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Operator: Good day, and thank you for standing by. Welcome to the Q4 full year 2025 Domino's Pizza, Inc. 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 will 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, Greg Lemenchick, Vice President of Investor Relations sustainability. Please go ahead. Good morning, everyone. Thank you for joining us today for our fourth quarter and year end conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner followed by our Chief Financial Officer, Sandeep Reddy. Greg Lemenchick: The call will conclude with a Q&A session. The forward-looking statements in this morning's earnings release and 10-Ks both of which are available on our IR website, also apply to our comments on the call today. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our filings with the SEC. In addition, please refer to the 8-Ks earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also being recorded for replay via our website. We want to do our best this morning to accommodate as many of your questions as time permits. As such, we encourage you to ask one question only. With that, I'd like to turn the call over to Russell. Well, thank you, Greg, and good morning, everybody. I'd like to start by saying how incredibly proud I am of our team and franchisees as we continue to bring our Hungry For More strategy to life and deliver some of the best results within all of QSR. Before I highlight our great 2025 and look ahead to 2026, I want to provide my perspective on the QSR pizza category in the US. There seems to be a narrative out there that pizza is a challenge, and declining category. That is just not true. Looking back to 2019, you'll find category that has generally grown approximately 1% to 2% per year including last year. 2025. I am confident QSR pizza will continue to grow at this historical rate, in 2026 and beyond. Pizza category is certainly mature, but do not let the challenges that some of our higher profile competitors drive a false narrative. Our competitors' results are not a reflection of the category's health or its future potential. Their results are a direct reflection of our strength. Domino's has dominated the QSR pizza category for over a decade, and we expect our momentum will continue. So to be clear, our growth prospects have never been greater because our brand has never been stronger. Our Hungry For More strategy is working, and we're leveraging the scale and advantages of being the number one pizza company in the world. I want to share what I think is the ultimate opportunity for Domino's in the US. When I look at our current market share in comparison to other leaders within QSR who own 40% to 50% of their categories, I believe that Domino's can double our retail sales from where they are today. Double. We've already achieved this higher market share in some of our international markets, and in some US markets today. I believe there is meaningful growth in front of us for many years to come. I'd now like to review 2025. Another successful year for Domino's. Despite a challenging macro environment that impacted the entire restaurant industry, we proved when we execute against our Hungry For More strategy, we deliver more sales, more stores, more market share, and more profits. Let's start with sales. We grew both our carryout and delivery businesses again this year in the US. Proving that our strategy and tactics are effective and producing best-in-class results. We also drove positive order counts in both our US and international businesses, as you know, order count growth is key to long-term success in the restaurant industry. Next, stores. We drove global net store growth in line with our expectations. In the US, we opened 172 net stores which is impressive in absolute and relative terms. When we benchmark versus all traditional public QSR brands of more than 3,000 units, from 2019 through the 2025. Domino's is number one in net store growth. Number one in pizza, and number one in nonpizza. We grew over 1,200 net stores while half the remaining top 10 public QSR brands were negative over this period. In our international business, China and India continue to perform extremely well and opened almost 600 net stores combined last year. Market share. In the US, our same store sales growth of 3% and success in net store openings led to another point of market share gain, in 2025. Domino's has gained approximately 11 points of market share over the last eleven years. Finally, more profits. All of this growth culminated in a year where we grew company operating profits by more than 8% and our estimated US franchisee per store profitability grew to approximately $166,000. Our strong results can be linked to our strategy directly. Our initiatives were effective effective across all four of our Hungry For More strategic pillars in 2025, I'm going to focus, though, on two of them. One from our most delicious food pillar, Parmesan Stuffed Crust, and the other from our renowned value pillar, Best Deal Ever. Each of these initiatives had a strong 2025 and will continue to positively impact 2026 and beyond. We are really happy with the Parmesan Stuffed Crust launched and and the way it performed throughout the year. It better high expectations on every level mix, incremental new customers, and franchisee profitability. Most important, our in-store teams continue to effectively execute this complex product. While also handling the challenges associated with our record-setting order volume in 2025. And in a year when customers continued to seek value, we innovated with our Best Deal Ever promotion. This price point screamed renowned value and a taste of a pizza that can be customized and loaded with toppings drove our most delicious food perceptions with customers. This promotion also demonstrated our system's operational excellence, as we did a great job of handling these customized pizza. Finally, and most importantly, Best Deal Ever drove franchisee profitability. The scale of our media and purchasing power enables us to drive the volume it takes to make a promotion like this profitable for our franchisees. You know, I've been asked whether or not QSR brands have pricing power anymore given the value consumers are seeking. As you can see from our 2025 results, and our franchisees increased profits, Domino's has something even more important than pricing power. We have profit power. We can offer value to consumers and still create profit gains for our franchisees. Now a big picture view of 2026 and why I believe we will grow our US comp by 3% during what we expect will continue to be a challenging macro environment. Domino's plays the long game. We have a proven track record over the last fifteen years. Our initiatives are rarely one and done. We identify opportunities that have multiple years of growth ahead of them. For example, committed to building our US carryout business back in 2010. It did not stop growing the year after we launched the initiative. In fact, it has grown an average of 10% annually since that time. Our carryout business ended 2025 at approximately $4,400,000,000. It has been a multiple year growth driver. And I believe we still have meaningful growth ahead as we have yet to achieve the same level of carryout market share as we have in our delivery business. Another example of a multiyear growth driver is our loyalty program. We launched it in 2015 made it even better in 2023. Domino's Rewards finished 2025, with 37,300,000 active users. Which is up almost 20% since our relaunch. Our long-term approach to initiatives of apply to what we launched in 2025, and what we plan to launch in 2026. These initiatives are just getting started. We will continue to evolve our product offerings to meet consumer demands, and preferences through two or more menu innovations. These will build on our successful product over the past couple of years that remain a key part of our future growth. Such as New York Style and Parmesan Stuffed Crust. I believe there is more growth to come from these crust types. We will continue to drive the renowned value initiatives that have powered our business. We already have proven winners such as Boost Weeks and our Best Deal Ever promotion, that we relaunched today. And we have a team focused on coming up with new that will grow our business into the future. In 2026, we expect continued growth on aggregator platforms, in particular, on DoorDash, where we were not fully rolled out until midyear 2025. We expect our share on DoorDash to grow as awareness and marketing spend increases. This opportunity is meaningful, as we have not yet reached our fair share on either of the major aggregators. Our business will be amplified this year by our enhanced ecommerce platform, which is a better experience for our customers and our brand refresh that has given Hungry For More a unique look sound, and heartbeat. Lastly, our scale advantages will continue to be a differentiator. We have best-in-class franchisee economics in QSR pizza, the largest advertising budget and a supply chain with incredible purchasing power. As a result, we expect our franchisee store level EBITDA to continue to grow in 2026. Now turning to our international business where we delivered a remarkable thirty second straight year of same store sales growth in 2025. We expect another year of same store sales growth in 2026 and an acceleration in net store growth. Our international business has generally tracked in line with the goals that we set forth back at our Investor Day in late 2023. Apart from Domino's Pizza Enterprises. We continue to work closely with them to turn their business around and are encouraged by the hiring of their new CEO, Andrew Gregory. That they announced recently. Mr. Gregory is a well qualified global QSR executive and brings more than thirty years of QSR experience to the role. Getting the DPE business back on track remains a top priority. As it is key for us in order to return to our international algorithm. In closing, I want to reinforce the same message I've shared with our team. Our strategy is not just about what we are doing. It's about how we are doing it. We remain focused on getting stronger every day. We build for the present and the future. Domino's has always been in the business of creating our own tailwinds and driving growth. That has been and will continue to be how we drive best-in-class results and long-term value creation for our franchisees and shareholders. I'll now hand the call over to Sandeep. Thank you, and good morning, everyone. We are very proud of our 2025 results as we drove profit growth that was in line with our expectations, despite a challenging macro environment. Income from operations increased 7.3% in Q4, excluding the impact of foreign currency. This increase was primarily due to high US franchise royalties and fees, and gross margin dollar growth within supply chain. This was partially offset by a decrease in US company-owned store margins, that were meaningfully impacted by outsized insurance costs. For fiscal 2025, our income from operations increased 8.1% excluding a $600,000 negative impact of foreign currency and $4,000,000 in refranchising gains. Excluding the impact of foreign currency, global retail sales grew 4.9% in the fourth quarter and 5.4% for the year, both of which were due to positive US and international comps, and global net store growth. Within the quarter, retail sales grew by 5.5% in the US, driven by same store sales and net store growth which was in line with our expectations. Same store sales were up 3.7% for the quarter, on the strength of our Best Tea Lover promotion, the launch of our new specialty pizza, and to a smaller extent, aggregators, all of which contributed to positive transaction counts. We continue to manage our aggregator business with discipline, with the aim of ensuring that we are maximizing incremental sales and profits for Domino's and our franchisees. Average ticket benefited from Stuffed Crust. Which carries a higher price point, which was partially offset by a slight decline in our mix, due to a higher carryout business that has a lower ticket than delivery. Pricing was flat in the quarter. Our carryout comps were up 6.5% and delivery was positive 1.6%, due to the previously noted initiatives. For the year, our same store sales in the US grew 3%, which was primarily driven by renowned value promotions, inclusive of best delever as well as our successful launch of Parmesan Stuffed Crust pizza. We also paced well ahead of the QSR pizza category which grew in line with its historical range, resulting in continued share gains. In terms of the breakout by channel, delivery represented 45% of our transactions, and 56% of our sales, while carryout represented 55% of transactions and 44% of our sales. The weight of sales and transactions shifted slightly more to out again in 2025, because of the carryout comp of 5.6%. The full year delivery comp was up 1%. The strong comps that we had flow through the franchisee profits, which we continue to believe are best in class. Our estimated average US franchisee store profitability in 2025 came in at approximately $166,000, up $4,000 over the prior year. Shifting to US unit count, in Q4, we added 96 net new stores, and 172 for the full year, bringing our US system store count to 7,186. Moving to international, where retail sales grew 4.5% in Q4, excluding the impact of foreign currency. This was driven by net store growth of 296, and same store sales of 0.7%, both of which met our expectations. For the year, retail sales grew 5.9% net store growth of 604 and same store sales of 1.9%. Excluding the headwind on our comp sales from DPE in 2025, we would have been in line with our long-term same store sales algorithm of 3%. Moving to capital allocation. This morning, we announced a 15% increase in our quarterly dividend, which was done in line with our capital allocation priorities. We also repurchased approximately 189,000 shares for a total of $80,000,000 in the fourth quarter. At the 2025, we had approximately $460,000,000 remaining on our share repurchase authorization. Now let's talk about our guidance for 2026. Please note that all of the metrics provided exclude the impact of the fifty-third week, which we estimate will have an approximately 2% impact on global retail sales and operating profit growth for the year. We continue to believe that global retail sales growth should be approximately 6%. As part of that, we expect the following. First, we expect our US comp for the year to be 3% and to grow our market share meaningfully in what we expect to be a QSR pizza category that continues to grow. We also expect that based on the timing of certain initiatives, that our comp will be higher in the first half compared to the back half. We also believe that the macro environment will remain pressured throughout 2026. Second, we expect our international same store sales to be 1% to 2% due to continued pressures at DPE, and impacts from our high-volume new store openings in China, which puts a slight drag on our comps despite being beneficial to retail sales. Shifting to net stores. We continue to expect 175 plus net stores in the US, and we have a robust pipeline heading into the year to achieve this. Internationally, we expect to increase our net store growth to approximately 800 stores. This increase is primarily due to DPE's expectation of fewer closures and continued meaningful net store growth from our two largest growth markets, China and India. All this leads to operating income growth of approximately 8% excluding the impact of foreign currency and refranchising gains. A few additional points of color on expectations for the P&L in 2026. We expect our food basket to be moderate, up low single digits. Our supply chain margins to grow year over year due to procurement productivity. We do expect the amount of procurement productivity to be less moving forward than we have seen in the last couple of years. G&A as a percentage of global retail sales to be approximately 2.3%. In February 2026, we increased the technology fee by $0.01 to $0.385 per digital transaction to fund our technology initiatives. Operating income margins to expand slightly in 2026, primarily driven by sales leverage and supply chain margin expansion. Interest expense to be generally in line with 2025. At current exchange rates, we expect foreign currency to have a modest benefit on operating income. We expect our tax rate to be in the range of 21% to 23%, which is consistent with 2025. And lastly, we expect CapEx to be approximately $120,000,000 due to investments we plan to make in our corporate office, before reverting to our algorithm of $110,000,000 in 2027. Thank you. We will now open for questions. Operator: Thank you. As a reminder, to ask a question, please press and wait for your name to be announced. In the interest of time, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from Brian Bittner with Oppenheimer. Your line is open. Brian Bittner: Thank you. Good morning. The question we continue to get, as you're well aware, is related to investors' skepticism about whether you can keep up the solid performance moving forward in '26 after you know, a very successful '25. And taking market share remains an important component of hitting your same store sales target. So can you talk about what you see as the biggest share drivers '25, do you think there's actually an opportunity to accelerate share gains in light of competitive closures and just separately on the industry, it does continue to grow, which I do think may be an underappreciated dynamic. Can you just maybe talk about what's driving the stable growth of of the industry? Thanks. Russell Weiner: Yeah. Good morning, Brian. A couple of maybe I'll start with the first question, then, Sandeep, you can do on talk about the the second one. Know, when I when I think about '26, I refer back maybe to what I talked about in the script. You know, I think a lot of the discussion has been around almost spreadsheet like look at the year. Okay. You had this last year are you going to lap that? In '26? And, you know, if you look back at our results over time, I think what you'll see is we're not a one and done company. We launched things that got legs far beyond the year in which they're launched, and then we bring new things on top of them in 2026. So, and or 2027, you know, in the future. So, you know, one thing I I can tell you about 2026 is you should expect in line with our Harmony for More strategy, two plus product innovations this year, On o, operational excellence, we're going to still continue to drive efficiencies on our stores, which drive profits, which drives that amazing store count. I talked to you about earlier. And then Renown Value, we're out out there right now with a Best Deal Ever. And so it's just it it's important to understand that when we launch stuff in the examples I gave, for example, were were carry out and loyalty, Carryout, we launched in in 2010, and it's still, you know, Sandeep talked about, you know, over 6% in the quarter. Loyalty continues to grow. So we think all that stuff will continue. Think in '26, in addition to what we come out with, continued growth of loyalty, aggregators, we said we're not at our fair share yet, so there's still still should be both in, Uber and DoorDash growth there. Carryout, we expect to continue to grow. Stuffed Crust, we've got, ahead of us. I think long headway. We got a brand new website that runs better than the old one. A brand refresh. There are a lot of things. I could go on and on, but Greg's telling me I'm running out of time. Sandeep. Alright. So let's talk about industry growth. Sandeep Reddy: And and I think that to me, as going through even what we talked about the last quarter, we talked about this on the on the on the call. This industry has been growing 1% to 2% for definitely the since 2019 and and even further back. And what we saw in 'twenty five was very representative of what the industry has been doing. Over the years, and we expect it to continue to be doing the same thing going forward as well. And so when we think about this, what is really impressive for us is the way we've actually consistently been gaining market share from our competitors. And I think this is actually highlighted by two things. One is our consistency in driving same store sales growth. The other is our franchisee economics, which are significantly better than the competition. We open 25 with a massive gap against all of our competitors, including the bigger national competitors. Guess what's happened since that time? One of our national competitors has announced that they're had a negative same store sales in the mid single digits. And they also talked about closing a number of stores up to 250 stores. In the first half of the year. All this plays into our strategy to continue to gain market share because we will go into that 1% to 2% growth in the industry with less doors outside which we can actually take share from effectively and grab those sales. And this is just a continuation of what we talked about at Hungry For More and what we've been doing for years. That's how we look at what's going to come in 2026 and beyond. Operator: Thank you. Our next question comes from Dennis Geiger with UBS. Your line is open. Dennis Geiger: Great. Thanks, guys. Congrats on the strong four and full year results. Russell and Sandeep, I wanted to ask a bit more on the US sales outlook for that 3%. You guys gave a lot of detail around plenty of runway from those existing initiatives that you came out with last year. Would it be possible to kind of highlight how you think about contribution from those existing initiatives versus maybe some of the newer stuff, whether it's the two items, other promotional deals this year. From from newer stuff. Any high level thoughts just on, hey. Is is the bulk of of what drives the US comp from from initiatives that are already in play versus some of that new stuff that may come out this year that will we'll see more as as the year goes on. Sandeep Reddy: Hey, Dennis. It's Sandeep. So I'll take this and I think I'm going to just do a bit of a framing, and then I'll get into some of the initiatives that Russell already talked about, but I'll just repeat them afterwards. So first of all, I think from a same store sales perspective, we talked about 3% for the year. We did say it's going to be higher in the first half than the second half. And I would be remiss if I didn't address what I think a lot of the industry has already been talking which is weather has been tough in January. It had a disruption on us. We had to close a number of stores like many others. And that factor is included in our same store sales estimate. So we acknowledge the pressure in the early part of the quarter. But I think we in our business, weather tends to even itself out over the year. And so as far as we're concerned for the full year, we do not see that being an impact. But clearly, it was a disruption in January. And I want to make sure we we hit that and and and make sure we address it. So in terms of the initiatives, Russell talked about it a lot in the prepared remarks. But look, the the thing about our business, and I'll acknowledge this, last year definitely had a few headline events that we talked about in 25. We were really thrilled with Parmesan Stuffed Crust. We were really excited to be launching with DoorDash. DoorDash. And and I think the the really cool thing was we'd already talked about renowned value. Then we brought in best deliver that ended up being a significant comp driver. None of these go away. They're they're all definitely there in the business in our in our baseline. And we expect these to compound over time as we move forward. Addition to that, Russell talked about the carryout business. Which has been on a tear. I mean, that we we grew 5.6% on the back of significant growth in the previous year as well. And just going back to the fact that we've actually gotten to $4,400,000,000 on the carryout business. Which is bigger than two of our national competitors on their total business. So in order of magnitude, with that kind of base, the compounding impact of growth on that on our total sales is very material. You then take the layer that we added as an accelerator to it, which is the loyalty program, that we launched in 'twenty three, We stated before that our objectives with the loyalty program was definitely to be catered much more to the carryout customer. And also to attract live users. And we just talked about the fact that we're up 20%. On the number of customers that have come into our loyalty program. So that becomes an accelerator to this fantastic carryout business that we're talking about. And then last year, when we initially talked about it, we talked about return value, but we did not talk about Best Deliver. But Bestie lever came, and it actually drove significant value for our consumers and for our profits as well. So we have a whole bunch of initiatives, back to what Russell talked about on the menu items that are going to come out, and we're going to lean on our four pillars. Lean on our four pillars and drive multiple initiatives that add up to the set 3% We do not talk about all of them just from a competitive perspective. But believe me, the competitors will find out as we go through the year. Operator: Thank you. Our next comes from David Palmer with Evercore ISI. Your line is open. David Palmer: You know, question on delivery. I I think one of the things that to this is a bit of a follow-up to Brian's question is is know, just people have a hard time seeing long-term sustainable delivery same store sales growth. They they look at what happened in '25, particularly the fourth quarter. There was the Best Deal Ever and more promotional intensity, but also, obviously, DoorDash And the delivery comp was was 1.6%. It was, you know, up. But but that was a lot of firepower against it. It feel felt unusual. So I guess maybe, you know, how do you reflect on the fourth quarter, the 1% for '25, and just your outlook for delivery, that that half of the business going forward on a sustainable basis. Thank you. Russell Weiner: Yeah. Thanks, David. You know, the way I look at delivery especially regarding the aggregators, is we're we're not at our fair share. So our our you know, we're about one of every three deliveries out there. We're not on that on Uber. Which has been more than a year, and DoorDash, which we got fully up to call it Q3 of, last year. And so that was kind of my point from before. When we when you launch something, you do not get to the full potential year one unless you're managing it in a irresponsible way, we continue to manage those two platforms, for incrementality. Because a lot of our, kind of self help initiatives are doing well. And so we're growing it slowly over time. We're not at our fair share. So there there there definitely is, upside. Second, when you think about what works on those platforms, it's what works in the, digital media. You know, we've got, what works in digital media is the expertise on how to run it. And the dollars in order to, you know, buy your your your media placement. We we do really well on marketplaces. And all these things are are marketplaces. And I think last is, the the the business is a delivery business and a carryout business. So I still think, and we are, growing our delivery business We're still not at our fair share yet. But remember, carryout is actually bigger than delivery. We only do one out of every you know, five carryouts. And and that business is growing significantly. So I think you know, at the end of the day, what folks are looking for is growth. I'm going to I'm going to add a little bit more texture, though. Because we've been we concentrate a lot so far on the call on same store sales. I want to take a step back and just really point out the engine that is Domino's Pizza. Which is same store sales and store growth. Right? You know, we talked about and I I I this may have been a surprise to some of you. If you look back to 2019, pizza or not pizza, if you look at public restaurants, with 3,000 stores or or above, we're number one in growth. And so part of the reason I think you're seeing the impact on the competitors that you are is because now people have a choice in their neighborhood. And Domino's is there. When Domino's there, they pick Domino's. When we grow these stores, especially from a split perspective, we split an area, two things happen. 80% of the customers that come in on carryout are incremental, But, David, to your point before, delivery business gets more efficient. And the quicker we can get more hot pizza to our customers, the better it is for your delivery business. So all of this truly is the domino effect. Of all the initiatives working together. Sandeep Reddy: And, David, think I'm just going to just add a financial component just to make sure that we I think Russell talked about that we're managing the business for incrementality. And profitability. And and and really playing the long game. But I think when you put numbers to what Russell was talking about, you take the 1% same store sales, you add the store growth, you're talking about three plus percent or around 3%. Growth in retail sales on the delivery business, which far outpaced QSR pizza delivery. And we gained share. We gained about a point of share in delivery We gained about a point of share in carryout, and a point across the entire business. So we're really happy with the delivery business and what we got out of it in 2025, and we're very confident as we move forward in '26 as well. Especially given the really tough macro backdrop that we've been seeing in '24 and '25. Operator: Thank you. Our next question comes from David Tarantino with Baird. Your line is open. David Tarantino: Hi, good morning. Russell, I think you mentioned the concept of doubling the US retail sales over time. And I do not recall you mentioning that before. So I guess if if you could clarify that as is is it a new goal to do that? And then I guess my questions are, you know, over what time frame do you think that's possible? And and does that sort of imply your thinking a little differently about the unit opportunity? I think you mentioned 8,500 plus at the, at the last investor meeting. Is it now something maybe higher than that as you think about the current competitive landscape? Thanks. Russell Weiner: Thanks, David. You know you know, the interest in anything I started downloads in in September 2008. And I remember back when we hey. We're going to be the number one pizza company out there, and and, that seemed like a a a stretch. And, you know, obviously, we're we're at that today. And and and so what I do is is I just look at a couple things. One is our continued the the continuous gain in market share. A point a year for the last eleven years. I then say, okay. Well, let's look at other categories. Where the and what are the share of the number one players? Where we're about one out of every, you know, four pizzas. Well, the number one players are 40 50 share. And look at and and and so looking at where we are, the assets we have in our franchisees their profitability, our marketing, this this should just you know, it why should not we be as big as the other players are, you know, in their in their category? It it's something we we have continued to do over time, and and we're headed that way. So it's, yeah. It's it's it's part and part partial for for for for what we've been achieving. Sandeep Reddy: Yeah. And David, I think from a guidance perspective, we've really talked about guidance through 2028. And that really implies a point of share through 2028. And we're only not going to comment past 2028 in terms of cadence, but I think we just framing the opportunity just like we did, say, 85 stores. We now believe that there's an opportunity to get to double our retail sales of about $10,000,000,000. Yeah. Over time. And I think that's really super important. And I think the other thing that Russell, I think, said at Investor Day, if I remember right, is every single time we thought we'd actually come up with a new goal in terms of full potential, that goal just kept going up. I think it was the six high six Yeah. But I I never 6,000. It was 7,000. Then it's 8,500. And it's not because we're bad at forecast. Russell Weiner: One of the things, that happens, I talked about store growth before. Is and you're seeing this. When we grow and we grow closer to where our competitor is, a lot of times we close that store. And so if you think about competitive closures, that actually is more opportunities for more stores. And so that that's something we're going to continue to lean in on I'd really urge people. I know it's same store sales are a number everyone focuses on, and we are too. You know, we're we're guiding to 3% this year. But if you do not take a step back and look at total retail sales, which includes sales from the new stores, you're going to underestimate, as Sandeep said before, how well we're doing in the delivery. But you're also going to underestimate how well we're going to do in the future. Because we are putting more points of contact for consumers out there. Operator: Thank you. Our next question comes from Peter Saleh with BTIG. Your line is open. Peter Saleh: Great. Thanks and congrats on a great quarter and year. I wanted to ask maybe if you guys could comment a little bit on the performance made by income cohorts. There's been a lot of discussion about that younger lower income guests kinda stepping back. You guys give us a little bit of color on what you're seeing there? And then also, you know, historically, you've been talking about how delivery and carryout are kinda separate occasions, different customers. Has that changed recently? Have you seen any more switching between the two, or has that stayed pretty consistent? Thank you. Russell Weiner: I'll maybe do the income cohort question. You can follow-up. Yeah, Pete. Morning. We certainly, in QSR, there's been a lot of stuff written about the lower income cohort declining. That is not something that has happened in Domino's. We grew and for the full year. that we grew all income cohorts in Q4, Sandeep Reddy: Yeah. And look, we've been seeing very consistent in terms of the delivery carryout overlap, which has been the mid teens. Over time, and we haven't really seen a change on that. So these tend to be very different occasions. And that's great because the addressable market is available for both sides. Operator: Thank you. Our next question comes from Gregory Francfort with Guggenheim. Your line is open. Gregory Francfort: Hey, thanks for the question. My question is just Russell, can you provide an update on maybe changes in '25 to your tech stack? You guys are you're known as a a technology forward company. And then as you look to holes or things you're trying to address in other '26 or in the next couple of years, what stands out Thanks. Russell Weiner: Yeah. Well, you know, last year was a a big year for us on the consumer side, you know, and the and the store side. We, relaunched our, ecommerce site online and, also mobile web. We will be launching this year the apps, versions of all those, the new site that's up already is performing better than the old site. Which is something that we said that we were going to do. We're focused on the same things for know, the app as well. Additionally, our our our DOM OS system continues to get better. And and so, Greg, just as a reminder, that's our system in store that helps our our that helps run the store. And we we, talked a lot last year about this idea of know, I've talked this this one forever. You know, we make products before consumers finish ordering them. Because of our technology, we're able to to to look at ahead of the order. But, also, from a dispatch standpoint, you know, we have smart dispatch that helps route our orders with our stores. Well, now the the the front end of that, the order, and the back end, the dispatch, are starting to talk to each other and with with with or via an orchestration engine. And so now if there is not going to be a driver back we have this in about six stores now, so I expect this to continue to increase. If there's not going to be a driver back in time, to get a pizza when it gets out of the oven and it's going to get out of the oven couple minutes later, Well, our our technology, this orchestration agent, will hold that order so the store does not see it. And so, you know, my goal at the end of the day is is is kinda real time pizza making and delivery. And so that's some of where we have been. And some of where, we're going both on the consumer and the and the store side. Operator: Thank you. Our next question comes from Danilo Gargiulo with Bernstein. Your line is open. Danilo Gargiulo: Great. Thank you. Sandeep, I wonder if you can give some color on this. Insurance cost, like outside insurance costs that are impacting your restaurant level margins in your stores. And more in general, can you comment on the level of restaurant level margins that you're targeting this year? And what do you think is sustainable, maybe not just for Domino's, but for the rest industry or maybe for the pizza category. As a restaurant level margin going forward? Thank you. Sandeep Reddy: Yes, Daniel. Thanks for the question. And look, I mean, think when we and I about in the prepared remarks as well, the corporate stores, which are about 260 out of the total 7,001 200 that we have roughly, is one that was impacted by the outsized insurance cost. It definitely impacted the corporate store P&L. I just want to first just say, yes. This was material to the corporate store P&L. And it was big enough that we called it out at the company level as well. However, when I look at the franchisee performance, and I look at what we actually delivered as a franchisee performance, had a 3% same store sales growth last year. And if you go to the franchisee economic, it it grew at approximately the same rate. So we held the margins And so including all of these insurance pressures, there are levers that the franchisees in the much larger portfolio that we have in their their their remit basically are driving very good profitability. So we do not really have concerns about the franchisee economics, and I want to make sure that I I touch on that. That being said, we are conscious of the fact that there's insurance pressure in the marketplace, and it it did impact us. And so we want to acknowledge it. We want to be clear. And we need to find ways to find productivities to offset some of these pressures and we did. In 2025. And we're able to actually find a way to actually grow our profits 8%. Russell Weiner: And, you know, I'd just say, you know, the other thing to think about is on the franchisee side is that we ended last year the average number of store per franchisees was nine. And so the enterprise profit for our franchisee is, you know, kind of approaching $1,500,000 now, which know, if there are bumps in a in a particular year, allows them to to get through those bumps. And so we're excited not only that the store level, profits are increasing, but the enterprise ones are as well. Operator: Thank you. Our next question comes from Sara Senatore with Bank of America. Your line is open. Sara Senatore: Thank you. Actually, one quick follow-up and a question. The question is actually about the delivery business. And I guess broadly across the industry, it seems like exclusively the growth, and this is not just pizza, this is everywhere, is coming in 3P versus 1P. So we hear a lot from other companies talking about how, you know, 1P has either been steady or mostly, you know, declined. So was just curious whether you think, you know, there is continued to grow 1P delivery Again, this is more industry wide. Or if we've sort of gotten to a point where growth kinda comes exclusively on the aggregators, again for for the restaurant industry as a whole. And then just quickly on the the comp, I do not know if you disclosed the price you had on the fourth quarter, but just wanted to see if I could get that. Thank you. Sandeep Reddy: Hi, Sarah. Yeah. No. I'm going to I'll address both these questions, and let let's start with the delivery business. And I I think it's more of a broad industry comment that you're making on 3P versus 1P. And and I I guess with 3P having really been in place for close to a decade at this point and actually gained scale around the time of COVID, Many other restaurant companies had already gone on to the three well before we did. We only got on 23, '24. So we're in the process of getting on to 3P like Russell talked about earlier. So I think it's a little bit early to actually see kinda what's happening overall. We've we have a sense that overall, delivery business has been pressured in the last couple of years with the macro. But it still grew. And I think we still are seeing share growth overall. And and we're managing for incrementality and profitability like we talked about. So we do see that there once things stabilize and normalize, once we've annualized completely on 3P, there should be growth both in 3P as well as 1P, and we should participate in both sides. So so with that, I'm actually going to move to the comm question that you and you asked about pricing. And you may have missed it, but I said pricing was flat. And that's why we we are so happy with our franchisees. The discipline that our franchisees have actually shown over the last few years going into Hungry For More and then since we've sort of been been executing Hungry For More has been fantastic. And that's why Russell talked about profit power versus pricing power, this is exactly what it is. With that type of pricing, we're able to drive incremental profits to our franchisees. And these economics are just the envy, I'm sure, of everybody in the industry. Russell Weiner: Yeah. So you think back to the comment earlier, on same store sales. The quality of the same store sales being order count driven. Versus ticket driven really speaks to the opportunity in the future. The kind of basic marketing is trial, repeat, depth of repeat. You do not increase trial when you increase price. Right? But the reason why people keep coming back for carryout and loyalty and Stuffed Crust and all of these products, is because we maintain a fair price and we have fantastic execution by our franchisees. So the quality of how we got to the 3% gives you a sense of why we're so confident. That that's going to continue. Operator: Thank you. Our next question comes from John Ivankoe with JPMorgan. Your line is open. John Ivankoe: Hi. Thank you. The question is on US store growth. And certainly, Russell, your comments around the US market opportunity being double what it is, is very interesting. So, you know, comment on, you know, the path to 7,700 US system stores in 2018, if we have a chance, to front load any of that, especially given some competitor kind of softness. You know, is there a date, you know, where you could do 8,500 stores in your mind? And, know, I know you've, you know, kind of been doing under 200 stores a year net in the US. Does it make sense to actually go higher given higher market opportunity? And where I'll conclude this question, and they're all related into one. Is how we're thinking about store splits. In other words, the impact of a new store sales on existing stores that very well may share existing delivery trade area. Are you able to better measure that and perhaps minimize the impact to a market overall? Thank you so much. For answering the new store development question. Thank you. Russell Weiner: Yeah. Sure, John. I mean, I think the better way to look at our store growth is actually look at closures. So we closed in the US last year on a base of over 7,000 stores. Seven. The year prior, we closed six. And so when we open up a store, it stays open. And we want to continue to be as aggressive as we can. And as I said before, since 2019, no one's been more aggressive than us. You can open a lot of stores, but if your net store number isn't big, then all you're doing is replacing one with the other. So we're going to be as aggressive as we can to continue make this a partnership with our franchisees and and both win. And and so you know, that to me, the closures is the more important thing. And that increases that and profits increasing. Increases the interest our franchisees to invest. Sandeep Reddy: Yeah. And and and I think, John, you you did mention splits and the impact of splits. So this is the reason to be very careful at what pace you go. Because when you do do the splits initially, you take a little bit of a step back and then you grow into it. So the profitability of the franchisees needs to be protected as we go along this growth path, and that's exactly the approach that we take. And and it's because we're protecting that profitability back to what Russell said. Seven stores last year, six stores the previous year. And and that's that's something that we keep in mind and are very careful and conscious about, to not go so fast and recklessly where you could have an impact where you end up having store closures. We want to protect against that. Russell Weiner: Not go so fast, but still faster than anyone else with over 3,000 stores in the US. Operator: Thank you. Our next question comes from Chris O'Cull with Stifel. Your line is open. Patrick: Thanks guys. This is Patrick on for Quick. For Chris. My question was just on international development. I was hoping you could could comment a little bit more on the visibility you have into the pipeline today for twenty six Just any potential risks to that 800 units this year and and just your level of confidence around how achievable that is. And a longer term, I mean, I know it's been a couple of years, and you talked about the importance of getting DPE back to being a net contributor. But do you have multiple paths to get back to that $9.75 a year over time? Can India accelerate or China Or does it have to be DPE getting back to you know, the level of contribution that they had previously? Thanks. Russell Weiner: Yeah. Yeah. Both India and China actually have accelerated And a good portion of those 800 stores are going to come from from, from from those markets. So look, we we talk we talk about another 200 stores this year versus last year. So with the closures of DPE behind us, some of that headwind is gone. Now them returning to growth is part of what gets us back to the algorithm. If you look at the algorithm we talked about, you know, Hungry For More at our Investor Day, the the the major cause for any slight miss in that algorithm on the store side or this year, as Sandeep pointed out, on the same store sales side, has been DPE, which is why know, we're so encouraged, with with their new hire of, of Andrew Gregory. The amount of work we're doing together Sandeep, next week is getting on a plane. He's going to bring his pillow from home, so he'll sleep well. Going to Australia with our head of international, Wei King. Know, we're on the phone top to tops all the time, and we're working with them to to turn around that business. It's an important part of our growth, one last thing I'd say on DPE Australia in particular, You know, when I was talking about earlier, places around the world where we're 40 50 share, Australia is one of them. And so that is a place from which we are certainly need to, fix the the the business. But we're we're we're working from a a place of strength. In Australia. Sandeep Reddy: And and and, Patrick, I'm just going to add one thing just on the the the guidance topic since you brought it up and you asked about the parts. And two different things. When we look at where we are either for last year or for the guidance that we're talking about, really speaking, excluding the impact of DPE, Generally, We're In Line With The Rest Of The International Portfolio. And While India and China have been doing fantastically and accelerating, that was already in kind of what our expectations were. So it's great, but but I think I just wanted to make sure that you're clear about that. And I do not believe that ex DP getting back to what our initial assumptions are, there's a pathway to get to the nine twenty five that we initially guided to. Because everything is just really running to plan. It's not running ahead of plan. And so I just want to make sure that that's clear as we as we talk about the outlook for the year. Operator: Thank you. And our final question comes from Jeff Farmer with Gordon Haskett. Your line is open. Jeff Farmer: Thank you very much. Just a quick follow-up to Sarah's question. And then another one real quick. But what menu pricing is assumed in that 3% same store sales guidance for 2026 coming off the flat pricing in Q4? And then can you guys just share any impact you've potentially seen on as relates to GLP ones and your business? Just any update there. Would be helpful. Thank you. Russell Weiner: Yeah. I'll do the the GLP one and and share the pricing. Yeah. So on GLP one, obviously, we're we're con we continue to watch that closely We have not seen an impact on our business so far. Obviously, with it coming out in pill form, we're going to wait and see if if if there's any implication you know, there. Right now, though, when you read the literature on on GLP ones, it's really more kind of breakfast and lunch focused. And know, dinner for us is a sharing occasion, so perhaps that's why we're not seeing any impact, but we're going to continue to watch And with, you know, 34,000,000 ways to make a pizza, got a lot of choices out there. But if if if there needs to be menu innovation around that, we will do that. Sandeep Reddy: Yeah. And and I think specific to pricing, you'll probably catch in the transcript when you list or read or listen to it later. But we talked about low single digit expectations on pricing. For 2026, and that's what's embedded in the 3% guide. Greg Lemenchick: Thank you, Jeff. That was our last question of the call. I want to thank you all for joining our call today, we look forward to speaking to you all again soon. You may now disconnect.
Melanie Jaye Leydin: Good morning, and welcome to LARK Distilling's Half Year FY '26 Results for the period ending 31 December 2025. Today, we have LARK CEO, Stuart Gregor; and CFO, Iain Short, presenting. There will be opportunity at the end of the presentation to ask questions. Please submit your questions in the function at the bottom of the screen. I will now pass to Stuart. Stuart Gregor: Thanks, Mel. Good morning, everyone. Thanks for joining us here for LARK's half year results. I'm personally quite honored and very thrilled to be presenting my first set of results as LARK's CEO 7 weeks into the job. In 2023, under the leadership of my predecessor CEO, Sash Sharma, LARK established 3 foundational strategic priorities that have served as the core pillars of our growth strategy. You can see them on the screen. They are building long-term brand value, international sales momentum and domestic leadership position and cash and capital discipline. As I now lead the ongoing refinement and evolution of the strategy, I'm confident that these 3 core pillars will remain unchanged, continuing to guide our ambitions to establish LARK as a preeminent force in New World Whisky. It is, by any measure, an exciting time for LARK. So some financial highlights. The first half of F '26 has started solidly with a significant amount of preparation going into our planned domestic and international brand relaunch in March and April 2026. Before we delve into the detail of these initiatives undertaken in the half and in each of our divisions, I'd like to touch on the financial highlights. Iain will provide a detailed overview a little later in the presentation. As an overview, we delivered net sales revenue of $8.7 million for the half, a 10% increase on the prior corresponding period. Within this, whisky net sales saw an 18% increase compared to the first half of FY '25. Gross profit for the half was $5.1 million, an increase of 2%. Gross margins were 58%. And while these were down due to the utilization of our higher cost acquired inventory, underlying margins remained stable at 63%. Again, Iain will detail the utilization of inventory and the fair value impact on our financial statements a little later. Our net operating cash outflows have improved by approximately $0.3 million or 10%. Improved net operating cash outflows reflected stronger underlying performance driven by stronger sales, moderated distilling through the commissioning of Pontville and increased interest income earned on cash balances. These improvements were partially offset by temporary timing impacts. Cash and capital discipline remains one of our key priorities, and we ended the half with $18.3 million of cash, providing flexibility to pursue our growth strategy as we move through this financial year and into the next. Operational execution. Operationally, we continue to execute on our strategic priorities. Our first is to establish LARK as a globally recognized and clearly differentiated luxury whisky. The LARK brand restage has been all but completed with a refreshed brand positioning, including new packaging and bottle size to elevate LARK as a leader in New World Whisky on the international stage. Operationally, much of the groundwork this half was preparing for the official LARK brand restage launch with coordinated trade and consumer launches. Initial shipments of the new 700 ml range were shipped to export partners in H1 with initial sales to domestic Australia and global travel retail to follow in H2 with incremental ranging and distribution secured for the launch across all channels. March 26 this year is the go-live date for our direct-to-consumer channels and our partners in the domestic and travel retail markets will begin selling the new look LARK from the back end of April this year. Importantly, the redevelopment of our long-term brand home in Pontville has now been finalized and the completed site development is showing encouraging improvements across safety, quality and efficiencies. The blending facility at Pontville is now operational with whisky marriages undertaken as part of the commissioning process, resulting in significant quality improvements to final products and efficiency and labor utilization. The finalization of the Pontville development sees the completion of a future-proofed single site operation and removal of production bottlenecks, enabling scaling to support growth. Pontville's annual distilling capacity is now circa 520,000 liters at strength of 43% alcohol by volume with a modular expansion that provides headroom for distilling volumes to increase as sales expand. LARK is looking to create repeatable, diversified revenue streams to support international sales momentum and domestic leadership. Renovations at Pontville and our Davey Street Hobart Cellar Door hospitality venues delivered increased capacity upgrades and enhanced ongoing brand and consumer experience. The Davey Street Cellar Door was reopened just prior to Christmas with a reopening event held only last week, which was a tremendous success and a leading member of the Tasmanian media called it a master class in how to do this style of event. We are winning over the Tasmanian media. E-commerce continued to play a pivotal role in our growth, and we continue to improve this channel operationally and support sales with specialty releases. Internationally, our momentum continued with a newly signed distribution agreement in Global Travel Retail as we look to expand into international airports in the second half of this financial year. And growth in our direct export business now sees us exporting to 10 Asian markets. Our third strategic priority is cash and capital discipline. And as mentioned in the previous slide, we improved net operating cash outflows, notwithstanding ongoing marketing investment. We remain well capitalized to execute on our growth strategy. And most importantly, we strongly believe that the continued execution across all 3 strategic pillars will drive long-term value for the business and shareholders alike. So some good news, positive momentum in net sales. This slide highlights the importance of the initiatives the team have undertaken over the past 3 years to drive growth across our 3 strategic pillars. LARK has continued to deliver improvements aligned to our strategic pillars, and there is no better reflection of this hard work than improving net sales. The actions we have taken have set the foundation for LARK's next stage of growth. The trajectory of net sales is especially encouraging when viewed against the challenging backdrop for the spirits market and consumer discretionary spending more broadly. LARK has sustained robust growth even as the category overall has faced a few headwinds. I'd like to call out that in quarter 3 F '25, LARK benefited from the initial release of the Seppeltsfield Rare Cask series with The Whisky Club, the world's biggest online whisky club. The comparable release for F '26 is scheduled for quarter 4. Nevertheless, we remain confident that the forthcoming official launch of the brand restage will lay a strong foundation to support long-term sales momentum. So building long-term value. Critically, the long anticipated resting of the LARK brand and portfolio has formed a cornerstone of our strategic vision. This initiative has given rise to an entirely refreshed portfolio, distinguished by innovative branding and a sophisticated new look and feel carefully crafted to resonate with the global luxury market. Beyond commercial repositioning, the brand's restage represents a powerful opportunity to elevate not only LARK, the Tasmanian and by extension, Australian whisky onto the world stage, showcasing our unique provenance and our unrivaled craftsmanship. The initial portfolio comprises 3 core expressions in 700 ml bottles, as you can see on the slide, a change that removes a long-standing barrier to international purchase and broadens accessibility. These initial launches will be supported by travel retail exclusives in addition to other product offerings being developed. The all-new visual identity has been created to ensure immediate cut through in a crowded category, while simultaneously celebrating the distinctive elements that define Tasmania. Our uncompromising climate, pristine waters and the creativity of our distillers converge to produce whiskys of genuine individuality and character. We are about to take some very distinctive only from Tasmanian whiskys to the world, rest assured. The brand restage will prove essential in unlocking the commercial potential of our whisky bank, which remains fundamental to driving the sustained future growth and sales momentum of the business. So here we are, we're underway. While we continue to invest in brand awareness in both Australia and overseas for the current range, a huge amount of work has been happening behind the scenes as we prepare for the coordinated launch of our new portfolio. I was up in Southeast Asia in just my third week in the job with Bill Lark and Chris Thomson, our Master Distiller, for launch events in both Singapore and Malaysia. The response to both markets was outstanding, and you can see some of the photos of some of the coverage we received on screen now. We've also shown the new range to key partners in Sydney already to unanimous acclaim. So the following slide continues to show how well our global reputation is rising. Ahead of the relaunch and rather, I must admit, exquisite timing, our Master Distiller, Chris Thomson was named as Master Distiller Blender of the Year for the Rest of the World at the World Whisky Awards just in January. This category celebrates excellence across more than 40 whisky-producing nations outside the traditional strongholds of Scotland, Ireland and the U.S. So the rest of the world includes whisky-producing powerhouses such as Japan. It's an incredible accolade for Chris, and congratulations to him and the distilling and blending team. News only got better later in that week when our founder and global ambassador, Bill Lark, was made a member of the Order of Australia and AM for his contribution to the Australian whisky industry. Bill is Australia's first modern era distiller to receive such national recognition, capping a legacy that includes him being the first Australian inducted into the World Whisky Hall of Fame back in 2015 and being the inaugural induct into the Australian Distilling Hall of Fame. Bill is an extraordinary legacy, and we are very proud to have him still working with us today in his role as global ambassador. Bill Lark remains a huge asset for our business. He's enormously popular amongst consumers and trade both at home and abroad, and we will continue to work closely with him in the years ahead. And importantly, as a sidebar, Bill absolutely loves the new whiskys and the new direction of the brand. International sales momentum and domestic leadership. Moving to Slide 13. Growing our presence internationally remains of critical importance for LARK. The half delivered export net sales of $1.3 million, an increase of $800,000 on the PCP, reflecting expanded distribution and improving depletion momentum across Asia as well as shipments of our new portfolio. The initial shipments of the new portfolio have been successfully delivered to 7 out of 10 key Asian markets ahead of the scheduled trade and consumer launch activities in the second half of this financial year. In China, the debut of Kurio, our