet our target. I mean the first one was, as I said, of the uplift we said should be coming from a market. Then third was, I mean, on cost, I mean, optimization. And the last, third, was the commercial excellence or the value over volume approach and the renegotiation of contracts. So that was broadly how we framed, how we are going to uplift that business. And I mean, if you go through our results, you will see that, I mean, on the factors within our control, we've done well. However, I mean, what we've seen playing out in the market was, I mean, not as to our expectations. So for now, we will double down on what we need to do, and that is why we're keeping -- I mean, that guidance, but we will keep on watching the market. And I think the same goes for Tabo, I mean, your question in terms of -- I mean, other people are closing, but our focus is on what we can do to improve the business. And with that, I want to hand over to Antje. Antje Gerber: Yes. Thank you, Simon, and thank you, Tabo and Sashank, for the good questions. Maybe starting, first of all, with the chemical plants or the situation of the chemical industry in Europe, which is in a tough spot at the moment. So it remains a challenging operating environment in Europe, given the structurally weak demand, overcapacity, high and also volatile energy costs and the increased regulatory complexity. Our strategy at Sasol does not assume a fast recovery of these issues. We are operating on, as Simon has said, value over volume basis in Europe. And while we do that, we actively optimize as well our portfolio, our portfolio of our offerings, products, but also how we operate in Europe. And while we focus more on specialty and contracted positions and volumes, we can also then earn acceptable returns, and you've seen that in our current results. On the other hand, where the assets do not meet our hurdle rates, we will also continue to take decisive actions and Europe must perform on its own merits. So we do not invest in hope. And that goes as well to the guidance of fiscal year '28. And to your question, Sashank, we are still confident that we can meet that guidance, which we have laid out on the CMD because 2/3 of those deliverables will come from our self-help measures. And we are here executing on identified actions and not aspirational growth assumptions going forward. 2/3, as I've said, are self-help measures. And I mean, some of the turnaround actions you can see already bearing some fruits. And we are very clear that they kind of here will also accelerate going forward in the next 2 years. We are just in year 1 of our turnaround. Tiffany Sydow: Thank you, Antje, Simon. If we could move back to Chorus Call, there are two more callers. Could we get the questions, please, operator? Operator: Next question comes from Chris Nicholson of RMB Morgan Stanley. Christopher Nicholson: Yes, I've got two questions. Just the first question is, could you just go into a little bit more detail on what's happening with the Gas from the PSA? You've downgraded guidance for Gas this year. Obviously, we understand the PPA assets is just rolling off. But you downgraded guidance and you've also put through this impairment of lower expected volumes from the PSA asset. Is that an absolute volume? Or is there something around the link to the amount of volumes that are kind of capped into the CTG gas to power plant? So a little bit on that. And then could you also just talk to the agreement that you've managed to strike with Prax and the current business liquidation there? How long are you able to utilize their share of the Natref refinery? And do you share the full 33% of those benefits? Or does that all flow to your bottom line? Tiffany Sydow: Thank you, Chris for those questions. Simon, would you like to start this one? Simon Baloyi: Yes. Let me start on Prax and the PSA. And Victor, you can just, I mean, close it out if I leave anything out. Yes, firstly, on Prax, I mean, Chris, they're under business rescue, so we can utilize, I mean, that portion of the volume, I mean, as long as the situation remains. We -- there is -- I mean, however, someone is running an M&A process, which means, I mean, by December. So we'll see how long that process takes. There might be a new owner that comes in and then, I mean, takes over that 33%. I mean, we'll see how those mechanisms, I mean, play out. But in the meantime, we've got access to it. Of course, we're not running the whole 33%. I mean, the refinery can go to 620, 650. We're running around 500 mark, 480 to 500 depending on our ability to place those volumes. So that then flows, I mean, directly to us. But of course, it does have working capital considerations because now we must carry, I mean, the crude for the finished products or components for the entire refinery. The PSA or the gas from Mozambique, I mean, we -- like we said, the volumes are intact. I mean, what you've seen in the impairment, the impairment was driven primarily by two key factors. The first one was the rand-dollar exchange rate, which is about 40% of what you see in that number of 3.9, which means if -- I mean, if we go back to the assumptions, you could easily reverse that. And the second one was due to the fact that you couldn't flow all the gas. So the volumes are there, but you couldn't flow all the gas because we do have a swap gas arrangement. So it's the timing of when you can get the gas. We're working at doing high performance test runs and we might do a small mode to enable that flowing of the gas. So that's where we are on the PSA. I think, Victor, maybe you can handle the final question in terms of why we revised our guidance of gas volumes down, but it might have to do with the fact that the CTT is not running. So there was also a component of gas that was supposed to go there. Victor Bester: Thank you, Simon. I think perhaps just to add to what you've said, Simon, I think the impairment is basically linked to two components. The CTT power plant is delayed. That has implications in terms of the impairment. Then secondly, Chris, as you would know, we commissioned and achieved RFO, ready for operations, on the PSA asset in the second quarter of this year. And as we are running the unit, I think we realized certain physical restrictions in the unit that limits the unit in terms of its throughput of excess gas to South Africa. The unit is still subject to a performance test run that will be done. And that performance test run will give us an indication of what options we have in terms of removing that physical restriction. What that simply means is in terms of the impairment, it's a delay in the gas profile that we can process through the unit. And we believe that post this particular high load test run, we will have a view in terms of what needs to be done. And we suspect it will likely be low or no capital solutions that we will deploy to basically increase the unit's capacity to process the gas. And we will have a review on that later in the financial year. In terms of the revision of the gas guidance, it's really linked to demand. And there are three components to it really or maybe two. It's our external customers, lower demand, as well as Secunda operations producing more gas, pure gas from our gasifiers also displaces natural gas. And that -- those two factors have basically contributed to lowering our guidance. And maybe there's a third one. I think, the floods in Mozambique, recent floods in Mozambique, but also the performance of our wells in Mozambique, where we need to do some work related to making sure that the licensing gets done in time and these wells are commissioned as the PSA comes on stream. Tiffany Sydow: Thank you, Chris, for your questions. We can go to the next caller, please. Operator: Next question comes from Alex Comer of JPMorgan. Alex Comer: Can you hear me? Tiffany Sydow: Yes. Go ahead, please, Alex. Alex Comer: Yes. Just a couple of quick things. Just in terms of the grant for the project in Germany, what volume of e-SAF is that designed to produce, that $350 million? (sic) [ EUR 350 million? ] Maybe give an explanation. Is that a CapEx grant? What exactly is that for and volumes do you intend to get out of that? And so timing of when you expect volumes to be produced? Tiffany Sydow: Is that your only question, Alex? Alex Comer: Yes. And then just a little bit of how I get from the EBITDA to the cash generated from operational -- from operations? There seems to be quite a big gap there. Tiffany Sydow: Great. Thank you. Thank you for that. Simon? Simon Baloyi: Yes. I think on the grant, I mean, as for the project development, I mean, Sarushen, you can add more. I mean, just to remind the audience, Zaffra is a joint venture between us and Topsoe to develop SAF, especially in the EU. So we are pleased with the award of this grant, I mean, which will then allow us to study this. Of course, it will ultimately be anchored by offtakes before you take an FID. But Sarushen, you can give more color on the timing and the CapEx for the project. Sarushen Pillay: Thanks, Simon. So the plant, Alex, it's a small plant. I mean, we're looking at about 2,000 barrels a day. That translates to about 40,000 tonnes of SAF. And as Simon said, we will now move into feed or the detailed feasibility and then feed, but it will be anchored on offtake, right, before we take FID. But if all goes according to plan, we expect first production around 2030 for that plant. Simon Baloyi: All right. Thanks. I mean, Walt, you can take the EBITDA. Walt Bruns: Yes. I think -- I mean, Alex, I think the team have sent you a reconciliation showing the movement between the adjusted EBITDA and the cash. I think just -- it's safe to say there are some non-cash movements in the numbers, and we welcome to share that. I think they've cross referenced it to the different parts of our analyst book and also on the interim financials. So I think we'd rather take that offline. Tiffany Sydow: Great. Thank you, Alex, for your questions. I think if we can move to the -- sorry, also