entry-level blended malt whisky has generated impressive early momentum. Boyed by enthusiastic consumer reception in the first 3 months of sales in market, our expectation is the product will gain even further traction across this year and beyond. A key priority for us remains growing brand awareness and presence in export markets. Key activities during the half focused on reinforcing LARK's luxury brand position and strengthening alignment with trade and distribution partners ahead of the global relaunch. Key activities included LARK's presence at the Singapore Grand Prix within the Singapore Tourism Board suite, where VIP tastings were held across all 3 days, reinforcing LARK's luxury brand positioning with high-value consumers. Finally, distributor and trade partners were hosted in Hobart, deepening brand immersion and strengthening alignment ahead of our rollout into Southeast Asia. Moving to Slide 14 and Global Travel Retail. As most of you on this call know, global travel retail, which we call GTR is an exceptionally important part of building an international luxury brand, given consumer eyes and ability to showcase our product with the right consumer, and I'm very pleased with the progress. Brand awareness for both domestic and international travelers continued in the first half of the year. GTR net sales rose 17% to $1 million, supported by a strong focus on brand visibility across Australian airports. The channel observed strong sales in specialty releases with Christmas Cask and Lunar New Year 2026 products, driving incremental performance and depleting well across airport retailers. LARK significantly enhanced its brand visibility through a strategic upgrade at Sydney Airport in this half. The existing branded Wool Bay has been transformed into one of the largest whisky features in the store reinforcing a commanding presence within this vital international gateway. And from May, with our new restage product, our presence at SYD will grow only further. In December 2025, LARK was the #4 selling single malt whisky from all countries at Sydney Airport. Not only were we well ahead of all Australian whisky competitors, but ahead of all Japanese single malts. A new channel exclusive portfolio has been finalized and successfully presented to key Australian airport partners. The response has been overwhelmingly positive with widespread support secured ahead of the planned May 2026 launch. Notably, every customer has confirmed their commitment to stocking the full suite of core GTR releases. The GTR channel is expected to grow further afield following the signing of a distribution agreement in December with CoLab, the leading travel retail agency based in Singapore. The agreement will cover the Asia Pacific region, excluding Australia and New Zealand. The new relationship will look to build our airport coverage across the region with a new 700 ml portfolio from the second half of this financial year. Turning to Slide 15, Direct-to-consumer. LARK's internally managed channels performed well with direct-to-consumer net sales of $4.2 million, up 17% versus PCP, driven by continued momentum in e-commerce, which grew by 33%. Our e-commerce channel exhibited strong gifting demand with key products, including personalization. The Christmas campaign kicked off in October '25 with a limited release Christmas Cask achieving excellent sales. The subsequent introduction of Lunar New Year offerings in December brought the half year to a resounding close, supported by optimization of digital acquisition and conversion to include digital channels such as RedNote to support Chinese consumer engagement. Our e-commerce platform remains a cornerstone of growth, and we continue to refine and enhance this vital channel. We've developed a comprehensively restaged website with a new brand positioning ready to switch over with the launch of the new portfolio at the end of March 2026. To strengthen our footprint in priority European markets, we have entered into a strategic agreement with a European-based e-commerce and logistics specialist. This partnership leverages established infrastructure and internal e-commerce expertise, enabling local fulfillment and logistics from a dedicated European hub. Consumer sales through this channel is expected to commence in quarter 4 of this financial year, allowing LARK to expand its D2C presence across key regions, including the Netherlands, Denmark, Germany and Austria by seamlessly integrating with our existing e-commerce capabilities. We continue to assess our options for D2C as well as traditional retail across Europe and Great Britain. In the hospitality segment at our brand homes in Hobart, sales were modestly lower than the prior corresponding period, primarily due to the 3-month closure of our Hobart Cellar Door on Davey Street for significant renovations. The refreshed Cellar Door reopened in time for Christmas just December '22 as it happens, with final enhancements to the venues upper level completed just this month. We've observed strong performance across other venues, offsetting the closure of Davey Street. Pontville saw a 28% increase in distillery tours versus the prior corresponding period. Renovations of event spaces at Pontville were completed during the half in support of our existing Tasmanian tourism innovation grant. The revamped site sees additional space added to support increased booking and events to aid brand awareness. Domestic, will head to domestic B2B net sales. Business-to-business net sales were $2.3 million for the half, which was a reduction versus last year with the comparative period seeing the transition of our sales model to service domestic Australia. For part of the comparative period, LARK operated under a direct sales approach prior to transition to a distribution partnership with Spirits Platform, the company's domestic distributor to provide the opportunity for significantly greater commercial reach versus the prior model. In addition to this transition impact, domestic B2B sales performance was impacted by timing of shipments to Spirits Platform. Importantly, however, underlying trade performance for LARK whisky remains positive with depletion volumes, that is sales from the distributor to our trade customers, up 9% versus the previous period despite challenging market we're operating in. We're expecting ongoing momentum in H2 with incremental distribution of the new range secured. While the gin category remains subdued as reflected in volume declines of Forty Spotted Gin, the brand has, however, demonstrated notable resilience versus the wider category, especially within our national accounts. Considerable effort is now underway with Spirits Platform to support the forthcoming launch of the refreshed LARK portfolio in the second half of this financial year. This includes intensified marketing investment and commercial execution plans. With the Spirits Platform operating model now fully embedded, the streamlined route-to-market structure provides a robust foundation for the restage LARK range. Incremental shelf placement has already been secured for the new portfolio with products scheduled to appear in stores across both national accounts and independent outlets from April 2026. To our third strategic priority, cash and capital discipline. As mentioned earlier, LARK has a strong balance sheet and cash position to support its growth ambitions and support its strategic milestones. We will continue to be measured in our capital allocation to support growth plans through to our positive operating cash flow target during FY '27. From a future capital allocation policy, it is important to note our Pontville development has now been finalized with major capital projects now complete. We will continue to invest in current and new export markets, including international and GTR expansion. We will commercialize the full whisky bank, including utilization of acquired inventory in products like Kurio and LARK Fire Trail to support future growth. Finally, and very importantly, we have the capital in place to execute our growth strategy. I'll now hand over to Iain to talk us through Pontville Distillery and our whisky bank. Iain. Iain Short: Thanks, Stu. I'm on Slide 19. As Stu just mentioned, the redevelopment of Pontville is now complete. As we previously outlined, the distilling capacity on site has now increased to approximately 520,000 liters at 43% and a modular design allows for future expansion with modest additional CapEx when required, future-proofing our distilling operations. Automation and site improvements have removed production bottlenecks and enhanced safety, quality and efficiency, supporting lower future production costs and the new make spirit that the team is now producing is exceptional. Our whisky bank, 2.4 million liters is a strategic asset for the company, underpinning both near-term growth initiatives and the longer-term expansion by growing export markets. The current sales profile is now carefully aligned with forward sales plans, enabling the optimization of short-term distilling volumes to broadly match current sales. There's obviously been significant work over the last couple of years on portfolio development. In addition to the more obvious consumer-facing pack and brand positioning to drive sales growth, a key tenet of this work has been ensuring utilization and commercialization of the full whisky bank, including inventory acquired in the Pontville acquisition back in FY '22. This whisky has a higher book cost under acquisition accounting as it includes a fair value uplift in addition to underlying cost of production. Through our portfolio work, we are now able to commercialize the acquired inventory at scale through products like Kurio Blended Malt and LARK Fire Trail. The deployment of this acquired inventory generates a noncash impact on reported gross margins. This arises because the fair value uplift recognized under acquisition accounting flows through as an elevated cost of goods sold. And as we continue to utilize this inventory at scale, it will impact reported gross margin for future periods. That's why, as previously outlined, to provide greater clarity, we will disclose the impact of this together with the underlying margin excluding this accounting impact. I'll talk more to this in the next section. Moving on to the H1 financial highlights and the P&L slide on Slide 21. As Stu mentioned, net sales revenue grew by 10%. And within this, whisky net sales rose by 18% versus first half of FY '25. The increase in net sales driven by growth in D2C, Global Travel Retail and export distributor channels, partially offset by lower net sales from domestic B2B. Net sales growth is a higher rate than gross sales, including excise due to the relatively higher growth in export shipments, which are not liable for Australian excise. As Stu mentioned, the domestic B2B comparatives were impacted by a change to the sales model back in August 2024, with part of the comparative period reflecting previous direct sales model as well as shipment timing and one-off transition effects. As I outlined just before, the start of utilization of acquired inventory at scale saw a historical fair value uplift flow through COGS. This resulted in a reduction in gross profit by around $0.4 million and gross margins by around 5 percentage points versus the underlying production cost of the whisky. It's important to note that when removing the noncash accounting impact, underlying gross margins remained broadly stable at 63%. We continue to prepare for the new portfolio launch in the second half of this financial year. And despite increased investment in consumer and trade activities in the half, we were able to reduce marketing expenses to 23% of net sales, down from 27% in the first half of last year due to nonrecurring brand development spend in the comparative period. Expenses for share-based payments benefit from the reversal of previously recognized expense following the forfeiture of unvested performance rights and the P&L also benefited from government grant income of $0.6 million recognized in relation to the Pontville Distillery and Tourism operations. Turning to the balance sheet. Cash and cash equivalents were $18.3 million at 31st of December. Trade and other receivables rose to $1.1 million, with the increase driven by growth in export sales as well as timing in relation to R&D income receipts. Total inventory with a book value of $65.2 million provides strong asset backing to underpin our future growth, and this includes $48.6 million at cost of production and $16.6 million fair value uplift on acquired inventory from the Pontville acquisition in FY '22. Property, plant and equipment increased by $0.9 million versus June with $1.2 million invested in the Davey Street Hobart Cellar Door redevelopment, Pontville distillery and wider Pontville site development. All major projects are now complete with minimal spend remaining. Trade payables reduced to $1.9 million versus June '25 with the prior period elevated by purchase timing and a $0.6 million government grant reclassified to payables and subsequently repaid in July. Deferred tax asset remains prudently derecognized. Carryforward losses remain available, and we expect the DTA to be re-recognized in future periods when profits are expected to arise. Deferred government grants were down $0.6 million versus June with the income recognized in the P&L and full recognition criteria has now been met for the remaining $1.7 million balance, and this will be amortized to income over the useful life of the related assets. Importantly, LARK remains debt-free. Moving to the cash flow statement. We continue to focus on cash and capital discipline across the business. Cash outflows from operating activities improved by $0.3 million through stronger sales performance, moderated distilling through the Pontville commissioning and interest income with these improvements partially offset by temporary timing impacts. These timing impacts included a reduction in creditors from the elevated June balance and the timing of R&D incentive receipts with $0.5 million received in the prior year and the equivalent receipts expected in half 2. Investing cash flows included payments for property, plant and equipment related to the developments I just talked about, which are now commissioned and repayment of government grants related to the unutilized funding under the modern manufacturing initiative, which was repaid in July, as just mentioned. Investments in the prior period reflected the timing of term deposit maturities and consequently, net short-term investment activity on a full year basis last year amounted to 0. With that, I'll hand back to Stu. Stuart Gregor: Thanks, Iain. And turning to our growth priorities and perspectives for the second half. As we look to the future, we look to executing on our 3 strategic pillars to generate the long-term value for all shareholders. Our growth strategy focuses on this orchestrated rollout of the refreshed portfolio, designed to build momentum across key markets and channels while reinforcing our position as a global scalable luxury brand. In the second half of F '26, we will execute coordinated consumer and trade launches across all channels. Export trade launches commenced from January, enabling early international presence. The domestic Australian market will follow in March and April, capitalizing on heightened local anticipation and GTR activations will begin in May, aligning with peak travel seasons to capture high-value aspirational consumers. To support this ambitious expansion, marketing investment will remain substantially elevated with a deliberate shift in allocation toward consumer-facing activations and trade engagement. This focused approach will drive awareness and loyalty while amplifying the portfolio's premium appeal. Concurrently, we will continue the systematic rollout of our updated brand positioning and visual identity across all consumer touch points. These enhancements are crafted to strengthen our luxury credentials, ensuring a cohesive, sophisticated narrative that resonates globally and supports long-term scalability. International sales momentum and domestic leadership remains a core priority. We anticipate sustained growth even amid challenging market conditions propelled by rigorous operational discipline, the compelling introduction of the new portfolio and the strengthened brand positioning. Within Australia, initial B2B shipments of the refreshed portfolio are slated to commence in quarter 3 of F '26. And meanwhile, sales through the Whisky Club of the Rare Seppeltsfield series, which was seen in quarter 3 of F '25 is scheduled for quarter 4 of this year as stated earlier. And as Iain outlined, commercialization and scale of acquired inventory will continue to see a modest noncash impact to reported gross margins. On the cash and capital front, we maintain unwavering discipline. Operating cash flows will reflect the upfront weighting of marketing expenditure in the next year or so before turning positive in FY '27 as sales momentum accelerates. The Pontville commissioning process is now fully complete with distilling volumes adjusted to anticipated demand and sales trajectories. With major capital projects now concluded, we've secured the necessary resources to execute our growth agenda. Future capital allocation will remain sharply focused on brand-building initiatives and commercial expansion, ensuring we continue to invest strategically in the drivers of sustainable, premium and long-term growth. As I said at the top, it's an exciting time for LARK. And that, my friends, is it from me, and I'm happy to hand back to Mel, who can facilitate any questions you might have. Melanie Jaye Leydin: Thanks, Stu. Our first question is actually about yesterday's news. Would you be able to give us a little bit of an update on the CFO process and Paul's appointment? Stuart Gregor: Yes. So yesterday, we were thrilled to announce that Paul Bowker will be joining the business. He was one of the co-founders of the Brick Lane brewery, and he's been a former CFO of a listed business for about 6 years of LogiCamms called ASX-listed business. We're thrilled to get Paul whilst sad to lose Iain, who's sitting on my left. Paul is a lawyer by trade has a Masters in Finance. He's entrepreneurial in spirit, and he starts on Monday. So it's a good time for us. It's a good transition with him and Iain that will go through the entire month of March. And I hope we're good to go. We're very excited to get him on Board. And he -- from some of the notes I've got from the trade and from some of the people in the finance world, he's pretty well regarded. So we're thrilled to get him. Melanie Jaye Leydin: Great. Thanks, Stu. We might stick with you, Nick from Barrenjoey has asked, what are the key learnings from your time at 4 pillars that could apply to LARK? Stuart Gregor: I mean -- where to begin? I mean some of the key learnings are how we can build a brand globally. Not many people probably gave a gin brand from the Yarrow Valley much of a chance to become a globally recognized brand and a brand that is doing particularly well in the global travel retail as an example. So I think we can learn from that. I think what it does is it gives me confidence that the world wants to see some great products, some great spirits coming out of Australia. And we had -- I think we crafted a great story of 4 pillars. But what LARK has that even 4 pillars didn't have is we have the Genesis story. We have the story of leadership. We were the first to do it. We've built the best reputation amongst all Tasmanian whisky. So we have a huge competitive advantage against our Australian competitive set. And I think we're going to be able to take really New World Whiskys. These are very different, exciting, delicious whiskys that don't taste like we're trying to mimic Japanese styles or we're trying to mimic Scottish or Irish or American styles. These are very uniquely Australian and uniquely Tasmanian whiskys. I think the other thing I've learned is the whisky is more complicated than gin, but potentially more fun, but definitely more complicated. So I think we've learned a little bit a lot from 4 pillars. But I think we can also apply some of the things that we probably maybe didn't get entirely right with 4 pillars. So hopefully, we can get it better the second time around. Melanie Jaye Leydin: Great. Love to hear it. So the next question is, what does the product pyramid look like once reset fully? Which parts of the product pyramid are going offshore? And what price point is sustainable at scale? Stuart Gregor: Let's just talk about there are 3 core brands that start at what we're going to call AUD 170. There will be some differentiation in pricing across markets depending on local taxes and everything else. But I think that is a sustainable price for our entry-level whisky, which will be the Fire Trail. I think that, that might be -- I think that's a product that is competitive enough in pricing. It's high enough quality for us to, I think, be able to sell that across duty-free as well as into domestic and international trade. So by that, I mean, on-trade and off-trade. We will then have a product around $200, the Devil's Storm. I think one of the things to remember is that these are going to be about price parity to our current products, but you've got 40% more. So you're a 700 ml product rather than a 500 ml product, and we're trying to keep the prices about parallel. I think they are sustainable pricing. And I think that when we look at the market of luxury whisky, so I'm going to call that whisky is above USD 100 a bottle for a 700 ml bottle. That is the segment of the category that is in greatest growth globally. It's the real low-value products that are really suffering at the moment. And I think people have probably heard about some of those Jim Beam and some of the other products that are really suffering at that really commercial level where price -- just aggressive price discounting is happening everywhere. And I think it's going to be happening in Australia a little bit more as well. So I think that $170 to $200 and then the Ruby Abyss, which will be in our core, which is the Red Label, if we go back a few slides, will be in the sort of $380 to $400, and that will be very much our first of our sort of super luxury products. And I think that, that will become a bit of an iconic whisky without wanting to overuse a term that gets overused, I think really this will become something really quite special. There will be other products. There will be a dark LARK coming in. And again, that will be in that sort of AUD 200 price point. Again, a little bit -- once we work on travel retail, we'll be able to adjust those pricing without that enormous excise that we have to pay in Australia. So these whiskys will be price parity across the world. But I think we're -- I think price-wise, we're good. So that's the pyramid, if you understand those 3 products. And then there will be other exclusive products coming into the direct-to-consumer channel. There will be exclusive products coming into the global travel retail channel, and there might even be exclusive products going to the on-premise channel. But that's our pyramid is currently 3, but there'll be a few more coming in at prices. But we won't -- and then there'll be Kurio, which will be around $100 blended malt price point moving forward. I hope that answers your question. Thank you. Melanie Jaye Leydin: Great. Iain, we might switch to you. Lachlan from Moelis has asked, how much in cost savings are you expecting from the completion of the Pontville site redevelopment? Iain Short: Yes, all right. So the Pontville site development, as I explained earlier, there's a couple of sort of key elements of that. One is significant automation versus the very manual footprint that we had previously. So we will see obviously efficiencies come through that. And in particular, that will be when we scale. Obviously, as we do scale volumes, we don't need to put significant additional headcount on. So we will see efficiencies within that distilling production cost. We will also see one of the things that's quite often overlooked is that blending and the wider infrastructure that we -- that we've developed down at Pontville is massive for us because it actually allows us to scale. Previously, we were relying on third parties for blending, so additional costs, et cetera. So we should have efficiencies in that blending cost as well, which will help us in COGS in particular as we scale. But probably the critical bit is the development does allow us to scale in addition to that cost base. Melanie Jaye Leydin: Great. And we might just stick there because Nick also from Moelis has congratulated you on the results. And he's asking if you could share some insights on how management and the Board are thinking to the potential expansion of Pontville to that 800,000 liters. What do you need to see to make the decision to pursue the expansion? And given the modular design, would you look to increase capacity and stages? Iain Short: Yes. So I'll cover that one. So yes, it's a modular design. So that means that we can, in the future, expand the capacity with pretty minimal CapEx. Importantly, we have just increased the capacity to just over 0.5 million liters, which gives us pretty significant headroom versus where we are now. We've talked for the last little while about broadly matching distilling production levels with our current sales. So in round numbers, we can talk probably for this calendar year somewhere in the region of 100,000 liters of production, and we'll be looking to increase that production as we grow our sales volume. So where we are right now is round numbers, 100,000 liters. We've got headroom and capacity to get to 500,000 liters. And as we grow, we will be growing sales -- sorry, as we grow sales, we'll be growing distilling. So you can think of the whisky bank in volume terms as broadly staying about that 2.4 million, 2.5 million liters for the sort of short to medium term. So it gives us optionality for the future, but that's for another day, another year, we've got the capacity to grow with our current footprint. Stuart Gregor: I think if we get capacity of Pontville soon, we've gone pretty well. Things are going great. Melanie Jaye Leydin: Okay. We've got a few questions here on Asian markets. So firstly, what early data points can you see at the distributor level for depletions of initial shipments? And what are your expectations for the size of reorders in key export markets like China, Japan and Southeast Asia? Iain Short: I can start off. In terms of initial data points, very, very limited right now. The new shipments of the -- sorry, the shipments of the new portfolio sort of back end of the half, landing in around about Christmas time with the first markets to go being Singapore and Malaysia that Stu talked about just before and had those pictures on. So very, very early days. And maybe Stu can give a bit of color, but -- because I wasn't there, but the reception from the -- from our customers, i.e., our distributor partners, trade, consumers, media was pretty exceptional by all accounts. So in terms of what that means for depletions, it's too early to tell. We're sort of desperate to get that, but initial reaction and support from -- across our distributor base and across the trade has been fantastic. So we are pretty excited and optimistic for that depletion run rate and therefore, reorders. Stuart Gregor: Yes. I would think it's something that we might have a little bit more detail on the next half. We just don't have it's literally too early. I mean the stock -- when we did our promotional tour of basically KL in Singapore was the third week of January, and that stock was only -- had only recently arrived. What we do know is that we depleted most of the stock that was -- that came out of bond already in Malaysia. So that's a good start. It's a good high -- it's good high-end whisky trading Kuala Lumpur but very strong. Singapore was also good. We know that Kurio has gone well in China. But again, it's particularly hard time to get data out of the Asian markets with Chinese New Year and everything else. But we're hoping that in March, April, we'll start seeing some real numbers coming back. So we should have something a bit better to report in the second half, I would hope. Melanie Jaye Leydin: So wait for Q3? Stuart Gregor: I think 7 out of 10 of our markets in Asia have got or on the water with the new product. So some of that 3 or 4 of our markets in Asia are still working through the old product. For instance, I had dinner last without Fiji and agency, lovely little market there, little bit of progress going on there, but still selling the old product into the luxury market into Fiji. I'll get the new product significantly later in the year, I imagine. Melanie Jaye Leydin: And just sticking with that, in terms of feedback from Asia and how LARK stacks up versus traditional single malt, what other investments does LARK need to do to drive awareness and perception of the brand? Stuart Gregor: In short, a bit, quite a bit. But we are going to a market that loves its whisky, huge market. If we just talk about Asia for the time being that loves its whisky is whisky drinking significantly greater percentage of spirit drinkers drink whisky than, for instance, gin. But we are going with new products. We're going with products that taste a little bit different. I think that the taste profile, they're very rich, anxious, viscous, sweet, beautiful Tasmanian whiskys. They don't taste like Macallan, which is a clear market leader in many of the markets that I visited recently. They taste -- I think they're going to appeal as flavor forward rich whiskys. They don't have an age statement. So we have to educate a very big market in what that means and why that's better, why Australian whisky and Tasmanian whisky in particular, doesn't need to be matured for 15 years to taste as good as it does. So there's a lot to do. We have to educate. We have to have people on the ground in Singapore. We have to do it hand-to-hand combat at our level. It's not a big advertising campaign, for instance. It's getting individual bars, individual retailers, individual travel retail ambassadors and advocates to understand why this is such a great story and why this is such a great whisky. It will take -- it's going to be a really interesting and engaging time up there. I can't wait, and we're going to have 3 people on the ground in Singapore full time whose sole role is going to be selling that story and these whiskys to those markets. Melanie Jaye Leydin: Great. Iain, we might switch to you. Could you talk to how you think about gross margins for the next little while? You touched on it, but it looks like we should expect acquired inventory to continue to be sold through. I appreciate this is a noncash pass-through, but for how long might this be? Iain Short: Yes. Okay. So yes, as I mentioned, noncash impact. And just to give a bit of sort of quantum. So what we're talking about here is the inventory acquired during the Pontville transaction back in FY '22. That was a little under 480,000 liters. So round numbers just a little bit less than 20% of the whisky bank. And we've only just in this half started sort of selling out at scale. So reasonable size volumes of that acquired inventory as a proportion. At this point in time, Kurio and LARK Fire Trail are the current products, which allow us to really utilize the acquired inventory at scale. And obviously, the utilization depends on the, let's say, the trajectory of those products. And equally, the relative impact to gross margin depends on the relativity between those products and other products which are utilizing our own whisky. So quite difficult to pin an exact number because there's multiple variables, but probably how to sort of look at it, we've seen about a 5% impact to gross margin in this half, something similar for the next little while because it's not just acquired inventory selling. So it's going to be a relatively modest impact, that sort of 5-ish percent. And as it's just under 20% of the whisky bank, we'll deplete that as we grow, but it's probably there for the medium term. Melanie Jaye Leydin: Yes. Great. And I think probably importantly, we're going to keep reporting. Iain Short: Yes. Yes. Melanie Jaye Leydin: So could you also talk to what we should see as consumers with the brand restage activations domestically? Assuming there will be some differences in your strategies to sell through to the D2C and B2B audiences. Stuart Gregor: Yes. I mean you will see a whole new LARK coming to market. The question was what we as consumers should expect to see. So you'll expect to see a whole new product on the shelves, a whole new -- totally new brand. You'll see a new website, you'll see new digital advertising once we go into the larger retail partners. You'll see an increased presence at both Sydney -- not just, Sydney, Melbourne and Brisbane Airport primarily. You'll see a totally new -- you'll see some new positioning around the island is calling whiskys from the new world, those sorts of things. And you will start seeing -- I think you will see more increased presence on the back bars of the best bars in the domestic market. We're just talking about the domestic market. I think that's what the question was. One of our focuses is going to be making these whiskys much more available for people to taste in the higher-end on-premise market, whether that' Sydney, Melbourne, Brisbane, Adelaide, Perth. And then you'll hopefully see us in as much retail at the higher end as we possibly can. It is -- they're much brighter. They're much livelier. And I think they will have increased shelf presence. So we think that people will hopefully want to take them off the shelves more regularly. Melanie Jaye Leydin: Great. And maybe just talking about channels there, could you talk to what are the next steps in the GTR journey? Or is it all about sell-through volumes now? Stuart Gregor: I mean, look, the next step in the GTR journey, well, Sydney is a priority gateway for us. It's a priority gate. It's an important door globally for whisky brands. We just stick to whisky. Our relationship with Sydney and Heinemann is crucial, not to diminish Lotte, not to diminish Brisbane and Melbourne are very important gates as well, increasingly so in Brisbane in particular. You will see us having a whole new -- our new positioning will appear from May. We will have -- in Sydney, we will have a whole new area dedicated to LARK. We will have all the new brand there, new product there, new packaging there. We are taking -- it's an interesting world travel retail. You have ambassadors on the floor selling a product and that sort of stuff. So we'll be taking all of them down to Tasmania. I think what you'll see is an increased presence in all of the Australian airports. I would very much hope that we would have a relationship with at least 1 or 2 of the key Asian gates before the end of this financial year. We have begun conversations with some of the more important airports. There's no guess, no massive mystery around what those would be for us. We will hope to have some presence in some of those markets. We've had those first meetings in literally the last 3 to 4 weeks. And it is -- as you can imagine, these are very, very large businesses, and it takes a little while for them to range new Australian whisky. So I would -- I hope that answers your question. But I would think -- and from a domestic -- just from a domestic retail perspective, I hope you see us a lot -- across a lot more independents and major chains. And as I said, I hope one of the things I really want to prioritize is seeing us more in bars. So people can get that little taste of a nick of one of our LARK's and that's something I want to buy, whether it's next time I go to a retailer or next time I go overseas. So yes, we need to get -- we all call it liquid on lips, right? We need to get people tasting these new LARK's. And that's a priority for the business is to get as many people to taste these LARK's because one of the things we found is that a lot of people know of LARK and like the brand intuitively. But then when you ask, well, have you tasted LARK, they tend to go, no, I don't have that, but I like the brand. So we just need -- that's the level of conversion we need. We need to get everyone to say, I like it, I want to buy it and I want to taste it and drink it. Melanie Jaye Leydin: Great. That brings us to the end of the question. So Stu, I might pass to you for final comments. Stuart Gregor: Well, look, it's been a -- not in the like, it's been a well-win 7 weeks. We've got a new Chief Financial Officer. We've been up to Asia. Bill and Chris have won a couple of awards. So it certainly has been a -- it's definitely been an interesting 7 weeks. We've had a lot of fun. I think we only reopened the Tasmanian Cellar Door last Thursday officially with all the local dignitaries in Hobart down there. It's really exciting that the distillery looks fantastic. The new make that is coming out of the distillery is the best I think the business has ever made, and that's coming from Chris and Bill. So the spirit that's going to be coming through us LARK over the next 5, 10 years is going to be incredible spirit. The new products are getting an, incredibly unanimously positive reception. So I think they'll really hit the market. March 26 is our go-live date from our internal perspective. So I think this half is going to be a really interesting half. It's going to have all of the challenges that these businesses have. And then I think moving into next financial year, we should really start seeing -- I hope we build some momentum. I hope we get some impetus going. And I think it's an exciting time. And primarily these whiskys are fantastic. And this new restage is fantastic. So credit to Sash and the team and Iain who have been working on this for 3 years. So hopefully, I can come in and take credit for all of the hard work they've done. Melanie Jaye Leydin: Thanks, Stu. Stuart Gregor: Thank you, team. Thank you, everyone.
Operator: Good morning and welcome to the Axsome Therapeutics, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Kevin, and I will be your operator for today's call. At this time, participants are in a listen-only mode. Later, there will be a question-and-answer session, and instructions will be given at that time. Please note this call is being recorded. I would now like to hand the call over to Ashley Dongdress of Investor Relations. Ashley, please go ahead. Thank you. Ashley Dongdress: Good morning, and thank you all for joining Axsome Therapeutics, Inc.’s fourth quarter and full year 2025 earnings conference call. With us today are Dr. Herriot Tabuteau, our Chief Executive Officer, Nick Pizzie, our Chief Financial Officer, and Ari Maizel, our Chief Commercial Officer. We will begin our call with prepared remarks. Mark Jacobson, our Chief Operating Officer, and Hunter Murdock, our General Counsel, will also be available for Q&A. Before we begin, I encourage everyone to visit the Investors section of our website to find the press release and presentation for today's call. Please note that today's discussion includes forward-looking statements regarding our financial performance, commercial strategy, and operational plans, including research, development, and activities. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our SEC filings, including our quarterly and annual reports, for a description of these and other risks. You are cautioned not to rely on these forward-looking statements, which are made only as of today. The company disclaims any obligation to update such statements. And with that, I will hand it over to Herriot. Thank you, Ashley, and good morning, everyone. Herriot Tabuteau: 2025 was a year of significant commercial, research, and development progress at Axsome. Our commercial business is strong, with Auvelity achieving sales of over $500,000,000 in its third full year of launch, Sunosi growth accelerating, and Cymbravo launching, adding a third pillar of growth. Total revenue for the fourth quarter increased 65% year over year to $196,000,000; for the full year, increased 66% to $639,000,000. Our innovative medicines continue to meaningfully improve patient outcomes. Just our current commercialized products have the potential to achieve multibillion dollars in annual peak sales. To support the continued momentum of our current products and future launches, we have built a technologically enabled scalable commercial platform. Against this backdrop, we are advancing a broad and innovative CNS pipeline, which includes five novel product candidates across nine high-impact indications. I will provide an update on our pipeline progress starting with our sNDA for Auvelity in Alzheimer's disease agitation. We recently announced the acceptance of the sNDA filing and the receipt of priority review designation with the PDUFA action date of April 30. If approved, Auvelity has the potential to address the prevalent and debilitating condition for which currently only one product is approved. As we approach the April 30 PDUFA date, launch readiness activities are underway, which Ari will discuss later in the call. We are encouraged by the level of interest within the treatment community and expect awareness to continue to build in the quarters ahead. Beyond the opportunity in Alzheimer's disease agitation, we are advancing our planned Phase III trial of AXS-05 in smoking cessation, with initiation anticipated in the second quarter. Moving to AXS-12 in narcolepsy. Following receipt of positive FDA pre-NDA meeting minutes, we have made significant progress with our NDA package, and we expect to submit that imminently. For solriamfetol, we continue to advance this differentiated molecule across multiple new indications, including ADHD, binge eating disorder, MDD with symptoms of excessive daytime sleepiness, and shift work disorder. These new indications represent significant expansion of solriamfetol's potential to help patients and create value for stakeholders. For ADHD, we recently completed a Type B meeting with the FDA, where we reached agreement on the planned Phase III studies in pediatric patients. We plan to conduct two Phase III trials in parallel, one in children and one in adolescents, and we are on track to initiate both in the first half of this year. For MDD, startup activities are underway for initiation this quarter for a Phase III trial of solriamfetol in MDD patients with symptoms of excessive daytime sleepiness. For binge eating disorder, our ENGAGE Phase III trial of solriamfetol in this indication is progressing, and we expect top-line results in the second half of this year. Finally, for solriamfetol in shift work disorder, we now anticipate top-line results in 2027, based on current enrollment trends. Turning to AXS-14. We recently initiated the FORWARD study, a Phase III double-blind, placebo-controlled, randomized withdrawal trial of AXS-14 in patients with fibromyalgia. This new study will supplement the two completed positive Phase II and Phase III trials of AXS-14 in this indication. To complement our late-stage pipeline, we recently acquired AZD7325, a novel oral GABA-A alpha-2/3 receptor positive allosteric modulator. We plan to evaluate AXS-17, the new designation for this compound, for the treatment of epilepsy based on compelling data in preclinical seizure models. Further, AXS-17 has demonstrated a favorable safety profile in over 700 patients to date. Phase II trial-enabling activities are underway, and we look forward to providing updates on this new development program in the coming months. Taken together, our growing commercial business, the potential label expansion for Auvelity, and the robust innovation across our pipeline uniquely position us to continue to deliver new treatment options for patients living with CNS disorders. With that, I'll hand the call over to Nick to review our financial results for the quarter. Nick Pizzie: Thank you, Herriot, and good morning, everyone. Our fourth quarter and full year 2025 performance reflects Axsome's growing commercial portfolio and the continued advancement of our industry-leading CNS pipeline. Together, these collective achievements firmly position us for the year ahead. As Herriot mentioned, total product revenue was $196,000,000 for the fourth quarter and $638,500,000 for the year, up 65% and 66% year over year respectively, which was driven by robust Auvelity growth, the continued solid performance of Sunosi, and initial contributions from the launch of Cymbravo. Auvelity achieved net product sales of $155,100,000 for the fourth quarter, up 68% versus the prior year. Auvelity sales surpassed the $500,000,000 mark in only its third full year from launch, totaling $507,100,000, representing a 74% year over year increase. Sunosi posted another strong quarter with net product revenue of $36,700,000, a 40% increase compared to 2024. Sunosi revenue was $124,800,000 for the full year of 2025, representing a 32% increase versus last year. Cymbravo generated $4,100,000 in net sales for the fourth quarter and $6,600,000 for the full year, following its second full quarter of launch. Together, these results underscore the continued momentum of our top-line performance and disciplined execution, which is resulting in further operating leverage in the business. Auvelity and Sunosi gross-to-net discounts in 2025 were in the high-40% range. Going forward, we expect Auvelity and Sunosi gross-to-net discounts to increase to the mid-50% range due to typical Q1 dynamics. Cymbravo gross-to-net discount for the quarter was in the high-70% range, which we anticipate will remain elevated during the launch phase. Now turning to expenses. Total cost of revenue was $12,300,000 and $47,500,000 for the fourth quarter and full year of 2025 compared to $10,500,000 and $33,300,000 for the comparable periods in 2024. Research and development expenses were $48,800,000 for the fourth quarter and $183,300,000 for the full year of 2025. That is compared to $55,000,000 and $187,100,000 for the fourth quarter and full year of 2024. The decrease in R&D spend for the year was primarily driven by the completion of clinical trials for AXS-05 and solriamfetol, which was partially offset by one-time acquisition-related costs and higher costs related to AXS-07. Selling, general, and administrative expenses were $160,300,000 for the fourth quarter and $570,600,000 for the full year of 2025. That is compared to $113,300,000 and $411,400,000 for the fourth quarter and full year of 2024. The 39% increase in SG&A spend for the year was primarily driven by commercialization activities for Auvelity, including sales force expansion and the national launch of a direct-to-consumer advertising campaign, along with the commercial launch of Cymbravo. Net loss for the fourth quarter was $28,600,000, or $0.56 per share, compared to a net loss of $74,900,000, or $1.54 per share, for 2024. The $28,600,000 net loss in the quarter includes $22,700,000 in stock-based compensation expense. Net loss for the full year of 2025 was $183,200,000, or $3.68 per share, compared to a net loss of $287,200,000, or $5.99 per share, for the full year of 2024. This year's loss of $183,200,000 includes $93,800,000 of stock-based compensation expense. Now turning to the balance sheet. We ended the year with $323,000,000 in cash and cash equivalents compared to $315,000,000 at the end of 2024. Looking ahead, we continue to believe that our current cash balance is sufficient to fund anticipated operations into cash flow positivity based on our current operating plan. With that, I would like to now turn the call over to Ari, who will provide a commercial update. Ari Maizel: Thank you, Nick. Axsome delivered strong performance in Q4 and completed 2025 with momentum for Auvelity, Cymbravo, and Sunosi. Our outstanding medicines continue to meaningfully improve patient outcomes. With our planned investments for 2026 and the power of our innovative digital-centric commercialization model, we have high confidence in our ability to deliver upon the vast opportunities that remain for our growing portfolio of CNS medicines. Beginning with Auvelity, more than 225,000 prescriptions were written in the quarter, representing 42% year over year growth and 8% sequential growth. By comparison, the antidepressant market was flat over the same time period. Our sales team continues to drive uptake across prescriber segments, particularly in the primary care setting. Primary care clinicians represented approximately one-third of all Auvelity prescribers in the quarter and continue to be the fastest growing prescriber segment, further expanding the overall prescriber base alongside continued growth within psychiatry. More than 5,300 new prescribers were activated in the quarter, bringing the total number of unique prescribers to approximately 52,000 since launch. Formulary access for Auvelity also remained strong. As of January 2026, commercial coverage increased from 75% to 78%, bringing total coverage to 86% of all lives across channels, and we expect coverage to continue to expand and evolve throughout the year. Auvelity’s growth to date reflects its distinct clinical profile, fast onset of action, sustained relief from depression symptoms, and a highly favorable safety and tolerability profile, supported by execution across our innovative commercial engine, reinforcing our confidence in the significant long-term commercial opportunity for the brand. To support the growing demand in MDD, and in anticipation of the potential launch in Alzheimer's disease agitation, we recently initiated our third and largest expansion of the Auvelity sales force to approximately 600 sales representatives. We expect to complete this expansion in the second quarter and look forward to providing additional details of these plans in the months ahead. Turning now to Cymbravo, which saw acceleration in new patient trial in Q4 resulting in more than 13,000 total prescriptions and approximately 5,300 new patients started in the quarter. Our disciplined launch strategy targeting headache specialists continues to grow advocacy for Cymbravo among the highest-volume migraine prescribers in the U.S., and we are pleased with the feedback from HCPs on the positive impact Cymbravo is having on patients. The key clinical attributes leading to Cymbravo trial include the multi-mechanistic approach to migraine symptom relief targeting multiple causes of migraine, rapid onset of action, and positive impact on patient functioning within two hours. We are excited about Cymbravo's long-term potential as a preferred acute migraine treatment. We continue to make progress with Cymbravo market access and coverage, with overall payer coverage at approximately 52% at the start of the year. The proportion of covered lives in the commercial and government channels is approximately 49% and 57% respectively. In addition, Axsome successfully contracted with a third and final large commercial GPO for Cymbravo in Q4, which now enables negotiation with all major commercial payers and PBMs. We anticipate coverage for Cymbravo to expand and evolve throughout 2026. And finally, Sunosi delivered another strong quarter of performance, with more than 54,000 prescriptions representing 11% year over year and 3% sequential growth. By comparison, the wake-promoting agent market grew 2% year over year and was flat versus Q3. Nearly 500 new clinicians prescribed Sunosi in the quarter, bringing the total cumulative prescriber base to approximately 15,100 since launch. Payer coverage for Sunosi remains steady at approximately 82% of lives covered across channels. Overall, the performance of our innovative marketed products in 2025 underlines the effectiveness of our commercial strategy and execution and positions us well as we enter 2026. Auvelity, Sunosi, and Cymbravo are delivering differentiated patient outcomes in the depression, excessive daytime sleepiness, and acute migraine markets, and together represent a proliferating growth foundation for Axsome. This year, our focus remains on scaling growth across our commercial organization and expanding adoption of our important CNS medicines. I will now turn the call back to Ashley for Q&A. Ashley Dongdress: Thank you, Ari. Operator, we are ready for Q&A. Operator: Certainly. We will now be conducting a question-and-answer session. Our first question today is coming from Leonid Timashev from RBC Capital Markets. Your line is now live. Leonid Timashev: Thanks, guys. Thanks for taking my question. I wanted to ask on what the implications are for you from the new FDA publication on sort of the one-trial policy given the amount of trials that you are running. I guess I am curious whether you think that means that some of the studies in binge eating and shift work disorder could potentially be approvable on a single Phase III. And then similarly, why, given that policy, for example, you are running two studies in ADHD splitting pediatric and adolescent patients? Thanks. Mark Jacobson: Hey, Leo. This is Mark. Good morning. So, obviously, that is hot off the press, and the team is assessing it. So one thing is, as always, we always vet our clinical plans with the FDA and their vision that the programs are under. So we are going to continue to do that. And, you know, if there are changes, we will see. You mentioned shift work disorder. That is an example where we already have alignment with FDA that the existing clinical package could serve as potential support of evidence should the study that we are conducting now be positive. So, that is one example where that is the place. I will pass it to Ari for thoughts on ADHD. But our plans for ADHD reflect, you know, regional alignment that we reached with FDA. Yeah. Yeah. Herriot Tabuteau: Just to add to what Mark was saying. So one thing to keep in mind is, although this is a broad guidance, each clinical situation, each indication is specific and has to be looked at from that perspective. So for ADHD, it is a disorder which affects different patient populations. For example, adults with ADHD are different from children with ADHD. So as you can imagine, this is a situation whereby you would not be able to, or the FDA would not allow you to do just one study in adults, for example. We are conducting two studies in pediatric patients with ADHD because, again, there is a sub-segmentation of pediatric patients. So you have children, so those are individuals who are less than 12 years of age, and then adolescents. So typically, the FDA does require data from both subsets of patients. It is possible, for example, to study both subsets of pediatric patients in one study. We decided to split it up into two studies, which will be conducted concurrently, and that will have no impact whatsoever on our eventual filing timeline. Operator: Thank you. Our next question today is coming from Marc Goodman from Leerink Partners. Your line is now live. Marc Goodman: Yes. Can you talk about AXS-17, just the types of epilepsy, the development plan that you are thinking about moving into? And you had mentioned that the product has been around and has some history in patients. Just talk about what kind of data do we have? Thank you. Herriot Tabuteau: Thanks for the question. So the product has been studied in different indications. So one indication that has been studied in the past is generalized anxiety disorder. And all of the safety data and safety experience comes from those studies. So it is really nice that the product has been studied in a range of doses and also with chronic dosing. As it relates to the direction of going in and looking at epilepsies, this is based on a pretty broad array of preclinical studies that have been done in epilepsy models that are predictive of clinical success. And, right now, what we are doing is we are starting—we have started—the work to make sure that we are Phase II ready and also are very closely assessing all of the various different epilepsies in which the product in preclinical models has shown promise. So stay tuned, and over the balance of this year, we will provide more details on which indication—exactly which specific epilepsy—we will target first. Operator: Thank you. Our next question is coming from Jason Gerberry from Bank of America. Your line is now live. Jason Gerberry: Hey, guys. Thanks for taking my question. Why don’t I just follow up on the comment about Auvelity? Payer coverage evolving over the course of the year? And one thing I just wondered about, like as you add the ADA label, sometime in April, you know, should that just mirror the MDD coverage? If not, is there a process for access build post the ADA approval? And the reason I asked, you know, I think about other CNS drugs like Caplyta, right, when they added different indications, it was a pretty seamless coverage post the label add-on event. So wondering how that looks for you guys with Auvelity and the ADA indication. Thanks. Mark Jacobson: Yeah. Thanks for the question, Jason. As you stated, in general, when you have a product that is on the market for a specific indication and you expand the indication, generally speaking, your existing coverage should apply to the new indication. I think what is unique about MDD and ADA is that MDD is largely a commercial business, whereas ADA will be more weighted to Medicare Part D. Our aspiration is to get as close as possible to 100% access for the brand, and that is something that is our aspiration. So just continuing to work with plans that do not currently cover the product and continue to work on things like removing steps in PAs where they exist today. Operator: Thank you. Our next question today is coming from Andrew Tsai from Jefferies. Your line is now live. Andrew Tsai: Hey, good morning. Thanks for the update. And back to Alzheimer's agitation, how should we think about the initial launch cadence in the first year? Do you expect your launch to be stronger than what Rexulti saw in only Alzheimer's agitation in terms of TRx volume and sales? And then maybe as a follow-up to the gross-to-net specifically, do you think combined gross-to-net for Auvelity could trend or shake out over time? Thank you. Ari Maizel: Thanks for the question. We do not generally forecast where we would expect ultimate uptake to land. But suffice it to say, we are actively preparing for the launch to enable commercial availability and customer engagement as soon as feasible post launch. And from our perspective, there is very limited analog in the market. Obviously, there is only one other product. So we are studying that carefully as well as the MDD launch for Auvelity to really assess where we think uptake will be on the first year. You know, once we have an approval, obviously, we will share additional details about our commercial effort. And so stay tuned for some more details later in the year. Nick Pizzie: Yeah. And hey, Andrew. Just maybe a note on the GTN. So we anticipate that 70%+ scripts for ADA will be written in the Medicare Part D channel. And as such, that channel has a more favorable GTN, specifically as there is no co-pay card utilization around that. So we would expect potential favorability from where we have been on the aggregate for Auvelity. Operator: Thank you. Our next question today is coming from Pete Stavropoulos from Cantor Fitzgerald. Your line is now live. Pete Stavropoulos: Good morning, and thanks for taking my questions. For Sunosi, you had double-digit year over year growth. What were the drivers of that? Is growth more volume driven, or are you seeing benefit from improved access, persistence, or share gain? And is growth being driven more by narcolepsy or OSA? Are you seeing any differences in prescriber behavior between those two segments? Thanks. Ari Maizel: Yes. Thanks for the question, Pete. Sunosi continues to deliver steady growth in both the OSA and narcolepsy markets. As we shared before, approximately 70% of prescriptions are EDS in OSA and 30% for EDS in narcolepsy. I think over the course of the year, we saw positive growth in new patient starts, total active writers, and total prescriptions. And part of our strategy over the past couple of years has been driving depth across existing Sunosi writers. So we are seeing growth from both ends, both OSA and narcolepsy. And really across specialty or prescriber segments, including PCPs, pulmonologists, sleep specialists, and neurologists. Operator: Thank you. Next question is coming from Graig Suvannavejh from Wells Fargo. Your line is now live. Graig Suvannavejh: Hey guys, this is Craig on for Ben. I appreciate the opportunity to ask a question here. I guess, could you guys provide a little bit more color on the progress of the DTC campaign? And you mentioned that Auvelity continued to grow. However, the MDD market has been overall flat. Where is that growth coming from? Are you seeing adoption in earlier lines of care? Thank you. Bye. Ari Maizel: Yes. Thank you for the question. Yes, as you know, we launched a national TV campaign late in the year around September–October timeframe. And we have been pleased with the impact of that campaign. It did generate inflection in new patient starts. And our analysis of the impact by media channel has enabled us to optimize our spend going into 2026. So we will have more details to share on that impact as we get through the year. In terms of where the growth is coming from, you know, we are pleased with efforts to expand use in primary care while also driving continued growth in psychiatry practices. So we are seeing really nice growth across all segments. But primary care was the fastest-growing segment in Q4 in terms of new patient starts and new writers. And so we expect that to continue to be a trend as we expand our efforts in the primary care setting. Operator: Thank you. Next question is coming from Raghuram Selvaraju from H.C. Wainwright. Your line is now live. Raghuram Selvaraju: Thanks so much for taking my question. I was wondering if you could comment on what you expect ultimate reimbursement market access to look like for Auvelity at steady state, particularly in the context of how Sunosi percentage covered lives is around 82%. Do you expect that to be similar for Auvelity, particularly once the product is approved both across MDD and chronic agitation? Or do you expect it to go meaningfully higher? And if so, what do you expect the ultimate optimal range to look like? Ari Maizel: Thank you. Yes. Thanks for the question. Our goal is to try to secure access for as many patients as possible across channels. And so although we do not typically guide on what the final steady-state covered lives percentage would be, I think you have seen for the past few years that we have made steady progress in terms of increasing covered lives, and our expectation is we will continue to work to ensure access for both the MDD and ADA indication. Operator: Thank you. Our next question is coming from David A. Amsellem from Piper Sandler. Your line is now live. David A. Amsellem: Thanks. Coming back to AXS-17, and sorry if I missed any commentary here. But can you talk about how you are thinking about it beyond epilepsy? For instance, it has been about 20 years since something has been approved for generalized anxiety disorder, and given the mechanism, it would seem that could be an interesting avenue to explore. So how are you thinking about broader development of the asset? And then secondly, just in general, are you looking at other assets to bring in to further leverage your infrastructure in both neurology and psychiatry? Thank you. Herriot Tabuteau: Sure. As always, with any molecule, we look very carefully at the biology. With an eye to what the possibilities are in terms of potentially affecting patients positively. So we—as you know—we in-licensed the asset. Our focus right now is with regards to epilepsies. We will obviously look at other potential indications, but we want to make sure that we stay with the initial indication. We think that there is a lot of promise there in that area based on all of the preclinical work that has been done by others and also by our team. So stay tuned, and stay tuned. And I think it is a little premature to talk about add-on indications to the primary indication. Operator: Thank you. Our next question is coming from Ashwani Verma from UBS. Your line is now live. Ashwani Verma: Hi. Thanks for taking our question. So on the salesforce expansion, pretty big step up, twice versus the 300 reps that you had before. Yeah, just curious what went into that math and if you can talk about consensus SG&A for 2026 is only showing up 15% year over year. What would be the right range for the models? Thanks. Ari Maizel: Yes, thanks for the question, Ash. So the salesforce expansion is designed to accelerate growth in MDD, while providing scale for a potential indication approval in Alzheimer's agitation later this year. So when you think about the expansion, the national hiring of reps throughout the country to increase reach and frequency to the highest value across specialties will enable us to capitalize on the momentum that we created in the primary care segment. And primary care is growing in importance because they are frontline treaters for both MDD and ADA. And then finally, it will allow us to engage with an expanded target universe. So a larger salesforce allows us to engage with a larger group of HCP targets when you think about the specialties that will be important for both indications. Primary care, psychiatry, neurology are really the largest specialty segments that we will be focused on. Nick Pizzie: Sure. Maybe just, Ash—maybe just a minute on OpEx and 2025 to 2026. So in 2025, in the P&L, we saw revenues growing roughly 3x faster than OpEx, so significant operating leverage in 2025. Even with this expansion, with the DTC that we have done and what we plan to do in 2026, we will continue to see that operating leverage throughout the year. Obviously, Q1, Q2, we will be building that team, as you mentioned, going from 300 to 600. But this was always factored into our cash forecast. So continue to see operating leverage into 2026. Operator: Thank you. Our next question today is coming from Ami Fadia from Needham and Company. Your line is now live. Ami Fadia: Hi, good morning. Thanks for taking my question. My question is on Cymbravo. With the additional third commercial payer contracted in the fourth quarter, how do you see the overall coverage evolving through the course of this year? And how should we see that impacting the gross-to-net or the rate of pull-through of prescriptions as the year progresses? Thank you. Ari Maizel: Yes. Thank you, Ami. So as we mentioned in the call, we secured a contract with the third large GPO. And as you recall, the GPO contract is really a precursor for negotiating with payers and PBMs to secure coverage. So although it does not guarantee coverage with the payers/PBM, it does allow for active negotiation. And so our team is engaged with all the national payers and PBMs. And I think we are optimistic about the potential to increase Cymbravo coverage. That is something that we are focused on primarily for this year, and we will share some additional updates as we secure access. Nick Pizzie: Maybe just a second on GTN. GTN in the quarter for Q4 was in that upper-70% range. We would anticipate that GTN to continue to remain elevated during the launch phase. And as Ari shared, as more contracts come online, you know, we believe that the GTN will be north of where Auvelity currently is, but less than GTNs that we see in the space. Operator: Thank you. Next question is coming from Joseph Thome, TD Cowen. Your line is now live. Joseph Thome: Hi there. Good morning. Thank you for taking my question. Maybe just in terms of the potential Alzheimer's agitation launch, when will you be in a position to be able to launch the therapy after the April 30 date? Will it take some time before we could see kind of the full-fledged launch there? And then what sort of metrics do you anticipate providing? Should the approval come through? Would you be able to separate kind of product revenues between MDD and Alzheimer's agitation? Or how can we best monitor how that specific launch is going? Thank you. Ari Maizel: Thanks, Joseph. Yeah. We will be ready to go within a quarter on ADA. And obviously, the team right now is preparing every aspect for launch readiness. And so we are feeling really optimistic about the potential impact, if approved. And then in terms of metrics, we expect to share approximate percentage of scripts coming from the ADA space as we learn more. As you know, the typical IQVIA data does not break out by indication. And so we have not finalized our plans, but we will certainly be able to share some details about how the launch is going. Operator: Thank you. Our next question today is coming from Sean M. Laaman from Morgan Stanley. Your line is now live. Sean M. Laaman: Good morning, everyone, and hope everyone is well. Thanks for taking my question. On the pipeline, AXS-12, the NDA in narcolepsy, with the NDA submission plan for 12 in narcolepsy, how do you see differentiation versus existing therapies, particularly around cataplexy control and physician adoption? Thank you. Herriot Tabuteau: Yeah. Thanks for the question. As you know, narcolepsy is a challenging disease to treat, and patients often are on polypharmacy, trying to find the right combination of medications to support symptom relief. I think what is very clear is that not every patient responds to every mechanism in the same way, and there is a lot of trial and error. So from our perspective, AXS-12 offers a very compelling treatment option for patients, both in terms of cataplexy relief as well as safety and tolerability profile. And so we feel, you know, it is a novel mechanism relative to what is in the marketplace today. And based on the feedback we have received in market research, there is a high degree of interest in using this for narcolepsy patients. Operator: Our next question is coming from Myles Robert Minter from William Blair. Your line is now live. Myles Robert Minter: Hi, guys. Congrats on the year. Just on AXS-17, just wondering how you are thinking about the therapeutic window there in epilepsy. I know that AZD7325 should be less sedative than a benzo, but I think in the hands of AstraZeneca in their Phase II, they did show a little bit of sedation in that generalized anxiety disorder. Just wondering whether you are going to play around with dose to try and dial that out or whether the change in indication here is enough to make that an acceptable therapeutic window. Thanks, guys. Herriot Tabuteau: Yeah. We are—thanks for the question—we are exploring dose. And part of that exploration is a lot of PK/PD modeling. We think that, based on the preclinical data as well as the clinical data, there is a range of potential doses. And as you mentioned, depending on exactly where you fall and which therapeutic indication, you might hit certain subsets of receptors. The goal here is to make sure that we pick a dose where we have the best risk-benefit profiles. Now the drug has not been studied previously in the clinical setting in patients with epilepsy. So, there is some work there to be done and some information to be gotten from the initial trial in those patients. So stay tuned. This is what research is about, but we are very excited about the mechanism of action and the specificity of the receptor targeting. Operator: Thank you. Our next question is coming from Matthew Baron Hershenhorn from Oppenheimer. Your line is now live. Matthew Baron Hershenhorn: Hey, guys. Congrats on all the progress and thanks for taking our question. So we were thinking about the safety data for Auvelity in ADA and just wondering how you see the likely label language upon the update reflecting differentiation versus Rexulti based on what we saw in the clinical trials? And how do you think about the biggest advantages for Auvelity once both treatments are available, especially considering the safety profile in elderly patients? Really appreciate it. Herriot Tabuteau: Hey, Matt. Good morning. Thanks for the question. The review is underway and, by the way, just a reminder, since this is a priority review, we are more than halfway through and we are just about two months out from PDUFA. So it is a little early for us to comment on potential, you know, potential label. However, what we can share is we—you know, should the product be approved—we would expect the safety profile to be described in the label in that patient population. And we would be pleased with that. And, you know, I think that is probably as much as we can say there. And could you remind me of the second part of your question, please, or maybe, Ari, you want to field that? Ari Maizel: Yes. Just relative to the positioning, I mean, so, obviously, when you look at our clinical data—rapid onset of action, durability of response, low side effects and safety issues, not an antipsychotic option, and currently approved as a monotherapy in MDD where there is significant comorbidity with Alzheimer's agitation—so we think that there are multiple elements of the clinical profile that will really help AXS-05 sort of stand apart. And there is a lot of excitement and enthusiasm about a potential launch amongst the Alzheimer's community. Operator: Thank you. Next question today is coming from Joon Lee, Truist Securities. Your line is now live. Asim (for Joon Lee): Congrats on the quarter and thanks for taking the questions. This is Asim on for Joon. Just a couple from us. So are you eligible for priority review for the AXS-12 NDA submission? And I just want to make sure I understand correctly. Nick, you are saying that the gross-to-net for Auvelity should actually improve after approval given the Medicare population? Thank you. Herriot Tabuteau: Hey, I will take the first part of the question. Thank you for the question. Our anticipation is that AXS-12 would be a standard review. I will hand it over to Nick for the GTN. Nick Pizzie: Sure. Yeah. And correct. Based on assuming that we would see that 70%+ in the Medicare Part D channel for ADA scripts, if that is how it evolves, we would anticipate that the GTN would be more favorable. We are seeing currently in the Medicare Part D channel that it is more favorable than the commercial channel. Operator: Thank you. Next question is coming from David Hoang from Deutsche Bank. Your line is now live. David Hoang: Hi, guys. Thanks for taking my questions. So maybe just on the breakdown between the community and long-term settings for ADA. Could you remind us how that breaks down and how you are planning to deploy your salesforce to address those two segments? And then if Rexulti’s coverage should be approved for the adjacent indication of AD psychosis, do you think that could become a competitor in ADA, you know, such that if patients are being treated for AD psychosis, that might also address their agitation? Thanks a lot. Ari Maizel: Yes. Thanks for the question, David. So as a reminder, about 60% of Alzheimer's disease agitation prescriptions are in community-based settings and 40% are in long-term care facilities. So it remains to be seen how the uptake of AXS-05 will be across those settings of care, but that is sort of how the market is behaving at the moment. And then in terms of your question on Rexulti, we do view also Alzheimer's agitation and Alzheimer's psychosis as separate and distinct indications. And so we do not expect there to be much confusion in the marketplace, and agitation symptoms are the most prominent and most burdensome for patients. And so there is significant opportunity, significant unmet treatment need, and that will be our focus at launch if approved. Operator: Thank you. Next question is coming from Yatin Suneja from Guggenheim. Your line is now live. Eddie (for Yatin Suneja): Hey, good morning. This is Eddie on for Yatin. Thanks for taking my questions. How should we think about the gross-to-net dynamics for ADA and how they are different from MDD? And then when looking at the Auvelity penetration within the PCP market segment, can you talk about how big you expect that penetration to be versus the sort of more defined neuropsych segment? Thank you. Nick Pizzie: Hey, sorry, I answered the question already a couple of times on MDD versus ADA. We would—we do—anticipate in that ADA channel to be more positive assuming that 70%+ would be in the Medicare Part D channel. Ari Maizel: I am sorry, could you repeat the second part of your question? Eddie (for Yatin Suneja): Yeah. I was just wondering if you could talk about the overall penetration within the—for Auvelity—PCP segment versus the, like, more neuropsych-focused segment. Ari Maizel: Yeah. It is a good question. Obviously, primary care is the dominant specialty in terms of overall volume. Because they tend to be the first-line treaters for MDD. That said, psychiatrists tend to have the greatest volume on a per-patient basis and see the most patients overall. So we have not specifically shared where we expect the final penetration to land in MDD. But as of today, we see about a third of our writer base is in primary care, whereas two-thirds is in psychiatry. Primary care has been growing as we have expanded our sales team and continue to penetrate the primary care segment. But where it will sort of end up at the end, it is difficult to say at the moment. Operator: Thank you. Next question is coming from Graig C. Suvannavejh from Mizuho Securities. Your line is now live. Graig C. Suvannavejh: Hey, good morning. Thanks for taking my question. Congrats on the progress in the quarter and the year. My question is around the opportunity you see with AXS-12 for narcolepsy. I know there was a question earlier on differentiation, but maybe if you could frame the opportunity vis-à-vis potential entry of the orexin-based products. I think this has probably been asked in the past, but just wanted to see how you were thinking of the potential impact on the orexins, again fully knowing it is a polypharmacy market, but just trying to size the market opportunity here. Thanks. Herriot Tabuteau: Yes. As we shared before, this is a difficult-to-treat patient population. There is a lot of trial and error, and I think although there is a lot of enthusiasm for the orexin agonists, I think there is also recognition that not every patient is going to respond or necessarily get the same level of symptom relief across the spectrum of symptoms. So from our perspective, AXS-12, you know, has very strong data within cataplexy. There is daytime dosing, which is very appealing to patients, and the potential impact across functional scores as well. It is something that we hear in feedback is very promising. I think in terms of how the orexins will stack up relative to other treatments, including AXS-12, remains to be seen. But our expectation based on feedback from KOLs is that they expect polypharmacy to continue to exist significantly with the advent of a new mechanism of action in the space. Yeah. And if I may add, just as a reminder, in terms of mechanistically how these agents work, as we know, narcolepsy is a disease where we do have a loss of orexin neurons, and those directly stimulate the locus coeruleus which produces norepinephrine. So we target with AXS-12 norepinephrine. So it totally makes sense in a way both groups of products are targeting exactly the same pathway. That is one of the reasons why we are very excited about AXS-12. It makes sense mechanistically, and clinically, you know, what we have seen is not only very profound effects on cataplexy, but also positive effects on excessive daytime sleepiness and also on cognition, which we have measured pretty extensively in the program. In clinical studies that we have done, also based on the results from the long-term safety studies, these effects are consistent. The other thing that we like about AXS-12 from a mechanistic perspective is the fact that a majority of patients with narcolepsy do suffer from depression, and the mechanism of action of AXS-12 does kind of dovetail into that. So in a situation, in a clinical situation where you do have a lot of comorbidities, it is helpful to have a drug with a mechanism of action which could potentially maybe impact the other diseases which are neighbors of the primary condition. So really excited about AXS-12 and especially the fact that all these benefits are delivered with a very favorable safety and tolerability profile. Operator: Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over for any further or closing comments. Herriot Tabuteau: We thank you, everyone, for joining us on this call. Axsome is in a unique position to continue to deliver innovative medicines at the frontier of neuroscience to patients and providers. And through disciplined investment and performance across our commercial and development CNS portfolios, we expect to continue to generate significant value through the next decade and beyond, not only for patients, but for stakeholders. We look forward to keeping you all updated on these important milestones ahead. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. Thank you for your participation today.
Operator: Greetings. Welcome to Freshpet, Inc.'s fourth quarter and full year 2025 earnings call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the presentation. Please note this conference is being recorded. I will now turn the conference over to Rachel Perkins-Ulsh, Vice President, Investor Relations and Corporate Communications. Thank you. You may begin. Good morning, and welcome to Freshpet, Inc.'s fourth quarter and full year 2025 earnings call and webcast. On today's call are William B. Cyr, Chief Executive Officer, and John O’Connor, Chief Financial Officer. Nicola J Baty, Chief Operating Officer, will also be available for Q&A. Rachel Perkins-Ulsh: Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements related to our strategies to reaccelerate growth, progress and opportunities and capital efficiencies, timing and impacts of new technology, capital spending, adequacy of capacity, expectations to be free cash flow positive, 2026 guidance, and 2027 targets. They involve risks and uncertainties that could cause actual results to differ materially from any forward-looking statements made today, including those associated with these statements and those discussed in our earnings press release and our most recent filings with the SEC, including our 2024 annual report on Form 10-K, which are all available on our website. Please note that on today's call, management will refer to certain non-GAAP financial measures such as EBITDA and adjusted EBITDA, among others. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for how management defines such non-GAAP measures, why management believes such non-GAAP measures are useful, a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, and limitations associated with such non-GAAP measures. Finally, the company has produced a presentation that contains many of the key metrics that will be discussed on this call. That presentation can be found on the company's investor website, investors.freshpet.com. Management commentary will not specifically walk through the presentation on the call. Rather, it is a summary of the results and guidance they will discuss today. With that, I would like to turn the call over to William B. Cyr, Chief Executive Officer. Thank you, Rachel. William B. Cyr: Good morning, everyone. The message I would like you to take away from today's call is that the challenges we faced in 2025 taught us quite a bit about our strengths and weaknesses, and have made us a much stronger company for 2026 and beyond. We learned that after more than a decade of strong, reliable, and predictable growth, the pet food category and the Freshpet growth algorithm are not immune to swings in consumer sentiment. Category growth last year slowed dramatically, and our net sales growth rate dropped from 27% in fiscal year 2024 to 13% in fiscal year 2025. While the 13% growth we delivered in fiscal year 2025 would excite most companies, it was not the kind of growth we had become accustomed to nor what we expected when we started the year. This dramatic change in sentiment forced us to reevaluate every aspect of our model and adapt to the new environment. We changed our messaging and media buying strategy. We increased our focus on creating value at the entry point. And we demonstrated flexibility in, and control over, our capacity expansion plans. In the end, I am very proud of the agility that our team showed in the face of a dramatic change in the macroeconomic market. The benefits of that agility were demonstrated in our results. Our growth was more than 10 points better than the category. We built significant market share. And we exceeded the $1,000,000,000 net sales target we set in 2020. We also expanded distribution in a very large club customer, and began testing another new class of trade, rural lifestyle retail. At the same time, we protected and even expanded our margins and achieved positive free cash flow. And we withstood the onslaught of new competitive entries with little discernible impact on our business. More importantly, we built a really strong foundation for fiscal year 2026 and beyond. Our new messaging and related media plans are showing early signs of generating the household penetration growth we expect. Our efforts to expand our ecommerce business continue to gain traction, with digital business growing nearly 40% last year, and it is now up to 14% of our total business. We have installed and started up the biggest breakthrough in manufacturing technology in our history. And we began testing fridge islands in a major retailer, one of our biggest breakthroughs in retail visibility and availability ever. In each case, we believe we are in the very early stages of a major new driver of growth and profitability. In total, we believe we are very well positioned to continue to capture a very large share of the growing market for fresh pet food. Our data suggests that despite the macroeconomic headwinds we experienced last year and continue to see today, the total addressable market for Freshpet, Inc. continues to grow and is now up to 36,000,000 households, compared to the 33,000,000 households we announced at CAGNY last year. These figures reflect consumers' ongoing interest in treating their pets as valuable family members and the growth is driven, in part, by the ongoing generational transition to younger consumers for whom pets and high-quality food are of greater interest than previous generations. We believe this suggests that fresh pet food is the future of the pet food category, and that Freshpet, Inc. has a very long runway for growth. And the results of the past year strongly suggest that we have the ability to maintain a very high share of this market, despite the determined efforts of many new competitors. The competitive moat we have built enables us to deliver a wide range of noticeably better products at lower costs, in more locations, in a variety of channels versus competition. And we continue to invest in new manufacturing technologies that we believe will extend our competitive advantages even further. Plus, we are leveraging our extensive fridge network, digital marketing efforts, and strong brand equity to create an omnichannel business that will be difficult for other fresh food marketers to match. We firmly believe we have a unique and compelling advantage in not only manufacturing, but also quality and product appeal. And it can be enhanced through marketing. Last quarter, we talked about our improved commercial framework that focuses on consumers who have the potential and ability to become very heavy users. We expected the increase in digital and streaming as part of our media mix to drive increased trial and usage by millennials and Gen Z, with the highest propensity to become MVPs. And it has. We continue to outperform the category and peers on household acquisition across income brackets and generations and see millennials and Gen Z as our fastest growing generations. Further, we are disproportionately gaining share despite heightened competition, particularly in retail. In 2026, we are rebalancing our media mix to be more diversified and digital-forward, helping to build out our omnichannel presence. We are evolving our marketing plans to super-serve MVPs, who now make up 71% of our net sales, designing our marketing plans to deliver against this critical MVP consumer while ensuring our media reaches our entire TAM. The current campaign showcases the products and the ingredients more than in the past, and has been effective so far in driving new households. In addition to our current campaign, we are leaning more heavily on trusted voices to build relevance and credibility with our MVPs. And this spring, we are introducing a new campaign that deepens our connection with our core audience. We believe we have a strong value proposition with our product portfolio today, and we are continuously working on ways to drive more perceived value for our consumers. We have affordable innovation with multipacks and bundles of both rolls and bags, now available in select retailers, and expect those to gain traction and more distribution in 2026, particularly in the club channel. We also have our complete nutrition line that is a bag item and a roll item at an attractive entry price point, which will continue to gain distribution as well. Further, we have an exciting pipeline of innovation and renovation slated for this year that we will share more on as it hits the market. From a distribution standpoint, 2025 was our best year in over a decade for new store growth, largely driven by our club expansion. In 2026, we are focused on having a stronger omnichannel presence, and we are building capabilities around that. In Q4, ecommerce as a percent of sales was 14.6%, and for the full year, it was up to 14%, as I mentioned earlier. The digital channel will be an important growth driver for us moving forward, but we are also still focused on expanding multiple fridges in the highest-velocity stores. The rural lifestyle retailer test we referenced last quarter has now confirmed the expansion to 250 stores in the first half of the year. We have expanded the fridge island test in a mass retailer from 16 to 28 stores today. Additionally, we are testing open-air bunker fridges and full-size open-air end caps as we reimagine how consumers shop for their pets. We expect continued experimentation with these new fridge configurations, seeking the optimal combination of visibility, shoppability, holding power, and space efficiency. We are also building a stronger product proposition by leveraging our breakthrough technology to deliver both meaningful product improvements and significantly improved economics. I am pleased to report that our first line using the new production technology is up and running and producing product that we began shipping to customers last month. The products produced in that new line are exceptional, and the early indications are that the new line should deliver significant quality, throughput, and yield benefits. We want to run the line for several months before we quantify the magnitude of the benefits, but we are encouraged so far. The first retrofit of an existing bag line in Bethlehem with the light version of this new technology is slated for the second quarter, and we plan to use it to both renovate and innovate our product portfolio. We believe that the conversion of our existing lines to the light version of the new technology will require minimal downtime and modest CapEx. Investing in manufacturing capability and technologies can not only extend our competitive moat, but also offers us the opportunity to produce the highest-quality products at the best possible cost, and demonstrate the technical mastery of our team. Now I will provide some highlights from the fourth quarter and year. Fourth quarter net sales were $285,200,000, up 8.6% year over year, primarily driven by volume. Adjusted gross margin in the fourth quarter was 48.4%, compared to 48.1% in the prior-year period. Adjusted EBITDA in the fourth quarter was $61,200,000, up approximately $8,500,000, or 16% year over year. For the year, net sales were up 13% year over year, in line with our guidance of approximately 13% growth. Full-year 2025 adjusted gross margin was 46.7%, up 20 basis points year over year despite the slowdown in volume growth. And full-year adjusted EBITDA was $195,700,000, up 21%, or approximately $34,000,000, year over year. From a category perspective, we are the leading dog food brand in U.S. food, and maintain a sizable market share within the gently cooked, fresh, frozen branded dog food segment in Nielsen brick-and-mortar customers defined as xAOC plus pet. We compete in the $56,000,000,000 U.S. pet food category per Nielsen omnichannel data for the 52 weeks ended 12/27/2025. And within the nearly $38,000,000,000 U.S. dog food and treats segment, we have increased our market share to 4%. As I mentioned a few moments ago, 2025 was our best year in over a decade for new store expansion, demonstrating that our fridge expansion has not been hindered by heightened competition entering brick-and-mortar stores. From a retail standpoint, products are now in 30,235 stores, 24% of which have multiple fridges in the U.S. and Canada. As we add additional fridges to the highest-velocity stores to service more omnichannel customers, this percentage should increase over time. We ended the fourth quarter with 39,347 fridges, or nearly 2,100,000 cubic feet of retail space, with an average of 19.1 SKUs in distribution. Our percent ACV in grocery was at 80% at quarter end. In xAOC, we are up to 72%. From a household penetration and buy rate standpoint, we have seen some green shoots recently. On a twelve-month basis, as of 12/31/2025, household penetration was 15,200,000 households, up 10% year over year. And total buy rate was approximately $115, up 4% year over year. MVPs, our super heavy and ultra heavy users, are continuing to grow faster than overall households and now total 2,400,000 households, up 11% year over year, and have an average buy rate of $56. Our fastest growing buyer group is our ultra buyers, who make up nearly 500,000 households and spend over $1,100 a year on Freshpet, Inc. Overall, we are not seeing trade down. And we are not seeing loyal customers buying us less often. We are continuing to win with new dog households, the next-generation dog owners, millennials and Gen Z, and believe our omnichannel strategy will drive further growth with these cohorts. Turning to capacity. We have 16 lines across our network today that can support over $1,500,000,000 in sales when fully staffed. This figure excludes additional throughput or yields that could come from the new technology we have developed for our bag lines. After we run both the full version and the light version for an extended period of time, we will update the market on what our full capacity potential is within the current footprint. Our capital efficiency framework underpins the work we have been doing to advance the manufacturing process for Freshpet, Inc. food and what we believe is a significant competitive advantage. To continue to drive capital efficiency, we aim to: one, get more out of existing lines, primarily through OEE improvements; two, get more out of existing sites, whether that be finding ways to optimize our network or add more lines on our campuses; and three, develop and implement new technologies. Now turning to 2026 guidance. We expect net sales growth to be between 7% to 10% for the year, and adjusted EBITDA to be between $205,000,000 and $215,000,000. We expect capital expenditures to be approximately $150,000,000 this year, absent any incremental investment to accelerate our manufacturing technology or capitalize on a distribution breakthrough in fridge islands. At our current plan level of capital expenditures, we expect to be free cash flow positive in 2026. If we do decide to retrofit more than just one bag line with the new technology, and we have a large rollout of fridge island units, we may choose to increase CapEx by anywhere between $20,000,000 to $50,000,000 so that we can capture those benefits sooner. John will walk through more details of our 2026 guidance in a few minutes. In regard to our fiscal year 2027 targets, we remain confident in our ability to deliver net sales growth well in excess of the U.S. dog food category growth, and thus grow market share. Depending on the macroeconomic conditions and the health of the dog food category, that growth could be in the high single digits or low double digits. We believe we can achieve at least 48% adjusted gross margin under a variety of growth scenarios and have updated our adjusted EBITDA margin target to a range of 20% to 22%. We believe we have a variety of paths to achieve those margins, including higher net sales growth rates, further improvement in gross margins, media efficiency and effectiveness, and further SG&A efficiencies. For example, if our net sales growth is in high single digits, we believe we can still achieve an adjusted EBITDA margin of approximately 20% in 2027. If we exceed the high end of our guidance and deliver growth in the mid-teens, we believe we can achieve a 22% adjusted EBITDA margin in 2027. As we announced earlier this month via press release, we are thrilled to welcome John O’Connor as our new Chief Financial Officer and Anna Lopez as SVP, Supply Chain. We continue to build out the leadership team that can support our mission and fuel our next phase of growth. John brings deep financial leadership and animal health expertise, having spent much of his career at Zoetis and previously served as Chief Financial Officer of Thrive Pet Healthcare, a leading veterinary services platform. Anna Lopez, our new SVP, Supply Chain, brings extensive experience across both supply chain and manufacturing. She joins us from Unilever. I would like to thank Ivan Garcia for the incredible job he did as interim CFO over the past several months. We did not miss a beat during his tenure, and he has made the CFO transition seamless. We are grateful for his continued assistance as John gets up to speed on the business. Lastly, as some of you may recall, we made an equity investment six years ago, and a follow-on investment a few years later, in a strategically related business for a total of $33,400,000. For competitive reasons, we never disclosed the company we had invested in. We can now tell you that the investment was in Ollie, the DTC dog food brand. We invested so that we could learn more about the DTC business and maintain some level of optionality if we wanted to enter that space. We learned quite a bit from that ownership position that is helping us develop our omnichannel approach to the Freshpet, Inc. business. And it was also a successful investment from a financial perspective. Ollie was recently sold, and we received proceeds of approximately $95,500,000 in January, plus the potential for a small amount of additional consideration subject to ordinary post-closing conditions. So we got a good financial return in addition to the strategic benefits of observing the development of the DTC dog food space from the inside. With John now on board and getting up to speed, we are evaluating our capital allocation strategy. I am pleased that we are operating from a position of strength, especially now that we are free cash flow positive and with a strong balance sheet, and plan to share an update on the strategy in the coming months. That update will take into account the opportunities we have to accelerate our growth and improve margins through various investments, and our desire to continue to improve our cash efficiency and deliver strong returns to investors. With that, I will turn it over to John to walk through more details of our financial results. Thank you, Billy, and good morning, everyone. The fourth quarter results demonstrated our ability to deliver category-leading growth while also achieving positive free cash flow. Net sales in the quarter were $285,200,000, up 8.6% year over year. Volume contributed 9.7% growth, partially offset by unfavorable price/mix of 1.1%, which was primarily driven by modest pricing actions in the current year designed to deliver value at the entry point and bring in new users and favorable pricing items in the prior-year period. We had broad-based consumption growth across channels. For Nielsen-measured dollars, we saw 9.4% growth in total U.S. pet retail plus with Costco, 8.5% in total U.S. pet retail plus, 9% growth in xAOC, 5.8% in U.S. food, and 1% growth in pet specialty. As we said on the last earnings call, the initial pipeline fill of a club customer helped boost our third quarter shipments and impacted the fourth quarter by about a point. Fiscal 2025 net sales were $1,102,000,000, up 13% year over year. Volume contributed 12% growth and we had favorable price/mix of 1%. Fourth quarter adjusted gross margin was 48.4% compared to 48.1% in the prior-year period. The 30 basis point increase was driven by reduced quality costs, partially offset by higher input costs. Fiscal year 2025 adjusted gross margin was 46.7%, an increase of 20 basis points compared to the prior year. Fourth quarter adjusted SG&A was 27% of net sales, compared to 28% in the prior-year period. This decrease was primarily due to lower variable compensation, partially offset by increased media as a percentage of net sales. Media spending was 10% of net sales in the quarter, up from 8.9% of net sales in the prior-year period. Logistics costs were flat in the quarter at 6.2% of net sales. Fiscal year 2025 adjusted SG&A was 29% of net sales compared to 29.9% in the prior-year period. Media as a percent of net sales was 12.7% compared to 11.4% in the prior year, while logistics improved 20 basis points year over year to 5.8% of net sales. Fourth quarter net income was $33,800,000 compared to $18,100,000 in the prior-year period. The increase in net income was primarily due to the contribution from higher sales, an increase in gross profit, and lower SG&A expenses, partially offset by the deferred income tax expense in the current-year period. Fiscal year 2025 net income was $139,100,000 compared to $46,900,000 in the prior-year period. The significant increase in net income was primarily due to the deferred income tax benefit resulting from the release of a $68,400,000 valuation allowance in the current year, higher sales, and was partially offset by higher SG&A. Fourth quarter adjusted EBITDA was $61,200,000 compared to $52,600,000 in the prior-year period, an increase of 16%. This improvement was primarily driven by higher sales and gross profit partially offset by higher adjusted SG&A expenses. Fiscal year 2025 adjusted EBITDA was $195,700,000, or 17.8% of net sales, compared to $161,800,000, or 16.6% of net sales, in the prior-year period. Capital spending for 2025 was $148,200,000, while operating cash flow was $160,600,000. We ended the year with cash on hand of $278,000,000 and we were free cash flow positive. As Billy mentioned, subsequent to the quarter end, we received $95,500,000 in proceeds from the sale of Ollie, bringing our cash balance to approximately $400,000,000 today. Now turning to guidance for 2026. As Billy mentioned earlier, we expect net sales growth of 7% to 10% compared to 2025, with the midpoint of this range in line with the growth we delivered in Q4. We believe this is a prudent place to start our guidance after a challenging year. As for the cadence of the growth in 2026, it is important to remember that the base year included some disruption in Q1 from the change in our pet distributor, and primarily from the significant expansion in a large club customer that we had unusually strong growth in Q3, including pipeline fill. That will make the Q1 comp a bit easier, and the Q3 comp more challenging. This guidance for the year assumes that there is no material change in the macroeconomic environment compared to where we exited 2025. It does not include any significant fridge island expansion. We continue to expect our growth to be in excess of the U.S. dog food category and in turn grow market share. Given year-to-date trends, we are optimistic about our ability to deliver these plans. Our current Nielsen growth rate and the recent household penetration and buying rate data we have seen support growth at this level or higher. Further, our advertising and media plans have begun to demonstrate traction in the market and we are increasingly confident that the plan is working. But we acknowledge the fact that it is still early; there have been storm-related impacts to the recent Nielsen numbers which create noise. To meet or exceed the high end of our guidance, from a category perspective, we would likely need to see stronger dog food category growth and/or a resurgence in trade-up behaviors. In terms of the factors that are within our control, we would need to see an outperformance of our omnichannel efforts, more rapid expansion of island fridges, and greater impact from our advertising. We expect adjusted EBITDA in the range of $205,000,000 to $215,000,000, an increase of 5% to 10% year over year. Media as a percent of net sales for the year is expected to be roughly in line with 2025 and will be front-half weighted in dollars and as a percent of sales, with the first quarter expected to be our largest quarter of media spend. With the turn of the calendar, we have reset expectations for incentive compensation to target levels, which will compare unfavorably to 2025, when lower variable compensation expense helped cushion margins from the lower sales growth than we expected at the start of the year. With this factor at play, to have adjusted EBITDA growth outpace sales growth in 2026, we need to overdeliver on sales volume. Beyond 2026, however, we expect adjusted EBITDA growth to exceed net sales growth on an expectation of a more consistent variable compensation expense. We anticipate adjusted gross margin to improve by approximately 50 to 100 basis points at the midpoint of our net sales range, primarily driven by plant leverage, partially offset by mix. We do not intend to add staffing in 2026 based on our guidance, but rather utilize our existing staffing and use further OEE improvements to deliver more volume. From an inflation standpoint, we are optimizing our formulations and have taken pricing on specific SKUs to address some higher input costs. Capital expenditures are currently projected to be approximately $150,000,000 in 2026, and as mentioned earlier, this figure excludes any significant incremental investments in fridge islands or expediting the rollout of our new technology. If we were to take those actions, we would likely make that decision sometime in the middle of the year, and they would be supported by strong results from our tests in the case of fridge islands and demonstration of consistent and meaningful efficiency gains in the case of the manufacturing technology expansion. As I said earlier, we believe our outlook is prudent coming off a challenging year and in the midst of a still-uncertain consumer backdrop. While I just completed my second week here, I am incredibly excited to join Freshpet, Inc. at such an important moment in its growth story, and look forward to meeting many of you over the weeks and months ahead. I believe the company has a long runway for growth from an already solid leadership position, supported by a strong foundation and a compelling long-term opportunity to capture sales and profit growth in the fresh frozen dog food category. That concludes our overview. We will now be glad to answer your questions. As a reminder, we ask that you please focus your questions on the quarter, guidance, and the company's operations. Operator? Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question. Please pick up your handset before pressing the star keys. We ask that you please ask one question and one follow-up question. First question is from Peter Benedict with Baird. Please proceed. Peter Sloan Benedict: Hi, good morning, guys. Thanks for taking the questions and welcome. Questions, I guess maybe just help us to understand a little bit more the implied uptick in EBITDA margins as you look out to 2027. Maybe can you help us size maybe the incentive comp impact on 2026? Obviously, that is something that is weighing on this year. But just the other factors that give you the confidence that these margins can be 20% plus in 2027. That is my first question. William B. Cyr: Peter, it is great to hear from you this morning. Just a notice for you and for everybody else, all of us are in remote locations this morning because of the storm. So if we sound a little disjointed, please bear with us. And if we have technical difficulties, please bear with us as well. It is a great question, Peter. I am going to just frame it up briefly, but then I am going to turn it over to John to give you some thoughts on it. But I would just say, as I said on the call, we see multiple pathways to getting towards our 2027 EBITDA margin target. As I said, there is an opportunity here to deliver more on gross margin, to deliver more on net sales, and also within the G&A structure. I think John can give you a more fulsome answer than that. John O’Connor: Sure. Thanks, Billy, and thanks for the question, Peter. I will focus first on SG&A from 2026 to 2025. And I will put it into really three main buckets in terms of the growth in dollars year over year. Roughly a third is coming from that compensation item. If you look at where we guided the year initially for 2025 versus where we ended, we fell well short of our goals, and as a result, had very, very limited incentive compensation paid out in 2025. That is a meaningful portion of SG&A growth, 2025 to 2026. Roughly another third is coming from the build-out of our omnichannel capabilities to evolve how we reach our customers. So we are evolving the model in how we go to market, and there is some investment required to do that. And then roughly one third of the growth is coming in media in terms of dollars, which we have said will stay in similar terms of percentage of sales year over year. In terms of 2027, at this stage, we still have a fairly wide range to the outcome. And importantly, because of two of those items that I mentioned earlier, in 2025 to 2026, that path of margins, 2025 to 2026, is not necessarily indicative of the underlying operating leverage in our model. The incentive comp impact is more one-time in nature. And while we are always going to be looking to make sure we have the necessary capabilities to continue growing our category leadership, we do not foresee the degree of additions that we have from 2025 to 2026 going from 2026 to 2027. As Billy said, we believe we have meaningful upside on adjusted gross margin through volume, OEE, and new technology, which is why we updated adjusted gross margin to be greater than 48% now. And the final driver will be what our net sales growth looks like for the next two years, and the degree of leverage we can gain over our cost structure. Peter Sloan Benedict: Alright. Great. That is super helpful. And I think leads me to the next question actually is around the omnichannel stuff. I am just curious if you guys could expand on what you learned from owning Ollie or being involved with Ollie for all those years, and how that is being deployed in your own custom meals business, your own DTC business. Maybe just expand a little bit more on that. It sounds like 2026 is going to be a big year for how you are going to start to push on that. So any further color there would be helpful. Thank you. William B. Cyr: Yeah. Peter, it was really good to have a front-row seat to watch how that segment of the market was unfolding. It is also nice that it turned out to deliver a very good financial return for us. But as we watched it, one of the things that became clear to us was that the best return for us was going to be focusing on building out what I would call an omnichannel business. And by that, I mean a place where we can leverage our brand equity, the brand investment that we are making in the existing channels to cover a wider range of channels. Then we could also leverage the manufacturing footprint that we have, which has significant scale and volume across the existing products and the existing channels, and cover a wider range of channels. And it is our belief that the combination of the custom meals business that we have incubating at this point as well as the broad retail network, you know, lots and lots of fridges, puts us in a position where we are uniquely positioned to meet the consumer wherever they want to buy and however they want to buy. So we will be able to provide you with the Freshpet, Inc. quality products in whatever way in which you want to purchase them. And we feel pretty good about that position, and, frankly, we want to invest in that. I am going to ask Nicola J Baty to talk just for a second about what that means from an organizational capability perspective and how we are investing the media dollars to match that. But to us, that is a huge opportunity and a fairly significant shift for us. Peter Sloan Benedict: Nikki? Nicola J Baty: Thanks, Billy, and good morning, Peter. Yes. As Billy said, we are very focused on omnichannel, and we see DTC as just one part of that. When we talk about omnichannel, we are still very much talking about it from a retail standpoint with click-and-collect, a segment that is last-mile delivery, a segment that is also pure play ecommerce, and then a final segment that really is our DTC business. As you know, we went to national on our DTC business really around a year ago, and we have had some great learnings from it. Over 74% of our households are actually coming in incrementally to Freshpet, Inc. They have never bought Freshpet, Inc. before in the retail environment, and I think that is just a key indicator that Omni, for us, drives better brand awareness, and we did have a gap in our brand awareness to purely being in a retail environment. So as we think a little bit about capabilities, we are building there in both the marketing teams and the sales team. On the marketing side, it will be moving more to what we call digital-forward in our media. So that will include everything from how we approach streaming, retail media, and social. And then on the sales side, it is really building capabilities not just to service our direct-to-consumer, but also really to service pure play and other areas too. Peter Sloan Benedict: Great. Thanks so much, guys. Good luck. William B. Cyr: Thanks, Peter. Operator: Our next question is from Brian Patrick Holland with D.A. Davidson. Please proceed. Brian Patrick Holland: Thanks. Good morning. Maybe just to start on rank ordering, if you would, the drivers for consumption growth in 2026. As you just spoke in great detail about DTC as obviously an increasing catalyst here. You have got distribution as well. You also have this increased focus on value proposition, which seems to be, at least from what we can see in tracked data, the initial impetus for the stabilizing in unit consumption growth. So just thinking about, as we bring this together in the aggregate, how you would rank order the consumption drivers in 2026? William B. Cyr: Brian, let me frame it, and then I will ask Nikki to fill in some of the building blocks. But from a broad perspective, what we are seeing is that the volume growth is going to come, as it always has, from highly effective advertising in a good environment. We obviously want to get increased visibility. We want the right product innovation program. But advertising will always remain our number one driver of our growth. And if we are operating with highly effective advertising, in a better backdrop, then we obviously would expect to see some acceleration beyond that. There are elements that are within that, such as the omnichannel piece we just talked about, some channel-specific stuff that I will ask Nikki to walk you through. But suffice it to say that the model is going to be evolving—still the same model, but it is evolving. You are going to see an increasing percentage of the growth coming from our omnichannel, or the ecommerce portion of the omnichannel business. Nikki? Nicola J Baty: Thanks, Billy. Yep. So maybe I will start there and build on that. On the distribution side, we have obviously got a full year of distribution coming through within the club channel. And we also believe we have got continued growth coming from clubs, so that is built into our plan. We will continue to grow new stores. So we had a record year of new stores last year, and we are still anticipating that there is more new store development to come through this year. And then also within distribution, outside of the ecommerce component of omni where we have significant headroom to grow, we also have multiples and new retail visibility opportunities—for example, the Island Genius. So that falls under that distribution bracket. Media Billy has already touched on. And then the third component I would suggest is what I would call affordability. And we have sharpened our plan in affordability and we do anticipate a little bit more coming through from how we have shored up the entry-level price point within our portfolio. And that is both in terms of innovation, but also in terms of some price elasticity work that we did. Brian Patrick Holland: Appreciate the color. And then maybe just looking backwards a bit, Q4 household penetration vis-à-vis my model came in above. CAC came in below. So that is an encouraging development relative to the prior few quarters. Just curious—you talked about in your prepared remarks the extent to which maybe hitting the high end or above would be dependent a bit on the category, maybe the effectiveness of some of the media. But we are, to be sure, in Q4 seeing some of this come together. So just curious to get your perspective on the landscape, whether it be competitive or category dynamics, consumer dynamics. Are we seeing any drivers here that we think would be sustainable as we start to look forward in 2026 and beyond? That we have seen the bottom in this category, and we are starting to see behaviors, if not back to the level they were, at least starting to normalize. William B. Cyr: Yeah, Brian. We are seeing some very, very early indications that the category trend, as well as our trends, have started to improve. You can—depends whether you are looking at household penetration, whether you are looking at our MVPs, whether you are looking at the category when it actually inflected. But it has begun to move up in the right direction. We are cautious, though, because there has been a lot of noise over the last several weeks, with all the storm impacts that we have seen. But even in Q4, we saw some hints that it was moving in the right direction. And we heard from some of our competitors and some of the retailers that they have observed some of the same phenomenon. How long it is going to sustain, we are not quite sure. That is why we want to provide a very conservative guide for the year based on what we did deliver in Q4 and what we feel very confident about. There is clearly some opportunity for some upside if those trends continue. Operator: Our next question is from Steve Powers with Deutsche Bank. Please proceed. Steve Powers: Great. Thank you. Good morning, Billy, Nikki. Welcome aboard, John. I guess, can we talk a little bit more about what you have learned so far from the fridge island expansion efforts and what you are looking to better understand as you move from the 16 to 28 stores? And you also talked about some of the other concepts that you are testing, including the open-air end caps and the bunker-style coolers. So is that part of the fridge island initiative? Or is that incremental testing? Maybe just a little bit more clarity there would be helpful. Thank you. Nicola J Baty: Billy, would you like me to take this one? William B. Cyr: Yep. Great. Nicola J Baty: So we are still very much in test phase with the islands. We are learning a lot. It is early days, and we have taken a thoughtful approach. Clearly, there is more capital that is required for these island units. But they do deliver us 2.5 times capacity versus a single fridge. So that is a really big move forward. So we are now at 28 island units. And what it is allowing us is a broader assortment which is ultimately bringing in new households into the brand. So just by getting that capacity up we get more assortment in, but we are also getting more holding capacity. And the holding capacity is really important for us for omnichannel, especially to serve click-and-collect as well. So we are finding we are staying in stock much better and able to service that consumer coming through too. So that is outside of the significant beacon it is providing, with a better location in the store and driving that awareness overall. So we are very encouraged—I think that is probably the best way to put it—with the fridge islands at the moment. And what our plan is is obviously to just continue to work with retailers that are looking to experiment in this way, and then make sure we really pick the right store locations in order to get the best return. But even outside of fridge islands, we still have a very significant opportunity with multiple fridge expansion. We are only at 25% of all stores having more than one chiller. So we will continue to lean in and put more multiples in, experiment with end-cap open-airs, and also bunker units. So very much looking to tailor our approach for different retailers. Steve Powers: Okay. Very helpful. Thank you. And then, Nikki, I do not know if you want to take this one as well, but you talked about the affordability initiatives, sharpening entry-level price points, etc. I guess, related to that, number one is, do we have more to go on that front, or do you feel like you have made the intervention necessary at this point? And either way, as you think about the full year 2026, is the expectation that volume growth exceeds sales growth because of those affordability investments? Or will revenue growth management and mix, etc., allow sales to keep pace or even exceed volume growth? How are you thinking about that? Nicola J Baty: Yeah. That is a great question. I think I would start by saying we did do a big step back. It was a very challenging environment for us really around 2026. I think to start with, for us, it is really about winning more with the retailers that are winning in the marketplace. So you saw us really focus and expand out some of our club channel offerings, and clearly in mass we have made some key moves. We do not anticipate a significant shift in mix or investment coming in this area. I think we have done what we needed to do really within the portfolio, and that is paying back as we saw through the back end of last year and into this year. And we did a lot of work modeling price elasticity, so the small movements we made