just to acknowledge a question from Sashank Lanka, similarly on the Prax timing and opportunity set there, which we've already covered in the previous question. If we can move to some of the questions on the SA ops. The first one coming from [ Tabo Pato from Katalyst Partners. ] Stripping out the absence of the shutdown in Secunda, how does this production compared to 1 half '25? And in addition, it has been 2 months since coal destoning has reached BO. At what percentage capacity is the plant operating? And are you seeing an improvement in the production, which we should expect to come through in the Q3 results? I think then coming back to the Natref agreement, a question from [ Jesse Armstrong from Fairtree. ] How much of the total net working capital build in the first half was related to funding with Prax working capital? And how much Chem Africa volumes already produced but not sold may roll over into the second half? Is the lower sales volumes versus production more logistics driven or demand or U.S. tariff based? I think I'll pause there. Simon Baloyi: Yes. I mean, thank you for the questions. The Secunda one, the impact of a shutdown is between 80 and 100 kilo tonnes. So I think you can just subtract that from our number, then you can compare with last year's number. Then the destoning plant it is done and it's running, it's up to speed. Sandile, you can give more color on that. I mean, Sandile is with the Mining operations. You can give more color on where we are on the destoning plant. But I think it's all done. And then, all that's remaining now is exactly what Victor has said. I mean, the first step was coal quality, then it was progressive step to repair our gasifier fleet of 84 gasifiers and we've done 25% of the gasifiers. But Sandile, you can give more color on the destoning plant. Sandile Siyaya: Thank you, Simon. And just the response to Tabo's question. So, as Simon has indicated, the destoning plant is done. And as you recall, with the CMD commitments, we had committed that the output from the destoning plant, we will be looking at supplying coal at below 12% to SO. However, for this year, we committed that it will be between 12% and 14%, and we are achieving those numbers. In terms of capacity, we are at full capacity. We will, however, continue to optimize the operation of that [ STP ] plant. Simon Baloyi: Thanks, Walt. You can deal with the working capital. Walt Bruns: Yes. So thanks, Jesse. So it's about ZAR 1 billion impact in the first half of the year related to the Prax working capital and how we're managing that. [indiscernible] also Simon cover on chemicals. Yes. And then on the Chemical side, I would say it's not a demand. We can still place the products. We have seen some demand weakness in some -- in certain products, but it's not broad-based. So I think it's a case of more timing, the logistics, to be fair, to transmit. We are seeing improved performance vis-a-vis the base that we were on. But we're filling up the supply chain. We're sending our product regularly via Richards Bay and Durban to our different customer locations. And now it's just a case of converting those volumes into sales sooner rather than later. And so that's part of what we see supporting our second half kind of improved earnings and cash flow generation is that unwind of some of that inventory into sales. I'll leave it at that. Tiffany Sydow: I think a follow-up question also on South African ops from Gustavo Campos at Jefferies. Do you expect the EBITDA in South African value chain to continue to decline in the second half? Do you expect the stronger rand in the second half to have no impact on your profitability given the hedging program? And you also achieved that SA oil breakeven of $53 per barrel. Where do you expect this to be in second half '26? And then I think going -- following on from the hedging element, there is a question from [ Siam Bata ] at Old Mutual. And she wants to know a little bit more about the hedging strategy for crude and the exchange rate? And can we talk through some thoughts on using puts only versus zero cost collars as well? So I think we'll start with the SA ops question first on the EBITDA performance and then move to hedging, if that's okay. Walt Bruns: Yes. So I do -- I mean, we -- I wouldn't say we expect a significant decrease in EBITDA in the South African business. As I mentioned, I mean, the pricing will come under pressure depending on what rand oil exchange -- rand oil price that you use. But we do see the volumes -- the sales volumes improving. I think in terms of -- it's difficult to say we don't expect any impact of -- on profitability from the stronger rand. I mean, we hedged 25% to 30% of our rand-dollar exposure on the income statement. So you will see some impact of the stronger rand, particularly when you look at how you translate your chemical prices back into rands. But we do try and manage that as much as possible through a combination of the instruments I mentioned earlier, but also the foreign exchange contracts that we take out on a more transactional level. On the breakeven of SA, I mean, $53 a barrel, we're very happy with the trajectory of that. But I wouldn't say that's the new sustainable level. If you look at the Secunda phase shutdown, we didn't have that in this year. And so that's probably about a $4 per barrel impact on an annual basis. So we will continue to reduce that amount, but I don't want to set that as the new base. And I think that's why we also haven't adjusted the guidance for FY '26 from the $55 to $60. Obviously, we think it will be closer to the lower end of that range, but a lot of that depends on the exchange rate, which does have an impact on how we calculate this. In terms of -- sorry, Tiffany, I'm just trying to -- was that the main one or... Tiffany Sydow: Yes. On the breakeven price, I think you've covered that and then the hedging instruments and what and which [indiscernible] Walt Bruns: Yes. On the comments on the hedging instruments, so historically, we've used just puts or vanilla puts on oil and zero cost collars on the exchange rate. The challenge for us right now is just getting them at the levels that we would like. So ideally, oil at a puts of $59 per barrel, you're going to pay north of $4 to $5 per barrel premium. That's quite rich, especially if we're trying to hedge out 22 million, 23 million barrels. So what we've done is expanded the instruments. So we use a combination of put spreads. So we limit the downside, but we don't protect 100% of the downside, and that's in a range of around $59 to $40 per barrel. And then we've also introduced some butterflies, which means that we can get the hedge floor of $59, but we give up a little bit between a certain cap on the upper end, and that we try and limit that range as much as possible. So I think my comment in my script around managing the risk, but also finding an optimal level between cost while retaining some upside participation. And then we've done something similar on the rand. I think we extended our hedging program this time last year. Normally, we hedge just 12 months out. We extended it to 18 months in January of last year. And right now, obviously feel very comfortable because we've got zero cost collars between ZAR 18 and ZAR 22 for this period. So we're certainly in the money at the moment on our hedges, given the rand is trading close to ZAR 16. Moving forward, we've had to expand our instruments there because we try to target a slightly higher floor price of where we currently are at ZAR 16, and that's where you'll see some more butterflies being introduced there or potentially some put spreads. But we'll continue to look at it, trying to manage cost risk and upside participation. Tiffany Sydow: Thank you for the question. Thank you, Walt. Just a reminder, if you have any further questions, please submit them online. If you'd like to ask any more, please submit them. Just want to check with the Chorus Call operator, are there any further people queued on Chorus Call? Operator: At this stage, we don't have any further questions from the lines. Tiffany Sydow: We have one follow-up question on International Chemicals. from Jesse Armstrong at Fairtree. Are you still confident on bringing fixed costs down by 15% by '28 versus FY '24? And what percentage of restructure costs, mothballing and SAP implementation has been completed? Or do you foresee this to be completed or rolling over into FY '27? Simon Baloyi: Yes. I mean we -- I mean, Jesse, thank you for your question. We -- yes, we are confident. I mean, you remember, we already started with the piloting of the SAP, I mean, in Italy, and that was completed. And in 1 July, we will start with the implementation. Around 1 July, we will start with the implementation in Germany, and then we'll follow on through that and follow our program to do the U.S. one. So that will allow us to, I mean, further reduce our cost for International Chemicals. So that program is ongoing. You can see the progress that we've made. And yes, we're confident that we'll be able to do that. I mean, if you ask about the percentage between restructure, mothballing and I mean, if you put SAP in there, I'll say, I mean, SAP cost, it does drive especially the restructure costs. I mean, it's the lion's share of that, maybe around 60%, I mean, 40% to 60% and then the balance will be the other ones. Tiffany Sydow: Great. Thank you. I think there's one final question from Thobela Bixa at Nedbank. How much did you receive from leasing your RBCT allowance? And was this leased to one or multiple operators that's in terms of coal exports? Walt Bruns: Yes. So it's more than ZAR 1 billion on the export side, and it's about ZAR 0.5 billion, give or take, on the leasing entitlement. Tiffany Sydow: Great. Thank you. Just want to double check if there are any more questions. Operator: Confirmed, there are no further questions from the telephone lines. Thank you. Tiffany Sydow: One last question from Gustavo Campos at Jefferies. What is the nature of the short-term and long-term financial assets? Why are they not included in net debt calculations? And why not liquidate them to reduce the leverage further? Walt Bruns: I'll take that. So there are a combination of different items. Some of them relate to also our insurance captive that we have offshore. We've historically not included -- and then we've also got some embedded derivative assets relating to our oxygen supply contract with Air Liquide. I think -- and some restricted use. So we don't have the full availability to access these, and therefore, we don't include them in our net debt calculation. Tiffany Sydow: Great. I think there are no further questions online. No further questions from Chorus Call. So that wraps up our Q&A for today. Thank you very much to all who have joined and participated, and we wish you well and a pleasant day forward. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the GeneDx Holdings Corp. Fourth Quarter 2025 Earnings 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 during the session, you will need to press *11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sabrina Dunbar, Investor Relations. Please go ahead. Thank you, operator, and thank you to everyone for joining us today. Sabrina Dunbar: On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx Holdings Corp. released financial results for the fourth quarter ended 12/31/2025. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, guidance and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, February 23, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our Fourth Quarter 2025 earnings release and slides available at ir.gnbx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. I will now turn the call over to Katherine. Thank you, Sabrina, and good morning, everyone. The fourth quarter was a strong finish to a transformative year for GeneDx Holdings Corp. Katherine Stueland: We reported quarterly revenues of $121,000,000, bringing full-year revenues to $428,000,000, underpinned by 54% exome and genome revenue growth. We continue to balance high growth and profitability in service of a massive unmet need, delivering accurate genetic diagnosis to the millions of patients and families seeking and waiting for it. Today, we reaffirm our full-year 2026 guidance, and will talk you through the elements of this growth that give us such confidence in our near and long-term targets. 2026 is going to be a breakout year for GeneDx Holdings Corp. We are operating in an enormous and largely untapped market with a twenty-five year head start. We have cemented our position as the clear leader in rare, by diagnosing more patients with exome and genome than anyone else in the world, and we have the number one genetic test, the largest and most diverse rare disease dataset, and the leading technology and team. Our leadership position was further reinforced by our recent FDA Breakthrough Device Designation, which positions GeneDx Holdings Corp. to become the first FDA-authorized comprehensive genomic solution in this category. A meaningful long-term differentiator, particularly as we enter mainstream medicine. The clinical case, the economic case, and the policy case for exome and genome are converging. And GeneDx Holdings Corp., alongside our patients, is shifting the power of genomics from promise to practice. Patients are the center of everything we do at GeneDx Holdings Corp. Every test, every data point, and every partnership comes together to create a network effect in service of faster answers, deeper understanding, and expanded access to precision care. We are opening new markets like general pediatrics, to reach patients at the earliest moment possible. Rare disease affects one in ten Americans, and it still takes an average of five years for a patient with a rare disease to receive an accurate diagnosis. The current standard of care often allows years of disease progression at a time when we can offer an accurate diagnosis in a matter of hours. There is a huge opportunity here that looks similar to where cancer diagnostics was fifteen years ago. And GeneDx Holdings Corp. is best positioned to serve this massive unmet need. Diagnosing rare disease is fundamentally a scale problem. In cancer, the key genes are well characterized, but in rare disease, most patients carry genetic changes that have never been seen before. Novel variants are not the exception. They are the norm. To diagnose these patients, you need to find others who share the same genetic change and the same symptoms. That means the size and diversity of your reference dataset is everything. The larger your dataset, the more matches you make, and the more diagnoses you deliver. No one does this at the scale we do, and that is because of GeneDx Infinity. INFINITY is the world's largest and most diverse rare disease dataset composed of more than 2,500,000 rare genetic tests, over 1,000,000 exomes and genomes, and over 8,000,000 phenotypic data points. More than 60% of the exomes and genomes in INFINITY have parental data, which is critical for interpretation. And over 50% are from patients of non-European descent, which improves their diagnostic capabilities across real-world populations. While incredibly vast, INFINITY is also deep, structured, and expertly annotated to enable fast and accurate diagnoses at scale, and across clinical indications. As we test more patients, the power of INFINITY compounds. With over a dozen exome and genome products currently on the market, GeneDx Holdings Corp. is still chosen 80% of the time by the most discerning specialists. And we have held that share through multiple competitive cycles. INFINITY was built specifically for rare disease, patient by patient, year by year in the clinic. It would take decades to replicate what we have today. And by then, we will be decades further ahead. Bryan Dechairo: AI models are only as good as the data they are trained on, and GeneDx Holdings Corp. INFINITY is a rich resource available. Our clinical experts and leading AI tools leverage INFINITY to surface insights hidden within complex clinical and genomic data. We are constantly innovating to amplify this impact. For example, our proprietary AI GeneMaker, Multi analyzes billions of internal and external data points to identify the most likely genes causing a patient's symptoms, improving our scale, efficiency, and turnaround times. AI is an enabler for us, and our team will remain at the forefront of leveraging this technology to improve outcome for patients. We are currently operating in six massive untapped markets, each of which will contribute to our accelerated growth in 2026. And we are nearly tripling what was already the largest sales force in rare disease to capture the wide open space ahead of us. We have multiple levers for growth, namely one, activating new clinicians in our existing call points, two, driving higher utilization among clinicians already ordering from us, and three, introducing our industry-leading testing to new markets. Even with geneticists, our most established market, we have 80% clinician penetration, but still have room to grow by shifting more testing from single gene and panel approaches to exome and genome. Among pediatric specialists, we have reached about 30% of clinicians and only 15% of eligible patients, giving us two clear ways to grow: establishing more doctors and increasing how often they order. In our four newest newer U.S. markets—prenatal, NICU, adult specialists, and general pediatricians—there are over a million addressable patients, and we have barely scratched the surface with clinician adoption still in the single digits. Our first-mover position, focused sales strategy, best-in-class products, geneticist endorsements, and experienced market access team best position us to build these new markets and take dominant share early. With that in mind, I want to walk you through our building blocks of growth, each contributing to a stacking effect of revenue and volume that will compound over time. Our foundational markets, geneticists and pediatric specialists, delivered most of our growth in Q4, and there is still significant runway ahead. These markets drove nearly all of our growth in 2025 and have strong momentum entering 2026. We will continue to layer on new indications and call points to these specialist markets, and we have expanded our dedicated sales team from approximately 50 reps in 2025 to 75 in 2026 to drive continued adoption. On top of that foundation, we are ramping in key expansion markets, the largest of which is general pediatricians. We are hearing positive feedback on our one-minute ordering experience, which is set to launch this summer, and in combination with a dedicated 50-person sales force, we are well positioned to begin seeing volumes really pick up in Q4. And NICU remains another key element of our expansion strategy. We know what good looks like here based on our experience with leading institutions like Seattle Children’s and the recommendations outlined in the 2025 SEQuence First study. This market takes longer to convert, but once it does, it is incredibly sticky and profitable. We have a team of 10 reps dedicated to the NICU and expect to see steady growth in 2026. We recently stepped into prenatal diagnostics with an exome and genome test intended for patients with abnormal ultrasounds. We are targeting maternal-fetal medicine specialists with a small team of about 10 new reps to begin driving utilization to help clinicians deliver answers in these critical moments for family. Additionally, we began leveraging our specialist sales force to sell into adult neurologists, diagnosing patients with pediatric-onset conditions that were missed as children. Lastly, we continue building an international strategy centered around software and interpretation-as-a-service, and we have five reps executing in key geographies. We also see three key future markets on the horizon: genomic newborn screening, new channels like telemedicine, and leveraging our dataset for biopharma in service of patients in precision medicine, and are laying the groundwork to unlock each. As you can see, our growth is not dependent on any single market or a single bet. It is layered, it is compounding, and it is anchored in a strong and fast-growing core. By introducing our services to mainstream clinicians, we are seizing a massive growth opportunity. And as the leader in rare, we are setting the standard for what exome and genome testing should be—accurate, fast, accessible, simple to order, and easy to understand—and we will continue to raise the bar. With that, I will pass it over to Kevin. Thanks, and good morning, everyone. For the fourth quarter, Kevin Feeley: Total revenues were $121,000,000, up 27% year over year. Within that, exome and genome revenues were $104,000,000, an increase of 32% year over year. Excluding a $6,800,000 one-time payer recovery in Q4 last year, our organic growth rate was 42% for exome and genome revenues. Turning to volume, we reported 27,761 exome and genome test results in the fourth quarter, capping a consistent trend of acceleration through the year during 2025 from 24% growth in Q1 to 29% in Q2, 33% in Q3, and now exiting the year at 34%. In the fourth quarter, we saw geneticists increasingly shift towards whole genome, signaling a desire among these experts to generate even more data for their hardest-to-diagnose patients. Our average reimbursement rate, or ARR, for exome and genome was approximately $3,750 in the quarter. As flagged on our last call, the rate fluctuated some in the fourth quarter due to mix dynamics, but the long-term trend is up and durable. Full-year 2023 was $2,500, which went up to $3,000 in 2024, and now $3,750 in 2025. And while any mix towards genome over exome in the outpatient setting may introduce some short-term ARR variability, it is ultimately what is best for both patients and our business. Total company adjusted gross margin for the fourth quarter and full year 2025 was 71%. Genome costs more than exome today, but that is mostly a function of higher reagent costs, which we expect to continue to come down as the adoption curve ramps. Importantly, our dry-side cost advantage applies equally between exome and genome. The annual trend demonstrates our proven ability to drive the cost curve down with scale over time. Full-year 2023 gross margin was 45%, which went up to 65% in 2024 and now 71% in 2025. Moving to the bottom line, adjusted net income for the fourth quarter was $4,400,000 and $4,800,000 for the full year, demonstrating leverage in our business model. Now, Katherine just laid out the strategic layers of our growth. To help you model the business, here is how we expect those layers to contribute to 2026. Let us first look at those foundational markets. First, we have deep penetration with approximately 80% share among clinical geneticists. We are still only ordering for about 30% of the patients, which we believe will grow over time. The go-get here is converting single gene and multigene panels into exome and genome, which we view as inevitable. Even within our own business, more than half of all tests are still single gene and multigene panels. Moving those patients to exome or genome materially improves diagnostic yield and reduces time to diagnosis. Conversion is driven by guidelines, education, sales coverage. Repetition is key, and conversion will continue to be a source of high-volume growth for years to come, and as it occurs, it will provide higher reimbursement and strong contribution margin tailwinds. Second, in February, we went live with an exome-to-genome reflex testing option, allowing clinicians to start with exome; if more data is needed, proceed to whole genome. This approach provides a faster, more cost-effective, and comprehensive diagnostic pathway. And third, nearly thirty percent of pediatric neurologists now order through us, and we have reached patient penetration in the mid-teens, all after just three years of targeting these clinicians. Growth here will come from both new clinician activation and increasing order rates per clinician for years to come. Moving to those expansion markets, first, the NICU remains a focus, and we are convinced these institutions should be ordering over 200,000 tests a year to address the unmet need and provide better and more efficient patient care. Nearly 25% of the target accounts are existing customers, yet utilization remains in the single digits. As our efforts to push forward the standard of care and ease the implementation burden take hold, we aim to influence that utilization rate up to 60% over time. We are seeing early signs of improved utilization, but we will remain conservative in our modeling assumption for the time being. Second, general pediatricians is a game changer. Following the mid-2026 launch of our custom-designed one-minute ordering workflow, expect volumes to pick up in 2026 and accelerate into 2027. Third, prenatal, adults, and international remain wide open. We expect prenatal to begin to ramp in Q2, and results in the second half of the year. Internationally, we are putting a small number of boots on the ground now to prepare for broader expansion that will become a contributor in late 2026 and beyond. The primary product here will be software and interpretation-as-a-service. And in all these new outpatient markets, we will remain conservative in our volume and ARR modeling assumptions until more history is built up. Now in terms of operating expense, we are in a phase of deliberate investment to accelerate growth. Specifically, we are deploying capital to nearly triple our commercial footprint in 2026. We are also investing in the next-generation customer experience—a portal designed by pediatricians for pediatricians—which will launch later this summer. And we are ramping our R&D to support clinical research that underpins commercial strategy. That includes finding the right balance and market fit for things like supplementing short read with long read sequencing and other new technologies to increase diagnostic yield and reduce turnaround times. So with all that in mind, we are reaffirming our guidance to include total revenues in the range of $540 to $555,000,000, exome and genome volume growth of 33% to 35%, with a baseline of 33% growth for Q1. We expect the foundational markets to contribute 25%–27% towards the growth rate. We expect those expansion markets to contribute 7% to 8% towards the growth rate, and we are assuming a very modest second-half contribution from general pediatricians this year. The future markets are about 1%. So to put all that in context another way, 33% volume growth in 2026 would mean 32,000 tests on top of the fiscal 2025 count. In 2025, we were only really active across geneticists, pediatric neurology, and the NICU, and those delivered the 23,000 tests of growth, all accelerating throughout the year. Given current penetration status, there is no reason to think those three markets would slow down. And on top of it, we are now adding 100 new sales reps, approaching new markets, launching a new customer experience, and doubling our marketing efforts. We are confident in our plan to deliver. We are expecting adjusted gross margin at approximately 70%, which takes mix shift dynamics into consideration. Despite a heavy investment cycle, we expect adjusted net income positive for the full year and each individual quarter. The first quarter in particular will be close to breakeven as we deliberately prioritize market capture over near-term margin optimization. As these newly deployed territories activate and ramp towards full productivity, we expect adjusted operating margin to build towards double digits by Q4 as these investments yield revenue. Before I move on, a few notes for your model. At this point in the quarter, volume is matching expectation. That huge storm in January did cost us a full day of volume, and we are experiencing another storm in the Northeast today. We have always built that level of impact into our Q1 projections. In our case, these children are sick, and missed appointments are not typically lost so much as they are rescheduled in the next quarter or maybe even two. Beyond that, this business has a predictable seasonal rhythm. In case clarification is required—and I have been at the company for ten years now—Q1 always steps down due to deductible reset dynamics. All else equal in terms of underlying fundamentals, volume in Q1 is typically lighter by a couple days, and underlying collection rates is typically down about 5% in Q1 compared to Q4, then builds back up because of the impact of deductibles. We factored this rhythm into our guidance. Last point, as a reminder, we wound down the hereditary cancer testing line in Q3 2025. So in terms of comps, that business line generated $2,000,000 in Q1 of last year and $5,000,000 fiscal 2025. Now before we move to Q&A, I do want to hit on something Katherine might be too humble to bring up. Last week, she was named to the 2026 TIME 100 Health list. Katherine has been quick to transfer all credit to the GeneDx team here, but on behalf of our 1,400 employees and countless families we serve, we want to offer our applause. But knowing Katherine, she would want me to point out who else was on that list, because it validates exactly where this industry is going. She was honored alongside pioneers like Dr. Musaad Al-Sudairy, Dr. Aaron’s Nicholas from CHOP, who saved baby KJ with a world-first patient-tailored CRISPR therapy. There were several other honorees this year related to rare disease, and the pioneering work to bring gene therapies forward. This all signals something important: rare disease and genomic medicine are having their moment. We are decades behind oncology, but we are coming fast in terms of diagnosis and eventual therapies. Katherine Stueland: Now as an investor, here is why you should care about that. Kevin Feeley: The evidence is clear. The science is ready. Our technology is capable. The