were really data-driven and well executed. So in summary, I believe as we look through this year, we have made the steps we think are right in the current macro environment. But we do reserve the right, obviously, to regroup and review that if things adjust and change as we go through the year. Steve Powers: Thanks, Nikki. Operator: Our next question is from Thomas Palmer with JPMorgan. Please proceed. Thomas Palmer: Good morning and thanks for the question. I wanted to ask just on the drivers of the gross margin expansion this year and how that might evolve as we think about the 48% plus target for 2027. One call-out for 2026, for instance, was increasing sales growth without really increasing headcount. So I guess to what extent is that a continued driver as we think about 2027? And what other items such as the new technology might be key drivers as we think about not just 2026, but beyond. William B. Cyr: Let me take a shot at that, and then John might want to add something to that. I would start with this is one of the areas that we are most bullish on. The reality is that our manufacturing team has done an exceptional job over the last several years. It started when we rebuilt organizational capability through the Freshpet Academy. It has included our Freshpet performance excellence program that has been driving up OEEs. That is really the biggest driver. But in addition to that, you saw we have continued to make good improvement on our quality costs and our input costs. From this point going forward, and particularly in 2026, the biggest driver is going to be, as you called out, getting more volume from the same number of people. We can do that because we have the installed asset base. And we can do that because the team that we have got is demonstrating every week and every month they are running the lines more efficiently than they have in the past, and we expect that to continue on for many years. We do not believe this is a one-and-done kind of program. There is a long runway for growth. There will be points along the way where, as we grow, we will have to add staffing. But incremental staffing, a shift on a line or something like that, is increasingly a small share of our total overall staffing. So it will be less disruptive to our margin progress. But I do expect into 2027, we will have to add staffing. It will be against a larger net sales base. Within that, we also expect to continue to improve yields on our lines even if we do not have the new technology. And then, as you highlighted, new technology is the big wild card. If we decide to accelerate the expansion of that new technology, which is one of the options we talked about—making that decision sometime in the middle of the year—that would have a meaningful impact in 2027, not in 2026. In 2027, we would start seeing much broader use of that technology and the related throughput and yield benefits, as well as quality benefits, we get from that. I do not know if I missed anything, John, or is there anything you want to add to that? John O’Connor: Yeah. Sure. I think you covered most of it, Billy. I think there is maybe just a smaller scale—as we continue to look to be efficiently managing our input costs, we are always optimizing our formulations to manage that margin. And then while we did focus on the last question on pricing items to drive value at the entry point, we are, in other places, actually taking price on some of our products and helping to expand margins there. Thomas Palmer: Right. Thanks for all the detail, guys. I do want to follow up just on that new technology rollout. You noted the potential for $20,000,000 to $50,000,000 higher CapEx both from the potential higher, accelerated fridge rollout and then the faster deployment of that new technology. Just any framing of, one, is it just the two rollouts in the $150,000,000 CapEx number; and two, how much does a new line with the technology actually cost? So if we do start to see the acceleration, we get an idea of incremental each one might be. William B. Cyr: Yeah. I will take a shot at that. So the base CapEx budget for this year includes the line that is already started up, but most of that CapEx was in last year. And it also includes the conversion of the first line that we are doing, which is here in Bethlehem. If we expand the CapEx, it would include additional conversions. As we said in the prepared comments, the cost of those conversions is a modest cost. Think of that in the single millions of dollars, not in double-digit millions of dollars per line, depending on the configuration, what line we are converting, how much space there is, those kinds of things. If we are going to install another one of the new full-up lines, like the line we have installed here in Pennsylvania, it is a little bit harder to describe that because it would, in essence, be replacing another line of a traditional technology line. And so think of this as: it is a more expensive line than a traditional technology line. It has significantly higher throughput. And so the cost per dollar of production is actually very competitive or very attractive for us. If we were to do that—install one of the new technology lines—we would incur some of the CapEx this year. A much bigger portion of the CapEx would come in 2027 for that line. You would not be starting up that line until sometime at the end of 2027 or in 2028. Thomas Palmer: Okay. Thank you. Very helpful. Operator: Our next question is from Robert Bain Moskow with TD Cowen. Please proceed. Robert Bain Moskow: Hi. Thanks, and welcome, John. Really a question for Billy and Nikki. I did not hear much in the presentation today about the journey to shift consumers from using Freshpet as a topper to more as a main meal. And I am just wondering, is that still a major objective of the marketing plan, or have you kind of evolved the marketing plan to, you know, through the variety of offerings that you have, you know, make it more that something can use more frequently for meals or in other, in other ways. So just wondering where you are in that journey. William B. Cyr: Yeah. Rob, I will have Nikki address this and our focus on the MVP consumer. Nicola J Baty: Thanks, Billy. Thanks, Rob. So it is still very much core to our marketing and plans. MVP is 71% now of our total sales. So by far, the biggest area that I call it, we need to super-serve. So in order to really be able to get these households in, this is what has also prompted our renewed focus on omnichannel. And one of the key elements, I think, to bring in those MVPs into the brand is shifting our media mix to being more digital-forward. And this is really driving brand awareness through streaming, through social, and then through retail media. And then making sure from an online standpoint, we can actually sell and serve those consumers where they best want to buy. So our efforts are still very much around super-serving that audience, but when we look at our total media spend, we will continue to make sure that we first address the TAM, which is those 36,000,000 households we have got. And then we will drive better reach and frequency, so we will put more dollars, I guess, per MVP household into what I would call the digital part of our spend. So it has not changed from what we talked about last year. I think that we just got better at where to spend those dollars and how to focus on and attract those MVPs. And then the last thing I would say, perhaps to put a bow around it, is our expansion in club and what I would call value packs and bulk packs is also really helping to serve those MVPs better. We rolled out a number of value pack items last year, and we have expanded into club. We do see club and online—online because of that retention, that subscription service, and club because of the nature of the pack—as really helping us to better improve our offering to MVPs. William B. Cyr: Hey, Rob. I would also encourage you to think about the discussion that we have had in the call so far, both the prepared remarks and in the questions, about omnichannel as being highly synergistic—highly synergistic—with the focus on MVPs. In essence, to meet the needs of the MVPs, we have got to be available and effectively marketed in a wider range of channels. And so when we talk about omnichannel, it is sort of the distribution and availability component of an MVP strategy. Robert Bain Moskow: Okay. I will follow up offline. Thanks. Operator: Our next question is from Michael Scott Lavery with Piper Sandler. Please proceed. Michael Scott Lavery: Thank you. Good morning, and welcome, John, as well. Just wanted to understand the multi a little bit better and maybe get a sense of how the consumer interacts with that—if you have found it to be incremental. You seem to have an already loyal consumer. Assume it is obviously at a more favorable price point. I guess, how do you know you are not just maybe giving a subsidy through that? Or how does it interact with the rest of the portfolio? William B. Cyr: Nikki, you want to take that one? Nicola J Baty: Yeah. Sure. I would say we are pretty early days on multipacks at the moment. So we have relatively focused distribution, especially where we are in the double chillers—so multiple chillers—and also in island units. So far, we have seen there is a certain kind of household that wants to buy those packs. And that is different to those that want to come in very frequently into store. One of the challenges I think we have had historically has been fresh food requires very, very frequent shopping trips. So putting a product into a multipack that is very convenient—both in an online format and also a club format—is making sure that they are getting enough of their food in a more convenient way rather than multi trips per week. So far, we are seeing a different household target coming through those multipacks, but we will continue to experiment and see how it works and make sure it maximizes incrementality. The other thing I would say is the discount level for a multipack is very, very low. So this is not something that we are driving aggressively in terms of pricing. Michael Scott Lavery: Okay. That is helpful. And just a question back on the consumer. Your upper, kind of middle-end consumer. It would seem to be the very one that could most benefit from some of the tax law changes, and maybe not as much a function of elevated refund this year as much as withholding changes that have an ongoing benefit. Is this something you think could maybe help drive some improvement in trends over the course of the year? And even if so, is it something that you, just as yet another piece of your conservatism, would not be capturing in the guidance, but that you would keep an eye on? William B. Cyr: Yeah, Michael. I will tell you there is a variety of things that we think can influence the macro market. The larger tax refunds are certainly going to help; the lower withholdings, in part because of the change in SALT deductions. All that is going to help, and we think there are other drivers that are helping. If you take a look at the consumer sentiment data, it was not good last year. It hit a real low in April and May, kind of bounced back, and it dropped down again very low in November. But we have now seen a couple of months in a row where it is starting to tick up, and one of the things that I would attribute that to is the consumer is remarkably resilient. They digest the bad news. They look for the good news. And then they move on. It takes time, and there is a little bit of pain that we all endure when you are going through that process. But the consumer, I think, is remarkably resilient over time. And we are hopeful that that means good things for the pet food category and certainly for Freshpet, Inc. Michael Scott Lavery: Okay. Great. Thanks. I will pass it on. Operator: Our next question is from Rupesh Dhinoj Parikh with Oppenheimer and Company. Please proceed. Rupesh Dhinoj Parikh: Good morning, and thanks for taking my questions. So just going back to the competitive backdrop, just curious if there is anything surprising that you have seen from some of the competitor entries, whether positive or negative, just given the increased focus on the fresh category? Thank you. William B. Cyr: Yeah. First of all, it is not a surprise that we have had as many competitors enter the market, in as many different channels. We think it is helping the total category—the increased attention of retailers, media investment, all that is—you know, a rising tide is going to lift all the boats, and we feel very good about that. We also believe that as you take a look at it, it is also validating that the business that we spent almost two decades now building, and the things that we have chosen to invest in—the strength of the brand—are the most important and most meaningful. The quality of our products that we have built, the manufacturing, distribution, and scale—all those have done a very nice job of insulating our business from fairly significant investments by a wide range of competitors with a very diverse array of offerings. At the end, we feel really good about the product proposition that we have, the brand proposition we have, and the capabilities that we have built. We are not standing still either. We are looking for ways to add on to that. So we talked about building out omnichannel. We have talked about new technologies in manufacturing. We are leaning in in a very big way to make sure that as this segment becomes a larger and larger share of the category—which I think everybody now believes it will be—that we will have a very large share of that expanding category. Rupesh Dhinoj Parikh: Great. Thank you, I will pass. William B. Cyr: Great. Thanks, Rupesh. Operator: Our next question is from Jon Andersen with William Blair. Please proceed. Jon Andersen: Hey, good morning. Thanks for the question and welcome, John. I guess, I wanted to ask on the 2027 EBITDA margin targets that you talked about—kind of reiterating what you have said before, 20% with an upper single-digit growth rate, and if you kind of resume mid-teen growth closer to 22%—what is, is the benefit of the technology that you have been talking about today, the production technology, included in those targets? And if so, to what degree? William B. Cyr: Yeah. I will take a shot at that, and then John might have something to add. I would start with the reality that unless we accelerate the manufacturing investment on the new technology, it will still have a relatively modest impact in 2027. The one line that we have installed in Pennsylvania is a relatively small-scale line, so it will produce good product, but not a significant percentage of our total volume. And the line that we are converting this year is, again, going to produce a good amount of product. But against the backdrop of the total number of lines we have, it is still a relatively small share. If we do pull forward the investment to accelerate the technology, it could help us get there. We have not—our building blocks have not assumed that. Our building blocks have assumed that we would get there through good old-fashioned OEE improvements, through yield improvements, through G&A efficiency, net sales growth that would be at a higher level. And that could just give us another lever to pull that might get us there, but it is not necessarily necessary. Jon Andersen: Thanks. That is helpful. And then the 7% to 10% sales growth for 2026, what are you—is that what we should expect from a consumption perspective as well? Are there any puts and takes that we need to think about there where consumption might deviate from that one way or the other? And then with respect to the cadence, I think John mentioned, to what extent should we be thinking about maybe over-delivery on that guide in Q1 due to easy comp and maybe under-delivery in Q3 due to the more difficult comp? Thank you. William B. Cyr: Yeah. Let me take a shot at that. So starting with the difference between consumption and net sales, consumption is now measuring just about every part of our business. It does not provide a complete measure of our DTC business or of some of the ecommerce businesses that we do. But it is a relatively small share of the total pie that it does not measure. So the two should trend fairly close together. There should not be any significantly meaningful difference between what is measured in consumption and what we report in net sales, outside of our own internal DTC business. In terms of the cadence, I think you called it out right. We said in the call, Q1 is a little bit softer comp just because of disruption we had a year ago. Q3 is a tougher comp. Beyond that, it is really going to come down to how effective is our advertising and what is the consumer environment. And that will dictate the pace of the year. But we feel very good about the trends that we are seeing so far. We feel really good about the building blocks that we put in place between the advertising program, the product initiatives, the retailer support that we are getting. Jon Andersen: Thanks so much. Operator: Our next question is from Peter Thomas Galbo with Bank of America. Please proceed. Peter Thomas Galbo: Hey, Billy, John, Nikki. Thanks for taking the question. Maybe if I could just actually follow up on the last question. I know we talked a lot about cadence of sales for the year, but maybe you could help us a little bit with the cadence of EBITDA delivery for 2026. It sounds like with the higher sales in Q1, but then you have some increased media investment spend. So maybe anything you can do to help us with detail there, please. John O’Connor: Sure, Peter. Yeah. So looking at the year, I would expect to index below our implied margins in the guidance in the first quarter, and then be building through the year, as we soften the amount of media spend—because that is going to be more front-loaded in the beginning of the year—and also as we continue to gain leverage through growing sales throughout the year. Peter Thomas Galbo: Okay. Got it. No, that is helpful. And Billy, we spent a lot of time talking about the gross margin improvement and some of the benefits that could potentially unlock from the technology side. I guess just what I have not heard today at all is any color on raw material inputs. You know, the protein complex has kind of been all over the map over the last twelve months and kind of where chicken has gone, where beef has gone. So maybe you can just remind us where you stand on material costs and the curve there—maybe locks for the year? Thanks very much. William B. Cyr: Yes. I will comment on this, and Nikki, you might want to add to it. But overall, we, as we mentioned in the past, we lock our chicken pricing, or at least the bulk of our chicken pricing, in the fourth quarter, and we did. And it came in at prices that were in line with where we were a year ago. The big issue for everyone is beef. Beef continues to be a higher cost. We are taking some actions to try to address the higher beef cost. But at the end of the day, that is the one commodity cost that is really a challenge for us in this year. And as we mentioned in the comments earlier, we have taken some pricing. We have done some formulation work. All of that is intended to address those costs. Nikki, is there anything you want to add? Nope. Peter Thomas Galbo: Awesome. Thanks. Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing remarks. William B. Cyr: Great. Thank you, everybody, for bearing with us through the middle of this blizzard. I want to leave you with a thought from the comedian Fran Lebowitz, and it is: if you are a dog, your owner suggests that you wear a sweater, suggest that he wear a tail, to which I would add, or you could just feed your dog Freshpet, Inc., and all will be forgiven. Thank you very much for your time. Operator: Thank you. This will conclude today's call. You may disconnect at this time, and thank you for your participation.
Operator: Good morning, and welcome to the Stepan Company Fourth Quarter and Full Year 2025 Earnings Conference Call. During the presentation, we will conduct a question and answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. As a reminder, this call is being recorded on Monday, 02/23/2026. It is now my pleasure to turn the call over to Ruben Velasquez, Vice President and Chief Financial Officer of Stepan Company. Mr. Velasquez, please go ahead. Thanks, Didi. Ruben Velasquez: Good morning, and thank you for joining Stepan Company's fourth quarter and full year 2025 financial review. Before we begin, please note that information in this conference call contains forward-looking statements, which are not historical facts. These statements involve risks and uncertainties that could cause actual results to differ materially including, but not limited to, prospects of our foreign operations, global and regional economic conditions, and factors detailed in our Securities and Exchange Commission filings. In addition, this conference call will include discussions of adjusted net income, adjusted EBITDA, and free cash flow, which are non-GAAP measures. We provide reconciliations to the comparable GAAP measures in the earnings presentations and press release, which we have made available at www.stepan.com under the investors section of our website. Whether you are joining us online or over the phone, we encourage you to review the investor slide presentation. We make these slides available at approximately the same time as when the earnings release is issued, and we hope that you find the information and perspectives helpful. With that, I would like to turn the call over to Luis E. Rojo, our President and Chief Executive Officer. Thank you, Ruben. Good morning, and thank you all for joining us today to discuss our fourth quarter and full year 2025 results. I plan to share highlights of the performance and will also share updates on our key strategic priorities, while Ruben will provide additional details on our financial results. 2025 was a transformational year for Stepan. We divested two manufacturing plants, made significant progress on the foundational work required to further optimize our global footprint, and positioned the company to execute against a more disciplined and resilient operating model in 2026 and beyond. I also want to highlight that we delivered the best year on safety results in our history. Congrats to the whole Stepan team on these excellent safety results. Despite a challenging macro environment, the continued pressure across the chemical sector, unprecedented raw material inflation, and tariff impacts, we delivered full year adjusted EBITDA growth of 6%. We delivered adjusted EBITDA of $199 million reflecting disciplined pricing and cost management, favorable mix, and solid growth across all our strategic businesses. Organic volume increased 2% year over year, driven by strong growth in crop productivity, oilfield tier two and tier three customers, global polymers, and specialty products. This was partially offset by softer demand in global consumer surfactants. Throughout the year, we maintained a disciplined approach to capital allocation. We generated positive free cash flow in 2025, strengthening our balance sheet and reducing net debt. Our leverage ratio improved from 2.8x to 2.5x at the end of the year. We did all of this while continuing to invest in the business. Consistent with our long-standing commitment to shareholder returns, we increased our dividend for the 58th consecutive year, underscoring our confidence in Stepan’s cash flow strength and long-term outlook. During 2025, the company paid $8.9 million in dividends to shareholders. Our Board of Directors declared a quarterly cash dividend on Stepan common stock of $0.395 per share, payable on 03/13/2026. This represents a 2.6% increase in our dividend versus the prior year. Importantly, in 2025, we demonstrated our ability to deliver earnings resilience, advance strategic priorities, and take decisive actions in a difficult operating environment. We successfully commissioned our Pasadena alkoxylation facility, optimized our asset footprint through targeted divestitures, and established the foundation to implement Project Catalyst, which we will discuss later today. I will now turn the call back to Ruben to walk you through the financial details for the quarter and the year. Ruben Velasquez: Thank you, Luis. My comments will generally follow the slide presentation. Let us start with slide five, which summarizes Q4 2025 performance. Fourth quarter 2025 adjusted net loss was $500,000, or down $0.02 per diluted share. Reported net income was $5 million, up 49% versus prior year, primarily reflecting the gain on sale of assets and certain nonrecurring items. The decrease in adjusted earnings was mainly driven by lower Surfactants operating income, lower capitalized interest expense, and a less favorable effective tax rate, partially offset by improved Polymers performance and lower corporate expenses. Importantly, several of these drivers, including higher depreciation and the declining capitalized interest associated with the Pasadena startup, had no cash impact compared to the fourth quarter of last year. Consolidated adjusted EBITDA was $33.8 million, compared to $35 million in the prior year, a 3% decrease. The slight decline in adjusted EBITDA was primarily driven by a 3% decrease in Surfactants organic volumes due to softer demand in global commodity consumer product end markets and elevated raw materials costs. Polymers delivered year-over-year growth, driven by strong volume performance in North America and Asia rigid polyols and in global commodity phthalic anhydride. Specialty Products results were modestly lower year over year, due primarily to order timing within the pharmaceutical business. Cash from operations was $60 million for the quarter, and free cash flow was positive at $25 million, compared to negative $200,000 in the prior year. The improvement was driven by reductions in working capital and disciplined capital spending. We remain focused on strengthening liquidity and maintaining disciplined capital allocation. Slide six shows the total company pretax income bridge for the 2025 fourth quarter compared to last year. Because this is a pretax view, the figures noted reflect operating performance before the impact of income taxes. Fourth quarter pretax income declined year over year, primarily driven by lower Surfactants operating income and lower capitalized interest expense. These headwinds were partially offset by improved performance in Polymers and lower corporate expenses. Slide seven shows the total company adjusted EBITDA bridge for the fourth quarter compared to last year. Adjusted EBITDA was $33.8 million, slightly down from prior year. Surfactants decreased by $2.6 million, driven by lower organic demand and elevated raw material costs. Polymers increased by $1 million, reflecting an 11% growth and improving operating leverage. Specialty Products decreased by $400,000, and corporate expenses declined year over year due to continued spending discipline and the nonrecurrence of CEO transition expenses recorded in 2024. Slide eight focuses on Surfactants. Surfactants net sales were $402 million, up from $379 million in the prior year. Organic volume declined 3% year over year, primarily due to weaker demand across commodity consumer and construction and industrial solutions end markets. Price and mix benefited from pass-through of higher raw material costs, improved product and customer mix, and pricing actions. Foreign currency translation positively impacted net sales by 3%. Surfactants adjusted EBITDA declined slightly, reflecting lower organic volume and elevated oleochemical input costs. Moving now to slide nine, Polymers net sales were $132 million versus $113 million in the same quarter of last year. Volume increased 11%, driven by North America and Asia rigid polyols and commodity phthalic anhydride growth. Price was negatively impacted by the pass-through of lower raw material costs and competitive pressure. Foreign currency translation positively impacted net sales by 2%. Polymers adjusted EBITDA increased 9% versus the prior year, driven primarily by strong volume growth, partially offset by lower unit margins and unfavorable product and customer mix. Specialty Products net sales and EBITDA were modestly lower year over year due to order timing fluctuations within the pharmaceutical business, though medium chain triglycerides continue to deliver double-digit volume growth. Let us move now to slide 12 to review balance sheet and cash flow. Free cash flow generation remains a key focus. Cash from operations was $60 million in the fourth quarter and free cash flow totaled $25.4 million, driven by working capital reductions. We ended the fourth quarter with net debt of $494 million, a $32 million reduction versus the prior year, and a net leverage ratio of approximately 2.5x trailing twelve-month adjusted EBITDA. This improvement reflects our continued focus on cash generation, debt reduction, and maintaining financial flexibility. Turning to full year results, reported net income was $46.9 million, down 7% year over year, while adjusted net income was $41.7 million. The decrease in 2025 adjusted net income was primarily driven by lower Surfactants operating income, lower capitalized interest expense, and a higher effective tax rate. Global organic sales volume increased 2% for the full year, driven by strong growth in crop productivity, oilfield, tier two and tier three customers, global Polymers, and Specialty Products. This was partially offset by softer demand in global commodity consumer end markets. Full year EBITDA increased 11% to $208 million and adjusted EBITDA increased 6% to $199 million. Cash from operations in 2025 was $148 million and free cash flow was $25.4 million. Disciplined working capital management and capital spending allowed us to generate positive free cash flow while funding strategic investments in 2025. With that, I will turn the call back to Luis to discuss our strategic outlook and Project Catalyst. Luis E. Rojo: Thanks, Ruben. I will begin with a brief update on our strategic priorities before turning to Project Catalyst, which represents a significant step forward in strengthening the Stepan foundation for long-term superior value creation. Our strategy remains centered on four key pillars. First, our continued focus on customer-centric innovation to create new applications and better solutions for our customer products and strengthening our strategic technical partnerships. Second, our diversification strategy is to deliver growth in higher value end markets and expand our reach in the tier two and tier three customer segments. Third, operational excellence in our supply chain remains a key priority for the future, improving the reliability and resiliency of our manufacturing network and operating metric results at our Millsdale site. And fourth, we continue improving our financial position by a relentless focus on improving free cash flow generation, deleveraging the balance sheet, and a disciplined and efficient capital allocation. Throughout 2025, we saw significant growth in crop productivity, oilfield, and Specialty Products, while Polymers also delivered strong volume growth across North America and Asia. We also grew mid single digits in our tier two and tier three business. We also made meaningful progress in growing our reliability in Millsdale. We fully commissioned our Pasadena facility, with production ramping up. This effort resulted in EBITDA growth, positive free cash flow generation, and a reduction of our leverage ratio during 2025. Let us move now to slide 14. Today, we announced Project Catalyst, which is a comprehensive plan designed to further optimize our asset base and create a more productive, agile, and accountable organization to enable growth. Project Catalyst is expected to deliver around $100 million in pretax savings over the next two years, with approximately 60% of the savings expected in 2026. Project Catalyst is not a short-term cost reduction program alone. It is a strategic transformation designed to enhance the competitiveness of our cost base while preserving customer service and growth flexibility. Project Catalyst is built around three core value levers. First, footprint optimization by consolidating volume and improving utilization rates in our more modern and cost-competitive sites. Another component of this effort is the ramp-up of our Pasadena facility, which we expect to reach around 70% to 80% in 2026 and full utilization in 2027. Second, operational efficiency and cost optimization. This includes procurement savings, productivity improvement across our manufacturing and logistics network, and the deployment of an enterprise-wide operating system that drives discipline, data-driven execution, and continuous improvement. Third, organizational effectiveness. We are clarifying accountabilities, streamlining decision-making, and aligning resources more tightly to our growth priorities to accelerate the value capture across the organization and improve productivity. Importantly, Project Catalyst is designed to partially offset inflationary pressures and other headwinds while creating the capacity to reinvest in growth initiatives, innovation, and supply chain resiliency. Today, we announced the closure of our Fieldsboro, New Jersey site. This is in response to continued lower demand in commodity surfactants used in the production of laundry detergents. In addition, we are decommissioning select assets at our Millsdale and Stalybridge sites. We are planning to execute these actions in the next few months. I want to acknowledge that the decisions we are making are difficult, especially as they impact people and communities that have been part of the Stepan story for many years. We deeply appreciate the dedication and hard work of our teams at these locations. We will continue to evaluate additional opportunities to further optimize our footprint and strengthen our competitive position while unlocking the potential of our existing sites. This is a dynamic environment, and we will adjust and make changes if necessary. As we look forward to 2026, we remain focused on delivering superior shareholder returns with a balanced approach between top-line growth and productivity cost-out efforts. We believe we are well positioned to deliver adjusted EBITDA growth and positive free cash flow in 2026, despite the ongoing market challenges. This concludes our prepared remarks. We will now open for questions. Didi, please review the instructions for the questions portion of today's call. 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. Our first question comes from Michael Joseph Harrison of Seaport Research Partners. Michael Joseph Harrison: Hi. Good morning. Good morning. I wanted to start out with a couple questions on Project Catalyst. I understand a lot of this consolidation has been a long time coming, but can you give us a sense of what capacity utilization looks like within the Surfactants business today, and following the optimization actions that you have enumerated here in Fieldsboro and the other two facilities, what would that do for capacity utilization going forward in Surfactants? And I guess I was looking to understand, the facilities that you are closing or the assets that you are closing, are they losing money on an operating income or EBITDA basis in 2025, or were they still providing some kind of a positive earnings contribution? Luis E. Rojo: Great questions, Mike. Look, of course, Surfactants have different platforms and different chemistries. What I will say is with the consolidation that we are doing, we are trying to optimize our cost structure. We are moving volume to, you know, less cost-effective sites to more modern and cost-efficient sites, and we still have a certain capacity for growth. And, of course, if you think about our calculation, we still have capacity for growth. AOS, and even in ether sulfates and lauryl alcohol ethoxylates we have capacity to grow in the future, but we know where the market is going, and that is why we took the decisions that we are making. It is not like we are losing money in those sites. The point is that we are moving the volume to other sites to improve the utilization rate in those sites and continue serving our customer at a more efficient cost structure. Michael Joseph Harrison: Alright. And then in terms of the $100 million worth of savings and just the timing, you mentioned $60 million is expected in 2026. But I wanted to understand also that you have noted that these savings are intended to help cover inflation that you might be seeing, and I was just hoping you could help us understand how we might think about the net savings, you know, that $60 million minus whatever inflation you are anticipating during this year? Luis E. Rojo: No. Good point, Mike, because, yes, we believe we are going to deliver at least the $60 million pretax in 2026. But as you know, it is public information that we have around $750 million in fixed costs when you think about, you know, salaries and maintenance and all of that. And, of course, inflation is still there. Right? I mean, you could argue that the inflation of 3% is still there. In some cases, the inflation is even higher when you think about health care, when you think about insurance, when you think about incentive-based compensation. So call it you have a three-plus inflation rate in our cost structure, and that, of course, is going to eat up some of the savings that we will deliver for sure in 2026. Michael Joseph Harrison: Alright. You had talked a little bit about oleochemicals creating some raw material pressure. I was wondering, did the impact of oleochemicals get worse in Q4 than it was in Q3, and should it get better as we get into Q1 given that it looks like the market prices of some of those oleochemicals have come lower? Maybe just help us understand a little bit more what is going on with the timing of those costs and also the timing of your pricing actions or any kind of index pass-through response that might be happening. Luis E. Rojo: No. Yeah. This is, of course, very relevant to our EBITDA margins in the Surfactants business. If you look at the business in Q1 2025, we still had a double-digit EBITDA margin, and that is when we saw the start of the escalation of oleochemicals. And there is a lag. Right? I mean, we typically carry a lot of inventory because it is from Asia, and all that supply chain is pretty long. So while you saw, you know, coconut oil prices going from the $2,000 to $3,000 per metric ton, and really, really, I mean, you felt all that impact in the P&L in the second half of 2025. Coconut oil prices are coming down significantly now and, actually, PKO is going up, which at the end is narrowing the gap, which at the end important piece is the gap between CNO and PKO. And the reality is that if you look at where we are now, January, February, that spread between CNO and PKO is almost at a normal level. Right? $200 difference. You have CNO at $2,200. You have PKO at $2,000. And that $200 delta is, you know, historically has been in the $130 to $150. So we are getting to a point where we feel very, very good. However, again, last year, we saw the impact in the second half, the, you know, the hurt of higher oleochemical in the second half. You are going to see the help in 2026 in the second half. We carry a lot of inventory. This is a very long supply chain. And as we, I mean, we keep increasing prices, and you have seen this in our price/mix numbers. But at the end, we will recover those margins at the end of 2026, more in the second half than in the first half. In the first half, you are going to still see the impact of lower margins in Surfactants. Michael Joseph Harrison: Alright. And then, my last question for now is just a little bit about the timing of earnings. I understand you have given a 2026 outlook that calls for EBITDA growth. Would love it if you could help us understand, you know, maybe some ranges or ideas of how much growth we could anticipate. But it sounds like between the oleochemical impact and maybe the savings starting to accelerate as the year goes on, it sounds like the second half should be quite a bit better than the first half. And I know this is adding an extra question, but I also assume there is maybe some weather impact that could drag on your first quarter. So maybe just a little bit of color on how we should think about the cadence of earnings and how much growth is anticipated next year in 2026. Thank you. Luis E. Rojo: Good questions, Mike. And so let me think about this. We are committed, and we feel good—that is why we had it in our prepared remarks—that we expect EBITDA growth in 2026 versus 2025. You are 100% correct that when you think about four, five big factors that are helping the second half and not helping the first half. So we already talked about the oleochemical raw material situation. Right? It is going to be significantly better in the second half versus the first half. Catalyst savings—we are committing to the $60 million pretax—and, of course, those are going to be heavily skewed to the second half. I mean, procurement savings and some of those things are throughout the year. But when you think about footprint and the other stuff, it is mostly second half. We are also expecting demand recovery in the second half versus the first half when you think about, you know, two interest rate cuts. Right? That is very important. I mean, if all the banks and everybody is projecting at least two interest rate cuts throughout the year, especially in the second half. So we expect demand to improve in the second half versus the first half. This is important for our construction business, both in Polymers and a little bit also in Surfactants. So when you think about all of those effects and the fact that we started Q1 with a historic weather impact. Right? Nobody was expecting this winter. I am telling you that we are pleased. We are extremely pleased with the supply chain that we have, and we did extremely well compared to many other winters, but it is true that some demand was lost. When you think about the Polymers business and construction activities and re-roofing, when you think about how this impacts some of our Surfactants business, there was some demand loss and there is also absorption, right, because we did not produce everything that we intended to produce in Q1. So there is an impact of around $6 million in Q1 2026 on an EBITDA basis due to the weather, but the good news is that we are expecting to recover at least half—hopefully more than half, but at least half of that—between Q2 and Q4. When you think about the absorption piece and some of the demand loss, we expect to recover at least half or more in the following quarter. So, yes, Q1 is a tough quarter to start. I think many chemical companies saw that impact, and it was a historic winter in the U.S., but the good news is that we did extremely well and we are well positioned to recapture some of that EBITDA that we lost in Q1. Michael Joseph Harrison: Alright. Very helpful. Thanks very much. Luis E. Rojo: Thank you, Mike. Operator: Thank you. Our next question comes from David Joseph Storms of Stonegate. Your line is open. David Joseph Storms: Good morning, and thank you for taking my questions. I just want to maybe circle back. Morning. I want to circle back to Project Catalyst. Just curious as to what your anticipated impacts on that project are to tier two and three customers. Is this going to make it easier for them to engage everyone there, or is this going to be maybe a little more challenging for them since there are going to be fewer areas for them to go to to interact with you? Luis E. Rojo: No. Look. Thanks, Dave, for the question. And look, Project Catalyst has three levers. Right? The first two levers are heavily focused on supply chain and footprint, but the third lever is very, very important, which is we are working on a more agile, accountable, and productive organization that is going to accelerate the growth of the company in the future. Right? So we are working those details right now. We are going to announce more things in the future. But what we are planning to do with the new organizational structure and with all the investments that we are doing on automation and systems is to actually facilitate the growth with tier two and tier three. We are very happy with the growth that we are having in this segment. We did mid single digits in 2025, and I am expecting this to grow even higher in 2026 as we facilitate to them doing business with us. So there are plenty of investments that we are making on automation, systems, and tools to make sure that we capture an even bigger share of the pie of the tier two and tier three segment. So I think Project Catalyst is just great news for our tier two and tier three customer segment. David Joseph Storms: Understood. And then if I could ask a question. It sounded like the answer around demand loss in the first quarter due to the weather sounded like that was mostly based on polymer demand loss, in the Polymer segment. Are you seeing any demand loss in ag? I know Q1 tends to be a big ag quarter for you. Just curious as to what you are seeing given the weather that we have had in the U.S. this year. Luis E. Rojo: No. Great point. Great point. Let me clarify. Out of the $6 million that I mentioned, the majority of that is Surfactants. That is where we saw the biggest impact. And Polymers, even though it is a low season—you know, Q1 is a low season on re-roofing—still we saw a lot of delays from our customers because of the weather. So at the end, the $6 million is more Surfactants than Polymers, but it is not in ag. I mean, ag continues growing very nicely. We are very happy with our ag business. We are very happy with our oilfield business. We are very happy with our tier two and tier three business. So we keep growing in all our strategic areas, and we will continue managing our commodity Surfactants business to make sure that it is more productive and cost-effective. David Joseph Storms: Understood. That is very helpful. One more if I could. Just around your inventories, I know you mentioned that there tends to be a little bit of a lag. I also know in the past, as the raw materials prices tend to increase, your inventory levels have increased as well. I noticed your inventory levels are actually down quarter over quarter. Is this you kind of learned your lessons from past, you know, inventory run-ups? Or is this just the lag that we should expect? Luis E. Rojo: No. Look. I would say this is the normal lag of Q4, but the reality is that of course we are extremely focused on free cash flow. We will continue managing our working capital to ensure that we have, you know, what we need and no more. So free cash flow continues to be a key priority. We deleveraged the balance sheet, and our leverage ratio went down to 2.5x because that is a key focus in the company. And having the right inventory levels is a priority for all of us. And, again, in some of those cases, as I mentioned, I mean, when you have a supply chain from Asia, including, you know, all the way to coconut oil, all the way to produce methyl esters, all the way to bring those to the U.S., it is a very long supply chain. And, of course, those have an impact when you think about the raw material situation that we have. But at the end, we feel good with our inventory levels and we will keep our inventory levels as we streamline our footprint asset base. David Joseph Storms: Understood. Thank you for taking my questions. Thank you. Operator: Our next question comes from David Silver of Freedom Capital Markets. Your line is open. David Silver: Yeah. Hi. Good morning. Thank you. Good morning, David. David. I have a bit of a scatter of questions, so I am sorry. It will be a little disjointed. You know, regarding Project Catalyst, you did go into some detail as to what production would be reduced from the actions at Fieldsboro. I was wondering if you might be able to do the same for Millsdale and for your U.K. facility. In other words, are all of the facilities affected? Are they all in the commodity Surfactant area, or might there be some other areas affected? And should we assume that, you know, all of the activities will mainly affect, you know, Surfactants segment as opposed to Polymers or Specialty Products? Luis E. Rojo: Great point, David. Welcome you back. And, look, all is in Surfactants. You will see in the press release a little bit more details. It is about the alkoxylation assets in Millsdale. And, of course, we have great capacity and a modern and state-of-the-art facility in Pasadena. So we want to make sure that we produce those products in the most cost-effective way, and that brings Pasadena. And in the case of Stalybridge, it is also Surfactants—of course, a Surfactant site—but it is more a commodity, low-margin, high-capex organics business that we are exiting. This is a business that does not produce a return that we deserve, and we are exiting that business. So it is all Surfactants, and it is to make sure that we improve the profitability and the return and the ROIC of the company. David Silver: Okay. Great. Thank you. I wanted to ask a question about your CapEx guidance for 2026. So at a range of $105 million to $115 million, that would be your lowest spend in several years, although if you go back a ways, you know, it was a little bit lower. Should we think of the 2026 CapEx as your new base level for sustaining CapEx, or might there be a certain amount of discretionary or growth-oriented CapEx? And if there is, could you just highlight the areas where you still feel discretionary CapEx is warranted in the current environment? Luis E. Rojo: No. Good point, David. And you saw before COVID and all of that, we were running in the, call it, at a $100 million range for our normal CapEx. Now, of course, we have a few new sites. Right? We acquired two sites with Invista, and we have Pasadena. But, look, the $110 million—let us take the midpoint—the $110 million reflects very, I mean, some small but good growth capital projects, and then our normal base CapEx for infrastructure, and EHS, IT, R&D, and all of those buckets. So what I will say is you can call it, you know, less than $100 million for the normal base CapEx and then some growth CapEx on top. It is not significant, but it is still giving us the opportunity to move forward with the projects and the innovation plan that we have for the next few years. David Silver: Okay. Great. I had a question on the demand side. And maybe this relates more to North America and Europe, but maybe not. But, you know, amongst some other ingredients producers that I track, there has been a lot of commentary about the stretched consumer—middle income or thereabouts—in the demographic customer. And there has been a lot of talk for a while, but even recently about consumers trading down, right, in their choice of personal care, let us say, personal care products. Would you say that that has been part of your view here and now? And, you know, how are you kind of adapting to that somewhat evolving demand profile, maybe, you know, to reflect a stretched, you know, kind of middle income consumer for personal care? Luis E. Rojo: Yeah. No. Very good points, David. And I think you are asking about personal care. I mean, if you think about it, I mean, you have two things: personal care, and then you have all the cleaning piece. But on the personal care, what I will say is that is why our huge focus is on tier two and tier three, and our huge focus on sulfate-free. When you think about personal care, you are rightly so that those are the dynamics. Right? I mean, you have consumers trading down not only on personal care, but on overall cleaning and disinfection and laundry and all of that. So our focus of tier two and tier three, on sulfate-free for personal care, is the right focus to continue growing where the consumer is going. Right? That is where the consumer is going, and that is where we are investing and that is where we are putting our focus. David Silver: Okay. Great. And then maybe just the last question. And this would have to do with, you know, kind of the global evolving kind of tariff situation. And, you know, I know, I guess it is difficult to ask the question in the current environment because there has just been another announcement over the past couple of days. But I am thinking more of your global footprint and in particular, you know, Mexico. And I am just wondering if, you know, the current status of how the U.S. is deploying their tariffs—has that had a negative impact on the ability of your assets to compete, you know, let us say, for business in the U.S., or, you know, how would you assess Stepan’s overall positioning, you know, in the current tariff environment? Luis E. Rojo: Look. Tariffs will continue to change, and you know better than me that this is an evolving thing. We are focusing on what we control. We have a great supply chain with a lot of options, and we will continue optimizing those options. Right? The reality is that we had an impact in 2025, and that is why I put it in my remarks. Right? I mean, inflationary pressures in raw materials and tariffs—we were not expecting that when we started 2025—and the reality is that all those millions of dollars add up. And we will see where the new policy goes. I mean, we have production in the majority of the regions where we source and where we serve our customers, so that gives us an advantage that we are very close to our customers, and that is the strategy. But, of course, we need to continue evaluating every supply chain based on where these dynamics go. But, again, we expect 2026 to be as volatile as 2025 in regards to tariffs, and we will look for every opportunity that we have in that front, including, you know, refunds of the previous tariffs that we paid. David Silver: Okay. Great. I appreciate all the help. Thank you. Operator: Thank you. This concludes our question and answer session. I would like to turn it back to Luis E. Rojo for closing remarks. Luis E. Rojo: Well, thank you so much for joining us today. Have a nice and safe day. Thank you. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good afternoon, and welcome to SI-BONE's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Saqib Iqbal, Vice President, FP&A and Investor Relations at SI-BONE for a few introductory comments. Please go ahead, sir. Saqib Iqbal: Earlier today, SI-BONE released financial results for the quarter ended December 31, 2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management's remarks today may include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, such as our most recent Form 10-K, and our actual results might differ materially from any forward-looking statements that we make today. Accordingly, you should not place undue reliance on these statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year. With that, I'll turn the call over to Laura. Laura Francis: Thanks, Saqib. Good afternoon, and thank you for joining us. Our strong fourth quarter and full year 2025 results validate that our innovation-led growth strategy is delivering meaningful real-world impact. We've built deep technical expertise to solve complex procedural challenges that historically lead to poor outcomes for patients with compromised bone. That expertise has produced a differentiated platform of solutions, including 3 products which have been granted FDA breakthrough device designation. We've consistently secured favorable reimbursement, including multiple new technology add-on payments and a transitional pass-through payment, confirming the superior outcomes, clinical value and health economic benefits we deliver. Supported by world-class clinical evidence and an industry-leading commercial team, our proprietary technologies have been used in over 140,000 procedures worldwide. Looking at our execution in 2025, we achieved a series of major milestones that strengthened our foundation and created powerful multiyear growth tailwinds. We generated record annual worldwide revenue of nearly $201 million, marking another year of over 20% growth. We reached new levels of customer engagement with over 2,400 U.S. physicians performing nearly 22,000 procedures in 2025. The 22% increase in U.S. physicians who used our technologies in 2025 demonstrates the growing adoption, the expanded utilization and the strength of our commercial engine. We meaningfully strengthened our reimbursement position, securing an NTAP for iFuse TORQ TNT and the TPT for iFuse Bedrock Granite. These are critical catalysts that enhance our access, drive adoption and reinforce platform leadership. At the same time, we've made substantial progress on 2 highly compelling new products. The first product, INTRA Ti, was launched last week, and we expect to commercialize our next breakthrough device in late 2026, further extending our growth runway. 