therapies are coming, and GeneDx Holdings Corp. is the engine that finds the patients who need them. Operator, let us open up for Q&A. Operator: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. We will now open for questions. Our first question comes from the line of Subhalaxmi T. Nambi with Guggenheim. Your line is now open. Subhalaxmi T. Nambi: Hey, guys. Good morning. Firstly, congratulations, Katherine, on that achievement. Truly remarkable. Second, I have a question on guidance. Let me start with some observations. Your guidance assumes 25,200 or so tests, 200 or so more foundational tests at the midpoint. This is impressive, given that the number of foundational tests last year was 22,700, down from 25,000 in 2024. So your guidance reflects an assumption that a recent trend reverses. What is driving that, and what gives you the confidence to bake this assumption into the guide? Kevin Feeley: Yeah. I think that, well, there is a lot of factors there, including the point we made on repetition. I think if you look at the overall amount of white space available in terms of penetration rates, there is just so much runway to activate new clinicians, to get them to order more, and, frankly, continue the conversion cycle from single gene and multigene tests. For the past few years now, we have really just focused a few cohorts of doctors, outpatients, geneticists, and pediatric neurologists, and spent most of the last three years specifically talking just about a few indications, that being epilepsy, intellectual development delay, and autism. There is a far wider range of tests that will be ordered by those physicians over time. And I think some of the strength that I could point to there is if you look at the comment I made on even GeneDx’s volume in the fourth quarter, still more than half of all tests we ran at GeneDx, despite our focus on exome or genome, is single gene and multigene panels. And so repetition is key. We have got a strong commercial team. We have got the largest rare disease sales team in the market. And as we said in the comments, we will be nearly tripling the size of that team. There is still a lot of work to do to move the paradigm towards exome and genome being the test to diagnose all hereditary disease. And, frankly, we are just in the early innings of that. Subhalaxmi T. Nambi: Thank you so much for that, Kevin. Could we also discuss the puts and takes for quarterly cadence this year on both volumes, ASP, and maybe gross margins? Thank you so much. Kevin Feeley: Yeah. I mean, I think if you look at the cadence of any year here at GeneDx, you would expect Q1 to be the low point in terms of volume and reimbursement rates, in particular driven by those deductible factors I discussed, as well, of course, weather, with Q4 typically being on a per-day basis the strongest. There is variability in the number of operating days. Our business, if you look at the outpatient setting, does tend to follow or draw strength from the school calendar as well as the holiday calendar. And so to the extent you have quarters that are heavy on the inability for families to get into physicians’ offices, it obviously plays a factor, but we typically see Q1 as the low point. Have that ramp throughout the year. From a seasonal strength perspective, Q4, the strongest typically, followed by Q1 then Q3, and then Q4, then Q2, then Q3, and then Q1 from a strength perspective, and we see this year being no different. Subhalaxmi T. Nambi: I mean, anything on gross margins, Kevin, as people ramp to newer call points start to order a whole genome extra, and then I will call back in the queue. Thank you so much. Kevin Feeley: Yeah. I mean, I think overall, where we ended the year around 71% for total company, underlying that, the exome genome portfolio operates significantly stronger than that, the combined exome genome portfolio in the eighties in terms of gross margin. Now the reality is, we still have a long way to go to reduce cost per test. The past couple years, we have been optimizing for reimbursement and cost per test on exome in particular, and now is our time to turn attention towards optimizing genome cost and reimbursement. I think we are well equipped to do that. We have got a proven playbook to do that. We are going to take many of the learnings from exome, and invariably, genome COGS will be coming down as, I mean, we would expect them to as the utilization ramp increases. In large part, the combination of that demand will put pressure on payers to open up access while at the same time allow us to get even further economies of scale and buying power with respect to the use of genome. What we have taken is a fairly conservative view to gross margin in terms of the guide. We want to see how some of these new markets, volumes from new diagnosis codes, play out, and ensure that we have the ability to outperform in terms of cost and gross margin. But ultimately, as we see the conversion from panels into exome or genome, both are far more favorable, and we would expect tailwinds from that for many years to come. Operator: Thank you. Our next question comes from the line of William Bishop Bonello with Craig-Hallum. Your line is now open. William Bishop Bonello: Hey. Great. I am just going to push a little bit more on the sequential just so we do not have kind of a repeat of last year, if you can help at all. But last year, I think we had cases down, you know, about 114 tests or so. So not a very significant sequential decline, and on the ASP side, we were just a little under $60 down. Given what you talked about with weather, and the, you know, big pop-up that we had in Q4 this year, should we be assuming, you know, a more significant sequential decline than 100 tests or so, I mean, maybe something more in the, you know, 400 to 500 range, or how are you thinking about that? Kevin Feeley: Yeah. Hi, Bill. In the prepared remarks, I said the baseline expectation for Q1 should be 33%. So if you take the Q1 number at 33%, that would infer a decline of even 300 to 400 tests in Q1 off of Q4 sequentially, would not be unexpected. Like I said, we lost a day of volume due to that storm. We are actually running our first virtual call today given the storm in the Northeast. And so, you know, the guide is anchored in 33% to 35% because of the dynamic of both weather and the deductible reset, typical seasonal plays. Would ask people to look to the 33% for Q1, and then we will build back up off of that. The good news, bad news of it all in terms of missed appointments from weather is, as I said, in our space, if a family cannot get to a physician because of weather impacts, kids are sick. They are not going to skip the appointment. They are going to get back. But the unfortunate reality that we aim to solve here at GeneDx Holdings Corp. is it might take a quarter or even two or sometimes nine months to get back into a specialist office. And so I think the way I would point you to is 33% is the baseline expectation, and we will try to beat that number. I will get a little wonky on you, Bill, but in both 2025 and 2026, Q1 has 61 operating days, Q2 is 63, Q3 has 64, and Q4 is 62 days. And so right off the bat, just calendar-wise, there is one less day in Q1 available than Q4 sequentially, and then you layer on the deductible impacts and the weather. The way we think about it. William Bishop Bonello: Yep. That makes sense. And just to be clear, the 33% you are talking about, is that for both volume and revenue as a good starting point? Kevin Feeley: Yes. William Bishop Bonello: Okay. That is great. And then just one follow-up if I could. You talked about nearly tripling the commercial footprint. What is sort of the base there? Is that from where you were before the heads that you were talking about in January that you have added or, you know, triple relative to what? Kevin Feeley: Yeah. Just call it the average through 2025. But if you look at the full year of 2025, frankly, we did not add a lot to the base. You know? Some reps come and go. But the way I think about it is the full size and scale of the team for the most of 2025 was about 50 sales reps calling on those outpatient markets of geneticists and pediatric neurologists, and then a small team, let us call it 10, focused on the NICU in particular. So 60 reps was really what we went to bat with for the balance of 2025. And we will be adding about 100 on top of that to start the year. Okay. Now, of course, there is a natural ramp, and that ramp has been contemplated in the guide. You know, we added new sales reps to general pediatricians in January. We added 10 new prenatal reps in January. We are adding about 10 more reps for the NICU, but it is going to take a few quarters for those reps to get fully productive. William Bishop Bonello: Yep. Okay. Thank you. Operator: Thank you. Our next question comes from the line of Kyle Mikson with Canaccord Genuity. Your line is now open. Kyle Mikson: Hey, guys. Thanks for the questions. Congrats, Katherine, as well, and I hope you are doing well this storm in the Northeast. So just on the guidance, thanks for the 1Q framing, Kevin. But for the full year, helpful that you have this expansion and future market and the kind of the current, you know, stable base, assumptions and stuff. But as you think about upside and, you know, what you are not baking in and things like reimbursement that was not exactly called out, how could you just, like, help contextualize that for us in terms of, you know, the excitement levels and what is actually possible to penetrate maybe in these newer areas? Thanks. Kevin Feeley: Obviously, we have got greater ambitions than what is baked into the guide for the year. I think areas where we have stayed appropriately conservative but offer potential upside, you know, we have consistently said on general pediatricians, expect eighteen to twenty-four months from guidelines to see volumes ramp. All interactions with pediatricians to date, including focus groups, extensive market research, we are out in the field, extremely positive. I think we have immense confidence these physicians will order. The acumen and willingness to order will be there. But it has also told us we have to deliver the front-end and back-end experience that they said they would need in order to get comfortable ordering, and we launch that customer experience later this summer, Q2 into Q3. And so we built some time for volumes to ramp following that launch. You know, it is conceivable that that takes off immediately after that launch. We are putting in the groundwork and effort now. Those reps have started. But before we build in any upside to the guide, ahead of what has always been our baseline expectation, we want to get that experience launched and into the hands of folks more than the focus groups that are building it. I think prenatal is another one. We started with a small team of 10. If you look at the size of the number of MFMs across the country, certainly, that team can and will be larger over time. But it is a new market. We started with a bit of a pilot team. We will see how signals pull through in the next couple of months, and it may mean we have the ability to add to the sales force there. But we wanted to take a conservative approach and learn the market. Those are just two, but I think there are plenty of areas in terms of volume that we have left out of the guide to be surprised with. And then in terms of reimbursement rates, as I said on the call, we are taking a fairly conservative view on what payment and denial rates will be in those outpatient markets that are new. There is no reason to see vastly different reimbursement rates or payment denial rates in those markets. But history has told us that the first time we supply new diagnosis codes or physician types to payers, they often have an inherent reaction to auto-deny those, and you have to prove sustained demand, and that the revenue cycle is going to keep coming back via appeal and further evidence. And so we think we have built in a fairly conservative view to reimbursement rates. It is an area where we tend to stay on that side of conservatism, and we will look for periodic updates throughout the year to see if we can beat those numbers. Katherine Stueland: The only one I would add to that, Kyle, is the NICU setting. We have been, you know, I would say, of sight on NICU. Just given our experience in 2025, we did just bring on a new Chief Medical Officer, Dr. Linda Gannon, who is a neonatologist. She is also been in the business of practice management for the NICU. We have new commercial leadership, including a neonatal nurse leading the strategy and the go-to-market there that is driving more of a protocol approach in the NICU. So, you know, I think we kept a conservative view on the NICU, but we are keeping an eye on that because I would say, you know, six weeks into the year, we are seeing some encouraging signs there. So that is another one we are going to continue to drive forward. Kyle Mikson: Alright. Perfect. And then just a quick follow-up on test performance, something that has been called out recently in our conversations. So if you maybe talk about, like, a snapshot regarding how performance compares to some of the up and coming tests in your view? And could you maintain or accelerate market share if you do not really invest in or lean into, like, integrating long read or these other technologies to increase diagnostic yield? Katherine Stueland: Yeah. So I think as we look at the strength of our test, we deliver two times the accuracy of another exome or genome out on the market today, and that is because of INFINITY and that reference data that I spoke at length about in the prepared comments, because I think as new entrants start to enter the market, they are going to, they and their customers will realize exactly how important it is to have the breadth and depth of both the genotypic and phenotypic data for your expert geneticist to be able to tap into. So, I would say at a baseline, we are absolutely confident in the importance of the accuracy of our testing. Not to mention the fact that we also have the scale. The turnaround times for other competitors in our space are far longer. We have our turnaround times down to about two weeks for an exome and a genome. So we are turning these around and that matters to customers. And we are doing it cost effectively, and we have the payer contracts, which, of course, is beneficial from the customer and from the patient standpoint. So we stand in a confident position in terms of our ability to continue to keep the competitive moat extraordinarily strong amidst competitors entering the market, which, again, is not a new phenomenon. There have been dozens of these tests on the market over the past decade plus. We are going to continue to invest in R&D. Kevin mentioned layering in long-read sequencing. We are looking at additional technologies for, you know, really keeping an eye on how do we continue to have the best industry-leading diagnostic test out there. And if we are able to increase our diagnostic yield because of a new technology, you can bet that we are going to make sure that we are layering that in. I think, interestingly, though, as we look at how far INFINITY actually gets most patients, we actually do a pretty darn good job with INFINITY alone and short read, but we are seeing some encouraging additional diagnostic yield that we can get out of long read. So as new technologies come to bear, you can bet on us that we are going to have the highest diagnostic yield without a doubt. Kyle Mikson: Perfect. Appreciate you guys. Operator: Thank you. Our next question comes from the line of David Michael Westenberg with Piper Sandler. Your line is now open. David Michael Westenberg: Hi. Thanks for the question, and I echo everybody's congratulations on all the work done and prenatal outside rare disease health. So I just wanted to talk about the general pediatric. You have noted an eighteen to twenty-four month adoption curve following the AAP guidelines and deployed a 50-person sales force to target this. What specific indicators—I do not know if that would be, like, repeat testing, number of new physicians ordering per quarter, utilization of one-minute workflow—what are you tracking to gauge success in that market that that sales force expansion is working? At what point in 2026 or 2027 do you believe this translates into a material inflection in revenue? Katherine Stueland: Yeah. So you are hitting on all the right key metrics, Dave. So thank you. We want to see number of new clinicians, and then we want to see time to ramp. So, you know, we are tracking: are they going to do one or two at a time just to kind of get some experience without the one-minute ordering? Then how much faster can we actually see the one-minute ordering start to accelerate utilization? So those are the key metrics. We are obviously going to be tracking average reimbursement rates, so we want to make sure that we have our revenue cycle management team revved up and continuing to make sure that we are getting paid for those tests. Again, in the one-minute ordering, we are building in the opportunity for a parent to be able to upload their child's symptoms, so all the phenotypes information. We think that is going to be really powerful also in the appeals/denial process. So those are the main metrics that we are looking for, and that Q4 inflection that we are anticipating, we start to see reps get productive. We have one-minute ordering launch, and as I said in the prepared comments, the feedback on that one-minute ordering is really positive. It was designed by and for pediatricians. You know, we are going to keep an eye on that sales force and see, you know, we are looking routinely to figure out exactly when we can continue to add reps. We know that 50 is not going to be the right size forever, but it is a great size just to get some experience, get some data, reramp into 2027, and then really start to accelerate as we David Michael Westenberg: Perfect. Thank you. And just one follow-up. Here on the NICU in Q4, you mentioned a 5% tenor rate. You know, how do you grow on that penetration rate? And, you know, what is within your control in terms of growing that? And then just, again, a reminder of how key how it went in Q4 and their opportunities to try to ramp that throughout this year. Thank you very much. Yeah. Katherine Stueland: No. Thank you. We learned a lot in the NICU. And we are, with our now 10 reps out there, really having them focus on selling directly to the neonatologist. Dr. Gannon is—she has been with us for about a month, but already has made an incredible impact. As I mentioned, we have a neonatal nurse who has helped us kind of refocus the go-to-market strategy. So, you know, we are eager to let that play out a little bit, but early signs, I would say, are good in terms of this new strategy in place, and we will keep you posted on what momentum looks like. David Michael Westenberg: Thank you. Operator: Thank you. Our next question comes from the line of Daniel Gregory Brennan with TD Cowen. Your line is now open. Daniel Gregory Brennan: Great. Thanks. Congrats on the quarter. Good close to the year. I had one on the growth drivers and one on pricing. Maybe I will just start with pricing, Kevin. Implied in the guide, right, is flat pricing for exome/genomes, but obviously, you are talking about conservatism on some of the new markets. In your prepared remarks, you talked about continued upside on pricing. So I guess the first question is, just kind of, you know, do we see really pricing going? Like, kind of what is the headroom we look out even beyond 2026? And I know you had some comments in the prepared remarks on genomes and exomes. I am wondering how those influence pricing. And is there anything baked in for Medi-Cal on pricing? Kevin Feeley: Yeah. There is nothing baked in yet with respect to Medi-Cal. In fact, although policy went effective November 1, we still have a published price, which