2025 also marked a step change in our financial profile. We delivered our first full year of positive adjusted EBITDA and achieved a 9% adjusted EBITDA margin in the fourth quarter. We capped the year by achieving positive free cash flow in the fourth quarter. Together, these results underscore a platform that is scaling and is positioned to deliver sustained, profitable growth. We started this company by creating the sacroiliac joint fusion market, and we remain the undisputed market leader. Over the past 5 years, we've expanded into new adjacencies in the broader sacropelvic space, applying our biomechanical expertise and proprietary technology to achieve better patient outcomes. Looking ahead, the next 5 years represent an innovation super cycle for us as we launch unique technologies targeting new clinical adjacencies. We're positioned to solve the largest unmet needs for patients with compromised bone, and we intend to lead this space for the long term. With a significant runway in our existing markets and focused innovation aimed at sizable new opportunities, we're confident in the long-term growth potential of the business. Now I'll highlight the progress we've made on our 4 key priorities: innovation and market development, physician engagement, commercial execution and operational excellence. Starting with innovation and market development, innovation to solve complex procedural challenges that historically led to poor outcomes for patients with compromised bone have been the primary driver of our industry-leading revenue growth of more than 20% since our IPO in 2018. We built a reputation for developing platform technologies that become category leaders in their respective markets. We offer the most comprehensive portfolio of solutions in SI Joint Fusion, purposefully designed to meet diverse patient needs and physician preferences. As we continue to expand this robust offering, we're reinforcing our leadership position and deepening our commitment to innovation that addresses the needs of our orthopedic and neurospine surgeons and a growing base of interventional spine physicians. Earlier this month, we received FDA 510(k) clearance for INTRA Ti, the newest addition to our SI Joint Fusion platform. INTRA Ti builds on the interventional spine physicians' preferred posterior approach that INTRA X uses and is backed by established nationwide reimbursement. We're confident that INTRA Ti will improve the procedural efficiency of SI Joint Fusion at ambulatory surgery centers. This launch further advances our strategy to be the go-to partner across call points and sites of service. We initiated our alpha launch last week and expect adoption to ramp over the course of 2026 as we scale physician education and training. INTRA X continues to gain momentum as the preferred percutaneous allograft solution in office-based labs. Effective January 1, 2026, Medicare reimbursement for the OBL site of care increased by 17%. The new reimbursement is nearly $14,000, reinforcing the economic attractiveness of minimally invasive SI Joint Fusion in this site of care. In the thoracolumbar market, iFuse Bedrock Granite has been one of our fastest-growing platforms and solidified our reputation as an innovator. Since launch, Granite has significantly outpaced the overall deformity market growth rate, driven by new surgeon adoption and expanding use cases across both deformity and degenerative spine. The success of Granite and pelvic fixation underscores our ability to introduce true platform innovation, disrupt relatively mature markets and establish new standards of care. Granite continues to benefit from TPT payment status with a $0 device offset, resulting in 100% reimbursement of facility reported cost for Granite when used in outpatient and ASC settings. Also effective January 1, 2026, CMS approved the inclusion of the open SI Joint Fusion code in the TPC calculation, further expanding reimbursement pathways for these cases. We're also encouraged by broader CMS policy signals that support outpatient migration in spine. Effective January 1, 2026, CMS created a new Level 7 musculoskeletal APC, paying nearly $28,000 for certain outpatient spine procedures. While higher acuity patients will continue to be treated inpatient and clinical practice patterns will evolve over time, these changes reflect CMS' continued efforts to move procedures to lower cost settings. We believe Granite is well positioned in this environment as an adjunctive solution to spinal fusion, particularly given the availability of the TPT. In the trauma market, iFuse TORQ TNT continues to gain momentum as highlighted by the 50% increase in physician adoption in the fourth quarter. TNT addresses a long-standing procedural gap for sacral insufficiency fractures, where the majority of patients have low-density bone. With an intuitive workflow and up to 30% higher NTAP reimbursement in eligible cases, TNT is increasingly the preferred solution for sacral insufficiency fractures. Finally, an update on our third breakthrough device. We remain on track to file for 510(k) clearance in the third quarter. Subject to FDA review time line, we could commercialize the unique product in late 2026. We believe this product will meaningfully expand our total addressable market and are excited about the clinical impact it can have and the growth opportunity it represents. Now let's move on to physician engagement. In the fourth quarter, a record 1,640 physicians performed procedures using our solutions. The addition of 250 physicians in the quarter represents 18% growth compared to the prior year period. This marked our 20th consecutive quarter of double-digit growth in physician adoption. Notably, this growing physician interest spans all call points as we observed double-digit growth across each of them in the fourth quarter. The number of physicians who performed procedures in the fourth quarter of 2025 as well as the prior year outpaced overall physician base growth. This substantiates that our expanded platform strategy is driving adoption consistency. This cohort of physicians also performed more than 3x the number of cases per physician compared to physicians who performed their first case with us in the current quarter. This highlights the long-term utilization potential as physicians integrate our solutions into their practices and use our modalities with increasing intensity. Furthermore, only about 25% of physicians who performed an SI Joint Fusion procedure have adopted another procedure, highlighting a significant opportunity to further expand the use of our products. We also expect future products to attract new physicians while accelerating procedural density with this growing physician base. Now let's turn to commercial execution. We ended the quarter with 89 quota-carrying territory managers. Annual revenue per territory was $2.1 million, reflecting 18% year-over-year growth. This marked the 13th consecutive quarter of double-digit territory productivity growth. Our hybrid sales model, combining a direct sales force with over 300 third-party agents has been instrumental in driving this productivity and enabling us to achieve strong operating leverage. In 2026, we plan to add 10 new territories while expanding strategic agent partnerships to ensure we can fully capture the large market opportunity. Given our success with the hybrid model, I'm excited to announce that last week, we entered into a strategic partnership with Smith & Nephew, an orthopedics industry leader to capitalize on the growing physician interest in our trauma solutions. This collaboration significantly expands our reach and accelerates our penetration into the trauma market. It will allow trauma surgeons across Level 1 and Level 2 trauma centers nationwide to gain access to TORQ and TNT and pelvic trauma. On the leadership front, following our announcement last August, we completed a smooth commercial transition. Nikolas Kerr has assumed the role of Chief Commercial Officer, succeeding Tony Recupero, who has retired from his position as President of Commercial Operations. Tony will remain in an advisory role for the next 12 months. Nick has been the architect of our product platform expansion and his deep relationships with both the field and our customers positions our sales organization for continued success. Before I hand the call over to Anshul, I'd like to share some additional leadership updates. I'm excited to announce that Anshul has assumed the role of Chief Operating Officer, alongside his current position as Chief Financial Officer. Anshul has been leading our operations function for the past 18 months. And now in this expanded role, he'll also be responsible for the IT and program management functions. Over the past 5 years, Anshul has been instrumental in bringing operational excellence to SI-BONE, playing a pivotal role in driving strong and profitable topline growth and guiding us toward our goal of sustained free cash flow. His strategic vision, combined with his deep operational insights, uniquely position him to drive the company's next phase of growth. I'm also pleased to announce the promotion of Jeff Ziegler to Senior Vice President of Market Access and Reimbursement. Jeff has developed our reimbursement strategy, playing a crucial role in securing favorable reimbursement, including NTAP and TPT for our solutions. He'll continue to drive impactful results as we focus our reimbursement efforts on our new technologies we expect to launch. With that, I'll hand the call over to Anshul to provide an update on our fourth key priority, operational excellence and discuss our fourth quarter results and 2026 outlook in more detail. Anshul? Anshul Maheshwari: Thanks, Laura. Good afternoon, everyone. My comments today will cover fourth quarter and full year revenue growth, profitability and liquidity, and then I will walk through our full year guidance for 2026. All comparisons provided will be against the prior year period, unless noted otherwise. Starting with revenue growth. Our fourth quarter worldwide revenue grew 15% to a record $56.3 million. U.S. revenue was $53.5 million, representing 13.9% growth, which was against a tough comparable prior year quarter. On a 2-year stack basis, U.S. revenue grew 20.7%, representing a 90 basis point acceleration compared to the third quarter's 2-year stack revenue growth. International revenue in the fourth quarter was $2.9 million, growing 38.8%. The strong international performance was driven by the stellar reception for iFuse TORQ. We're encouraged by the traction we are seeing with TORQ and are actively working to get TNT into these markets in late 2026, well ahead of our previously planned launch in 2027. For the full year 2025, we generated worldwide revenue of $200.9 million, reflecting 20.2% growth. Our U.S. revenue grew 20.6% to $191.1 million. U.S. revenue growth was driven by a 22% increase in procedure volume growth. International revenue for the full year 2025 was $9.8 million. Moving to profitability. Fourth quarter gross profit increased 14.8% to $44.5 million. For the full year, gross profit increased 21% to $159.9 million. Gross margin was 79% for the quarter and 79.6% for the full year. The gross margin for the full year came in approximately 200 basis points above our original 2025 guidance. This outperformance was driven by stable ASP from a favorable procedure mix and supported by the positive impact of our ongoing operational initiatives, including improved supply chain efficiency and cost optimization. Operating expenses grew 6.2% in the fourth quarter to $47 million. For the full year 2025, operating expenses grew 8.9% to $182.2 million. The increase in operating expenses was mainly driven by revenue-generating activity, including higher sales commission and increased R&D investment aimed at expanding our product pipeline. Net loss narrowed to $1.6 million or $0.04 per diluted share compared to a net loss of $4.5 million or $0.11 per diluted share last year. For the full year 2025, net loss narrowed by 38.8% to $18.9 million or $0.44 per diluted share. We delivered positive adjusted EBITDA of $5.1 million in the quarter, a 176.2% improvement over the prior year. Our 9.1% adjusted EBITDA margin in the fourth quarter highlights the scalability of our infrastructure. Adjusted EBITDA for the full year 2025 was positive $8.9 million compared to $5.1 million of adjusted EBITDA loss in 2024, representing approximately $14 million improvement. Turning to liquidity. We exited 2025 with $147.8 million in cash and equivalents. This was an increase of $2.1 million from the third quarter. The fourth quarter was our second consecutive quarter of positive cash flow from operating activities and the first quarter in which we generated free cash flow. We generated nearly $0.5 million in net free cash flow in the fourth quarter. This was well ahead of our previously stated goal to achieve free cash flow at some point in 2026. For the full year 2025, our cash consumption was just $2.2 million compared to $16 million in cash consumption in 2024. This significant improvement achieved while continuing to invest in surgical capacity reflects our disciplined working capital management and our highly efficient asset-light business model. Our robust liquidity position, consistent profitability and recent cash flow inflection positions us to self-fund revenue accelerating investments in platform technologies targeting new addressable markets. Finally, moving to our outlook for 2026. In 2026, we expect worldwide revenue of $228.5 million to $232.5 million, implying year-over-year growth of 14% to 16% driven by high teens growth in U.S. procedure volume. Our guidance also assumes revenue growth to be weighted towards the second half of the year as we expect the tailwinds that Laura highlighted to increasingly benefit the business as we progress through the year. Consistent with our guidance philosophy, we believe it's prudent to allow these tailwinds to materialize before we fully incorporate them into our expectations. Based on the revenue assumptions, we expect 2026 annual gross margin to be approximately 78%. We expect annual operating expenses to grow 12.5% at the midpoint of the revenue range, allowing us to fund key growth initiatives, including new product launch activity, planned sales force expansion and pipeline development that we expect to commercialize in 2027 and beyond. Importantly, in 2026, based on the operating leverage inherent in our model, we will deliver increased adjusted EBITDA compared to the prior year and remain firmly on track to deliver on our free cash flow commitments. With that, I will turn the call over to Laura. Laura Francis: Thanks, Anshul. I want to congratulate my colleagues for record performance across revenue, physician engagement and profitability. You are our most valuable asset. And I want to thank you for your commitment and contributions, which have helped tens of thousands of patients this year improve their lives. As we look ahead, I'm excited about the momentum we're carrying into 2026. With a strong foundation, a robust pipeline of innovative products and expanding market opportunities, we're well positioned to deliver another impactful year. With that, we're happy to answer your questions. Operator? Operator: And our first question for today comes from the line of Patrick Wood from Morgan Stanley. Patrick Wood: I'll just do 2 quick ones. The first one on the Smith & Nephew partnership, like how did that come about? How are you thinking about the potential contribution for that? And did we factor any of that into the guide? Laura Francis: Patrick, it's Laura. Thank you so much for the question. We are really excited about the partnership with Smith & Nephew. And as you know, over the last few years, we've actually successfully deployed a hybrid sales model, and it's really been a key contributor as we expanded access to our solutions. And it also translated into significant territory productivity gains as well. So what we did is building on that experience. We are announcing that partnership with Smith & Nephew. We understood that they had a very significant footprint on the trauma side, and we have particular strengths and want to focus our team on spine and on interventional. And so we had talked about this on our last couple of earnings calls that we were looking at large strategic distribution partnerships, and we're very excited that this one came to fruition. In terms of the partnership itself, it covers Level 1, Level 2 trauma centers, and it's going to allow trauma surgeons to get access to our trauma solutions and to treat these patients that have sacral insufficiency fractures. So really for both of us, it's a win-win situation, gives a large number of trauma surgeons working with Smith & Nephew access to our breakthrough technology. And we do believe that it will become a standard of care for treating pelvic fracture similar to what we did with Granite and pelvic fixation. And as I said, it also frees up our direct sales force to focus more on market development and physician engagement with spine surgeons as well as interventionalists and especially given our march toward commercializing new products this year as well. Anshul Maheshwari: And then, Patrick, on your question on whether -- what's included in the guide, as we shared in our prepared remarks, trauma was a nice growth driver for us last year. It's still year-1 into its launch, and we saw a 50% increase in the number of physicians actually using our solution. So really excited about what this partnership can do in terms of expanding the access of our platform to these Level 1, Level 2 trauma sites. But it's too early. We just signed the agreement. We want to see how it seasons and matures as we go through the year. And we'll be sharing more as we go through the year on the impact it's having on the business. Patrick Wood: Super helpful. And then just as a quick follow-up. You guys now have a clear clinical data set showing that the IPM physicians are getting very similar clinical outcomes to the direct surgeons on that side. Do you think that helps sort of create more engagement on that side? Do you think the mix changes over time? Or should we see a similar mix of physicians being onboarded? Laura Francis: So I think what you're asking is the opportunity that we have with interventional in SI Joint Fusion. And as you can see with the launch of our INTRA product, it shows the dedication that we're making to the interventional physicians. Also, you mentioned clinical data, our STACI study was recently published and showed the efficacy of our TORQ product used by interventionalists and shows that they are able to perform these cases and have the same sorts of outcomes that we've seen in our other prospective studies as well as randomized controlled trials. But yes, as you can tell, we're really leaning into our work with interventionalists. We're seeing significant growth in our interventional business and our INTRA Ti product really rounds out our SI Joint Fusion portfolio. It's going to allow physicians to use iFuse regardless of their preferred approach and implant type to fuse the SI Joint. So in this particular case, INTRA Ti, it's a posterior metal implant with piercing features. It qualifies for CPT 27279, which is clearly covered at all sites of service. And also the posterior approach really aligns with interventional spine physicians' preferred workflow. And we have a streamlined single-use instrument kit, and it's going to allow us to drive procedural efficiency, specifically in the ambulatory surgery center site of service. So we're excited about the opportunity with interventional and with our suite of products, which includes TORQ and INTRA as well as INTRA Ti. Operator: And our next question comes from the line of Mathew Blackman from TD Cowen. Mathew Blackman: Great. I've got 2. Maybe, Anshul, starting with you. If I'm backing into your adjusted EBITDA from some of the commentary, some assumptions on stock-based comp and maybe a little bit of math, it seems like you're guiding to somewhere north of $20 million for EBITDA, adjusted EBITDA in 2026. So the first question is, is that right? Am I doing that math right? Any help there would be appreciated. And then I've got one follow-up. Anshul Maheshwari: Yes. Thanks for that question. So the way we've talked about it externally is if you look at our growth rate for the year from a guidance perspective, it's around between 14% and 16%, gross margins of 78% and OpEx growth of 12.5%. So rough math, that would imply operating leverage for 2026 being at 1.2x. And there are 3 reasons for the operating leverage to be at 1.2x this year is we've got 2 new products that we want to look to commercialize this year. We're making investments in potentially putting out TNT in Europe as well in 2026. So you've got a lot of training and commercial activity that goes on to drive the adoption. of the technologies. That's number one. Number two is we are investing in expanding our commercial infrastructure. So as we've shared in our prepared remarks, we want to add 10 more territories. Part of that is in anticipation of these new product launches and making sure we can maximize the opportunity ahead of us. And then indexing on R&D again, growth remains a key priority for us. Laura talked about a regular cadence of product launches that will happen between now and 2030. So we're really indexing heavily on the R&D side as well. And on the adjusted EBITDA side, what we've said is we expect it to be an increase from prior year. We're not being very specific. But if you did the math, it would come not at $20 million, but a bit lighter than that. Mathew Blackman: Okay. I appreciate that. And then my follow-up is on INTRA Ti. And just thinking about its ASC-centric nature, how should we think about or should we think about a possible halo effect from INTRA Ti that perhaps pulls through more of the portfolio in that setting as the product ramps over the next couple of years? Laura Francis: Yes. I think it's a good question that you're asking because it really is targeted toward the ambulatory surgery center. I did talk about how it really fits well with the interventional spine physician preferred workflow. And typically, those cases are done at the ambulatory surgery center. But it is also true that many of our spine surgeons also are working at ASCs too. And so we do think it's important in terms of continuing to see the growth that we would expect in our SI Joint Fusion part of the business. So just a little more information on it is a 3D printed titanium solution. It has a similar workflow to our allograft solution. And as I said previously, it is reimbursed under CPT 27279, which has nationwide coverage. So in terms of revenue impact, I'd say that it expands the market in a couple of ways. It provides interventional spine physicians with products similar to our INTRA X workflow. But there are 22 states where allograft solutions are not reimbursed. And so we think that it's going to be an important solution for the physicians that are there. And then there's also a subset of interventionalists who prefer a non-allograft solution that's delivered in a posterior approach. So INTRA Ti is allowing us to serve those particular physicians. But I think what's most important is that we have a full suite of products for SI Joint Fusion. So with TORQ, INTRA X, iFuse-3D and now INTRA Ti, we have a setup to continue to lead the market, both with spine surgeons as well as interventional physicians as well. And maybe the final thing I would say is that we still are in alpha launch right now. So we expect an adoption ramp, and we expect to see progress through the year and into the back half of 2026 for that particular product. Operator: And our next question comes from the line of Travis Steed from BofA Securities. Travis Steed: I wanted to ask more on the cadence on revenue. You mentioned second half a little bit more weighted. Any color on kind of how you titrate Q1? And if you kind of quantify some of the tailwinds and benefiting the second half. Anshul Maheshwari: Yes, Travis, happy to take the question. So look, coming into 2026, I think we have more tailwinds in the business than we've ever had before. If you look at the physician base that we entered the year with, we exited 2025 with over 1,640 active physicians. So that's a pretty formidable physician base. You've got the improved reimbursement backdrop that Laura talked about, whether it's the NTAP for TNT, the TPT for Granite, the increase in OBL fees for SI joint dysfunction. You've got the INTRA Ti product that we just launched. You've got the second BDD product that we're looking to commercialize potentially in late 2026. And then you've got the commercial expansion, both direct as well as the strategic partnerships. So a lot of tailwinds coming into the business. Now we do think about our business on an annual basis and increasingly on a multiyear cycle basis. So we don't really provide quarterly guidance. And as you know, at our scale, the cadence of the business can vary based on the timing and scale of new product launches. and how they get commercialized, especially through this new commercial model, the hybrid commercial model. So for modeling purposes, we're expecting the revenue growth to be back half weighted, so we can see all of these tailwinds starting to materialize and incorporate them in our guidance. Travis Steed: Okay. Helpful. And I think earlier in the prepared remarks, you mentioned an innovation in super cycle over the next 5 years. And like should we think about that as kind of sustaining the long-term growth rate? Or is there a potential that this company is actually growing faster over the next 5 years than it has been over the last 5 years? Laura Francis: Yes. Thanks for that question, Travis. And if you think about since our IPO, we've been delivering average revenue growth of around 20%. And we've been doing that through developing these innovative solutions and addressing failures of incumbent standard of care. So as we look at applications in compromised bone, we're looking at markets that have these higher weighted average market growth rates because of these unmet clinical needs in the space. And our technologies have gone on to become category leaders. So we're in -- whether it's SI Joint Fusion or whether it's pelvic fixation or now in pelvic trauma, it's allowing us to grow multiple times at the broader market growth rates in spine and interventional. So as we think about developing these various platform technologies, they are meaningful expanding the total addressable market across various new disease states, but very specifically targeted towards spine and interventional, which is really important to us in terms of focus. But looking ahead over the next 5 years, we had used that term innovation super cycle, and we think that's the right way to think about it. We're going to be regularly launching a cadence of products, but they're going to be these unique technologies, and they're going to be targeting these new clinical adjacencies that focus on spine and interventional. And it really, first of all, takes these core competencies that we've developed in the business to address issues with compromised bone, but then also to lead the space for the long term. Operator: And our next question comes from the line of Matthew O'Brien from Piper Sandler. Anna Runci: This is Anna on for Matt. I want to start with one on the guide. I mean, it seems like you guys have a ton of tailwinds throughout the year, but you're baking in sort of a 500 basis point sequential slowdown versus last year. So just wondering if there's anything specific to call out on areas for upside. It seems like there's a lot of areas for things to move higher. So yes. Anshul Maheshwari: Yes. So happy to take that, Anna. In terms of potential areas for upside, you're right, we've got a lot of tailwinds in the business. And the way I would categorize it is, if you look at our base guidance, it assumes high teens growth in procedure volume, and sort of a degradation in ASP, mostly driven by the mix in procedures. Some of the deformity and trauma procedures use fewer implants, so the ASP tends to be lower. And what we've been able to do in the last few years is actually offset that ASP pressure with continued growth on the deformity side and the SI joint dysfunction side as well. So just simplistically maintaining that discipline and execution focus should provide some upside on the ASP. That's number one. And then you get into the potential ramp expectations of INTRA Ti, the continued acceleration of Intra-x and also this partnership with Smith & Nephew, which will continue to evolve as we progress through the first half of the year. So that also gives us a lot of confidence. and the continued ramp in the business as we progress through the year. And more importantly, that ramp continuing into 2027, especially when you incorporate the rollout of TNT in Europe at some point in 2026, the potential impact of our ability to commercialize the third breakthrough device at the end of 2026, which will be a material impact in '27. Anna Runci: Super helpful. And then I guess just again on the new INTRA Ti product for the ASC. I was wondering if you could give a bit more color on what your presence in the ASC is today, what you size that opportunity as and how long it will take to really penetrate that market? Laura Francis: Yes, I can help out on that. So I've been the CEO for 5 years of the company. 5 years ago, virtually none of our sales were in the ASC. And today, around 35% of our SI Joint Fusion sales are in the ASC. So we do have a significant footprint there already. But I think the point you're trying to make is that with this new product INTRA Ti that it's going to provide another opportunity for us to grow the business overall and that a significant amount of that growth should be seen in the ASC. And just given the nature of the product, the single-use system that we have, the simplicity of it, it's really set up perfectly in order to grow overall in the SI Joint Fusion market and to drive additional sales to the ASC. Operator: And our next question comes from the line of Caitlin Roberts from Canaccord Genuity. Caitlin Cronin: Congrats on the quarter. Just to talk about the commercial expansion, the direct commercial expansion. As you think about adding these new territories and the focus on growing the outpatient business, you're just touching on the ASC, how are you thinking about strategically adding these territories? Laura Francis: Yes. I mean what we do, obviously, we have quite a bit of information already on the opportunities that we have there. And so you identify where your targets actually are and where we're penetrated and where we're less penetrated. So what we're doing is we're looking across the United States and addressing those areas where we have a significant opportunity, and it could be on the spine side or it could be on the interventional side and then you add accordingly in terms of territory managers in those particular locations. In addition, in around half of our cases, we actually will split a territory where the more junior territory rep is promoted to a territory manager. So in around 50% of the cases, we're typically promoting somebody into that level and another 50%, we're actually hiring from the outside. But we do have very significant opportunities across the portfolio to continue to grow and expand. We've gotten very significant leverage through our hybrid sales model with the addition of third-party agents. We have over 300 of them just in the U.S. alone. But there is a balance between growing your direct sales force and then supplementing it with hybrid, and we think that we're striking the right balance by adding 10 more territories in 2026 to capture the opportunity. Caitlin Cronin: That's great. And then just a quick one on the patent extension. It seems like it applies to your original triangular iFuse implant. How much of your business would you say is that legacy segment? Anshul Maheshwari: Caitlin, happy to take that. The legacy Classic is barely any part of our business. I'd say it's less than 0.1% at this point. Majority of our SI joint business comes from TORQ 3D and now with the going into interventional allograft and now we expect INTRA Ti to be a bigger contributor to the business as a portfolio. Operator: And our next question comes from the line of David Saxon from Needham & Company. David Saxon: I wanted to follow up on the Smith & Nephew partnership. Maybe you can talk about the cadence of how that partnership ramps up in 2026. When do Smith & Nephew reps actually start carrying TORQ and TNT or those sets place? And then is that like a second quarter dynamic? Or can that start as early as March? Laura Francis: Yes, I can at least start to answer that question. I mean we just signed the agreement last week, but we are already in discussions to train and place implants as well as instrument trays into the field as well. So we're forming a joint steering committee between the 2 different companies. They're going to meet on a weekly basis and really get into a lot of the details of the relationship. But we do expect to start seeing some activity already in the month of March and then ramping up over the rest of the year. Anshul Maheshwari: Yes. And what I would say there, David, is just like when we put out a new product, we want to make sure we have the surgical capacity available to be able to support it. And the expectation is you should see the capacity ramp in Q2 and Q3 in preparation for Q4, which tends to be the biggest quarter. David Saxon: Okay. That's helpful. And then, Anshul, maybe sticking with you. So gross margin guidance, 78%. Looking back, you've seen expansion to varying degrees over the last couple of years. I understand there's this product mix dynamic that you might be considering, but would love to just understand kind of the drivers of the 160 basis points of compression, mix, pricing, ramping product launches, et cetera. Anshul Maheshwari: Yes. No, happy to take that. On the gross margin side, again, look, really proud of how we've been able to address our gross margin. Obviously, we started the year in 2025 at 77% to 78%. We did much better than that, about 200 basis points higher. And as we get bigger, as the business scales, we're actually more focused on top line acceleration and operating profit dollars growth. So for 2026, as we look at our guidance of 78% gross margin, we exited the year at about 79%. So it's 100 basis points of gross margin impact. I'd put most of that is noncash impact from depreciation. A lot of that's associated with the increase in surgical capacity. So for example, as we're building out this Smith & Nephew distributorship, we're going to be putting out TNT trays that support the volume of demand we see there. Granite continues to perform really well. We're going to be putting capacity out there for that. Potentially the new product that we want to commercialize towards the tail end of 2026, there's going to be surgical capacity for that as well. ASP does have some pressure on gross margins, but we're offsetting them by some of the operational initiatives that we've been working on over the last 12 to 18 months to bring our own cost down. So I'd say, by and large, a lot of the impact is noncash. And look, like we've seen over the last couple of years, the investment in surgical capacity and the new products, that does drive meaningful acceleration in our revenue growth. And while it is driving some de minimis pressure on the gross margin side, it's allowed us to get significant leverage and profitable dollar expansion over the subsequent period. And so we feel really good about the setup and the balance we're striking. Operator: And our next question comes from the line of Richard Newitter from Truist Securities. Ravi Misra: This is Ravi here for Rich. Congratulations on the promotions, everybody. I guess 2 on our end. First, on guidance. You're talking about kind of high teens U.S. volume growth procedure weighted. And that would represent a little bit of a step down versus what you did in 2025. And I'd like to just kind of understand the rationale behind that outlook given that you have a little bit more of a focused sales force coming in that's growing. You have this partnership with Smith & Nephew that should help kind of lever each product set in the respective areas of the hospital. And you have a number of new product launches. So just why was kind of high teens the right point that -- and then I have a follow-up. Anshul Maheshwari: Yes. So Ravi, happy to take that. The first part of why it's high teens, it's -- you have to think about it from a comp perspective. Some of the impact from new products is going to happen as we progress through the year. So if you look at 2025, Q1, Q2 continued to benefit from new product launches that had happened in late 2024. If you look at it on a stack basis, actually, you do see a much higher increase in procedure volume growth versus 2024. So I'd say part of that is just the comps being the way they are. That's number one. Number two is, look, whenever you're putting out new products or expanding the impact of reimbursement coverage or commercial footprint expansion, we want to see how those play out before we start incorporating them in our guidance. So as you look at the rest of the year, you will see that impact happen more pronounced, but we think it's prudent early in the year to be thoughtful. Ravi Misra: Great. And then I guess on the -- another question on the Smith & Nephew partnership. Can you help us understand what the incremental or the kind of marginal profit looks like for each dollar of sale transferred over to Smith & Nephew? Anshul Maheshwari: Yes. We're not going to break down what the relationship details are from that perspective. For us, what's important with the Smith & Nephew relationship is, number one, getting our product in Level 1, Level 2 trauma sites at a national level. Number two, being able to satisfy the demand that we're seeing from the trauma physicians; number three, which is a natural offset of building this distribution partnership is allowing our reps to be freed up to continue to go, build relationships, engage surgeons and interventionalists to drive that side of the business grow. So it's a multifaceted impact versus just one-off with what the impact Smith & Nephew will have on the P&L. Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Laura for any further remarks. Laura Francis: I just wanted to say thanks to everybody for participating in our call and appreciate your interest in SI-BONE. And we look forward to seeing all of you at upcoming conferences. Thanks again. Goodbye. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good afternoon, and welcome to Offerpad's Fourth Quarter and Full Year 2025 earnings conference call. My name is Kara and I will be your conference operator today. [Operator Instructions] And with that, I'll turn the call over to Cortney Read, Offerpad's Vice President of Investor Relations and Communications. Cortney Read: Good afternoon, and welcome to Offerpad's Fourth Quarter 2025 Earnings Call. During the call today, management will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain and events could differ significantly from management's expectations. Please refer to the risks, uncertainties and other factors relating to the company's business described in our filings with the U.S. Securities and Exchange Commission. Except as required by applicable law, Offerpad does not intend to update or alter forward-looking statements, whether as a result of new information, future events or otherwise. On today's call, management will refer to certain non-GAAP financial measures. These metrics exclude certain items discussed in our earnings release under the heading, non-GAAP Financial Measures. The reconciliations of Offerpad non-GAAP measures to the comparable GAAP measures are available in the financial tables of the fourth quarter earnings release on Offerpad's website. With that, I'll turn the call over to Brian Bair, Chairman and Chief Executive Officer. . Brian Bair: Thank you, Cortney, and thank you to everyone for joining us today. On the call with me today is our Chief Financial Officer, Peter Knag, along with leaders who are central to how we execute and scale in 2026. Rich Ford, our Chief Strategy Officer and President of Cash Offer Marketplace; and Chris Carpenter, our Chief Operating Officer. Each of these leaders owns a core operating function that directly impacts how we allocate capital, drive conversion and deliver returns. Today's call is about 3 things. First, the disciplined capital allocation decisions we made in 2025, decisions that we believe position us for sustainable, profitable growth. Second, how we evolve from a single product company into a 4 solution real estate platform capable of monetizing transactions across the spectrum of capital intensity. And third, how the operational improvements we made in 2025, stronger pricing segmentation, better conversion infrastructure and deeper marketplace liquidity are translating to momentum we're already seen in early 2026. Let's start with the market context. The housing market remains constrained, transaction volumes are below historic norms, affordability continues to limit mobility. Mortgage rates, while moderating, remain elated relative to the prior cycle. Recovery is gradual and uneven. At the same time, nearly half of the listed homes are hitting the market today are over 40 years old. Many of these homes require significant updates to meet modern buyer expectations and mortgage financing standards. Yet homeowners are often locked into low mortgage rates and lacked the liquidity or time to renovate before selling. The combination of agent inventory, capital constraints and limited mobility creates friction and friction suppressive transactions. But friction also creates opportunity for platforms that can step into that gap. That's where Offerpad is deciding to perform. We purchased homes at approximately $370,000 median price, which is right in the heart of affordability for first-time and middle-income buyers. In 2025, we invested an average of $25,000 per home in targeted repairs and renovations, and we delivered move-in ready mortgage eligible homes in established neighborhoods where supply is often limited. We're not just facilitating transactions. We're solving a fundamental market problem, expanding access to quality, move-in ready housing at price points where demand is strongest and supply remains constrained. Now let me talk about what we did in 2025 and why. Our priority in 2025 was not volume. It was readiness. We made a deliberate choice to widen underwriting spreads, operate with tighter risk hard rails and slow acquisition velocity rather than to chase transactions into an uncertain market. Let me be specific about what we saw and why we made that choice. Throughout 2025, the housing market showed intermittent signs of improvement, but the underlying transaction data remains unstable. Existing home sales were approximately 4.1 million units, essentially flat year-over-year and the lowest annual level since the mid-'90s. At the same time, we observed operational signals across our markets. Days on market extended in multiple metros. Price dispersion widened even within the same neighborhoods and buyer cost pressures from insurance to taxes to maintenance increasingly impacted transaction velocity and completion rates. When transaction velocity slows and price dispersion increases, pricing accuracy matters more and margin for error shrinks. That combination triggered our decision to one, tightened by box guardrails and two, increased required contribution margins before deploying capital. Last year, every home competed for capital. If we could not underwrite to a durable risk-adjusted return, we simply didn't transact. Importantly, what we're seeing in entering 2026 is greater pricing clarity. While overall transaction volumes remain constrained, instability has moderated. Days on market has stabilized in several of our core markets, price cuts have become more predictable and inventory growth has normalized relative to demand. We are not calling for a housing surge. What we are seeing is a market that is more measurable and measurability supports disciplined scaling. Over the past several years, the housing market has reinforced a clear lesson. Capital deployed without discipline erodes returns quickly. We chose a different path. In the second half of 2025, we deliberately slowed acquisitions and cleared aged inventory acquired earlier in the year. That decision pressured near-term cash offer margins, but have positioned us to enter 2026 with a cleaner, faster-turning portfolio. As of today, aged inventory that is not under contract has been reduced to fewer than 60 homes, materially lowering aged inventory exposure. Importantly, as of the end of the year, all cohorts across our inventory with the exception of 2 homes are expected to be profitable. As we enter 2026, we are doing so with a streamlined portfolio, limited aged exposure and embedded mark-to-market strength across the majority of our assets. Importantly, while we moderated capital deployment, demand did not moderate. Top of funnel engagement remained consistent. Just in the past few months from November through January, signed contracts doubled up 102%, reflecting stronger downstream execution. December signed volumes increased 71% month-over-month, and that momentum carried into January. In fact, as of mid-February, we signed approximately 305 contracts nearly matching the full Q4 total of 314 with half the quarter remaining. These are measurable leading indicators that we did not lose demand. We chose to align capital more selectively against that demand. At the same time, we learned something important about today's seller. Throughout 2025, we analyzed the outcomes of sellers who came to Offerpad, whether they accepted our cash offer, listed their home, refinanced or ultimately stayed put. What became clear is this. Sellers aren't coming to us for a cash offer alone. They're coming to us for a liquidity solution. They're seeking help understanding trade-offs, time lines and outcomes. That shift is precisely why expanding into a broader multi-solution platform was necessary. We responded by building an integrated conversion engine designed to meet sellers where they are and guide them to the best solution. whether that's an Offerpad cash offer, an external buyer cash offer through our cash offer marketplace or a listing solution. Here's what's materially different today compared to prior years. First, we are no longer a one solution company seeking to attach ancillary services. We are a platform where each solution is designed to generate meaningful revenue and operate at scale. Second, we built the operational infrastructure to convert sellers across these pathways. That means dedicated teams, refined handoff processes and technology that tracks the customer journey across multiple solutions. Third, we're seeing it in our data. Conversion rates are improving. Customers who don't take our cash offer are increasingly staying in our ecosystem by transacting through the marketplace or listing solutions. Now let me walk you through the 4 solutions that makes this possible. First is the cash offer, which remains the foundation of our business. We deliver pricing certainty to sellers, purchase homes, renovate and sell them to buyers. Create a streamlined, reliable transaction from start to finish. Our underwriting today reflects a sophisticated application of decision science, supported by generative AI and machine learning that ensures we are buying the right homes in the right markets at the right time. We're leveraging years of operating data and experience, transaction history and market intelligence to increase pricing precision and reduce risk. In parallel, under the leadership of Dr. Jai Singh, our Chief Pricing and Analytics Officer, we are developing and piloting an integrated portfolio management system that applies AI, machine learning and advanced decision science to optimize the full life cycle of a home, acquisition, hold strategy and disposition. This platform is designed to fuse qualitative property level signals, including images, inspection notes and customer interactions with quantitative inputs such as local micro market dynamics, demand indicators, inventory trends and broader macroeconomic data. By integrating qualitative and quantitative data into a unified decision framework, we are improving precision, increasing consistency and optimizing capital allocation across our cash offer portfolio. Now let me be clear about how we think about our cash offer returns. We're not optimizing for margin per home. We're optimizing for return on deployed capital. On the property level, we target contribution margins in the mid-single digits, but what matters is capital velocity. We're targeting 90- to 120-day turn times which means we can turn the same dollar of capital 3 to 4x per year. When you turn capital that fast at those property level margins, we're generating annualized returns in the 15% to 20% range on deployed capital. That's the right way to evaluate cash offer economics. The business operates with clear guardrails around pricing, risk and capital deployment, but our focus is velocity and returns, not just margin per transaction. Second is the cash offer marketplace. This solution extends external buyer demand beyond our balance sheet by routing homes to a diversified network of professional buyers. Our Direct Plus partners include short-term value-add operators, regional professional investors and structured capital buyers. This diversity is strategic. It deepens buyer demand, increases bid confidence and enhances execution certainty for sellers. By matching homes with the right capital profile for each property and market we are able to deliver more competitive outcomes while maintaining disciplined capital allocation. When you route a home through the marketplace, we retain a 5% average seller paid fee, approximately $20,000 and a $400,000 home without deploying principal capital. Last year, marketplace transactions increased approximately 60% year-over-year. To lead continued growth, Rich Ford joined Offerpad as Chief Strategy Officer and President of cash offer marketplace. Rich brings more than 2 decades of experience building and scaling residential real estate marketplaces. His mandate is to expand and scale this business line. Third is brokerage services. Within brokerage services is HomePro. This is not a traditional listing attachment. It's a premium differentiated listing service designed to deliver a highly curated, value-added experience for sellers who prefer to go to market. When the seller list through HomePro, Offerpad earns a referral fee which averaged approximately $4,500 per transaction in 2025. Within brokerage services, the agent partnership program allows agents to introduce offer pad as one of several options available to their sellers, including the cash offer. Agents remain the trusted adviser, helping sellers evaluate alternatives and determine the right path for their situation. In 2025, approximately 1/3 of cash offer requests originated through agents who include Offerpad as part of the conversation, reinforcing our role as a solutions platform supporting both sellers and real estate professionals. Additionally, we work with homebuilders through our homebuilder program, helping buyers remove sell contingencies on new construction by providing certainty around the sale of their existing home. Together, brokerage services positions Offerpad as a first stop for both sellers and agents with the goal of ensuring each customer is directed to the right solution while improving conversion across the platform. Fourth is RENOVATE. RENOVATE plays a dual role. First, it enables the performance of our cash offer model. As stated earlier, many homes require updates before they are list ready and mortgage eligible. By executing these improvements efficiently and with cost discipline, we return homes to the market in buyer ready condition that meets financing standards. This expands access to quality, move-in ready housing often at price points aligned with first-time and middle-income buyers and supply-constrained neighborhoods. Second, RENOVATE is a fee-based B2B service, generating margins between 20% and 30%. It supports professional owners, operators and Direct Plus partners with targeted repairs and full rehabs, enhancing asset readiness and execution while producing revenue without deploying balance sheet capital. Last year, RENOVATE generated $27 million in revenue, up approximately 50% year-over-year. Led by veteran renovation leader, Bobby Triplett, who has overseen more than 40,000 renovations, the business delivers consistent execution and cost control at scale. In 2026, we're focused on expanding business-to-business partners while maintaining margin consistency and repeat volume. Together, these 4 solutions provide flexibility to support the right path for each seller while operating within our defined capital structure. Importantly, our 2026 framework does not currently assume additional capital. We believe that capital base we have today positions us well to scale transaction volumes drive conversion improvements and return to profitability within that structure. To execute this at scale, we strengthened operating leadership. Chris Carpenter joined as Chief Operating Officer with responsibility to optimize the operating system that drives execution across the platform, end-to-end performance, cross-functional coordination and scalable systems that deliver consistent outcomes within our guardrails. Scaling with defined risk requires more than oversight. It requires repeatable processes, disciplined feedback loops and systems designed to produce optimal outcomes at scale. That is where AI-led decision science becomes foundational. Across acquisition, underwriting, renovation and disposition we are embedding institutional-grade analytics into the core operating model. Powered by more than a decade of transaction and customer data, our system increasingly integrate both structured and unstructured inputs from market dynamics and inventory trends to property level signals to support more consistent, analytically driven decisions. This is not automation for automation's sake. It's about improving return stability. Better precision at entry reduces volatility. Portfolio level optimization improves capital rotation, more disciplined disposition decisions protect margin and enhance balance sheet efficiency. At the Board level, we expand the breadth of expertise to support the continued scaling of our multi-solution real estate operating model with the addition of Tela Gallagher Mathias who brings more than 25 years of enterprise technology and generative AI leadership across the housing, finance and regulated environments. The work we did in 2025 was about readiness. We didn't chase volume, we built infrastructure. We didn't deploy capital indiscriminately. We engineered optionality. The result is that Offerpad today is a different company than it was 12 months ago. Stepping back, what we're building here is a fundamentally different category leader. Not just an iBuyer and more than a brokerage. A housing transaction platform that meets sellers across multiple pathways, deploys capital selectively and generates returns through a mix of principal and fee-based businesses. Our near-term objective is approximately 1,000 transactions per quarter as we exit 2026. It gets us to profitability, improves the operating model at scale. So let me be clear, 1,000 transactions per quarter is not the finish line. It's just the beginning. I'll now turn the call over to Peter. Peter Knag: Thank you, Brian. As you've heard over the past year and especially in recent months, we've strengthened leadership across our core operating areas, refined our operating model and leaned into a broader product set focused on targeting higher conversion and profit. That clarity is translating into more disciplined capital deployment, tighter cost control and more consistent execution. In Q4, revenue was $114 million with 312 homes sold, bringing full year revenue to $568 million and 1,591 homes sold. Gross margin was 7% for the quarter and 7.4% for the full year generating gross profit of $8 million and $42 million, respectively. While volumes in 2025 were below historical norms, the operating framework and control supporting those transactions are stronger than ever before and we expect this will position us to scale back up to higher volumes driven by our broader product set. Adjusted EBITDA loss for the fourth quarter was $6.9 million. Excluding onetime restructuring and other costs, underlying performance was consistent with the prior quarter. At quarter end, total liquidity was over $55 million, reflecting unrestricted cash plus the estimated fair market value of our inventory and including $27 million of unrestricted cash. As previously announced, we completed an $18 million capital raise early in the first quarter of 2026, further strengthening our liquidity and providing additional flexibility to support increased transaction volumes. Including the $18 million capital raise, our total liquidity was over $70 million. At the same time, the cost structure of the business has fundamentally changed with over $140 million of annualized expenses removed since 2022. Importantly, our cost base can support much higher transaction volumes without proportional overhead growth. That operating leverage is a critical driver of our expected path to profitability in 2026. Turning to the near term. We expect the first quarter to reflect normal seasonality and a measured start for the year. For Q1, we are guiding to 250 to 300 real estate transactions across cash offer, cash offer marketplace and brokerage listings with revenue of $70 million to $95 million in sequential improvement in adjusted EBITDA. Importantly, we believe current transaction volume represents a trough for the business. The low volume experienced over 2025 is expected to be temporary and reflects our strategic expansion into a broader set of solutions. By offering more paths for sellers, we increase the likelihood of engagement and selection which we expect to drive aggregate transaction growth, improved overall conversion and a reduction in customer acquisition costs over time. We've already begun to see increased activity early in the year with transaction pipeline rising meaningfully in the first several weeks of the quarter. Given the natural timing of the acquisition to sales cycle, that pipeline momentum is expected to translate into higher closed transaction volumes over subsequent quarters, supporting growth in volume as we move through the year. In 2026, our expectation is to return to approximately 1,000 home transactions per quarter across cash offer, cash offer marketplace and brokerage services. We expect to reach this goal as we exit 2026. Separately, RENOVATE remains an important revenue engine incremental to the rest of the business. RENOVATE delivered $27.1 million in revenue in 2025. While these projects are service-based B2B transactions and not included in the 1,000 transaction per quarter target, they contribute meaningfully to margin and overall profitability. At these levels of activity and with the cost structure and product mix in place today, we believe the business is positioned to support a return to profitability. Based on our current outlook, we continue to expect to achieve positive adjusted EBITDA within the year. We entered 2026 with a stronger balance sheet, a structurally lower cost base, healthy inventory levels and a broader set of monetization pathway than at any point in recent years. That foundation supports more consistent performance as we scale responsibly across a diversified platform. Importantly, our 2026 operating framework currently does not require incremental capital to execute. We believe our current liquidity position, asset-backed facilities and operating structure fully support our plan to scale within defined guardrails. We remain open to potential capital opportunities if they enhance flexibility lower our cost of capital or accelerate growth initiatives. With that, we are now ready to take your questions. Operator: [Operator Instructions] Your first question comes from the line of Dae Lee with JPMorgan. . Dae Lee: Great. I have two. So first one for Brian. So with the AI expertise you've added across the board and management, where are you most excited to see the impact of AI in your business? Which P&L line should we expect to show -- to see that show up first? And secondly, to Peter, could you walk us through the bridge from first quarter 2026 transaction volume to the year-end target? And if there's any like step-up or proof points that we should be watching through the year? And if that rise should be steady? Or do you expect more of a back half ramp as you go into 2027? Brian Bair: Peter, do you want to take the first one? I'll take... Peter Knag: Sure. Brian Bair: Yes, sorry, start with the second one. Peter Knag: Sure. So we're ramping. I mean, we've effectively given full year guidance, right, at 1,000 transactions per quarter as we exit. So that means that on a run rate basis as we exit, we'll get up to that level. We've guided towards 250 to 300 real estate transactions and just reclarifying that we're moving now to a focus of 3 product focus across the cash offer, the cash offer marketplace, which is when we're selling homes, underwriting and selling to an investor and three, traditional list product as well. So we are not giving guidance for second quarter and third quarter. But what I'd say today is we expect a fairly -- roughly linear growth trend as we move from in the neighborhood of 100 transactions per month up to just above 300 transactions a month across a broader product set of three products instead of one. Brian Bair: Yes. And then I'll take -- Dave, I'll take the AI. Listen, AI is such a powerful tool. I'm excited in a lot of different areas there. But specifically, the real estate operations and the power of AI, what we're working on there as far as pricing, pricing sensitivity. We have 10 years of data that we can pull from property inspections to likely sellers to it's just phenomenal what -- over the last 10 years of what AI can do with that. And so the data that we have in place but also just as we work through the process of -- from the disposition process of when to sell, how to sell, how to look at those things differently. But there is -- like I said, the real estate is really impactful. But we're also seeing immediately, we're seeing some really good impact in just something very simple is through AI voice scheduling inspections. We schedule hundreds and thousands of inspections throughout the year. We've had a lot of labor either outsourcing it or overseas or having large internal teams. And with the ability of AI voice, we can now schedule inspections to have our call center Q&A, people can call and ask questions about where they are in the process. So -- and the other thing I'll just add about AI is that it's across the company. Even just our individual employees using that in their day-to-day life on that is I think it makes them 60%, 70% more efficient. So there's a lot of opportunity we really excited about there. Operator: Your next question comes from the line of Ryan Tomasello with KBW. Ryan Tomasello: Starting with the real estate transaction targets for the year. Can you give us a sense of what mix you expect for traditional cash offer products to comprised as you kind of march towards that 1,000 target per quarter. And more near term here, what's being baked into the 1Q guide for real estate transactions in terms of that cash offer mix? Peter Knag: Sure. Yes. So we -- Ryan, so we have been, as we've talked about before, it depends on the month and the quarter but somewhere in the neighborhood of 1/3 of the transactions are -- have been across Direct Plus. And 2/3 through cash offer. Now we have three products, not primarily one or two. As we roll out, as we focus really equally across three products. We expect that mix to move up towards eventually to 50-50 range. Again, it will change month-over-month. But that's the effectively where we expect to go. Brian Bair: Yes. So I think -- Ryan, I think you're going to see 2/3, 1/3 as we begin here. But like Peter said, we're focused and the -- our focus really is what's going to provide seller with the best solution, whether that's a cash offer from Offerpad or one of our partners or the listing side. So we're going to work towards 50-50 and figuring out what the best solution for them is. And so as we focus on every day, everyone that comes to Offerpad, we want to provide -- we want to have a solution for them and be able to convert them into one of our solutions. . Peter Knag: I'd just add one more thing, Brian. Just to that, we are in our trending schedules on the IR side, going to begin breaking out volumes -- we already have cash offer and RENOVATE, we're going to have third KPI with volumes for the other 2 products. And then just finally, as you think about the quarters, we're not guiding specifically to the mix for first quarter, but you can look at the percentages. And then I'd add for fourth quarter, we -- in addition to the homes sold number that we disclosed, there were over -- were between 50 and above 50 transactions across the other services. Ryan Tomasello: Okay. I appreciate all that color. And then you guys have obviously done a really nice job executing on the expense efficiency side. I guess as you think through your 2026 operating framework here, how much more wood is there still left to chop on the expense side? And how dependent is the breakeven EBITDA target on continuing to drive down on the OpEx side of the P&L? Brian Bair: Yes, for sure. I mean, first, I'd point out, we've done a lot there. If you just look at -- and so part of expenses is we will continue to march forward and take out additional expenses . If you look at Q4 '25 versus Q4 '24, operating expenses came down from $24 million to $15 million, so $9 million there. Again, we will continue there was an additional risk and some actions in fourth quarter. There's some third-party spend that we can need to look at, one that's a fairly large item that we're hoping to execute across. So there will be more there. I just want to highlight that we've already come a long way. So as we look at the -- taking the operating contribution from a cash flow perspective down to 0. We've done a lot of it already. The biggest piece that's left is to take up the transactions up towards 1,000 transactions per quarter. . Peter Knag: And Ryan, one thing that I'll add to that is with what we're looking at as we build and scale the company again, scale it differently and smarter and obviously, with the power of AI and technology, the ability of what we can do as we continue to grow. The 1,000 transactions is our first short-term goal and then after that, but to scale it through AI and technology is something we're going to be focused on. Operator: [Operator Instructions] Our next question comes from Gaurav Mehta with Alliance Global Partners. . Gaurav Mehta: Yes. I wanted to ask you on your comments around 4 solutions platform. And maybe get some color on how you view revenue allocation from each of those solutions, maybe near term and short -- long term? . Peter Knag: Sure. Yes. So this business is all about conversion. And by -- there's 3 solutions that are solutions for our home sellers. And again, we're really pivoting from mostly focusing on one solution to three. And by doing that, we expect that conversion will climb materially. One of the big focus areas of our Chief Operating Officer, has joined is conversion across our portfolio. We have, in any given month, somewhere between at 10,000 and 20,000 home sellers top of funnel and to get to the 1,000 transaction mark per quarter, we need to increase conversion by just around 1%. So it's not a huge amount when you look at it from that perspective. And then just to round out your question, it's really 3 products that are focused on the home seller and conversion that are that homeowner B2C transaction and our fourth product is really a separate product line, it's related. It's our renovation business where we renovate real estate assets, single-family homes that are owned by other third parties. . Gaurav Mehta: All right. The second question I want to ask, you made big picture, there have been some talks about government restricting institutional investors from purchasing single-family homes. And just wanted to get some color if that impacts your business at all directly or indirectly. . Brian Bair: Yes. So as far as from the Offerpad perspective, we own home short term. So we're aligned with how they're thinking is the home ownership side. That's what our -- that's the mission of our company from day 1. So definitely aligned on that. From an Offerpad perspective, we buy, renovate and sell homes and put a better home on the market within a very short period of time. As far as our cash offer marketplace, there's 2 ways to look at our Direct Plus partners in there. We have long-term investors, which think of the rental funds that we have short terms. And on the short-term side, you'll see everything -- think of more fixed and flip to partners in there that will have a different kind of cash buyers or a cash offer for the seller. So they'll get 80% of the money upfront. And then be able to have some of the -- to share some of the upside. So from the long-term investment side, obviously, we're watching that closely. But what we have focused on in the last year is adding a different array of cash buyers in there. And so have hundreds of different kinds of cash buyers in there. That's so for example, if one segment slows down for any reason, we're going to have another segment that can pick up that volume. And so obviously, we're wanting it closely. But I do like just overall, I think the focus on affordability and the home ownership is, I think it's key for operate, it's something we believe in. Operator: There are no further questions at this time. This concludes today's conference call. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hims & Hers Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Bill Newby, Head of Investor Relations. Bill, please go ahead. Bill Newby: Good afternoon, everyone, and welcome to the Hims & Hers Health Fourth Quarter and Full Year 2025 Earnings Call. Today, after the market closed, we released this quarter's shareholder letter, a copy of which you can find on our website at investors.hims.com. On the call with me today is Andrew Dudum, our Co-Founder and Chief Executive Officer; and Yemi Okupe, our Chief Financial Officer. Before I hand it over to Andrew, I need to remind you of legal safe harbor and cautionary declarations. Certain statements and projections of future results made in this presentation constitute forward-looking statements that are based on, among other things, our current market, competitors and regulatory expectations and are subject to risks and uncertainties that could cause actual results to vary materially. We take no obligation to update publicly any forward-looking statement after this call, whether as a result of new information, future events, changes in assumptions or otherwise. The risks, uncertainties and other factors that could cause actual results to differ from our forward-looking statements are described in our earnings release and SEC filings. Please see our recent earnings release and most recently filed 10-K and 10-Q reports for a discussion of these risk factors as they relate to forward-looking statements. In today's presentation, we also have certain non-GAAP financial measures. We refer you to the reconciliation tables to the most directly comparable GAAP financial measures contained in today's press release and shareholder letter. You can find this information as well as a link to today's webcast at investors.hims.com. After the call, this webcast will be archived on the website for 12 months. And with that, I will turn the call over to Andrew. Andrew Dudum: Thanks, Bill. Good afternoon, everyone, and thank you for joining us today. I'm excited to tell you about the tremendous progress we're making at Hims & Hers. This starts, as it always has, with our fundamental belief that everyone should have access to the highest quality of care available, customized around each person and their individual needs. Today, only the wealthiest in our society can expect this level of care. By continuing to put the customer at the center of everything we do, we are changing that. Our teams are pursuing this vision every day across an expanding set of specialties. We have proven that access to care doesn't need to be limited by privilege, prices don't need to be prohibitive, and customers don't need to settle for a one-size-fits-all approach. We believe GLP-1s are a case study in how medicines are coming to market differently. The dynamics we've seen over the last 18 months, including U.S. prices for injectable GLP-1s falling more than 80% reflect a broader disruption happening within the United States. Customers are demanding better access, more direct engagement and prices that align with other regions around the world. That pressure is forcing a long overdue conversation, how do we use today's technological advances to help more people feel great? We see this moment as the early stages of a new model that actually works for everyday people. Netflix and Spotify reshaped how people could access not only a broader range of content, but also the best the industry has to offer. Health care must evolve towards that same consumer-oriented distribution model. That evolution will demand creativity and new commercial frameworks for consumer platforms and drug makers work together to help people get healthy. Our platform puts us at the forefront of that change. Before ever scaling our weight loss offering, we built a platform that surpassed $1 billion in revenue and achieved profitability by scaling offerings like sexual health and dermatology, specialties that continue to grow today with strong unit economics that allow us to fund the next opportunities for growth. GLP-1s are an example of one such opportunity and have provided a meaningful acceleration to the business. But they are a single treatment within a single specialty on a broader global consumer platform that is growing stronger and more diverse with every investment we make. At the end of 2025, over 2.5 million subscribers on our platform were benefiting from our pursuit of this vision. As we expand new offerings that can serve our customers as they enter different life stages, we are increasing our ability to build and maintain deep, longer-term relationships. With only a small minority of subscribers utilizing a compounded GLP-1 treatment, it is clear to us the impact of what we are building reaches well beyond a single weight-loss treatment. By leveraging the same technological advancements that completely changed how we experienced entertainment, how we travel from place to place and even how we manage our finances, we are making high-touch personalized care accessible to millions of people across more specialties and in more geographic markets. No one is better positioned to create a world where more people can access quality care. That is our core belief, and it's one we do not take lightly. We've spent years building operational expertise across each of our offerings, growing customer awareness and leveraging scale to drive broader accessibility to personalize care. As a result, we can now bring new offerings and markets to the platform more quickly and efficiently than ever before, whether you live in a rural Midwestern community in the U.S., a large city in the U.K. or somewhere in between. To give you an idea of how our speed to market has changed, historically, we targeted launching one new specialty every year, and each of these usually require a few years of development before becoming, meaningful contributors. Longer tenured offerings like sexual health and hair loss for both men and women took 3 and sometimes even 4 years to eclipse $100 million in annual revenue. Comparing this to how we operate today is truly remarkable. As we have shared in the past, our weight loss offering reached $100 million revenue run rate in less than 7 months after launch and that excludes any contributions from compounded GLP-1s. Within a span of 3 months in 2025, we launched our new Labs offering as well as hormone therapies with support for low testosterone, menopause and perimenopause. In just 90 days, we created 3 distinct new entry points to our platform, each addressing large, underpenetrated markets that have been largely ignored by the traditional health care system. While not every new offering will scale the same pace as weight loss, early customer success and accelerating customer adoption following the placement of our Super Bowl commercial gives us confidence that each of testosterone, menopause and Labs can eclipse $100 million in annual revenue in the near future. Even more energizing since launch, we've identified that over 70% of Labs customers may be eligible for treatment plans offered through the platform and more than 95% of individuals utilizing a testosterone support offering experienced an increase in testosterone levels within the first 2 months of treatment, with an average increase of over 80%. These 3 new entry points are not simply new offerings. They are a start to far deeper relationships and value for our customers. These early signals demonstrate our evolution towards providing access to more proactive and preventative care. Insights we glean through our platform can inform an expanding selection of care pathways and can streamline the process for customers to get support where they need it the most. Today, we are addressing areas like cardiovascular risk, metabolic dysfunction, hormone levels and expect that over time, we'll add areas such as performance, recovery and sleep. As we accelerate the development of a more comprehensive approach in the U.S., we're also taking significant steps to extend our reach abroad. We see expansion into new international markets as the next logical step in bringing the trusted Hims & Hers experience to more people and to more places around the world. Last year, our acquisition of ZAVA's deepened our presence in the U.K. and enabled our entry into Germany, France, Ireland and Spain. More recently, the acquisition of Livewell extended our presence into Canada, one of the first markets that is expected to have access to generic semaglutide. And just last week, we announced, we signed an agreement to acquire Eucalyptus, a leading global health innovator. Upon closing of the transaction, we will further strengthen our U.K. and European presence while also bringing the Hims & Hers brands into new markets like Australia and Japan. I have known Tim Doyle, the Co-Founder and CEO of Eucalyptus for years and have enjoyed watching him and his teams build an innovative health care experience that is focused on safe, highly accessible care and puts customers at the center of everything they do. I am confident he is the right leader to make the Hims & Hers experience central to how customers in each of these new markets approach their daily health. The opportunity is significant. We believe that with the deliberate investment and execution, we will have the teams in place to drive category leadership in each of these markets, positioning our international business to scale to more than $1 billion in annual revenue within the next 3 years. This growing presence across both specialties and geographies provides important building blocks for the future of healthcare we are driving. There are 3 key elements to that future, and we are investing across technology and infrastructure to bring them to life. First, innovation in diagnostics and devices will continue to evolve how each person understands their whole picture of health. With our recent lab launch, we are providing customers with over 130 biomarkers across key areas of long-term health. Results are delivered directly within our app. For AI-supported readouts, highlight metrics that are already optimized and those that need attention, while also educating customers on both lifestyle and clinical interventions. And with the acquisition of YourBio, we plan to make targeted and condition-specific lab testing, more convenient and approachable with technology that can be used in the comfort of your own home. Together, these new services and expanding capabilities will give customers a deeper understanding of their health and help providers make more informed decisions. Over time, we expect to build on this with the integration of wearable technology like continuous glucose monitors and daily fitness trackers as well as expanded testing options that bring insights like polygenic risk scores directly to our customers. Second, AI will become a critical layer on top of that data that helps define, refine and implement precision treatments, interventions and lifestyle adjustments. Our growing technology and product teams reporting to Mo ElShenawy and Dheerja Kaur are ensuring that as our offerings expand and deeper insights help uncover areas of need, we are building the experience that makes access to proactive care simple and readily available. We envision customers being able to add, adjust or switch treatments within a single intuitive platform as their health evolves. At the same time, static and reactive communication is being replaced with proactive conversational support to guide customers throughout their journey. Early deployments of proactive messaging and weight loss have already driven more than a 50% increase in weight logging frequency, signaling an ability to improve customer commitment and engagement as they progress in their weight loss journey. And behind the scenes, automation is removing cumbersome processes and facilitating administrative interactions, allowing providers to focus on clinical decision-making. The result is faster responses, higher customer satisfaction and a scalable model that can deliver access to high-touch care to millions of people while still prioritizing clinical excellence. And third, deeper data and more proactive care demands more precise personalized treatment plans for each customer. Doing that at scale means investing in an infrastructure that can deliver access to personalized treatments in custom formulas that safely bring together pharmaceuticals and supplements. We know treatments should be driven by what's best for the customer, not by what's covered by insurance or what's currently in stock at the pharmacy. We've spent years building the physical infrastructure required to deliver access to truly personalized care at scale. Over the last 3 years alone, we've invested more than $300 million into our facilities, expanding our footprint to over 1 million square feet across pharmacy operations, lab testing capabilities and R&D supporting innovations like peptide therapies. This foundation allows us to combine quality with broader access and continued innovation so that access to personalized care is delivered consistently across our platform. The first 2 pillars deeper data and stronger technology are advancing across the industry. We believe those advancements demand the third pillar, a scalable way to make the final step in healthcare more precise and more personal. We believe our technology and infrastructure investments put us in a leadership position to bring a more individualized experience to tens of millions of customers while maintaining the high standards customers have come to expect around the quality of their care. At Hims & Hers, the team wakes up every day motivated to change an outdated healthcare system that has refused to put the customer first. As we work to fundamentally reinvent these systems, we expect to encounter challenges. It takes time for industries to change, but we are navigating this on behalf of our customers. When it comes to ensuring more people have access to the most innovative and groundbreaking treatments and services available, we will continue to fight, holding true to our mission that we can make more people feel great through the power of better health. Pursuit of this mission takes commitment and resilience. That was true at our founding and it is true today. We will continue to push for better, more accessible care around the world by focusing on a consistent set of priorities, bringing more offerings to our customers with more insights and deeper personalization capabilities and when appropriate, partnering with leaders who also believe in a better healthcare experience. By investing with conviction across these priorities, we believe Hims & Hers will be a leader in the next era of health care, which will continuously evolve to better serve the customer. This conviction underpins our confidence in our ability to push towards our 2030 target of $6.5 billion in revenue and $1.3 billion in adjusted EBITDA. At Hims & Hers, we are honored to lead the shift towards the consumer-centric system. We feel both the privilege and responsibility to change what people expect from their health care. It is why we started on this mission, and it continues to motivate us every day. Thank you. I'll now pass it to Yemi to walk through the financials. Yemi Okupe: Thanks, Andrew. I'll start by providing an overview of our fourth quarter financial performance before diving further into our outlook for 2026. Our progress in 2025 reflects the increasing scale of our customer-first platform as we continue to expand access to high-touch personalized care across more conditions, enabling us to build deeper, more valuable relationships with our subscribers. Subscribers on our platform grew to over 2.5 million in 2025 as we continue to execute on our mission of helping the world feel great through the power of better health. Personalized solutions remain a cornerstone of our ability to attract and retain subscribers. Personalized solutions encompass tailored treatments and programs that seek to address key consumer needs and concerns. These needs include tailoring dosing to meet individual patient needs, simplifying treatment regimens by leveraging a single solution to address multiple conditions, improving customer options through alternative form factors and providing data-driven insights and tools to supplement medical treatments. In 2023, we began increasing investment to expand the assortment of personalized treatments and have seen resounding success. Since the end of 2023, we've added almost 1 million net new subscribers to our platform. At the end of 2025, approximately 65% or 1.6 million of our subscribers were utilizing a personalized treatment. The differentiated solutions that we're able to provide not only aid in drawing new subscribers to our platform but also drive higher retention and customer lifetime value. Incremental insights and data from new offerings like Labs will enable us to better attract potential consumers for treatments across newer specialties such as hormonal support. We believe this will increase subscriber engagement and have already seen early success signals as monthly revenue per average subscriber increased 11% year-over-year to $83 during the fourth quarter. Continued subscriber growth and deepening engagement are translating into financial success. Revenue in the fourth quarter was $618 million, representing a year-over-year growth rate of 28%. For the 2025 fiscal year, revenue was $2.35 billion, representing a year-over-year growth rate of 59%. Our 2025 results continue to reinforce our conviction that we have a strong multiyear growth runway across 3 key areas of the business: the Hims brand in the U.S., the Hers brand in the U.S. and an expanding international footprint. Within our Hims brand, we drove year-over-year revenue growth of over 30% in 2025 despite headwinds resulting from our deliberate efforts to pivot away from generic on-demand sexual solutions. Since 2023, we've introduced several combination treatments within our sexual health specialty that address health concerns such as low testosterone, heart health, hair loss and vitamin deficiencies. Nearly 0.5 million subscribers on our platform are benefiting from these daily solutions and the year-over-year growth of those subscribers consistently exceeded 30% throughout 2025. Over 2026, we expect to continue this transition. Our expectation is that retention benefits from our daily sexual health offerings as well as the evolution of new offerings such as testosterone support will continue fostering a robust growth for the Hims brand. Switching to Hers. In 2025, our Hers business continued to display triple-digit revenue growth and accounted for nearly 40% of U.S. revenue. Similar to our Hims business, revenue growth is increasingly driven by deeper engagement across a broader set of women's health needs. Continued expansion in established facilities like weight loss and dermatology is being bolstered by new offerings in menopause support and diagnostics, presenting opportunities to strengthen customer relationships and extend their tenure on the platform. The depth that we are able to provide across a breadth of specialties, making us relying on no one single offering is the power behind our domestic business. Strengthened tenured offerings such as men's dermatology, women's dermatology and sexual health allowed us to surpass $1 billion in revenue, reach adjusted EBITDA and net income profitability and generate positive free cash flow. This allowed us to aggressively invest in our weight loss offering and add a meaningful growth vector to our portfolio with access to oral and injectable weight loss treatments. Consumers have experienced success with both oral solutions and injectable GLP-1s available through our platform with a typical consumer reporting average weight loss of approximately 22 and 29 pounds in their first year of treatment, respectively. While GLP-1s have accelerated our trajectory, the majority of revenue and cash flow generation across our portfolio is generated from our non-GLP-1 offerings. Higher margins from our more tenured offerings will be instrumental in providing resources necessary for investment to scale the next wave of specialties, inclusive of weight loss, lab testing, low testosterone and menopausal support. Our consumer-centric approach has resulted in immense success in the U.S., where revenue grew over 50% year-over-year to more than $2.2 billion. Our belief is that the value we bring from our approach transcends borders. In 2025, we welcome ZAVA and Livewell to the Hims & Hers family and now we're able to serve consumers in Germany, the U.K., Ireland, Spain, France and Canada. International revenue grew almost 400% year-over-year to $134 million. We expect our international footprint to become a more meaningful portion of our revenue in the future. As a reflection of this importance, we will adjust our revenue disaggregation from online and wholesale to U.S. and rest of world revenue going forward. With that, I'll now turn to profitability dynamics before diving deeper into our balance sheet and future plans for investment. Adjusted EBITDA in 2025 increased nearly 80% year-over-year to $318 million. Adjusted EBITDA margins on a full year basis expanded nearly 2 points relative to 2024 to 14%. In the second half of 2025, we meaningfully invested to increase the density of our technology talent, scale new specialties and deepen our policy and safety talent to facilitate the continued expansion of our operational footprint. Adjusted EBITDA was $66 million in the fourth quarter, representing an adjusted EBITDA margin of 11%. Gross margins in the fourth quarter declined approximately 2 points quarter-over-quarter to 72% as tailwinds from continued growth in non-weight specialties were offset by growing revenue contributions from our international markets expenses related to the launch of new specialties and pressure from the shorter shipping cadences in the weight loss that we discussed last quarter. Prior investments in our brand and product suite continue to be a key driver in our ability to drive marketing leverage. Marketing as a percentage of revenue in the fourth quarter and fiscal year 2025 was 39%, representing a 7-point year-over-year improvement. We continue to see acquisition gains in lower cost and nonpaid channels, following years of investment in brand campaigns to drive greater top of funnel awareness. Additionally, retention improvements across our subscriber base are compounding as we directly address more customer needs with a growing portfolio of personalized solutions and a customer experience that is driving stronger engagement. G&A cost as a percentage of revenue increased 2 points year-over-year in the fourth quarter as a result of increased international head count as well as additional expenses related to the hiring of new leadership talent. On a full year basis, G&A cost as a percentage of revenue were essentially flat relative to 2024. A similar dynamic was seen in operations and support costs. Technology and development costs as a percentage of revenue increased to 7% for both the fourth quarter and full year. Investment in engineering and AI talent has resulted in modest deleveraging, but we believe the ROI will be substantial as a result of an ability to move faster and elevate our consumer offering. We have already seen early signals as demonstrated by our ability to bring multiple specialties to market in the second half of 2025 as well as our ability to improve the customer experience and realize operational efficiencies. Net income for the full year increased notably year-over-year to $128 million as compared to 2024 net income after adjusting for a tax benefit in the prior year related to the release of a domestic tax valuation allowance. While we expect to maintain annual net income profitability, our priorities continue to center on long-term free cash flow generation. This enables us to expand our operational capabilities as well as accelerate our strategic road map, including through M&A. In 2025, we generated $300 million in operating cash flow. Strong cash flow generation from our domestic business as well as the strength of our balance sheet allowed us to actively put capital to work across each of our priorities. First, we invested over $225 million into our operations through discretionary CapEx to drive both expanded capacity and new capabilities across our domestic facilities, which now total over 1 million square feet. Second, in 2025, we entered into agreements to deploy over $330 million in purchase price consideration towards acquisitions that have allowed us to accelerate expansion into new international markets as well as launch R&D efforts in the peptide space. We believe YourBio, which recently closed in 2026 for approximately $150 million, will ultimately allow us to augment our diagnostic specialty in the future with a painless at-home offering. Lastly, we repurchased roughly $90 million worth of common stock in 2025 with $80 million worth of shares repurchased in the fourth quarter at an average price of $39. In the fourth quarter, we completed our $100 million share repurchase program and have $225 million remaining on the $250 million repurchase program that commenced in November of 2025. After meaningful investment in 2025, we generated over $57 million in free cash flow and ended the year with $929 million of cash, short-term and long-term investments on our balance sheet. We believe our ability to leverage our financial position and the rigor of our capital allocation framework will position us to rapidly serve a broader set of consumers, placing us on track to become one of the largest consumer-centric health care platforms in the world. Our capital allocation priorities will focus on deepening our ability to combine data and insights, thoughtfully expanding personalized solutions and elevating digital and physical consumer assets to improve the health care experience for tens of millions of consumers. In 2026, we expect this to materialize across the following areas. First, we will continue investing in the capacity and capabilities of our operational facilities. We expect investment in these facilities to unlock our ability to respond to insights from labs and eventually wearables with a broader set of personalized treatments. Additionally, verticalization reduces our cost to serve, ultimately allowing us to pass value back to consumers and selectively expand margins. Second, we will continue to invest in new experiences and physical technologies that will allow us to make treatments more accessible for our subscribers. We believe the integration and scaling of YourBio, which uses a virtually pain-free microneedle blood sampling technology, is a great example of this. Long wait times from overcrowded facilities, fear of pain or an inability to find the time to drive to a facility, all service barriers to prevent many consumers from obtaining deeper insights into their health. We expect that investments in these areas will ultimately allow us to provide users with the ability to perform blood draws from the comfort of their own home and AI technology can help orient providers toward the tests that are most impactful for a subscriber at any point in time. Third, we expect to continue investing in technology. We are one of the few platforms that have insights into the patient journey from intent to outcomes and with Labs this differentiated capability further expands. A world-class product experience, high-quality provider network and personalized solutions backed with data are differentiating factors for us. We expect these investments to deepen customer engagement and retention as well as unlock operational efficiency gains over time. Fourth, we expect to continue expanding the network of partners that will further our ability to become a curator of world-class health care services. Over the coming years, our ambition is to partner with other companies that share our vision to unlock more value for our customers. International expansion will perhaps be one of our most significant areas of investment in 2026 and the coming years. We recently signed a deal to welcome Eucalyptus to the Hims & Hers family. Upon closing of the transaction, Eucalyptus will complement ZAVA and deepen our presence in the U.K. as well as unlock a model more closely aligned to our domestic business in Germany, Australia and Japan. Assuming the transaction closes, our expectation is that our collective international business will break even within 12 to 18 months, inclusive of Eucalyptus. Eucalyptus deploys a rigorous capital allocation framework similar to our own. They currently have an annual revenue run rate north of $450 million and strong execution enabled them to drive triple-digit year-over-year growth in each quarter of 2025, while also maintaining line of sight to profitability. While we do not expect the business to drive meaningful adjusted EBITDA losses, we do not expect to drive meaningful margin expansion for several years in our international business. Across the majority of international markets, we expect to take a growth-oriented approach and focus on reaching as many consumers as possible before focusing on the margin expansion efforts, even if that means running certain markets at or near breakeven on an adjusted EBITDA margin basis. We saw this approach work in the U.S. and will utilize a similar playbook to progressively expand markets towards margin expansion in the future. This is our largest acquisition to date at up to $1.15 billion of total consideration. The upfront payment at close is expected to be approximately $240 million, with the remaining payments for guaranteed consideration and earnouts to be made through 2029. As we have done in the past, we will monitor the landscape of potential opportunities to reinforce our balance sheet to maintain optionality in ways that thoughtfully considered dilution. However, we are prepared to fund the majority of the Eucalyptus transaction, with the strength of our existing balance sheet and cash flow generation from our domestic operations through 2029. With that, I will provide an additional perspective on our initial outlook for 2026. Note that these numbers do not include the Eucalyptus transaction. In the first quarter, we are anticipating revenue in the range of $600 million to $625 million, representing a year-over-year increase of 2% to 7%. We expect adjusted EBITDA to be between $35 million to $55 million, representing an adjusted EBITDA margin of 7% at the midpoint of both ranges. For the full year, we are anticipating revenue of between $2.7 billion to $2.9 billion, representing a year-over-year increase of 15% to 24%. It is our expectation that 2026 adjusted EBITDA will be between $300 million and $375 million. These adjusted EBITDA and revenue ranges imply an adjusted EBITDA margin of 12% at the midpoint of both ranges. Behind our outlook are the following assumptions: first, we expect an approximately $65 million revenue headwind in the first quarter, resulting from the change in shipping cadences in our weight loss business following the shift to 503(a) fulfillment. For context, in the second half of 2025, this revenue headwind was approximately $40 million. We expect this effect to mitigate as cohorts continue to stack throughout the year. It's important to note these dynamics affect only the timing of revenue recognition and not customer demand or engagement. Demand for weight loss remains strong with subscribers growing more than 70% year-over-year in the fourth quarter. We expect subscriber growth within our weight loss offering to remain strong throughout 2026. Second, our investment in our 60 second Super Bowl commercial is expected to place additional pressure on EBITDA in the first quarter. This investment played an instrumental part in our ability to educate consumers about our platform as well as evolve the brand towards being known for proactive healthcare solutions. No change is expected from our framework that calls for a payback period of less than one year on marketing spend. We expect adjusted EBITDA margins and revenue growth to scale from the first quarter. Third, our expectation is for several of the newer offerings such as low testosterone, menopausal support and labs to incrementally scale throughout the year. Newer offerings will play a key role in maintaining solid growth for Hims as well as helping the Hers portfolio continue to scale and reach its first year of $1 billion in revenue. Investment across most offerings will be stage gated and incremental investment released as these new offerings hit unit economic and scale milestones. We believe each of these offerings has the potential to drive meaningful future growth and will play a critical role in our ability to obtain our 2030 aspirations. Fourth, investment in our platform's product experience, technology and AI capabilities are expected to become a larger priority in 2026. We believe we are in a unique position to connect deeper health insights with improved conversational support that is available whenever our customers are in need. Our guidance affords us the flexibility to lean into these opportunities to create a more engaging customer experience from start to finish, driving stronger conversion and retention over time. Finally, international expansion will offer a meaningful driver of incremental growth in 2026. Our initial outlook anticipates at least $200 million in revenue contributions from international markets. This includes any additional contributions from our acquisition of Eucalyptus, which is expected to close in the second half of this year. Assuming the transaction closes as expected, we would expect additional second half revenue contributions of at least $200 million. Our primary objective in international will be oriented towards growth expansion. While we do not expect meaningful adjusted EBITDA losses, we're expecting newer international markets to run near breakeven. We left 2025 with a great deal of momentum that has allowed us to continue bringing new sources of value to millions of subscribers. Our success in the U.S. places us in a position to thoughtfully expand and rapidly scale across international markets such as the U.K., Germany, Canada, Australia, Japan and others. Strong free cash flow and adjusted EBITDA from tenured specialties in our domestic operations will allow us to continue expanding specialties while also concurrently growing our subscriber base across strategic markets. In the near term, we expect many of these international markets to run at breakeven, but in the medium to long term to become meaningful growth in profitability vectors as we optimize and realize economies of scale, similar to what we achieved in the U.S. Continued growth in the U.S., combined with the scale of the international opportunity in front of us, reinforce our confidence in our ability to meet or exceed our 2030 ambitions outlined last year, at least $6.5 billion in revenue and $1.3 billion in adjusted EBITDA. Our success would not be possible without the significant efforts of Hims & Hers' employees around the world. I'd like to thank them, our subscribers and our shareholders for supporting us in our mission to help the world feel great through the power of better health. With that, I will now turn the call back over to Bill to kick off Q&A with 2 questions from our retail community. Bill Newby: Thanks, Yemi. And thank you to everyone who's asked questions over the weekend. First, from Jay, who has a question on our growing international footprint. With the acquisition of Eucalyptus accelerating international expansion into Australia, Japan and building a deeper presence in Western Europe, can you share more about the company's long-term vision and key priorities for global growth over the next 3 to 5 years? How do you plan to integrate Eucalyptus's operations and brands to drive synergies? Andrew Dudum: Yes. Thanks, Bill. And thanks, Jay, for the question. I think from the beginning, we've always believed that the vision for consumer-centric health was global. When you think about great health care, it's a thing that we care about most personally, it's a thing that we care about for a family. And yet no matter where you are in the U.S., the U.K., Germany, when you talk to actual people their frustration with the current status quo is consistent. And so we have really huge ambitions globally. At the core of it is to target the 10 key most critical markets and to win them handily over the next 12 to 24 months across acquisitions of ZAVA and Livewell and with the addition of Eucalyptus, I think we have those critical pieces in place. I've known Tim Doyle for going on 4 to 5 years, he is the founder and CEO of Eucalyptus and have absolutely loved watching that team execute. They're exceptional leaders with a strong shared commitment to the consumer. And so when I look at the combination of the 2, I think we have a bold ambition to see the Hims & Hers brand be unified across all of these major markets within the next year or 2 and a North Star of $1 billion plus in incremental international revenue in the next few years as well. Bill Newby: Thanks, Andrew. And the next question comes from the Hims & Hers retail community. What impact do you expect from the regulatory and legal scrutiny on growth numbers for the next few years? How will you reduce risk from a potential ban on compounding GLP-1s and what categories are positioned best to pivot the business away from GLP-1s? Andrew Dudum: Yes, it's a great question. I think that maybe to step back a little bit, when I founded the company nearly 10 years ago, the vision here was not to launch treatments on a website, it was to disrupt how customers have access to great care. And I think that opportunity today is just as strong as it was nearly 10 years ago. When we first launched, for people who have been following us, people used to call us the Viagra company, right? We're an ED-only business. And for years and years, that was the headline. That was the concern dependency on Viagra, that category. And then as we progressed and we launched the Hers business and that was getting started, people started to worry, hey, maybe this is a Hims only business. Maybe Hers doesn't have the ability to replicate itself and scale as well. And now that business is achieving this year, hopefully, $1 billion plus in revenue. And I think the reality is Hims & Hers has always been and continues to be more than one treatment. When you look into the business today, it's important to remember that the majority of our revenue and profitability is driven by offerings outside of weight loss. And really, the amount of patients that actually are on the compounded GLP-1s is actually quite a small minority of the aggregate subscriber base. And so when referring to -- pivoting the business to manage the dynamics in the ecosystem, I don't really think that's how we feel about things internally. I think we plan to continue to operate like we always have, which is expanding the offering systematically to patients, broadening the assortment on the platform and the care that we can offer them, deepening our relation with them, deepening our understanding of them, expand into new categories like labs and menopause and low-T, work on innovation and R&D for future categories like peptides, which we're working on right now. And ultimately, add more value to customers' life in an expanding set of markets. I think between our existing diverse business lines, the pace of the new expanding categories that I touched on in the prerecorded remarks, as well as now this accelerating international business, there's just really never been a point in our company's life where we've had such a durability in growth engines to achieve the much broader vision for the business. Bill Newby: Thanks, Andrew. And with that, I will pass it back to the operator, and we can begin the regular way analyst Q&A. Operator: [Operator Instructions] Your first question comes from the line of Maria Ripps with Canaccord. Maria Ripps: First, I just wanted to ask about your U.S. weight loss business, maybe expanding a little bit on the last question, sort of given all this sort of maybe increased scrutiny on compounded GLP-1s. How should investors think about sort of the durability and maybe growth profile of that business kind of over the next few years? And then secondly, maybe more badly, how is your marketing mix sort of evolving as you expand into sort of broader less stigmatized health categories domestically? And are you seeing sort of structural improvement in CAC and lifetime value sort of as your brand matures? Andrew Dudum: Yes. Great question, Maria. I'll maybe answer the first part and let Yemi handle the second. I think when we look at the weight loss business domestically, there's an increasing range of assortment, which I think is really important. And we follow what is important for the patients. When you look at both the next-generation therapies that the major drug companies are bringing to market, when you look at the pipeline of biotech in Phase II and Phase III, we deeply believe that in the next 2 to 3 years, there's going to be a dozen or maybe 2 dozen added treatments that are going to make a big difference in people's lives. And for us as a platform and for our patients, we deeply believe that assortment matters. And so I think we will continue to adjust the model as necessary to ensure that we have the breadth of assortment that patients need and want. As Yemi shared in our remarks before we even had the compounded GLP-1 business line, our weight loss offerings was the fastest category to ever launch, just with our combinations of therapies focused on conditions around metabolic and insulin resistant dynamics. That business scaled to $100 million run rate in just 7 months. And so we believe there's a really durable weight business even if you think -- even kind of in a draconian scenario of compounding GLP-1s not being there. And I think even more so, when you look into the next year or 2, there's an expanding assortment of therapies that I think are going to be very important to patients, and we're going to have to keep evolving that offering in category just like we do in other categories to make sure that we've got great treatments that patients are really looking for. Yemi Okupe: Then the second part of your question, Maria, just around how we see acquisition trends evolving. And you see some of this in the marketing leverage that we were able to gain that was quite substantial in 2025. Really what we are seeing is that like we are benefiting from the breadth of treatments that we're able to offer on the platform as well as the investments we've made historically around really communicating to consumers the power of the platform. I think with that, we view that, that gives us a competitive edge on the acquisition front. And then we do see, particularly as we enter newer specialties like Labs, will enable us to provide more insights to consumers as well as move towards the world that's more oriented around proactive care. Our view is that carries immense potential to further drive acquisition efficiency. What we observe on the LTV front is that as we are able to help our providers on the platform, pair consumers with personalized treatments that really are unique and meet their needs, that effectively drives stronger retention across the platform, whether that's as we talked about in the prepared remarks, addressing multiple conditions through more simple mechanisms or helping users balance both efficacy with side effects or providing alternative form factors. We see all of those things as well as the ability to leverage more and more insights to help providers pair consumers with those treatments, driving stronger retention, which ultimately drive stronger lifetime value for the consumer. Operator: Your next question comes from the line of Justin Patterson with KeyBanc Capital Markets. Justin Patterson: Great. I thought I'd talk a little bit more about some of the investments you're making. It sounds like between AI, labs and wearables, you're creating the conditions for a flywheel down the road. So I would love to hear a little bit more about just how deep you're looking to go into the wearables ecosystem? How long we should really think about the investments to support some of these initiatives and how we should think about Labs, the steps to scale up Labs over the next year or so? Andrew Dudum: Yes. Thanks, Justin. I think those 3 buckets are a real focus for the business. And I think when you step back there's just never been an easier way to collect more advanced data from patients across these things, whether it's wearable devices, whether it's polygenic risk scores that you can do a swab on the inside of your mouth, whether it's cancer testing or it's full gene sequencing, I mean it's just really incredible. And so as that accelerates and our investments in YourBio accelerate and we're able to get testing at home for cheaper, cheaper, cheaper cost, we'll be verticalizing that infrastructure so that you as a member of Hims & Hers can be getting access to this type of data collection on a really frequent basis. I think that intelligence layer to then help understand how we get ahead of what you are struggling with or what you may struggle with in the future is going to be an increasingly important part of the business. And so this is where I think the platform really transitions from focusing on a single treatment to proactive preventative care. I actually think that type of care is in and of itself a new category for Hims & Hers. It's almost a longevity category, so to speak. But I think as people start to realize a platform like Hims & Hers gives you access to what the 1% have and let you take the necessary steps to get ahead of it, it's extremely empowering, right? And so we are going to go deep in all 3 of those areas. From the device side, either through our own or through partnership, we've obviously already acquired our own blood testing device through our own AI efforts and teams, which we've already started to launch with the Labs efforts. And it's starting to pay off, right? When you look at the prepared remarks, we shared that 70% of people who do a lab test on the Hims & Hers platform identify an area of risk that is treatable on the Hims & Hers platform. right? Most of the time, this is something patients are learning for the first time that they're prediabetic, that they are at risk of cardiovascular disease, et cetera. And so there's a massive flywheel in making the entry point in data collection and learning about your health extremely low and extremely easy to get started and then ultimately build value over the long term with these patients as we expand our care and can have a more comprehensive look at their health. Yemi Okupe: Yes. I think what I'd add to that, Justin, is I think similar to what we've done in the past, like we will be thoughtful and continue to stage gate the investment. I think much of what we're investing in kind of follows the 4 pillars that we've always spoken around, which is like the brands, investment in technology and data that provide -- reinforces the personalization and unique products we're able to deliver as well as just the strength of our provider network. And so I think that what you see now is a very vast balance sheet as well as a strong free cash flow that's enabling us to make the transition that Andrew mentioned towards a platform that is more oriented around leveraging data to treat consumers proactively. Ultimately, we think that these investments as they start to come together in 2026, even outer years, have the ability to quickly have positive ROI and ultimately pay off for themselves and become self-funding. Whether that's in the form of higher lifetime value that we discussed around the last question, or even just with proactive care being able to unlock new insights to consumers to drive better acquisition efficiency through their lower cost channels. Those are all mechanisms that we'll monitor and continue to lean into. But ultimately, we believe, have the ability to effectively make these investments pay for themselves very quickly. Operator: Your next question comes from the line of Craig Hettenbach with Morgan Stanley. Craig Hettenbach: For some of the legacy core offerings, can you just talk about which categories you expect to kind of drive growth in 2026? And then within weight loss, is there a range that you're embedding into guidance for this year? Yemi Okupe: Yes. Thanks for the question, Craig. Maybe I'll start. I think increasingly, just a concept of -- I just want to caution the concept of core versus like noncore is becoming increasingly less and less relevant. I think that's how we're orienting the business is because the lines across specialties are blending more and more is really around the concept of international and domestic. And then underneath that, what you do see is you have businesses of a varying tenure. We see a lot of potential in both the Hims & Hers specialties for continued growth. I think we were excited to see the Hims brand growth 30% year-over-year in 2025. And we do believe that we're positioned for continued growth whether that's in the form of newer specialties like testosterone that are rapidly emerging or even as we start to see the benefit from the stronger retention on the daily health offerings in both sexual health and greater assortment in other categories like hair, each of these disciplines have the ability within the Hims specialty to continue to power growth. And then flipping to Hers, we're seeing very much the same element. Historically, newer categories that we've launched have taken 12 to 18 months to scale. I think that as we look at around things like labs, menopausal support as well as some of the tenured categories like Hers Care, we continue to see robust growth across many of those, and I think we'll continue to invest in those. But as we make the transition that Andrew mentioned previously in both his prepared remarks and in the question, we're able to proactively serve consumers. I think that's going to be a pretty substantial unlock that will provide the ability to -- for us to continue to see our tenured specialties grow. Craig Hettenbach: Got it. And then just as a follow-up, when I think through the 2030 target and kind of the path to 20% margin, you commented a few times international is kind of breakeven and there's some investments there. So is there anything around kind of the U.S. business or efficiencies that are helping to potentially offset some of the drag on international just from a margin perspective? Yemi Okupe: Yes. I don't think that the drag on international is going to necessarily be permanent per se. I think that what we will do, and I think it's almost going to be more on a market-by-market basis, we will look at the opportunity in front of us. I think across most international markets, the orientation will be growth orientation. I don't know that the international universe necessarily will be static for us as well as we continue to utilize our current assets as well as the Eucalyptus team to launch in new markets. Newer markets will tend to probably carry a more challenging margin profile. But then as we look to markets that season over the next 2 to 3 years, where there's already a strong presence in, there's the opportunity to start to see some margin expansion as you get 2, 3 years out. And you kind of -- if you look at the history of the U.S. and as we made the transition from a loss-making business on our domestic operations to profitability, the ramp in margin as we were able to realize economies of scale kind of from 2022 to 2023 was fairly rapid. And so I think our expectation is on a market-by-market basis, there'll be a similar concept in the international markets. And then as we look to the domestic operations, we are investing fairly aggressively in a number of newer tenured specialties. As those specialties hit their milestones and stage gates, we'll continue to invest. But what you also do see is on a specialty-by-specialty basis, the spread between the tenured specialties and the newer specialties, the margin profile start to converge. And so I think between that and the domestic operations as well as on a market-by-market basis, international markets kind of in the latter half of this decade, becoming more and more margin accretive. We view that as the path to hit our goal of $6 billion of revenue and $1.3 billion of adjusted EBITDA. Operator: Your next question comes from the line of Eric Percher with Nephron Research. Eric Percher: Andrew, I'd like to ask your perspective on the composition of the international business as we look out a year, both across ZAVA and Eucalyptus in terms of specialties or personalization. And then I know you had this line about becoming a leading provider of branded GLP-1 medications. Is that as simple as what we see running through Juniper today? And how do you think about maintaining relationships with the brand manufacturers? Andrew Dudum: Yes. That's a great question, Eric. I think the composition overseas will likely mirror eventually as it matures the U.S., right? I think there's a lot of category expansion overseas. And each of these businesses that we are integrating in have different focuses in different markets for the pilot brand in Australia, very focused on men, the Juniper brand focused on women and weight. Ultimately, we think that it will probably converge to have really nice diversity at scale. I think the overseas -- the relationships with our international teams and the brand and pharmaceutical companies is quite strong because there's really consistency. They've got great report. They've been able to be a large consumer distributor to them. I would expect that to maintain and stay consistent. We don't expect to change that model. I think that's the winning model overseas and would expect it to remain so. Eric Percher: And just a follow-up. Was the comment on the majority of the business being non weight loss, both for revenue? And was it free cash flow or cash flow? Yemi Okupe: Yes. Yes. The comment was just around the majority of our revenues are actually coming from outside of the GLP-1 business today. And then you can just translate that from the tenured specialties carrying a more robust margin profile from economies of scale. The adjusted EBITDA -- the margin profile tends to be stronger on mature categories as well. Operator: Your next question comes from the line of Mark Mahaney with Evercore. Mark Stephen Mahaney: I just want to ask 2 questions about both the fertility opportunity that you're seeing and then the Labs to date, you've talked about them both in the past. Can you just give us more of an update on the data points that you're seeing and how you think about those opportunities? Andrew Dudum: Yes. Thanks, Mark. We've yet to launch anything on the fertility space. We have launched in the last couple of months, the menopause, perimenopause and low-T as well as Labs. Those kind of happen side-by-side. So far, I would say just nearly 10 years of testing out go-to-market strategies, I would say we are incredibly encouraged by the early data. I think we believe that each of those 3 have near-term opportunities to scale to $100 million run rate, just like many of our other winning categories. We also see that the actual engagement with the experience from a consumer standpoint is a very high-value engagement. On hormonal side, men are seeing massive increases in their testosterone levels, feeling better. Retention indications are showing it's in line with some of our best-in-class categories. And on the lab side, also, it's just providing people data that, frankly, used to cost somewhere between $5,000 or $10,000. And so it's an immense amount of knowledge. And then from there, 70% of those people are identifying an area of concern and an area of clinical risk that the platform can actually help treat. And so I think both in hormones and labs, we're incredibly encouraged. We've got dedicated efforts on both of those. And I'm fully convinced that there will be big parts of the business going forward and for the coming years. Operator: Your next question comes from the line of Brian Tanquilut with Jefferies. Brian Tanquilut: Maybe just a quick question, Yemi. As I think about the range of guidance on EBITDA, pretty wide range there, where it could be down or up in the year. Just curious what the swing factors are that we should be considering that would drive the variability there? Yemi Okupe: Yes, I think it's a great question. I think a lot of it is like we've historically done in the past. We stage-gate many of our investments where as they hit scale milestones or as they achieve economic profiles, we tend to lean in a bit more. As you look kind of at the end of 2025, we launched 3 specialties that we feel have the ability to be fairly transformative to the platform. And so I think what our guide provides is the ability and the flexibility to lean into continuing to scale those specialties if we see them achieve promising signs on the unit economic front. We spoke a little bit around how we're investing in tech and some of the ROI that we expect to see there. Additionally, embedded in our guidance is the flexibility to continue to proceed with many of those investments as they shows sign of success. And then the final area of investment, we spoke around really just in the international business, both in terms of as we do the integration of the assets with some of the companies that we've already closed upon such as Livewell as well as ZAVA but also Eucalyptus potentially coming in the second half, we wanted to leave ourselves a long enough range to invest across all of those areas. And so if we see meaningful opportunities for growth in technology, meaningful growth opportunities in new specialties or meaningful growth opportunities in our international markets, we definitely want to take the growth orientation to take them because we feel like as we've demonstrated in the past and from past pattern recognition, the ability to expand margins with greater scale is something that our teams are quite good at. Operator: Your next question comes from the line of Glen Santangelo with Barclays. Glen Santangelo: I just want to follow up on the 4Q U.S. revenue number being up 17%. I was kind of curious, if we were to sort of parse out the compounded GLP-1 revenue , the compound GLP-1 is a headwind or a tailwind to that number? And the reason I ask, right, is because Andrew, you're sort of talking about that it's becoming such a small part of the subscriber base, but yet Yemi, you sort of talked about it as a $65 million headwind in 1Q. I'm just trying to reconcile all those data points and how we should think about the contribution at this point, particularly within the fiscal '26 guidance. Yemi Okupe: Yes, Glen maybe I'll start with that. I think what we -- you do see kind of in the transition from Q4, and then I think you'll really see this in Q1 is just we -- how to shift to where we are recognizing a lower revenue per order, that's not just a shift on new customers. I think it's a shift across the entire business. It's progressively happened over the course of the last, call it, 2 to 3 quarters. the ticket size for the GLP-1 business is a bit larger than our core business. So the revenue impact as well as the EBITDA impact there that we see is fairly meaningful. But I think that said, I think while GLP-1s have been a meaningful growth factor to the platform over the course of the last year. As we kind of indicated in the prepared remarks, the vast majority of the revenue is made from the non-GLP-1 business. As we continue to diversify, we expect that trend to continue. And Andrew, I'm not sure if there's anything you wanted to add more broadly to that? Andrew Dudum: No, I think that's right. Thanks, Yemi. Operator: Your next question comes from the line of Ryan MacDonald with Needham & Company. Ryan MacDonald: Andrew, obviously, a lot of news flow sort of post the pill launch and then sort of pulling the pill from the market. Can you just give us an update in terms of sort of sort of where sort of things stand from a regulatory perspective, if you've had any conversations with FDA or DOJ or sort of what level of concern, I guess, there is around that? And then the second question I have is around clarification on your earlier response. I think it was to the first question. You talked about that, obviously, the pipeline is very strong for at least a dozen or 2 dozen treatments in the next couple of years here. As you think about supporting that broadening assortment, do you intend to do so via branded partnerships as those come to market? Or sort of continuing sort of the historical practice within the business of focusing on personalized offerings instead. Andrew Dudum: Yes, Ryan, it's a great question. On the pill side, as well as the others, there's probably not too much we can say. I think we believe that the pill was a continuation of the strategy to broaden greater personalized options for patients on the platform and spend many months working on that. I think we pulled it back to prioritize honestly, just engagement and the relationships with the ecosystem stakeholders. We talked to quite a few of them on launch and understood their dynamics and chose to prioritize them in those conversations and so decided to pull it. Regarding FDA and DOJ, I don't think we can share too much on anything ongoing, but continue to welcome their conversations. And as we've talked about within the FDA in the past, feel very strongly that they play an important role in the safety of consumers and are happy to be working with them to figure out the areas of concern. On the pipeline side, when you look at the weight loss category specific, I think there's an accelerating amount of treatments that are going to be coming to market that are on the branded side of the business. So this is next-gen biotech that are in Phase II and Phase III as some of the larger players. And so I do think consumer sentiment and consumer demand is going to continuously change. You see that in the last few years from when these drugs first came to market, with the launch of Zepbound vials, you see traffic dynamics moving pretty materially when you look under the hood. I think that's just going to be the evolution of this category where you're going to have more and more options, they're going to be different price points, they're going to have different side effect profiles. They're going to be known by different providers. And ultimately, I think for us, as we've said, across all of our categories, we've seen breadth really matter. And so I do think we'll continue to evolve our platform, evolve our relationships and our approach to make sure that what we have on the platform is what people want. I don't think we are stuck in any single way. I think we have prioritize the consumer up until this point for what we think is best for them and what they are looking for and what they want. And as that changes, we'll continue to change with them. Operator: That concludes the question-and-answer session. Ladies and gentlemen, this concludes the Hims & Hers Fourth Quarter 2025 Earnings Call. Thank you all for joining. You may now disconnect.