makes it hard to accrue and forecast. That is just working through the mechanics of the powers at Medi-Cal. And so continue to leave Medi-Cal out of the guide for now. And consistent with what has always been our approach, what we have left out of the guide, of course, is any new Medicaid state coming online as well. A lot of work to influence more Medicaid coverage expansion, but there is just so many factors out of our control. So the guide does, effectively, assume zero new Medicaid states this year. Do I think that that is reasonable to expect zero? I do not. But we will always leave new Medicaid coverage out until proven otherwise. So that is one I would point to. And then as I said on the new markets, we have taken a fairly conservative view. What does that mean? Back in 2023, when we first launched into pediatric neurology, which was the first outpatient call point beyond geneticists, we saw for the first couple quarters the denial rate elevate up to about 70%—so being paid about 30%. And as you know, over the past two years, we have now worked that down to the point where we are getting paid, you know, in the high fifties. And so we have taken that past experience and applied that level of expectation for the first few quarters out of the gate at those new outpatient call points. Now, again, if you look at underlying policy coverage in the markets and diagnosis codes that we are choosing to pull through, there is no reason that we should see that high of a denial rate. But want to let history build up. And so would be pleased to be surprised otherwise, but we built that level of conservatism into the ARR guide. Daniel Gregory Brennan: Great. And then maybe just on the 7%–8% contribution from the new growth drivers, could you share a little bit of color between the p-neuro and prenatal since I am assuming no—excuse me—the p-neuro and, yeah, prenatal and/or NICU, just any relative contribution you can share with us and kind of what informed that. Thanks a lot. Kevin Feeley: Yeah. If you had to rank order those, NICU is at the top of the pack there. And I guess as we talked about on this call, we are seeing great early signs to start the year in the NICU in terms of increased utilization rate. And if you look back at 2025, we actually activated more NICU accounts than what was in our original plan. Now what offset that was we did not see the quick ramp-up that we expected in terms of ordering patterns. But if you look at where that utilization rate has gone in the past couple months, I think we are seeing great signs to start off the year, but like I said, we will take a fairly modest approach in terms of modeling at this point until that really takes hold. But the NICU does provide significant growth out of that expansion market layer in 2026. We think we have got all the pieces in place now, including a revamped approach on how to ease implementation burden from hospital systems. After that, prenatal. It is a big opportunity. See how that ramps throughout the year, but with a launch in Q1 into that market, really expecting zero contribution in Q1, very little in Q2, but some early volumes in Q2, and then Q3, the start of a nice ramp up. Then, as we talked about pediatricians, we have taken a fairly modest view there. But just remember that in that expansion layer is the NICU, which will be the bulk of the growth here for that layer in 2026. Daniel Gregory Brennan: Great. Thanks a lot, Kevin. Operator: Thank you. Our next question comes from the line of Tycho W. Peterson with Jefferies. Your line is now open. Tycho W. Peterson, your line is open. Please check your mute button. Tycho W. Peterson: Hey, can you guys hear me? Kevin Feeley: Mhmm. Tycho W. Peterson: Kevin, can you maybe, I appreciate all the color on ASPs. I mean, obviously, in the background here, you have got, you know, H.R. 7118, you know, Genomic Answers for Children Act and Florida Sunshine Genetics Act. Can you maybe just talk about how you are thinking about these opportunities? Obviously more of a 2027 driver than 2026 drivers, you know, if it does go through for H.R. 7118. But how are you kind of handicapping this over the next, you know, couple of years? Kevin Feeley: Yeah. Clearly, nothing in 2026 in terms of uplift expected from any national legislation. Look. It is exciting, and we are part of a group of about 30 influencing that bill to make its way through the process. Now, introducing a bill and getting it signed and across the President’s desk is two very different things. I think what we are seeing is great reception across policymakers, and it could be a big deal for us, but, obviously, it is something that we would not build into our short-term expectation until we get much clearer line of sight. So I would love to take anything off of that pending legislation out of the outlook. For now, we will continue to do that until we get some more clarity. But, overall, I would say beyond the national stage, there continues to be great progress at state houses with respect to moving along both biomarker bills and expansion of Medicaid coverage for exome and genome. And we would expect another great year there. We are just going to leave it out of the expectations until they hit. But I think more and more, we are seeing policymakers understand not just that there is an unmet medical need, but it is really the best thing for them to spend their dollars wisely, to prevent disease, to diagnose it early, and I do not think there is any slowing down of that. Tycho W. Peterson: And then, that is helpful. Thanks. Katherine, can you maybe touch on—I know you are talking about doubling the business this year. I guess, any color on just kind of what sort of contracts these are? Does the recent Komodo Health partnership help pull through incremental demand there? Or is that too early? I know you have, you know, hired a bit. You hired Lucia Guri in September. So maybe just talk a little bit about, you know, where you are from scaling on the pharma side. And is that mostly, you know, patient matching and longitudinal data for FDA submissions, or are you kind of expanding the scope of what you are doing with pharma too? Katherine Stueland: Yeah. Thank you for that. So we are encouraged, I would say, by the types of conversations we are having with pharma companies. I think one of the notable shifts in our go-to-market strategy is focusing on some of the adult-onset conditions. And we feel like in focusing on adult-onset conditions, if it is sponsored testing or patient matching, that gives us the opportunity to work really strategically with these companies as we have seen happen in the pediatric side of things to accelerate adoption of these technologies, generate a body of evidence to be able to go to payers. And so, you know, we are thinking across both pediatric and adult as well as many of these bespoke. We talked about CHOP and baby KJ. There are more and more—there is more and more organizing happening amongst these parents who are becoming biotech CEOs. So how do we really work in partnership with them to put our data to work for their families and for their businesses. So encouraged by, I think, the shift in thinking and the more expansive nature. It is everything from clinical trial matching to sponsored testing, just getting different types of docs using testing. And what is also really—I know we have talked about this in the past, Tycho, but it is true across every condition. The more you test, the higher the prevalence is of these diseases. And so, you know, we were sitting with a pharma company that was looking for 400 patients. We happen to have 2,300 of them in our database, and really challenge the understanding of the prior limited prevalence. So I think it is going to change the equation for investors as well. The larger patient populations are going to make it much more compelling for investors to get involved in these companies. So more to come, but we are excited about what we are seeing and the conversations we are having and the opportunity that is ahead. Tycho W. Peterson: Great. And then maybe just one last one on competition. I mean, we have not really, you know, touched on it on the call, but—and you have always said competition validates the market size. It does not really threaten your leadership, and, you know, new entrants can help educate payers and governments. But anything you can kind of flag here—is that, you know, how your thinking here has evolved? I mean, has it—are you going to have to counter-detail more? Are you pulling forward any hiring? Just maybe just talk a little bit about the competitive environment because we are obviously all getting more questions on that too. Katherine Stueland: Yeah. No. And you are right. I think competition is a good thing. I think that more—it validates, as you said, but it also helps put more and different types of on clinicians to start using this testing. So, you know, the sheer size of our sales force—I think our sales team is six times the next largest sales team. I think we have more reps in California than one company has for their entire sales team. So we have got a massive footprint for rare disease. We are always going to be looking to pull forward hiring. We talked about some encouraging signs in the NICU. That might be an area where we could pull forward some more hiring. We pulled forward hiring into our specialty sales team. So, you know, as a commercial person, I, of course, am always eager to see how do we continue to accelerate our growth. So I would say we are seeing positive signs across the board, but even if we were to not hire another person—which I feel confident we will continue to strengthen that team—we have a monster-sized team compared to the next one out there. And, you know, I think more education on this is a good thing. There is plenty of wide-open space. INFINITY, as the reference dataset, is going to continue to ensure that GeneDx Holdings Corp. is delivering the most accurate information, which is, of course, what is most important to these clinicians and these families. But also the turnaround times. I said we are now at two weeks for exome and genome. Just being able to do it better, faster, more cost effectively. All of that means we can move faster and keep adding more clinicians along the way. Tycho W. Peterson: Great. Thank you. Operator: Thank you. Our next question comes from the line of Keith Hinton with Freedom Capital Markets. Your line is now open. Keith Hinton: Great. Thank you. Can you hear me okay? Katherine Stueland: We can. Keith Hinton: Okay. Great. Just one question then a quick follow-up. Just in terms of the foundational market growth, obviously, as we have talked about, looking for a little bit of an acceleration here versus last year. So I just want to Mark Anthony Massaro: Just want to clarify. Are there any sort of major new indications or disease areas you are launching in 2026 that fall into that foundational bucket, or is this just a natural reacceleration? Kevin Feeley: No. We have got a multiyear roadmap for expansion of indication targets that we kicked off early 2025. As I said, we went the previous three years really just talking three of what ultimately is a span of thousands of rare diseases that our technology can diagnose. We have been taking a fairly disciplined approach to only target pulling through volumes where underlying guidelines and reimbursement policy would be secured to get paid. And the aperture of that continues to increase, in large part because of our work, but also other evidence provided by many others. And so, yeah, underpinning those foundational markets is, of course, effort across the commercial engine, but there is a far larger set of diagnosis types or indications that we will be targeting in those clinician offices. Mark Anthony Massaro: Got it. Okay. And then just on the follow-up, I am looking at Slide 22 of the deck here and looking at the 300,000 annual patients among geneticists, penetration a little bit above thirty percent. You know, kind of two ways to look at that—on the positive side, you know, a lot of room for growth. On the negative side, you could say you guys have been at this a long time, and it is only at thirty percent. So my question is more geared towards that more bearish look, which is, you know, obviously, some portion of those patients may not have a best fit for getting an exome/genome versus a single or multi-gene panel. I am thinking about a patient that has kind of strong suspicion for a particular rare disease based either on pheno or family history. So do you have any sort of insight based on your market research into what percent of that 300,000 patients, you know, maybe the best clinical practice would not be a next-gen—would be to start with something like a single or multi-gene panel, and then reflex to a next-gen if needed? Kevin Feeley: Yeah. Look. I think our position has always been and remains that ultimately there will be one test for all hereditary disease diagnosis, and it will be a whole genome. I think if you look to say, well, we have activated eight out of ten clinical geneticists who have been ordering from GeneDx Holdings Corp., and we have held that share for at least the ten years I have been with the company, I think proves the power of our service offering. You say, well, why are they only ordering for 30% of their patients? Like I said, we have not been attempting to pull through all volume types. In the fourth quarter and all periods prior, there is volume we have left on the table. There would be demand out there for offering physicians a far better answer than multigene panels if we were just willing to take all the volume and not get paid for it. We have been taking a fairly disciplined approach to step up those conversion rates over time in a way that is both good for patients and healthy for our business. I think we are going to continue to do so. But with the emergence of new guidelines, clinical evidence, economic support, there is and will continue to be a tidal wave of support in terms of adding exome and genome into reimbursement policy to replace those tests. All in, still think we are in the very early days of a generational change to replace all multigene panels with exome and eventually genome. It will be the one test that outlasts them all. Katherine Stueland: The only thing I would add to that is by continuing to utilize single gene or multigene panels, we are just contributing to the diagnostic odyssey. So we have gotten the industrial strength of exome and genome to the point where multigene panels really should, for the most part, be retired. But their use in the settings that we are in are just continuing to proliferate the delayed diagnosis. Mark Anthony Massaro: Understood. Thanks so much. Operator: Thank you. Our next question comes from the line of Brandon Couillard with Wells Fargo. Your line is now open. Brandon Couillard: Hey, thanks. Good morning. Thanks for squeezing me in. Kevin, just one for you. Given it sounds like you have front-end loaded this sales rep build for the year, I think you talked about a double-digit operating margin by the fourth quarter. Should we expect a modest loss to start the year here on the operating line? And just how we think about OpEx ramp moving through the year? Kevin Feeley: Yeah. Not a loss, but as we said, expect Q1 to be right near breakeven. So it will push the boundary there, but we expect to be able to hold it positive and then build up throughout the year as those reps in particular and some other factors start to earn their keep. Great. Thanks. Operator: Thank you. Our next question comes from the line of Mark Anthony Massaro with BTIG. Your line is now open. Mark Anthony Massaro: Hey, guys. Thank you for taking the questions, and congrats on a strong 2025, and congratulations, Katherine, for the award. I wanted to ask about, you know, I did not hear a lot about EMRs or Epic Aura. Can you just speak about your EMR strategy in 2026? Should we expect that to lift, and how do we think about EMRs going into the pediatrician market? Katherine Stueland: Yeah. And thank you, Mark. I am glad you are asking this. So last year, we, you know, for better or for worse, I think we tied EMRs very much to the NICU. And we learned a lot. What we learned is that clinicians who have been ordering testing from us like our portal. So that is great. We continue to improve it. And so they like that workflow. And so, we spent a lot of time with the team at Epic just to really understand where the opportunities are from their perspective. They obviously see a lot of this business. So we really want to focus our Epic strategy on new customers. So general pediatricians would be a great example of a new customer where Epic can be helpful. So we are thinking about Epic as a driver for both outpatient and inpatient. So really going in with health systems, we have been kind of reprioritizing which health systems we are going into. So looking at it less as a current customer unlock and more as a future customer unlock. So that has been, I think, a really healthy shift for us and very much in line with what Epic sees as kind of best in class moving forward. So more to come on that and how it plays a part in unlocking new customer types. As we have talked about, we are also going to be releasing that one-minute ordering. So I think we can kind of see, like, in a sense, Epic is one-minute ordering, so we can see what is going to work better for different types of clinicians. So I think we will be tracking it. We will share as we learn, and we are, without a doubt, enthusiastic about Epic being able to unlock more volumes, really focused on new customers who have not had a prior experience with us ordering. Mark Anthony Massaro: That is really helpful. And then last question for me. It looks like the NICU is going to likely be the largest source from that 7% to 8% growth from the expansion markets. Understand that you are adding 10 reps into the NICU, and, you know, you have talked about onboarding a neonatal nurse. You have talked about, you know, a lot of lessons learned last year. So it seems like this is an important initiative for 2026. Is there anything else you could just speak to that gives you confidence about maybe some of the, you know, encouraging early performance you have seen here in Q1, but how you are thinking about this building throughout the year with respect to the lessons you learned from last year. Katherine Stueland: Yeah. So we are happy with what we are seeing from an ordering perspective year-to-date. So I think that is point one, and that is a great message to be able to deliver. So much so that we are, you know, we are taking a look at do we want to add more reps and at what point in time. The new leadership that we brought on, our Chief Medical Officer, Dr. Gannon, she is super eager to be spending time in the field and to start a real peer-to-peer KOL strategy because her view is neonatologists are going to listen to other neonatologists. So we need to kind of break the pattern of the neonatologists constantly deferring to the geneticist. And so I think the peer-to-peer work that we are going to be deploying this year we feel like is going to be powerful. She has been making calls already, sharing great feedback on GeneDx Holdings Corp. from those who are ordering. And then, you know, just in her network, being able to already unlock some good opportunity for us to go get. And so with that and then also with the SEQuence First protocol being a really important tool for us, I think it is really just trying to simplify the selling strategy. So we are going right to those neonatologists and activating them more directly versus having to tackle it in a more systemic way. Mark Anthony Massaro: That sounds great. Thanks for all the color, guys. Katherine Stueland: Wonderful. Thank you. Operator: Thank you. And I am currently showing no further questions at this time. This does conclude today's call. Thank you all for your participation. You may now disconnect.