Paul Ruedige: Hello, and welcome to the Mercury Interim Results 2026 Investor call. We've got Stewart Hamilton, Chief Executive; Richard Hopkins, CFO presenting and will be followed by questions. Stew? Stewart Hamilton: [Foreign Language] everybody. Welcome to the presentation of our interim results for FY '26. Very excited to be here with Richard to be presenting a strong set of results. This slide, I'll cover off really talks to our strong first half '26 performance shows that we're investing at scale and growth and that we're performing very well. The 3 themes you'll see across the results for the first half are resilient earnings, our disciplined growth and our strong balance sheet management. This all brings together our strategy of being better today, building tomorrow and brighter together. Starting with resilient earnings. For the first half, we have delivered an EBITDAF of $337 million (sic) [ $537 million ]. That's up 28% on the prior comparable period, driven primarily by higher renewable generation and a very good cost discipline. From a customer perspective, we now have 40% of our customers with multi products continuing to show the strategy since we have merged and acquired with Trustpower. From investing in our core assets, we're pleased to communicate that we have reached final investment decision for $590 million investment back into the next 3 hydro stations on river that will take place over the next decade, adding additional 76 megawatts of capacity. From a growth perspective, our geothermal OEC5 unit at Ngatamariki near Taupo has commissioned and that commenced in January 2026. It's delivered on time and on budget. Our 2 wind projects, the first 1 at Kaiwera Downs 2 in Southland, second 1 at Kaiwaikawe in Northland are both under construction and tracking to deliver and basically by the first part of FY '27 and the second part of this calendar year. Those 2 projects combined will deliver enough power for 140,000 homes, which is the equivalent of Christchurch City. Also moving towards the next consent for our next wind farm project that has a project that many will know as Mahinerangi Stage 2. We have named it Puke Kapo Hau, which means the hill that catches the wind. And that is targeting final investment decision in the first quarter of FY '27, so the middle of this calendar year. And from a balance sheet perspective, we've got strong financial guardrails in place with our debt-to-EBITDA ratio, giving liquidity and headroom to support investment and further investment at scale. We have an ordinary interim dividend up 4% to $0.10 and importantly, have invested just around half of the EBITDAF of $270 million into new and existing assets. And looking ahead to the full year of -- the financial year of '26, our guidance remains on track to deliver our EBITDAF guidance of $1 billion, deliver our OpEx of $370 million, deliver our stay-in-business CapEx of $150 million and deliver our guided dividend of $0.25. Overall, shows delivering for shareholders and also delivering for New Zealand. This covers off the progress against our strategic priorities. Our 5 key aspirations. I won't go into detail of it, except to say that this is the strategy we shared in June 2025 at our Investor Day. The target 5 objectives shown in blue through the middle there are all progressing well. The scorecard shows traffic light performance for each of those. I'll touch briefly on a couple. So starting with generation development. I'll talk a bit more to geothermal pipeline coming up. We now have a team in place to keep delivering in that space, and there's a slide later in the pack on that. In terms of capturing energy transition growth, we've commenced a number of long-term contracts with Fonterra, with Whakatane Mill, with Visy, which is very exciting in terms of capturing the electrification growth. And we're also progressing with further smart hot water control programs that bring more, another 20 megawatts of control under management, which supports increasing flexibility. In terms of rebuilding sector confidence, there's no doubt that we have been doing well in the space but still have a way to go. There's confidence growing. There's still a lot for us to be done, and we'll keep pushing on that area as we progress this year, particularly as we hit towards the Trilemma, which is making sure we have affordable, sustainable and secure electricity for New Zealand. And final point I'll cover on that slide, just under earning transformation is the work we're doing around cost discipline and cost management. Very pleased to say that we're on track to deliver our reduced OpEx target of $370 million for this year. Over the second half of 2021 or the first half of financial year '26, we welcomed 2 new executives to the team. Suraiya Phillimore-Smith joins us most recently from Suncorp and to the Chief Customer Officer role and has had the team running really well, and I look forward to hearing her over the next little while, sharing with you the work that we're doing around transforming our retail business. Catherine Thompson also joined us in the last part of 2025. Catherine joins as the Chief Sustainability Officer, having the executive roles at a couple of other gentailers in the past, enormously experienced and adding enormous amount of value to Mercury already. And then as we head into April, I also welcome Michele Mauger to the team. Michele is joining from Vocus in Australia. She'll be joining Mercury as the Chief People Officer. We continue to make really great progress in the maturity of our health, safety and well-being systems. We've been implementing a number of world-class programs, and those programs are starting to deliver results. Results show up ultimately in our total recordable injury frequency rate, TRIFR, and for the calendar year, it's at 0.39 and showing just a consistently better result over time with the number heading further down, which is great. We also have teams and talents that are developing skills in a number of areas. The key areas that we are developing strength is really on the strategic opportunities ahead of us. So in the retail, the technology, the generation development and the asset resilience areas. I'll hand over to Richard to cover some of result information. Richard Hopkins: Thanks, Stew. Look, you've seen the half year '26 delivery scorecard that is off and our progress against our strategic priorities. What I'm going to take you through is what drove the results, what it means for cash and investment capacity and how we're staying disciplined on balance sheet while continuing to grow our dividends. Look, the sector has been under a fair bit of scrutiny since the low hydro year in 2024, and our response is really simple to deliver and keep on delivering. From my side, it comes down to cash conversion and disciplined fund growth within guardrails and let delivery do to the talking. Looking at the slide, look, Stew and I are really proud of what the team has delivered in the first half. We've delivered a record EBITDAF of $537 million and an operating cash flow of $531 million. And what matters to me is the quality of the earnings, earnings converting to cash and the cash funding delivery and dividends. And when you sort of look high level across the slide as a whole, you see everything is moving in the right direction. So trading margin up, OpEx down, EBITDAF up, NPAT up, operating cash flow up, stay-in-business CapEx pretty much in line, growth investment up and dividends up, doesn't get much better than that. Look, so we've invested $208 million in growth during the year, $64 million in stay-in-business CapEx and declared a $0.10 interim dividend. The NPAT was $20 million, and that's driven by the negative noncash fair value movements on electricity derivatives across the existing long-dated contracts and 3 new contracts signed during the period, including the Huntly HFO. So the story is really simple, resilient earnings, disciplined growth and balance sheet strength. Moving to the drivers of EBITDAF. The bridge from $418 million to $537 million is mainly higher generation volumes, so plus $113 million and lower OpEx plus $24 million. Generation volume was up 0.5 terawatt hour, and hydro really did the heavy lifting there and we converted conditions into earnings and earnings into cash. Customer yields were modestly positive. Our mass market VWAP up $11 a megawatt hour, 7% and C&I VWAP at $1.2 per megawatt hour. Look, our net position reflects lower wholesale prices and our net CfD position with higher generation, and it moves with conditions and portfolio settings. On to the next slide, cost and cash discipline. Look, OpEx was lower and what's that been driven by? Well, we talked at year-end about the savings and the initiatives that we've put in place. So the main savings were through people, through a little bit on maintenance, which is mainly timing and other operating costs as major projects completed and consulting reduced. We're tracking to the FY '26 OpEx guidance of $370 million, so down from $396 million last year. So easing inflation. And it's all been around delivering through the operating model and tied to cost control. Despite investing at pace, you can see our net debt moved only $60 million. So up to $2.243 billion in December, 50% of our EBITDAF went into investing. And that's the discipline point, funding delivery without stretching the balance sheet. Turning to stay-in-business CapEx, we sort of break down what's been going on there. Stay-in-business CapEx is all about reliability and protecting long-term earnings quality. The mix includes geothermal drilling, hydro rehab and resilience, Arapuni Left Abutments and Taupo Control Gates plus other sustaining CapEx. Surplus $64 million versus $73 million last year, mainly lower drilling and major hydro resilience spend, such as Karapiro completed. The Rotokawa drilling progressed as well. So the key point is planned sustainable investments and not maintenance being cut. And next slide, please. So here, hydro, look, the hydro inflows were elevated at the 85th percentile hydrogeneration was really strong during the year with -- during the 6 months with record generation in July. We've set out what's been going on with the spot prices there, and we've managed a reasonable amount of spill, over 400 gigawatt hours. Hydro is increasingly our flexibility engine supporting the systems through volatility. We've committed, as Stew touched on to more hydro rehabs investing there. So $590 million has gone through FID, all approved by the Board, which is protecting the long-term future of those assets and also generating more power as well. So look, I'll hand you back to Stew now to run through the hydro investment program in a bit more detail. Stewart Hamilton: Richard, as you mentioned, definitely, the hydro system on the Waikato River is the core of our portfolio. And I believe it's one of, if not the most flexible renewable asset in New Zealand. And so it's great to see the work we're putting into this very valuable asset. Firstly, we completed the upgrade of our Karapiro Hydro station. That was a 3-year program that's completed and Karapiro is now fully operational and operated from that. We've now got a strong team in place and really strong supplier relationships from that 3-year program. They're well established and that sets us up to move into the next 10 years of the program. We have now, as Richard mentioned, committed to 3 further hydro upgrades with the FID approved for $590 million. That will enable the upgrade of Maraetai I, Ohakuri and the Atiamuri stations. The design and print work for that is now underway over FY '26, '27, '28, that will include the procurement of early lead items and the design and construction manufacturer of various parts, including turbine and generator. We'll then kick into the actual replacement process through the late part of FY '28 into FY '29. And then overall, that program will take us through to about FY '34 and provide increases in capacity by 76 megawatts spread across the 3 power stations. We're also maintaining a resilience of the core set of assets. That's really vital to deliver our strategy. Part of that is the approval of the FID investment to strengthen the Arapuni dam with construction underway, and you'll see a big part of that coming in, in the next half. This is really about reducing risk, strengthening asset resilience and Arapuni Left Abutment is a key component of that. The Arapuni dam is our oldest operational dam, constructed in 1927. And so for us, it's making sure that, that asset is resilient for the next century ahead of us. Also, over the last couple of years, we've reestablished our geothermal development capability. The focus has been on rebuilding our capability and the design, the build and the commissioning of geothermal power stations that includes and is demonstrated through the successful commissioning of our 50-megawatt Ngatamariki plant. We also now have a team that's successfully been executing on a drilling program. And so over the last couple of years, we've completed the 8-well geothermal program, which has spread wells across Kawerau, Ngatamariki and Rotokawa. And we'll also combine that with the project capability and the project management that we are supporting in the supercritical project that's being driven by the government. So with that capability in place and the delivery of new production and drilling team, we'll now turn our attention to the future and how we can utilize those teams to deliver future growth and build into the potential 5 terawatt hours that we've identified. We'll provide more detail on that plan in May, and all of you are welcome to join us at that investor event. Mercury's wind development team, I think, are the leading wind farm growth team in New Zealand, if not Australasia. We've developed 5 of the last 6 wind farms in New Zealand, and the team is doing a great job at the 2 current projects underway, both are on track for delivery on time and on budget. If you look at Kaiwera Downs, we now have -- I think actually today, we might have nearly 12 of the 36 turbines up in the air, which is fantastic. First generation is expected in May and then that will flow through to the end of the year with all those turbines coming on stream. And then up at Kaiwaikawe, the first parts have been delivered to site earlier this week and first generation for that project is expected in August. And our generation pipeline continues to grow as well as the team continues to explore, identifies and develop these prospects. So our total pipeline has expanded further by another 2 terawatt hour. The bulk of our pipeline options exist in the North Island, as you can see from sort of third blue bar along on that chart on the first chart there. That's great to have those options located near the load in New Zealand. Our team has a job of progressing those various projects through a disciplined set of stage gates really making sure that most valuable projects are progressing, so we can make the right choice for a final investment decision at the right time. And overall, if we come back to the projects that are nearer term and those that are in construction and closer to the final investment decisions, we still remain on track to deliver the 3.5 terawatt hours by 2030. We've got the balance sheet capacity to do that, and we've got the team capability to deliver. Our project pipeline is critical to make sure that we had our FY '30 EBITDA expiration of $1.15 billion to $1.25 billion. As I mentioned, we have a pretty disciplined project gate process to take these projects through. We have about 55 Mercury team members in the generation development team embedded across Mercury and their role is to make sure that we're bringing the best projects to the fore and then delivering on those. So our fully renewable asset base does require firming to support our -- not only our current set of assets, but also our growth ambitions. Part of our wholesale team and our generation development team inside Mercury, big part of their focus is on developing the firming to support our renewable growth assets and our aspirations. We have several diversified solutions currently in place shown on the chart and the bottom there. But also, we're looking out to the future, particularly as we head towards our 2030 and what's required to support our growth plan to 2030. We are as part of that targeting battery energy storage solution or BESS. We have a consented BESS at Whakamaru, and we're targeting a final investment decision around about this time next year. Moving through to the regulatory and political part of our ecosystem. There's been extensive focus in this area and a market review that was conducted late last year. Ultimately, that independent advice confirms that the electricity sector is performing well. However, further evolution is required, particularly with the declining indigenous gas situation in New Zealand and the requirement to firm dry years. Sort of key themes that we take away from the various reviews that have taken place. The first is that electrification continues to grow and with that comes demand growth. We also see strong theme around security of supply. And of course, the final one, which is a major focus for New Zealanders, both businesses and households is an affordability. So our approach and the choices we're making around those 3 areas include when it comes to demand growth and electrification. The delivery of our renewable generation pipeline through that process. We are committed to developing those projects in consultation with EV communities and stakeholders, always considering environmental impact through the consenting process. We're also seeking to help increase demand by supporting large industrials to transition and to electrify. When it comes to security of supply, we've been supporting market mechanisms and that includes entering into the firming supply agreements with the Huntly Firming Option. And then from an affordability perspective, the 3 key areas we are focusing on. Firstly, around delivering greater clarity and transparency of our bills and our pricing. Secondly, providing consumers with control, and that includes the work we're doing over the next 6 months for time of use products for our customers. And finally, making sure we have care in place for those customers that are in situations of hardship and vulnerability. I'll hand back now to Richard just to touch on the customer work that we've got underway. Richard Hopkins: Yes. Thanks, Stew. Look, I just think that's an awesome program of work we've got going on. It's so exciting to be part of Mercury and delivering for New Zealand. When we look at the customer side of things, just a couple of key points from me. So multiproduct continues to build. So about 40% of our customers now are multiproduct, that's 2 or more products and that's improving value per customer. Our connections are up at 30,000 versus prior calendar period. Our -- fiber is now ticked over 150,000 and we're over 94% of the broadband base. OpEx per connection is down and there's -- you can really see that in the yellow bars at the bottom chart. So yes, it's really great to see down 4% versus prior calendar period and 16% below HY 2024. So big, big progress there. Unit economics are improving through multiproduct pricing actions and customer value initiatives and really disciplined cost to serve. Making some good progress on time of use, and it's good for customers, good for system resilience, and we're on track to have that delivered by the end of the FY '26. And lastly, we've got a great new leader in Suraiya, leading the customer business. We're really excited to see what she can achieve, and you should be looking forward to hearing more from her as we talk to you going forwards. On the next slide, look, we're disciplined and we're careful with our money and the choices that we make. We target a debt-to-EBITDA of 2 to 3x, S&P adjusted, and that's consistent with the BBB+ rating. At half year '26, we're at 2.2, and net debt has gone up slightly to $2.243 billion. And so it's really well within the guardrails while we invest $1 billion across OEC5, KD2 and Kaiwaikawe and get those online and delivering money and cash to the bottom line. Look, we've got undrawn facilities of $465 million, and we're proactively considering the refinancing options for our $200 million green bond, which matures in September. Looking to go to market and get that done during March. We've got $1 billion, as I mentioned, committed into new wind and geothermal, and we're also investing significantly in hydro, including the $590 million rehab program that Stew mentioned, 76 megawatts, 87 gigawatt hours per year. But the big point here is that we can deliver the program on balance sheets with conservative debt-to-EBITDA settings with liquidity headroom to manage volatility. So we're in a good place. In terms of dividends, look, interim dividend is $0.10 at 4% and dividend guidance remains $0.25. The payout is towards the low end of the range because we're in peak investment period and balancing progressive dividends and our long track record of growth with funding, value-accretive growth and maintaining balance sheet resilience. Our half year operating cash flow supported dividends and growth investment with balance sheet headroom and portfolio flexibility. And 2026 guidance, this is pretty simple, unchanged. Full year EBITDAF remains at $1 billion. It's based on 4.4 terawatt hours of hydro generation. And obviously, subject to hydrology and wholesale market conditions going forward. We're confirming our OpEx guidance of $370 million, our SIB CapEx guidance of $150 million and dividend guidance of $0.25, so up 4% on last year. We're starting the second half in a strong storage position, but there's still a long way to go to 30th of June. And the key point here for us is discipline. That's the point we want to keep on executing, stay conservative on guidance and build confidence through delivery. We'd rather let delivery do the talking. So with that, I'll hand back to you, Stew, to run through the final slide, and then we can open up for Q&A. Stewart Hamilton: Thanks, Richard. Yes, absolutely. So to summarize our half year '26 interim results, we are very much demonstrating the delivery of our strategy with strong performance in terms of better today, building tomorrow and brighter together. That's showing up through our resilient earnings, through our disciplined growth and through our balance sheet strength. So we're leveraging our strength in wind and geothermal in particular, we've got a superior project pipeline ahead of us and a strong financial position to start with. That will enable us to make smart, disciplined investment decisions focused on the delivery of our performance, and I look forward to sharing the continued delivery of those results as we get into the second half. And with that, I'll hand back to Paul to open up for questions. Paul Ruedige: Okay. Thanks, Stew. Thanks, Richard. Okay, I'm just going to bring Grant Swanepoel on from Jarden. Grant Swanepoel: Is that working? Sorry. First question, just on this hydro spend. Do we think of it as the maintenance CapEx going from $150 million to $209 million for the next 10 years? And on that investment, the 76 megawatts and 87 gigawatt hours on your long-run wholesale expectations, what does that deliver you in terms of extra EBITDA? Richard Hopkins: Yes. So look, in terms of the investments, Grant, that's all sitting between -- in our stay-in-business CapEx and even the sort of growth element, we don't do anything cunning there and call that growth. We just call that stay-in-business. So it's all within the $150 million, and we continue to expect to stay within the $150 million going forward. This was all baked in when we've been talking about our sort of forecast and the guidance out to FY '30, this is all baked into that. And so when we look through. We still remain very confident of the range that we've provided for FY 2030. We still remain confident that we'll be picking our debt-to-EBITDA at 2.6x, which is what we talked about at the Investor Day last June and then leverage will be falling away from there. So look, we've got plenty of funding capacity to do everything that's in our pipeline and to do more. Equally, we can see what others are doing as well. So we're going to be disciplined about that to make sure only the best things make it through that have great LRMCs and deliver great returns to shareholders. Stewart Hamilton: Sorry, on the value part of your question, Grant. Very much that additional megawatt capacity really feeds into the firming part of our portfolio. So that kind of slide that shows where our capacity requirements are. So it will enable us to have the firming, which means we can continue with confidence to keep building our wind portfolio out, for example. And then if we look at sort of our expectations of where the gigawatt hours show up, has it really changed in terms of our expectation of the long-run marginal price being somewhere between that sort of 110 to 125 region? So as these projects come online, that's what we're considering them against. Grant Swanepoel: That's very clear. Then you did mention that you will be watching all the others build programs with Contact and Genesis now having raised a bit of capital and accelerating their programs. Do you have enough of a culture in your company that you can shift from just growth, growth, growth to something that's a bit more subdued? Stewart Hamilton: Yes, absolutely. So plan of our pipeline is -- and Matt Tolcher and the generation development team are to bring these projects so they are execution ready, ready to go. And then that's for us, we take these projects through a pretty disciplined process with our Board to make sure that when we do head to FID or final investment decisions for those projects, we're considering where the project is and what the demand and supply situation is in New Zealand before we actually press the button on those projects. And a big part of that is also looking at our wholesale part of the business to try and work through developing a load or a long-term supply agreement that actually back to back with the supply that we're going to provide. So you see that a little bit with the Kaiwera Downs 2 project. That largely came off the back of a long 20-year contract with the Tiwai Point aluminum smelter, and that's something which we watch very closely as well. Grant Swanepoel: And my final question is just a short-term one. Your OpEx improved materially first half, great outcome and not material improvements set for the second half. But there's no run rate in that OpEx out in the first half, that would see you reducing the $370 million for FY '26 outlook? Richard Hopkins: Yes. So look, there's -- when we look at this Grant, there's -- a lot of it was -- has come through in that first half, but there. There are swings and roundabouts as we go through the year. So it's always interesting to look at the first half, but there's other overs and unders as we go through. So look, we think $370 million is a good number to be hitting. We still got a way to go. And what's the risk? Well, the risk is something goes bang and creates a bit of a maintenance blip for us. We've got contingencies in place for that, if it happens. So look, we think the $370 million is the right number to be guiding on. If we -- if everything goes really well, can we come in lower? Yes, a bit, but not materially. Wouldn't be doing anything well on that front. The main thing for us is to be setting ourselves for this -- setting ourselves up for this year and for the next 2 years as well. Grant Swanepoel: And I wanted to ask you about your conservatism in not changing your $1 billion forecast for this year, considering that was such a good first half. But thank you for answering my other questions. Paul Ruedige: Okay. I'd like to bring Vignesh Nair onto the screen, if you can unmute. Vignesh is from UBS. Vignesh Nair: Stew and Richard, well done on a really strong result today. Couple of questions. First one, just can we get a bit more color? I think you can sort of -- so you snuck in a geo project of 30 megawatts in the pipeline. Understandably, you're probably providing more details on the 14th of May. Can you sort of talk to that a bit? Is this the only project from a geothermal perspective in the pipeline that can be delivered pre FY '30 potentially? Or are we still talking to post '30 new geothermal? Stewart Hamilton: Yes. Thanks, Vignesh. Good question. So we have, I think, previously talked about a GEO project 1 which is the most likely project which we will deliver before 2030. So whilst we have a really strong pipeline of opportunities ahead of us, and we'll share a bit more of the detail of those projects when we get to May. The target for us is to deliver a project before 2030, whilst we continue to grow the potential projects, which will likely be delivered in the 2030s. So that 5 terawatt hours, the bulk of that will require us to do exploration, including drilling and development over the next few years that will lead into then the execution and delivery of those projects beyond FY '30, but we are certainly going to be pushing pretty hard to get the first one of that project in place and operational before 2030. Richard Hopkins: Yes, that project wasn't new, though. That's something we had in our investor stuff back in June last year. But yes, there's a few different options behind that. So we just need to see which of the options we can get done in time. But yes, we just think geo is great, it has got really attractive. We understand it well. If you look at what's happened on OEC5, delivered on time and on budget, LRMC when we've been talking about H2 before, it's going to -- touching wood because we're just in sort of final reliability testing now, but it's going to come in below that. So yes, show me someone else is delivering any sort of value like that. Vignesh Nair: Awesome. And secondly, I can see that you've changed your stance on the Whakamaru BESS slightly from 150 megawatts to a range of 100 to 150 megawatts. Just keen to hear your maybe broader thoughts on the New Zealand battery markets. Many of your peers are sort of obviously quite bullish on it medium to longer term? Stewart Hamilton: Yes. Yes. So much to cover in that question. So from our perspective, when we look at batteries, there's sort of 3 broad areas that we see the value show up. And firstly is in the area of arbitrage from an electricity pricing perspective. The second is in reserves and the third is in portfolio benefits. From the first -- the kind of the portfolio benefit is the one that's most likely to drive us looking at construction of a battery and our portfolio of assets. That's sort of what we tried to show a bit on that Slide 18, where we've got enough in our current portfolio to support what we are currently operating in our gen dev pipeline at present. But as we head towards bringing on stream the next set of wind farms, we will need batteries in our portfolio to help firm that. And so that's largely our thinking around the value show up for us in terms of the portfolio benefits and firming the other projects. So that's why we're sort of working through the best size of that project and the best time to stagger that investment. So we might stagger that up. We've got a consent for up to 300 megawatts of Whakamaru, but the likelihood is that will be staged potentially 100 megawatts first stage or 150 megawatts and basically staged to make sure it matches the renewable generation projects that we're building at the same time. Richard Hopkins: Yes. So we're not sitting on our hands there. We've done a lot of thinking, a lot of work. We're going to be moving forward into procurement in the not-too-distant future and expect to be building it certainly this side of 2030. We can see some real value in our portfolio to it, but we're just doing it at the right time where it delivers most value. Paul Ruedige: Next, we've got Andrew Harvey-Green from Forsyth Barr. I am just bringing on screen, Andrew, if you can unmute. He did mention he might have some issues with this particular call. So wait a couple more seconds, and then I'll just let go of Andrew, and then hopefully bring you back later. Next, we've got Josh Dale from Craigs, bringing on screen now. Do you want to unmute, Josh? Joshua Dale: First question, just on your FY '30 EBITDAF target, we have visibility on most pieces of the buildup to that with the exception of maybe Waikokowai, Puketoi. Do you have any indication on timing for those? And I guess, are there any risks of not having that generation come online for a full FY '30 contribution? Stewart Hamilton: Yes. So in terms of timing for that, we're progressing at the moment. We are aiming to get consent in place for that project sometime over the next 12 months or so. So that from a Waikokowai perspective, we certainly see that as the most likely next project to get off the ground in terms of consent through the final investment decision. It's a potentially a really valuable project in a great location. So it's really key for us. So that's certainly a project we're pushing pretty hard at the moment. Puketoi is another one, which we've done a lot of work around over the last couple of years, just trying to optimize that. There's already a consent in place for that project, but it's not a consent, which is, I'd say, commercially valuable or viable. And so the key thing for us is to make sure that those projects are progressing at pace. But equally, we won't push the button on those projects if they're not going to deliver good commercial outcomes. So yes, we're still targeting that. We expect that we'll have our aspiration. If those -- 1 or 2 of those projects don't come off, then we have another pipeline of projects, which will fill that gap. So our idea is to push those projects as hard as we can. But equally, we've got a number of options that sit underneath it to plug the gaps. Richard Hopkins: Yes. And when we sort of put up that forecast back in the day, we weren't assuming everything actually happened on this table. So there was some optionality around Waikokowai versus Puketoi. And so you can hear which one we think is the most likely today. But yes, as we look forward, I'll keep on the theme of under promising and over delivering. That's what we think we're doing with the range that we've given for 2030. Joshua Dale: Okay. That's helpful. And on the $590 million of hydro refurbishment spend. I appreciate you've got the phasing on Page 12, which is helpful. Is that CapEx deployed fairly evenly across those rehab periods? Or is it more front or back-end weighted? And I guess adding to that is the 120 for Arapuni as well? Just an indication of phasing would be helpful. Richard Hopkins: Yes. So pretty evenly spread over time. I think the big bits for us is actually -- there's -- I think as you look around the world, there's a lot going on with turbines. We've been working with ANDRITZ for a long time now. And the big bit is to have an agreement in place with them, to have manufacturing slots booked with them to have the long lead time stuff starting to get ordered. And so yes, we're expecting, at least in theory, Josh, are pretty smooth path through all of that within that sort of 150 guardrail that we've been talking about. Yes, we think it's a good place to be committing long term to those things for our own asset resilience, but also committing long term with our key partners as well to make sure that we're at the front, not the back of the queue. Stewart Hamilton: I'd say the Arapuni Left Abutment, definitely, the spend on that will be focused on the next couple of years primarily. And then the hydro upgrades at the Maraetai, Atiamuri, and Ohakuri largely spread out across the next 7, 8 years. Joshua Dale: Excellent. That's helpful. And last question. Out of interest, did you toy at all with upgrading FY '26 guidance given Lake Taupo's full OEC5 has progressed pretty well. Richard Hopkins: Look, we had -- we always have a good look at our guidance and make sure it's in the right place. So we have had some discussions and agreed that this isn't the time to be upgrading. There's -- yes, if only life was as simple as a flat line and what you think is going to happen happens. We've got hydrology, got wholesale prices. Look, we're comfortable with that. And yes, but no, we haven't upgraded the guidance because we think we've made it pretty clear where we stand. And yes, it would be disappointing from here not to be delivering it. Paul Ruedige: Andrew, I'll just bring you back on screen. I'll take your screen again, Andrew. We'll go to Steve Hudson from Macquarie. Stephen Hudson: Just got a couple for me. On your South Island development options, perhaps Stew, should your old employer push go on sort of bringing back potline 4 and perhaps a greenfield potline 5, how well placed are you to further supply into that kind of demand? Stewart Hamilton: Yes. So definitely, if we look at, for example, as I mentioned Kaiwera Downs 2 is largely set up to support baseload at Tiwai. As we look for Puke Kapo Hau or as you know, at Mahinerangi 2, that's a project, which is also in the lower south of the South Island and certainly would make sense to have a load in the South, whether it's a smelter or whether it's a data center or whether it's Fonterra electrification. There are a number of quite large potential opportunities in the South which is why we're still progressing some of those projects because PKH or Puke Kapo Hau is a really good project with a great LCOE. It's obviously in the location, which isn't great. But if we can find loads such as Tiwai's line 4 or line 5 and beyond, all those other things I spoke to, then that's really well suited for those. Stephen Hudson: Yes, makes sense. Richard, maybe one for you, very clear sort of messaging on the balance sheet. You've got a 0.8 turn on EBITDA sort of headroom. I just wondered how the credit rating agencies look as you're going through a significant build phase at some sort of forbearance above the 3x ceiling. Richard Hopkins: Yes, I'm pretty sure that that's not on my bucket list. But look, the credit rating agencies will look through if there's a short-term increase over and above. It sort of varies depending on the reason that you're above as to whether there's sort of a negative outlook or not. So there's -- yes, companies have the possibility of getting into the low 3s for 12 months or so, 18 months if there's a clear plan to get back under over time. But yes, we're a long way away from that peaking. Just the same as what I said back at the Investor Day back in June last year, sort of 2.6x. So we're pretty good and got a good amount of headroom there. My constant thing is to talk to Stew and talk to Matt and say we want to do more because we've got a great pipeline. We don't need to accelerate what we've got. We're moving fast. We're the ones building stuff and having 3 coming online, I would love to build some more. Yes, so we don't need more capital to speed up, we're going as fast as we can. What's slowing us down? Well, it's the normal stuff around consenting, but we're pushing through that as quickly as we can, and we'll keep on building where there's great value. Stewart Hamilton: We sort of look at, Steve, is every sort of terawatt hour to build is around about $1 billion worth of investment. So we look out to our goals in terms of 3.5 terawatt hours by 2030, it gives an idea of the sort of money that we want to be spending and then that's built into the capital headroom, which Richard and the team look at. Richard Hopkins: That's right. Look, it's big assumptions is how lumpy is it? And yes, it's nice and easy to say $600 million a year broadly, and that's what we'll spend this year. But there might be some lumps in that, but even if there's a big lump, 2.6 gigawatts still looks like where we'll be. Stephen Hudson: Just one final one. We've often quizzed you about the GWAP/TWAP factors that we might expect over time from the wonderful Waikato hydro peaking assets that you've got. Do you think you might be in a position to share a little bit more of your thinking around that come your Investor Day? Or do you think it will be largely geothermal focused? Stewart Hamilton: Yes. The idea is very much for the May session is very much geothermal focused and sort of opening the covers a little bit to create a bit more clarity around what that looks like over the next 5, 10, 15 years. But certainly something we can take away, Steve, and think about even for our full year results, if that's something which might add value for us to be presenting to help. Richard Hopkins: Yes. Look, I mean, I think it would be, 5 terawatt hours is a big number as well, but we'll just add that to the wish list. Paul Ruedige: So that's the end of questioning. I pass back to you, Stew. Richard Hopkins: We will talk to Andrew later, will we? Stewart Hamilton: Yes, I look forward to catching up when we talk later on, Andrew. Yes. So thank you very much. I just really wanted to take the chance to thank the Mercury team. It's been a really great start to FY '26, but there's still a lot of work for us to do, whether that's in delivering our new projects, whether it's in the work to support the regulatory and government space, all the way through to the core assets, which include the 1,300 people inside Mercury that are servicing customers and supporting our assets on every day. So thanks very much for your time. Look forward to catching up through the day and over the next few days and sharing the results of the second half of FY '26. Richard Hopkins: Thanks, everyone.
Operator: Ladies and gentlemen, welcome to BWX Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to our host, Chase Jacobson, BWXT's Vice President of Investor Relations. Please go ahead. Chase Jacobson: Thank you, operator. Good evening, and welcome to today's call. Joining me are Rex Geveden, President and CEO; and Mike Fitzgerald, Senior Vice President and CFO. On today's call, we will reference the fourth quarter and full year 2025 earnings presentation that is available on the Investors section of the BWXT website. We will also discuss certain matters that constitute forward-looking statements. These statements involve risks and uncertainties, including those described in the safe harbor provision found in the investor materials and the company's SEC filings. We will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of the earnings presentation that can be found on the Investors section of the BWXT website. I would now like to turn the call over to Rex. Rex Geveden: Thank you, Chase, and good evening to all of you. We closed out a record 2025 with another strong quarter of results that were ahead of our expectations. For the full year, revenue grew 18%, adjusted EBITDA grew 15%. Earnings per share grew 20% and free cash flow grew 16%, all exceeding the initial guidance we provided at the start of the year. These results reflect our ability to scale successfully in the context of robust demand in all of our nuclear end markets. We ended the year with backlog of $7.3 billion, up 50% year-over-year with meaningful growth in both segments. In government, we secured new pricing agreements for naval propulsion equipment and fuel and booked initial scopes on major awards to build out a U.S. defense uranium enrichment capability and to expand production of high-purity depleted uranium and commercial backlog was boosted by CANDU life extensions, multiple SMR projects and our first engineering contract on an AP1000. Beyond financial performance, 2025 was a year of exceptional strategic success. We completed the acquisitions of AOT and Kinectrics, enabling key wins such as the $1.6 billion high-purity depleted uranium contract and the owner's engineer role for Bulgaria's Kozloduy AP1000 project. Building on the significant capital we invested in our business earlier in the decade, we continue to invest in our facilities to support our customers and build capacity for future demand. In 2025, we held the grand opening for the BWST Innovation Campus, the home of our advanced nuclear and microreactor businesses and continue the expansion project at our large nuclear component plant in Cambridge. We recently completed construction of the Centrifuge manufacturing development facility and are designing a new high-purity depleted uranium manufacturing facility, both to support the NNSA. And earlier this month, we opened the BWXT Digital Center in Melbourne, Florida, which is our hub for digital transformation and AI initiatives across the organization. Turning to segment results and market outlook. Government Operations revenue was down 1% and adjusted EBITDA was down 5% in the quarter, slightly ahead of our expectations. In naval propulsion, with 2 new pricing agreements in place, our teams are focused on long lead materials, operational excellence and delivery. During the quarter, we shipped 2 large steam generators for CVN 81, a Ford-class aircraft carrier from our Mountain Vernon, Indiana facility, highlighting our rhythm delivery for naval reactors. The Mountain Vernon facility sits on the Ohio River and has a 1,000 metric ton crane capacity suitable for lifting the largest nuclear reactor components on to barges directly from the site. Accordingly, we are considering expansion there to supply the U.S. commercial nuclear market. In Technical Services, a team led by BWXT, including Kinectrics, assumed the management and operations operations contract for the Canadian Nuclear Laboratories, our first international TSG project. We are tracking several other contract opportunities within the DOE complex as well as in a new domain. In fact, BWXT was an awardee on the Missile Defense Agency's $151 billion Shield contract or Golden Dome, which positions us to compete for infrastructure support and engineering and manufacturing technology development on this strategically important national security program. In microreactor and advanced nuclear fuels, we delivered the first core of TRISO fuel for Project Pele to Idaho National Lab in November. We are also manufacturing TRISO for Antares, which aims to achieve reactor criticality by July 4 of this year, in line with the administration's nuclear executive orders. While others are planning to produce and manufacture advanced nuclear fuel, we are delivering today. Further, in the space domain, we continue to develop the technology required for nuclear thermal propulsion with NASA and are seeing specific opportunities around vision surface power. Lastly, in Special Materials, our team stood up the centrifuge manufacturing development facility in just 7 months for the defense fuels program with NNSA, reestablishing a domestic uranium enrichment capability for national security purposes. We are also preparing for the construction of a new facility in Jonesborough, Tennessee for high-purity depleted uranium production. These programs support our robust revenue growth outlook in 2026 and are highly strategic for the future of our special materials portfolio. Turning now to commercial operations. We reported impressive organic revenue growth of 31% in the quarter and total revenue growth of 95%, strong growth in commercial nuclear power and medical and sales from Kinectrics. Backlog ended 2025 at $1.7 billion, up 85% compared to last year and up 16% sequentially, driven by equipment for CANDU refurbishments in Canada and other international markets and design awards for SMR components to various reactor OEMs. This backlog growth, coupled with robust market demand supports our expectations for low double-digit organic revenue growth in the segment in 2026. BWXT Medical reached a milestone of slightly more than $100 million of annual revenue, up about 20% from last year with double-digit growth in diagnostic isotopes a meaningful increase in actinium sales and steady growth in TheraSphere. We expect similar growth in 2026 as these factors continue to drive the business. We continue to make measured investments in our medical portfolio as we work through the industrialization of our Tech 99 products, explore new modalities for producing actinium-225 and around other therapeutic isotopes such as Lead-212. Turning now to commercial nuclear power. Demand is strong and our opportunity set is expanding. Commercial nuclear power book-to-bill was over 2 in the quarter. [indiscernible] CANDU aftermarket services and components in Canada, Europe and Asia, a new long-term CANDU fuel contract and design and component manufacturing contracts with several SMR technology providers, underscoring our role as a super merchant supplier for critical nuclear technologies. Additionally, in December, a consortium of BWXT Laurentis Energy Partners and its subsidiary, Canadian Nuclear Partners, was selected to provide owners engineer services for 2 proposed AP1000 nuclear reactors at the Kozloduy site in Bulgaria. This is BWXT's first meaningful AP1000 award, leveraging our large nuclear project experience and Kinectric's depth in licensing, regulatory support and engineering. We are actively bidding component packages for multiple AP1000 projects and expect additional awards this year. With that, I will now turn the call over to Mike. Michael Fitzgerald: Thanks, Rex, and good evening, everyone. I'll begin with total company financial highlights on Slide 4 of the earnings presentation. Fourth quarter revenue was $886 million, up 19% year-over-year as strong growth in commercial operations was partially offset by a modest and expected decline in government operations. Organic revenue was up 4%. Adjusted EBITDA was $148 million, up 13% year-over-year, attributable to robust double-digit growth in commercial operations and lower corporate expense, which were partially offset by lower government operations. Adjusted earnings per share were $1.08, up 17% due to strong operating performance and a higher contribution from nonoperating items of approximately $0.05. Our adjusted effective tax rate in the quarter was 19.5%, which was below our full year tax rate of 20.4% due to timing of R&D tax credits. In 2026, we expect our tax rate to be slightly higher at approximately 22% as growth in our commercial power and Kinectrics businesses will result in a greater percentage of international earnings. Fourth quarter free cash flow was $57 million and full year free cash flow was $295 million, up 16% compared to last year, inclusive of 17% operating cash flow growth. Capital expenditures in 2025 were $185 million, 5.8% of sales. In 2026, we expect CapEx to be about 6% of sales as we continue to invest in the business to meet our commitments with our government customers and to support the growing demand in our commercial markets. During the quarter, we also completed a $1.25 billion convertible debt offering with a 0% coupon. In connection with the offering, we entered into a capped call transaction, which essentially increased the conversion price to over $396. Funds from the transaction were used to repay balances on our credit facility and term loan, which we in turn renegotiated with more favorable terms and increased capacity. This was a highly opportunistic transaction for BWXT. We reduced our cost of debt, lowered our interest expense, enhanced our financial flexibility and increased our liquidity, which stood at $1.7 billion at the end of the year. Moving to the segment results on Slide 6. In Government Operations, fourth quarter revenue was down 1% as expected, with growth in special materials and contribution from AOT being offset by lower microreactor volumes and long lead material procurement for naval propulsion equipment, the latter of which was a benefit to our results in the first 3 quarters of the year. Adjusted EBITDA in the segment was $111 million, resulting in an adjusted EBITDA margin of 18.8%. Our quarterly adjusted EBITDA margin was slightly lower than the full year result of 20.4% due to mix as newer projects in this segment began to ramp. Turning to commercial operations. Revenue was up a robust 95%, driven by 31% organic growth with strong growth in both commercial power and medical and contribution from Kinectrics. This reflects both accelerating organic momentum and the strategic expansion of our commercial capabilities. Adjusted EBITDA in the segment was $44 million, up 87% from last year. Adjusted EBITDA margin was 14.9%, a notable improvement from last quarter. In 2026, we expect the Commercial Operations segment adjusted EBITDA margin to increase by roughly 100 basis points as higher revenue and more normalized mix is partially offset by continued growth investment as we scale the business for the future. Beyond 2026, we expect growth investment to be less of a margin headwind as continued investments are offset by additional revenue growth. Turning to our 2026 guidance on Slide 10 and 11 of the earnings presentation. From an operational standpoint, our guidance is largely in line with the preliminary outlook we provided in November. We expect revenue of approximately $3.75 billion, up high teens compared to 2025. In Government Operations, we expect approximately low to mid-teens growth with over half coming from the defense fuels and HPDU contracts. In commercial operations, we expect approximately 25% growth, driven by low double-digit growth in commercial power, high teens medical growth and a full year of contribution from Kinectrix. For adjusted EBITDA, we are guiding $645 million to $660 million, up low to mid-teens compared to 2025. In Government Operations, we expect margin to be slightly lower given the significant revenue contribution from new programs, which begins at a lower initial profit recognition and expands over time as execution milestones are met and contract risk is reduced. In commercial operations, we expect margin to trend back toward historical levels, as I previously discussed. Regarding the cadence of operating earnings, we anticipate our results will be slightly more back half weighted than usual with about 55% of full year EBITDA anticipated in the second half. This will largely be reflected in first quarter results with a return to more normal seasonality in second quarter. In the first quarter, while we expect solid year-over-year organic revenue growth, EBITDA is likely to be flat to slightly higher in both segments due to seasonality, short-term impacts of mix and ramping of new programs. In Government operations, this will likely translate to first quarter EBITDA being roughly flat year-over-year, yielding a margin that is slightly below the full year guidance rate. And in Commercial Operations, margins are expected to start the year well below our full year guidance before improving sequentially each quarter throughout the remainder of the year, reflecting program timing and mix. These assumptions lead to non-GAAP earnings per share guidance of $4.55 to $4.70, up mid- to high teens, driven largely by growth in both segments. With a modest contribution from nonoperational items as lower interest expense is partially offset by a slightly higher tax rate and share count and lower pension and other income. From a quarterly perspective, while we anticipate earnings per share to follow a similar pattern to our operating earnings with first quarter EPS relatively flat compared to last year, we are highly confident in delivering our full year earnings growth outlook. Finally, we expect free cash flow of $305 million to $320 million, inclusive of low to mid-teens operating cash flow growth, in line with our adjusted EBITDA growth outlook. Importantly, this level of cash generation supports both continued reinvestment and long-term shareholder value creation. Overall, we see 2026 as another year of meaningful operational growth for BWXT. We've strengthened our balance sheet, expanded our commercial platform and positioned the company for continued margin improvement and cash generation. Our focus remains on disciplined execution, prudent investment and long-term shareholder value creation. With that, I will turn it back to Rex for closing remarks. Rex Geveden: Thanks, Mike. 2025 was a monumental year for BWXT. We set at the intersection of the national security and commercial nuclear power markets in a market-leading position with unmatched scale, experiential qualifications and regulatory credentials. It's an exciting place to be, and the outlook is bright. This position demands that we execute to drive quality earnings growth and shareholder value. Our priorities are executing against our robust backlog, process optimization, new technology adoption throughout the organization and on disciplined growth investments, both organic and inorganic. And with that, we look forward to taking your questions. Operator: [Operator Instructions] Our first question comes from the line of Scott Deuschle with Deutsche Bank. Scott Deuschle: Mike, should we expect government operations margins to trough in 2026 on these mix headwinds? Or could there be incremental mix pressure in 2027 that we should be mindful of? Michael Fitzgerald: Thanks, Scott. No, I don't see any real incremental pressure as we look at 2027. I think as I've mentioned in the last call and maybe over the last couple of earnings calls, we feel really good about the current pricing agreement. If you look at our core naval propulsion business, we're actually performing really well. Efficiency and utilization are up at our best sites and our largest sites. And so -- we see a lot of opportunities as we move through the future. I think what you're seeing in 2026 is a little bit of this mix pressure. As we discussed, half of the growth is coming from these new programs where we're making infrastructure investments. And so you're seeing a little bit of a decline there, but we would expect a rebound in '27. Scott Deuschle: Okay. And then Rex, can you talk about how BWXT is using AI internally today? And then are there any business functions where you're particularly excited about the potential impact of AI over the medium term, whether that be from cost synergy opportunity or something else? Rex Geveden: Yes. Sure, Scott. Thanks for the question. I think there's an outside story for AI with BWXT and there's an inside story. I think you obviously know the outside story, which is there's an expectation that nuclear power will power the data centers of the future, and I think that's a reasonable expectation. But that's all in the windshield for us. Certainly, that's not part of the current business mix. The inside story shapes up like this. I think there -- I think over a kind of 3 phases. The first phase was BWXT using machine learning to improve certain internal functions, particularly manufacturing processes we, for example, put hyperspectral sensors on complex well processes and use the machine learning algorithm to figure out when those things were going out of spec, which saved us a ton of expensive rework. And we did it and there are other examples I can side. So I'd call that Phase 1. Phase 2 is with the release of large language models, we're figuring out ways to use those in our business to improve functional efficiencies and like. And so in this phase now that we're basically democratizing access to the tools. And I mean tools like Databricks and ChatGPT and the like. And then the third phase is going to be a factory automation. That's kind of our learning platform in the sense that we've got a lot of traditional plants that need to be automated and digitized. And so in the future, it's our expectation to have fully digitized quality records, automated inspection, digital twin representations of every component that we manufacture. So that's the phase that we're going into right now, and we're quite excited about that. Scott Deuschle: That's really interesting. For Phase 3, do you see any limitations from the security clearances required, things like that, that would prohibit your ability to deploy those types of systems, particularly for government operations? Or do you think you have the ability to use things like digital twins and some of those classified areas as well? Rex Geveden: I'd say not much, Scott. I mean, certainly, we have to be concerned about using WiFi and Bluetooth kind of systems in a classified manufacturing environment. So there are things that we will have to work around, but I think we will work around them with support from our customers. Operator: Our next question comes from the line of Matt Akers with BNP Paribas. Unknown Analyst: I wanted to ask, I think some of the commentary from the shipbuilder this quarter was relatively positive in terms of just some of the supply chain bottlenecks they had seen maybe starting to get a little better. Just curious if you're seeing any of that flow through to you in terms of maybe more pulling demand forward or anything like that or if you're seeing anything along those lines? Rex Geveden: Yes, we've seen that encouraging news, too. I'd say our reaction to it is that from the very beginning, I think we've held the view, and I believe that the Navy and the government held the view that instead of slowing down the supply chain, what you got to do is fix the bottleneck. And so I think we're seeing that now. I think we're seeing pretty encouraging progress at the shipyards. I think you'll know, and we announced this a couple of quarters ago, at least that Admiral McCoy, who's been running our government operations business was seconded into the Department of Defense to support the Navy for that specific purpose, the express purpose of improving throughput at the shipyards. And that's what -- certainly what the nation needs to do. That's what the Navy needs to have. So I'd say we're continuing at the pace we were delivering on our delivery schedules and very, very pleased to see the shipyards turning the corner and bouncing off the bottom in terms of delivery rate. Unknown Analyst: Yes. And I guess as a follow-up, just I want to ask on capital deployment and sort of what your priorities now? And how big could M&A be as a part of that after AOT and Kinectrics? Michael Fitzgerald: Yes. So we're -- look, we're really excited about some of the things that we've done to strengthen our balance sheet. We did the convertible in the fourth quarter, I think, which really gave us a lot of flexibility. And so we feel well positioned for potential M&A as we come into 2026. I will say, as we look at a number of different targets that are out there, we're highly focused on continuing to drive something within our core and also very highly focused on driving an increase in our overall capacity as we prepare to support our customer needs in the future. So those are the things that we're going to be looking for. We have a number of assets that we always look at that on a consistent basis. But I do think that we will continue to see M&A as a big part of our capital deployment strategy. Operator: Next question comes from the line of Jeffrey Campbell with Seaport Research Partners. Jeffrey Campbell: Congratulations on the quarter. I'll just stick with one. Rex, you mentioned your U.S. commercial facility might be built at Mount Vernon. I just wonder, are there any particular challenges in citing a commercial facility adjacent to one that's dedicated to defense purposes? Rex Geveden: Yes. Thanks, Jeff, for the question. Good to hear you. No, I think it's the opposite, right? There's some synergies between our government business there and the would-be commercial facility there. For example, you share radiography facilities. I did mention that we have 1,000 metric ton crane capacity to Stevedore components right on to the Ohio River there. So we would certainly jointly share those assets and be able to amortize the cost over those assets together. So I think there are certain advantages. We would segregate those businesses for certain reasons financially. But yes, no, very good reasons and very good synergies for putting those 2 things on the same side. Operator: Next question comes from the line of Robert Labick with CJS Securities. Unknown Analyst: This is Will on for Bob. As a U.S. company with obviously strong operations in Canada, what is the latest impact, if any, on the tariff situation? And in general, does the seemingly souring of U.S.-Canada relations have an impact on BWX? Rex Geveden: Knock on wood, it hasn't so far because we're still operating under the framework of the USMCA trade agreement, the U.S. and Mexico, Canada trade agreement that was struck in the last Trump administration. And so it hasn't -- there are no tariffs in that framework on medical products or on nuclear components happily. And this last announcement around 10% and then 15% tariffs across the board does not apply to the USMCA agreement. So we're still operating in that framework. And that's being renegotiated right now. So we'll see how all that comes out. But I'm certainly hopeful that trade relations between the U.S. and Canada and Mexico remain normal and continue to not have a negative influence on our business. Unknown Analyst: And one more. As we look over the next several years, we have DUECE and HPDU incremental growth this year in naval growth coming in 2027. Beyond that, can you discuss the timing of Canadian newbuilds, micro reactors and other long-term layers to your growth map? Rex Geveden: Yes. I'd say a variety of different time frames for all of that stuff. And now we mentioned on the script that that we now have business with AP1000 in Europe with that Kozloduy owners engineer contract. So we certainly have an SMR -- we have SMR contracts in hand right now, but we're certainly making the reactor pressure vessel for GE, and we're doing a number of other components for different small modular reactor suppliers. And so I think you just see that building over the years. It's my expectation that we'll have additional orders for the X300 this year. It's also my expectation that we'll have orders for the AP1000 this year. We'll see. Those aren't in hand yet. But I think we're starting to see the commercial side of our business build very nicely, and we have forecasted pretty aggressive organic growth there, but most of that is in hand. And so I think you can see small modular reactors ramping up starting now essentially. Micro reactors, of course, we've had a good program going for some years now, but we now have the Janus program as sort of a follow-on program to Pele. And we're in a good competitive position for that, and we're hoping for a good outcome. And so you could see that building over the next few years. And then medical has been growing at this sort of 20% compounded clip. So we're seeing generally very good demand in all of our markets, and we expect it to build at various timings over the years. Operator: Next question comes from the line of Jeff Grampp with Northland Securities. Jeffrey Grampp: Rex, to go back on the AP1000 comments that you had in your prepared remarks, could you give us a sense for BWXT's revenue content per project you're competing on or any generalities there just to kind of get a sense of materiality for some of these projects for the company? Rex Geveden: Yes. I think we've characterized it historically for the large reactors, I think on a CANDU new build, which was not your question. But on that one, it's $500 million to $1 billion perhaps, particularly in Canadian with the Kinectrics contribution, maybe pushing to the high end of that. I'd say on an AP1000, depending on the components that we win, steam generators and whatnot, you could think of in the hundreds of millions, maybe in the low hundreds -- but that's a bit of guesswork, right? We don't know what content we're going to win yet. We're bidding on a lot of different things, and we'll just have to wait and see how that comes out. Jeffrey Grampp: Understood. That's helpful. And for my follow-up on some of the recent government contracts you guys alluded to having some lower margins at the front end. I'm just wondering, structurally, as these ramp over time, did we expect just a kind of linear progression in margin over time as these mature? Or is it kind of more of a stair-step function as milestones are reached. Just kind of wondering to level set expectations as those contracts kind of roll through the results here. Michael Fitzgerald: Yes. So I would say that the contracts are structured slightly differently. We are in the first phase of negotiating under the Defense fuels program. And then for HPDU, that's a longer kind of upfront negotiated program. I think in both cases, what we would typically do along with our processes is kind of evaluate the overall margin performance. And usually, as we meet various milestones and reduce risk under those programs is when we would incrementally adjust margin. So those programs, we feel like we have a great opportunity to perform well, but it's a little early days. And we talked a little bit about how we're doing some infrastructure build-out. And so we have some lower margin components associated with those initial costs. But we do expect that as we start to get into full ramp of processing of the materials and production that ultimately we'll have an opportunity to outperform. Operator: Next question comes from the line of Jed Dorsheimer with William Blair. Jonathan Dorsheimer: Congrats on the quarter. Rex, I guess, first question, Pentagon just released $29.2 billion spending added a new sub. I'm just wondering how that compares to your expectations? Was that ahead in line behind your expectations? Any surprises as you look through the budget allocation, then I have a follow-up. Rex Geveden: Yes. Sure, Jed. So the -- that appropriation of funding really doesn't influence our business, right? Our programs are funded through different lines. And so it was a neutral for us. We are still on the shipbuilding schedule at 2 Virginias a year, 1 Columbia a year and Ford is more or less on 5-year intervals. So it was -- we were indifferent to that news. Jonathan Dorsheimer: Got it. And then maybe for both you and Mike, as you think about capital allocation on the commercial side of things, you're in the CANDUs in Canada and abroad. you've just gotten into AP1000 and you're in a variety of SMRs between GE, Rolls-Royce and also some of the new players. And so I'm just curious how -- with that level of visibility, are you -- how are you thinking about the business? Are you seeing -- is it sort of growth at a steady pace, but in different regions that you're able to support? Or do you see any particular technology that's advancing at a faster pace? How are you thinking about adding resources to supply those markets? Rex Geveden: Yes. I'd say when we look at our capacity in Cambridge, Jed, it's not -- you could see a couple of years into the future where we start to look capacity constrained. And so we're looking for assets, in particular, in the U.S. We've got things in the -- interesting targets in the acquisition pipeline. And I mentioned explicitly on the call, the thought of building a plant at Mount Vernon. So we think we need U.S. capacity first and soonest, and we put a high emphasis on that. I think the second interesting opportunity is around Europe. There's an appetite for small modular reactors there. And I think whether we would invest there, I think it depends somewhat on localization demands. But yes, we need capacity. We need it pretty soon because we see a lot of demand coming in the future, and we'll start in the U.S. with it. Michael Fitzgerald: Jeff, the only thing I would say, in addition to expanding footprint, we are also investing in technologies to drive throughput within the factory. So it's not just a -- let's go get as much footprint as we can because we're trying to drive throughput through our operational excellence initiatives, which really supports the overall workforce as well. So that's an important aspect as we look to capital deployment and where we want to spend money on additional machinery and technology. Operator: Next question comes from the line of Sam Straker with Truist Securities. Unknown Analyst: On for Mike [indiscernible]. I think just to start kind of a 2-part building off of the conversation around SMRs and micro reactors. I was curious if you guys could just put a little more detail on kind of where you are with the NASA and military micro reactor programs. And then also with the growth that you're seeing in small modular reactors, how are you guys looking at the TRISO fuel market overall in terms of where it's at now and potential opportunities moving forward? Rex Geveden: Yes, sure. A few questions embedded there. On micro reactors, we're in the middle of Pele. We deliver that to Idaho National Laboratory next year. We announced the delivery of the fuel for that reactor at the end of last year. So we're proceeding at pace and that reactor will start undergoing testing in '27, '28 time frame. Think of that as a precursor to the Janus program, which is in procurement right now. They're soliciting offers from various technology providers, including us. We see that one as a super interesting opportunity. On the NASA side, we're still doing some work on nuclear thermal propulsion, although it's not within the context of the DRACO program, we still have some level of effort with NASA. I think the bigger opportunity in the space market is around vision surface power. It looks like NASA intends to procure a vision reactor for a lunar base. And certainly, we have got the right credentials to compete for that. In terms of TRISO fuel, I think there are 2 interesting things going on here. One is demand on the government side that's related to programs like Janus, where the micro reactor technologies generally are calling for TRISO fuel or designed around TRISO fuel. But I think there's also an interesting commercial play there, and we're certainly evaluating that, either sub-grid or below grid capacity power output and certainly remote applications for high-density power. So very interesting opportunity around TRISO, and we're looking pretty hard at whether we make an investment there, a larger scale investment. Operator: [Operator Instructions] Our next question comes from the line of Jan Engelbrecht with Baird. Jan-Frans Engelbrecht: Congrats on a strong quarter. I think I just want to return to the AP1000 and the CANDU market. As we think about the AP1000 that owner's engineer contract you won and just in terms of components, is it -- do you consider your bid on sort of the component work to be more competitive if it's a North American project that gets announced versus something in Europe? Because we know on AP1000 in Poland, there's -- they've announced sort of the steam generator supplier on that one. And I know you guys didn't bid on that. But how should we think about as the new AP1000 contract or project gets announced, do you see that you have a sort of a better probability on which continent it's on? Or just how should we think about that? Rex Geveden: I don't think we're thinking of it that way, JF. The owner's engineer contract with Bulgaria was a unique opportunity for us to team up with a component of Ontario Power Generation. So we have their [indiscernible], and we have our deep engineering capability, which is augmented by Kinectrics. So that was a very particular opportunity there. I think we're sort of geographic agnostic when it comes to component supply. We hope to be able to compete reasonably well in all these markets. But I would also say that as the market really starts to warm up and we start to see real capacity constraint, I think we'll be more competitive and we'll have more pricing power. So I'm optimistic about all of it. Jan-Frans Engelbrecht: Perfect. And just a quick follow-up on the naval nuclear business. A lot of shipbuilding reconciliation funding for shipbuilding. And then you just got the news from Australia, they're going to invest, I think, close to $3 billion in their own shipyard. And in terms of second source opportunities, can you just sort of how are you thinking about long term, all this new funding that's going on? It seems that there's really a lot of attention being placed into sort of reducing the bottlenecks. But how does that set you up beyond 2030 for long-term growth in that segment? Rex Geveden: Yes, maybe a little hard to say. I mean, right now, we're sort of building our guidance and our internal forecast around the shipbuilding plan. We do have some business on the AUKUS side related to production capacity that's giving us a bit of growth here in 2026. And of course, there's the sort of the wildcard of South Korea out there, we would hope to be involved in, say, fuel manufacturing at least, if not reactor cores. So there are interesting possibilities out there. I would say that if you think about reconciliation and just a broader defense budget, I think you can see more opportunities around micro reactors, fuel and other such things that are sort of not prescriptively mapped into the shipbuilding schedule. So a bit of a TBD for us, but certainly exciting on the national security side of our business. Operator: Next question comes from the line of Andre Madrid with BTIG. Unknown Analyst: This is Ned Morgan on for Andre. I just want to ask and get the latest on the Canadian Competition Bureau's investigation into the Kinectrix acquisition. Rex Geveden: It's been pretty quiet on our front. No news on that one. Unknown Analyst: All right. And then a follow-up. Is there any update on when we could see approval of Tech 99. Rex Geveden: Yes, not much new there. I've said the last couple of quarters that we are in the sort of the grilling last mile of that around some issues with product quality, filtration concentration, things that we've been working on. We do have new leadership in that medical business and the person of Jason Van Wart is showing a lot of strong leadership in that business and has -- Jason has some compelling new ideas around our commercial product strategy, including Tech 99, early days on that, but we'll see how that forms up. So I find myself encouraged about that business broadly. We have not submitted to the FDA yet. And I have, frankly, imperfect clarity around that because of these product quality issues that we're having to sort through. I will say that we did not contemplate Tech 99 revenue in 2026 in our guidance that we just published. And so it's not in our numbers. It would be an upside for us if it did occur. Operator: There are no further questions at this time. I would like to turn the call back over to Chase Jacobson for closing remarks. Chase Jacobson: Yes. Thanks, [indiscernible]. Thanks, everybody, for joining us today. We look forward to speaking with many of you and seeing you at upcoming investor events are on calls. If you have any questions, please feel free to reach out to me at investors at bwxt.com. Have a great night. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Almirall Full Year 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pablo Divasson, Head of Investor Relations. Please go ahead. Pablo Divasson Fraile: Thank you very much, Sandra, and good morning, everyone. Thank you for joining us for today's quarterly earnings update and review of Almirall's full year financial results of 2025. As always, we are sharing the slides we are using today in the Investors section of our website at almirall.com. Please move to Slide #2. Let me remind you that the information presented in this call contains forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to materially differ from what we are sharing today. Please move to Slide #3. Presenting today Carlos Gallardo, Chairman and Chief Executive Officer; Jon Garay, Chief Financial Officer; and Karl Ziegelbauer, Chief Scientific Officer. Carlos will start with the guidance and business highlights of 2025, followed by an update specifically on biologics and the key growth drivers of our Medical Dermatology portfolio. Karl will provide you with an update on the pipeline and R&D programs. Jon will then walk through the financials before Carlos concludes the presentation, and we open for questions. I will hand over to Carlos Gallardo, our Chairman and CEO. Please move to Slide #5. Carlos Gallardo Piqué: Good morning to everyone in the call. Before turning to the highlights of the year, I'm pleased to report that we met our 2025 guidance in line with our midterm outlook. For 2025, we guided for net sales growth of 10% to 13% and delivered closer to the upper end with 12.4%, bringing net sales to EUR 1,108 million. On profitability, we expected EBITDA in the range of EUR 220 million to EUR 240 million and we closed the year at nearly EUR 233 million, comfortably within the range. Turning now to 2026. I'd like to share our guidance, which remains aligned with our medium-term targets. We expect net sales growth of 9% to 12% and EBITDA in the range of EUR 270 million to EUR 290 million. With that, let's revisit our midterm guidance on the next slide. We are pleased to reiterate our midterm guidance, which remains unchanged. Between '23 and 2030, we expect to deliver a double-digit compound annual growth rate in net sales and reached an EBITDA margin of around 25% by 2028. Together with the new 2026 guidance, this confirms our confidence in both short and medium term. Please turn to the next slide on the 2025 highlights. Almirall delivered solid performance in 2025, in line with our expectations, exceeding for the first time EUR 1 billion in net sales. Growth is supported by successful commercial and operational execution, particularly in the sales of biologics. We continue to deliver innovative treatments, broaden access for patients and support our physician community. Ilumetri continues to deliver steady growth, reaching EUR 234 million in sales and is on track to achieve peak sales of over EUR 300 million. Ebglyss maintained a strong momentum during 2025 as the rollout is now complete in all key European geographies and these markets begin to scale. The good performance reinforces our confidence in the product's positioning and growth potential. Regarding our products, Wynzora keeps its leading market share in key countries, while Klisyri maintains a strong performance across Europe. During 2025, we have focused on continuing the development of our strong presence in the Medical Dermatology field. We presented at major events such as the 2025 Annual AAD Meeting, and we reinforced our presence at the 2025 European Academy of Dermatology and Venereology Congress in Paris. On the clinical side, we are excited about the new developments in our pipeline. We have initiated 3 Phase II proof-of-concept studies and 3 other PoC studies are on track to enter Phase II in the upcoming quarters. Most of these assets are either first or best-in-class. Karl will soon provide a full update on the recent developments in our pipeline. Please move on to Slide 9 for our -- for an update on our biologics portfolio. In 2025, Ilumetri net sales reached EUR 234 million, representing a steady 12% year-on-year increase. The brand continues to perform consistently, and we remain firmly on track to deliver the more than EUR 300 million peak sales in net sales, even as both the product and the IL-23 class move into a more mature phase of their growth cycle. Ilumetri remains well positioned within the psoriasis market, maintaining its market share and remains one of the leading therapies within the class. The successful launch of the 200-milligram formulation provides enhanced dosing flexibility for patients, thereby strengthening the product's competitive profile and supporting long-term growth. Additionally, the 2-year positive study results presented at EADV 2025 further demonstrate Ilumetri's long-term value, highlighting meaningful real-word benefits in patient's wellbeing and reinforcing the product's clinical and commercial relevance. Please move to the next slide on Ebglyss highlights. Ebglyss continues to be the most successful atopic dermatitis launch in recent years. Since its approval in Germany in December 2023, it has quickly become our second best-selling product. The advanced therapy segment in AD across the EU5 nations continues to expand rapidly at around 30% growth annually. Full year sales more than tripled to EUR 111 million, up from EUR 33 million in 2024, reflecting the successful European rollout with healthy scaling across all key markets and encouragingly early traction in new country launches. This gives us a strong confidence in Ebglyss as a major growth driver in the coming years. Patient and physician acceptance along with good commercial and operational execution have been key elements to achieve this result. Clinically, our collaboration with Lilly remains highly productive. At EADV in 2025, we presented a wide set of Lebrikizumab data, including real-world evidence, long-term results up to 3 years, patient-reported outcomes and safety data, all showing rapid and sustained efficacy and reinforcing its differentiated profile. Please turn over to the next slide. We are working closely with our partner, Lilly, to build a growing data set for Ebglyss through a series of synergistic post Phase III studies on lebri. The objective is to strengthen the evidence base through life cycle management, supporting broader patient access, expanding our market presence and exploring additional indications for these advanced treatment. As part of this effort, Almirall recently initiated a new Phase III study in nummular eczema. Karl will provide you with additional details in the following section. Additionally, we will be conducting a face and neck study on lebrikizumab to further strengthen the profile of the product. Let me turn it over to Karl for the pipeline update. Karl Ziegelbauer: Thank you, Carlos, and good morning to everyone on the call. This slide gives an overview of our life cycle management activity for products that are already commercialized. And I would like to highlight the progress we made in recent months. Seysara was approved in China end of last year. We have also signed a partnership agreement with Sinomune to commercialize Seysara in China, strengthening our presence in this important market. Together with our partners, Sun Pharma and Eli Lilly, we continue to advancing label expansion opportunities for Ilumetri and Ebglyss respectively. Carlos has already shown what we expect in terms of clinical data flow for lebrikizumab. The next readout will be the week 16 data of the ADorable-1 study, which we expect to share in the coming weeks. ADorable-1 explores the safety and efficacy of lebrikizumab in pediatric patients with moderate to severe atopic dermatitis. As mentioned earlier, Almirall will also explore lebrikizumab in ADorable-1 nummular eczema. Next slide, please. Nummular eczema is a chronic inflammatory disease with a high unmet medical need. Today, treatment is largely limited to topical therapies, which often fail to provide adequate disease control, and there are currently no approved systemic treatment options. IL-13 is hypothesized to be a central cytokine, not only for atopic dermatitis, but also for nummular eczema. Given the proven efficacy of lebrikizumab in atopic dermatitis, we believe there is a strong rationale for meaningful symptom relief and quality of life improvement in patients with nummular eczema. We expect to start enrolling patients in Q2 2026. Next slide, please. This slide shows you the status of our early and mid-stage pipeline. Today, we have 3 proof-of-concept Phase II studies ongoing with 3 additional studies planned over the next 12 months. In 2025, we progressed our anti-IL-1RAP antibody into Phase II for hidradenitis suppurativa and our IL-2 mutant fusion protein for alopecia areata. In addition, our partner, Simcere, initiated a Phase II study of the IL-2 mutant fusion protein in atopic dermatitis. As a reminder, we retain global rights for this asset outside Greater China. Looking ahead, we plan to initiate 1 additional proof-of-concept study each for the IL-2 mutant fusion protein anti-IL-1RAP antibody in an inflammatory skin disease. The anti-IL-21 antibody we plan to explore in hidradenitis suppurativa. We also expect our bispecific antibody for atopic dermatitis to move into Phase I in the coming months. Furthermore, we have started preclinical development for an oral small molecule targeting Th2 diseases and a new approach using mRNA/LNP technology for non-melanoma skin cancer. Let me show some more details on the most advanced projects on the next slide. For hidradenitis suppurativa, we have 2 programs. The anti-IL-1RAP antibody has recently entered Phase II and the anti-IL-21 antibody is expected to start proof of concept in the coming months. The anti-L1-RAP antibody blocks anti-IL-1RAP inhibit signaling across the IL-1, IL-13 and IL-36 pathway. Inhibiting these pathways concurrently is intended to support deeper suppression of the inflammation and the relevance of the IL-1 and the IL-36 pathways in hidradenitis suppurativa is supported by existing clinical evidence. The second program targets IL-21 and is designed to modulate both B and T cell activity. We believe that this dual strategy targeting 2 distinct inflammatory pathways has the potential to provide meaningful differentiation compared to current treatment. Please change to the next slide. The IL-2 mutant fusion protein has entered Phase II development in alopecia areata. Alopecia areata remains an area of high unmet medical need with fewer than 30% of patients achieving a satisfactory symptom response with currently approved therapy. The disease has a prevalence of approximately 0.1% to 0.2%, a lifetime incidence of around 2% and 44% of cases are moderate to severe. It is also the third most common dermatosis in children. IL-2 mutant fusion protein is designed to selectively expand regulatory T cells with the aim of rebalancing the immune system. This mechanism is intended to support immune tolerance, addressing the underlying autoimmune component of the disease rather than only its symptoms. From those 6 proof-of-concept Phase II studies, we anticipate data readouts over the next couple of years, starting end of 2026, beginning of 2027. While these programs remain at an early stage, they address well-defined biological pathways and represent a range of first or best-in-class approaches. In summary, our investment over the past few years is beginning to translate into tangible progress in our pipeline. With that, I will hand over to Jon for the financial review. Jon U. Alonso: Thank you, Karl, for the update on our R&D programs and pipeline, and good morning, everyone. As Carlos mentioned earlier, company's consistent execution continues to translate into solid tangible results. In 2025, Almirall delivered a strong performance with net sales growing over 12% year-on-year, achieving our 2025 guidance. Our European dermatology portfolio remained the key growth engine, further reinforcing Almirall's path towards leadership in Medical Dermatology. Gross margin for the year reached 64.4%, reflecting continued royalty pressure from Ilumetri royalties, partially offset by the Q1 2025 divestment. EBITDA came in at EUR 233 million, up 21% year-on-year, driven largely by strong top line growth that outpaced SG&A increase. As expected, SG&A increased 7.9% to EUR 501 million with Q4 reflecting the previously announced uptick. R&D investment grew by roughly 11%, representing 12.5% of net sales, fully aligned with our annual targets and guidance. We closed December with a net debt-to-EBITDA ratio of 0. During the final quarter, we successfully completed the issuance of a new high yield bond at a 3.75% interest rate, a level that reflects the strong trust Almirall has built among financial markets. Company long-term credit rating by Standard & Poor's was improved to BB+, very close to investment grade. Our strong balance sheet gives us meaningful flexibility to pursue licensing opportunities and targeted bolt-on acquisitions as and when attractive opportunities arise. Overall, these results strengthen our confidence in delivering full year 2026 guidance and the midterm outlook we shared earlier. Let's move now to the details of our sales breakdown on the next slide. The European dermatology business delivered a strong performance with net sales up 25.6% year-on-year in 2025. Additional details will be shared on the next slide. In general medicine and OTC, European sales included the divestment of Algidol and the out-licensing of Sekisan. A softer allergy season for Ebastel and lower sales of cardiovascular products such as Crestor, were largely offset by a solid contribution from Eklira Performance in the U.S. declined and further details will be shared on the next slide. In the rest of the world, overall sales were broadly stable with rapid growth in dermatology offsetting a decline in general medicine. Let's take a closer look at the dermatology business on the next slide. Our European dermatology business continued to prosper positively. Ilumetri maintained its healthy year-on-year growth, while Ebglyss further strengthened its role as our primary growth engine. At the same time, we continued to build relevant market share for Klisyri and Wynzora with bought products continuing to gain traction across key European markets. Ebglyss delivered EUR 111 million in 2025, beating slightly consensus as European markets continue to scale up following launches in all key countries. This performance reinforces our confidence in its robust long-term growth potential. Across the rest of the portfolio, Ciclopoli sales remained broadly stable and Skilarence posted a solid improvement versus 2024. In the U.S., performance declined year-on-year. While Klisyri's large field launch continued to deliver some growth, these gains were offset by ongoing pressure on the legacy portfolio. Products such as Cordran, Tazorac and Aczone remain affected by persistent generic competition. In addition, Seysara sales declined, driven mainly by intensifying competition in the oral antibiotic segment for acne. In the rest of the world, dermatology sales increased year-on-year, supported by portfolio momentum and a minor contribution related to the recent Seysara partnership agreement in China. Overall, the performance of our dermatology franchise remained strong. Let's now review the remaining elements of the P&L, starting with some of the ones mentioned earlier. Gross margin came in at 64.4% in 2025, 30 basis points lower than prior year, reflecting margin pressure mainly due to higher royalty tiers associated with Ilumetri's growth. R&D spending represented 12.5% of net sales, broadly in line with last year and guidance. SG&A expenses increased 8% year-on-year, driven by ongoing support for Ebglyss launch across new markets and continued investment behind our key brands. As we highlighted previously, SG&A picked up in the final quarter due to some seasonality in the second half and ended align with expectations. Financial expenses improved versus last year, supported by a EUR 12 million positive impact from the equity swap valuation, reflecting share price gains year-to-date. Finally, our effective tax rate ended at 38%, an improvement by 24 basis points versus prior year, driven by the strong increase in the group's overall profitability, which materially reduces the relative impact of our U.S. business at the consolidated level. Please move to the next slide to take a look at the balance sheet. Our balance sheet remained very stable in 2025 compared with previous year. Capital expenditure were elevated in the final quarter, mainly reflecting the Ilumetri sales milestone of nearly EUR 50 million recently extended collaboration agreement with Simcere, capitalization of Ebglyss R&D programs and pipeline progress achieved in prior quarters. This increase was more than offset by higher depreciation, which resulted in a decline in goodwill and intangible assets. Our net debt ratio remains close to 0, providing us with a strong financial flexibility to pursue inorganic growth opportunities. The reduction in net debt primarily reflects solid cash flow generation in the third quarter. Let's take a look at the cash flow statement next. Company's free cash flow more than doubled in 2025 compared to last year. Cash flow from operating activities reached EUR 174.5 million, an increase of EUR 17 million versus prior year. It was mainly driven by a more than twofold increase in profit before taxes, partially offset by higher working capital needs linked to the growth in biologics volumes with the rollout of Ebglyss in Europe. Cash flow from investing activities was minus EUR 127 million, an improvement by EUR 13 million compared to the previous year. It reflects lower investment outflows versus prior year, which included the EUR 45 million Ilumetri sales milestone as well as milestone payments related to Ebglyss, Wynzora and pipeline progress. Cash flow from financing activities amounted to minus EUR 87 million, representing higher outflows versus the minus EUR 31 million recorded in 2024. The difference is mainly explained by the refinancing of the senior notes where the variance in nominal amounts combined with issuance costs had an impact of roughly EUR 55 million. In addition, we recorded a higher cash dividend selected by shareholders, which was partially offset by the positive EUR 12 million equity swap impact supported by the increase in our share price. I will now give some more color on our 2026 guidance. We anticipate quarterly performance to strengthen progressively as the year advances. In the first quarter, in particular, while being positive about the underlying growth of our business, we are going to face a tough comparison considering the divestment of Algidol and out licensing of Sekisan during the first quarter last year. Regarding the details of the 2026 guidance, I would like to outline some assumptions used regarding the rationale behind provided ranges. As in every other year, we have 4 main elements that may impact both net sales and EBITDA. Firstly, the speed and level of penetration of biologics in the overall market; secondly, underlying market growth and competitive dynamics; thirdly, performance of the legacy portfolio; and lastly, potential opportunities that may arise through portfolio management strategy. Any changes in these elements may influence the performance within the reasonable range we have announced this morning with 10.5% as a midpoint of net sales growth at EUR 280 million as midpoint of EBITDA level for 2026. Other than that, we are positive about ongoing performance of the business and confident in delivering a good set of results for 2026, driven mostly by our newer products and biologicals. We feel comfortable with market expectations for our biologics in 2026. Checking Bloomberg or Visible Alpha sources, Ilumetri seems to be in the range of EUR 260 million and Ebglyss seems to be in the range of EUR 180 million to EUR 190 million. At the same time, we reiterate our midterm guidance of double-digit CAGR growth in the period 2023 to 2030. In 2026, we will continue to experience a slight gross margin pressure given increasing royalty rates, particularly for Ilumetri. R&D investment is expected to stay at the level of 12% to 12.5% relative to net sales. And in 2026 and going forward, we continue expecting net sales to grow faster than the SG&A as we have seen in 2025, now Ebglyss has already been launched across Europe. Regarding the tax rate in 2026, it should continue going down towards the mid-20s target by 2028 as a strong increase in the group's overall profitability materially reduces the relative impact of our U.S. business at consolidated level. With this, I would like to thank you all for your attention this morning. I will pass the word to Carlos for his closing remarks. Carlos Gallardo Piqué: Thank you, Jon. Building on the strong achievements of 2025, let me highlight the momentum we are now carrying into 2026 across our biologics pipeline. We are well positioned to lead in an expanding dermatology market, supported by a broad and highly relevant portfolio. Our pipeline includes disruptive potential programs across immune-mediated skin diseases, rare dermatology and non melanoma skin cancer. Today, we already have 3 studies advancing through proof of concept and Phase II with 3 additional programs expected to start in the coming quarters. That gives us strong scientific foundation and a clear path to sustainable value creation. At the same time, we continue to evaluate opportunistic bolt-on acquisitions in commercialized assets and remain active in pursuing early-stage licensing opportunities in promising advanced therapies. Importantly, we are turning strategy into results through rigorous execution. Having delivered fully on our 2025 guidance, we remain firmly on track to achieve our midterm targets of double-digit sales growth and a 25% EBITDA margin. The Ebglyss launch continues to scale strongly across Europe, while we effectively manage Ilumetri's transition into its more mature growth phase. We are committed to shaping leadership in Medical Dermatology in Europe, turning innovation into growth and delivering lasting value for patients and shareholders. With this, we conclude the presentation, and I hand it back to Pablo for the Q&A session. Pablo Divasson Fraile: Thank you very much, Carlos. Sandra, back to you for the Q&A, please. Operator: [Operator Instructions] And the first question comes from the line of Shan Hama from Jefferies. Shan Hama: Two from me, please. So firstly, what is factored into the top and bottom end of the net sales guidance for 2026? And then secondly, if I can push you a little bit, why is the bottom end of the guide 9% when the midterm guide is double digit? Is there any way you can reconcile that? Carlos Gallardo Piqué: Thank you, Shan, for the question. Let me for this color, I think Jon can take this question. Jon U. Alonso: Absolutely. Thanks a lot, Carlos, and thanks a lot Shan, for your question. I think both questions can be replied basically into one for the low range. As you know, usually, the management portfolio strategy is part of our guidance. But as I have said during my script, in Q1 2025, we had the opportunity to execute 2 transactions. One was the divestment of Algidol and the other one was the out licensing of Sekisan computing for around EUR 12 million in Q1 2025 and around EUR 15 million on a full year basis. In order to be able to overcome the double-digit growth, we also need to replicate these 2 transactions or even more to compensate that amount of volume. So this is what it makes the lower range guidance that perhaps we are not able to close this year 2 transactions in the same way. Moving to the higher range, basically means a the other way that we are able to close 2 or even one, but basically that we are able to accelerate Ilumetri and Ebglyss further in the high range of provided guidance. These are basically the main levers for the low and the range, Shan. Operator: We will now take the next question from the line of Francisco Ruiz from BNP Paribas. Francisco Ruiz: I have 3 questions, very quick ones. The first one is, if you could give us an update on your peak sales that you expect on Klisyri and Wynzora, now they are gaining some weight on your P&L. The second one is, if you could give us some detail on Seysara's partnership in China and how much will contribute in the future for you? And then there are some question on modeling. I mean you commented on reducing the tax rate towards the 20% target. Could you give us some more detail for next year and also the milestone payment that you're expecting in '26 and '27? Carlos Gallardo Piqué: Francisco, thanks for your questions. So we are not providing a review on peak sales projections for Klisyri and Wynzora at that stage. I think both brands are progressing extremely well. We're happy with the progress, particularly in Europe. Seysara partnership, we are pleased of the approval. We're pleased of the partnership. The contribution at that stage, we prefer to be prudent, and we think it's going to be modest. And the modeling part, I'll pass it to Jon. I'm sure he will be -- he will do a much better job than me. Jon U. Alonso: Yes. Can you please repeat the question about the modeling part, Francisco? Francisco Ruiz: Yes. I mean -- so one is about the tax rate for next year, although you say that we should see 20% or mid-20% in the medium term, but for next year more specifically. And also on the milestones cash out as we should expect in '26 and '27? Jon U. Alonso: Yes. Thanks. So regarding the effective tax rate, yes, during my script, I have said the expression that by 2028, we expect to be in the range of mid-20s, and we will continue going into that direction. Guidance for 2026, we should expect a reduction at least I would say, mid-double digits is our intention to go in that path as we increase the group overall profitability. Regarding the other aspect about the CapEx payouts, reasonable investment CapEx, excluding recurring CapEx, will average around EUR 70 million to EUR 75 million in the upcoming years, excluding potential additional in-licensing deals. Basically, this covers milestones for in-licensed assets. When we talk about ordinary CapEx, ordinary CapEx are expected to be in the range of around EUR 70 million to EUR 80 million in 2026 and then go down in the upcoming years as we have some ongoing post Phase III studies that are capitalized, as Carlos has mentioned during his script, together with IT projects, industrial CapEx and other minor tax. Operator: Thank you. We will now take the next question from the line of Jaime Escribano from Banco Santander. Jaime Escribano: A couple of questions from my side. In terms of gross margin, what should we expect based on the product mix? I guess, Ebglyss and Ilumetri licensed products are putting a little bit of pressure there. And my second question would be on Almirall legacy. So there is a EUR 12 million one-off in 2025. So in 2026, what should we expect from the rest of the portfolio? If you can give us a little bit of color on the different moving parts there? Carlos Gallardo Piqué: So let me take the second question, and then I'll pass it to Jon for the gross margin question. So as we have shared with you on a number of occasions, we have a big product portfolio on the legacy bid. Our goal is always to keep an optimization strategy. That meaning if we see an opportunity to acquire something where we can add value, we do so, as we did 2 years ago. But also if we think that we are not the best owners of a certain asset because we are not promoting it and someone comes in and offers us a superior value than the value that it has in our hands, then also we divested it. And this is the case that we've done in Q1 last year. So it's difficult to make projections on this because this is business development. But our strategy will be to keep optimizing this portfolio, and it might entail some maybe small minor acquisitions or might entail some, again, divestitures. But it's difficult to anticipate any specific transaction at this point. Jon, do you want to take the gross margin question? Jon U. Alonso: Thank you very much, Carlos, and thanks for your question, Jaime. So regarding the gross margin expectation for next year, please let me start saying that the gross margin, you may appreciate in Q4 has been lower than expected, and it doesn't represent what you should be expecting. The margin in Q4 came in at 62.8% as a consequence of an accrual to cover potential inventory write-off related to quality observation in some time batches for minor products. Having said this, that this is a one-off, we should expect certain pressure taking the margin down for next year. We don't disclose guidance, but in my earnings call of Q3, I said that the Q3 margin we disclosed could be a good proxy for next year, something in the high 63% could be used as a base. And then coming back to the point of the EUR 12 million milestone you have commented, I linked to this in the reply to Shan, that we need to overcome it to be able to deliver double-digit CAGR growth this year as well. And that's why we have provided the range. But having said that, let me reiterate that we are fully convinced about the 10.5% midpoint of guidance on net sales we have provided this year. We feel comfortable with the market expectation for 2026 is for our biologics, Ebglyss and Ilumetri, and we reiterate the midterm guidance of double-digit CAGR growth between the period 2023 to 2050. Operator: Thank you. We will now take the next question from the line of Guilherme Sampaio from CaixaBank. Pablo Divasson Fraile: Guilherme, this is Pablo. We cannot hear you. We cannot hear you very well. Guilherme Sampaio: Hello? Yes, is this better? Pablo Divasson Fraile: Yes, no better. Guilherme Sampaio: Okay. Sorry. So the first one is for Karl. If you can comment on the relevance of IL-13 in the cascade of nummular eczema versus atopic dermatitis? And then 2 ones related to financials. The first one in terms of phasing of the growth for next year, I already mentioned that Q1 is going to be below the average. Just wanted to understand how do you expect this to evolve in the remaining quarters? And the third one, if you could provide a bit more details in terms of Klisyri. So there was some step-up in terms of sales in this quarter. Just wanted to understand how this should unfold over the coming quarters. Carlos Gallardo Piqué: Karl, you can go straight to question. Karl Ziegelbauer: Thank you, nummular Guilherme, for the question. I think that nummular eczema is a disease that is different from AD, sometimes there is certain comorbidities or certain coherence and it's characterized by pruritic discoid shape, well-demarcated, you know, some of the most lesions that are frequently occur both on the arms and the legs. IL-13 is hypothesized to be a key cytokine in both indications. And therefore, we believe that we have a good chance to see with lebrikizumab a meaningful treatment effect in this patient population. It is a disease where the prevalence is estimated between 0.1% and 9%. So there is a lot of variability reported. We believe it's at the lower end. And we think addressing this high medical need indication is a good opportunity both to help these patients, but also to expand the use of lebrikizumab. Carlos Gallardo Piqué: Jon, do you want to take number 2, number 3, there? Jon U. Alonso: Thanks a lot, Carlos. So in terms of phasing, yes, in Q1, we will face a tough comparison. I have already disclosed that we will be competing against a very challenging Q1 2025, where we reported the divestment of Algidol and the out licensing of Sekisan for about EUR 12 million in that specific quarter and EUR 15 million on a full year. Once we pass the Q1, Q2, we will come back to a more normalized comparison, but definitely, the growth will accelerate in Q3 and Q4. So we expect a stronger second half of 2026 versus a softer in half in 2026 due to this divestment. And then the third question was about Klisyri. Yes, I mean, Klisyri has basically 3 legs, Europe, U.S. and global. In the area of Europe, we have seen a good commercial execution that has driven the good results, nothing to compare. We work with a long-term vision. So some quarters can be better, some quarters can be not so good. We are pleased with the performance of the product in Q4, but nothing specifically to mention. Regarding the rest of the world, we have mentioned during the script that there is a minor contribution in other countries. For example, we signed the agreement with one partner in Asia Pacific during Q4, and it gave us an access. It's a testimony to the strength and scientific value that Klisyri brings to patients, the fact that they are global partners that they want to collaborate with us in territories that we do not operate. And then in the case of -- in the U.S., the performance in the quarter has been impacted by the FX rate. Well, you see our numbers reported for Q4, they are negative by 9% but the reality is the U.S. team is doing a good job. And in terms of volumes and dollars, we are growing in low single digits. The euro-U.S. dollar FX rate has had an impact in this case in Q4 isolated, where last year, the average was 1.15 to 1.17, while in Q4 2025, we are in the range of 1.05 more or less. Operator: We will now take the next question from the line of Damien Choplain from Stifel. Damien Choplain: This is Damien. Congrats on the strong full year results. I have a first question on your midterm guidance. So you have guided to a 25% EBITDA margin by 2028. But given that gross margin will remain under pressure and SG&A piece is already well optimized, what specific sources of operating leverage will support reaching your 2028 target? So this is my first question. And second one on Ebglyss. Could you provide some colors on what could be the market size for nummular eczema? And when should we expect the Phase III readout? Carlos Gallardo Piqué: Thank you, Damien, for the question. In terms of the midterm guidance, yes, there will be operational leverage, and that's where it's going to come this margin expansion. And again, as we've mentioned in previous calls, we've done all the investments that we needed in infrastructure to maximize the value of this asset. So we don't plan to increase or continue to invest in this type of infrastructure. And of course, we're also expecting productivity gains on SG&A. So overall, we are very comfortable with the guidance provided, and we are comfortable that we will deliver on these margins. On Ebglyss, please can you comment, Karl perhaps can do that. Karl Ziegelbauer: Happy to comment. So as mentioned, the study will enroll patients in Q2 this year, and we expect readout in the 2029 time frame. So far, this indication has not been included into our peak sales guidance. Operator: Thank you. We will now take the next question from the line of Alvaro Lenze from Alantra Equities. Alvaro Lenze Julia: The first one is on the rate of growth of Ebglyss. You've been adding roughly EUR 5 million of incremental revenue every quarter. I wanted to know how much of this comes from new launches and how much comes from growth in the -- mainly in Germany? My second question is on working capital. You have invested quite a bit in working capital this year more than in previous years. It doesn't seem to be inventory buildup because I see that your level of inventory is roughly stable. I don't know if this is just a seasonality thing of how some payments ended up in -- at the cutoff date on 31st December or if there is any fundamental reason driving this working capital and if we should see similar investments into working capital in 2026? And my last question would be on capital allocation. You're generating cash, the payments going forward are likely going to be lower than in the past few years in terms of milestones or capital -- cash flow generation should increase. So we were a bit surprised to see the issuance of an additional bond. So I don't know if you see plentiful investment opportunities or otherwise, why are you not reducing your debt levels? Carlos Gallardo Piqué: Thanks for the question, Alvaro. In terms of the rate of growth for Ebglyss, we're seeing strong contribution from all countries. We are in all the countries where we've launched, we've seen double-digit penetration in terms of dynamic market share. And lately, we're seeing also increased acceleration in terms of growth in some of the latest countries where we have launched such as Italy and France. So overall, very pleased with the rate of growth, very confident, very homogeneous across countries. So that gives us total confidence on delivering on our peak sales estimate. On working capital cash flow, Jon, do you want to take those questions? Jon U. Alonso: Yes. Thanks a lot, Carlos. Thanks a lot, Alvaro, for your question. Regarding your question about working capital, you are spot on. It's basically facing seasonality of collections. It has happened this year is not structural. So we will not see the same increase in the years to come. And then the third one, which is capital allocation and why we did the bond. First of all, let's start with the transaction that we bought in sale that I think we were able to obtain a very good price in the current environment. And I feel this is a testimony to our prudent financial approach and the good performance of the company. But having said that, I think the bond is very important for us because it represents the commitment to maintain a solid liquidity position to keep investing in early-stage R&D deals and bolt-on acquisitions as and when they come up. It may be in short term, it maybe in midterm, but we want to have this flexibility to execute. That's why we executed the bond, and that's why we reduced it from the prior EUR 300 million to the current EUR 250 million because we also believe we are going to generate positive cash flow in the upcoming years. Operator: We will now take the next question from the line of Joaquin Garcia-Quiros from JB Capital. Joaquin Garcia-Quiros: It's just on the alopecia areata and you have hidradenitis suppurativa. If you could give us a bit more color on the market that you see for this or maybe number of patients, if you can? And is this -- do you expect this to be -- with a similar size of Ebglyss? Or we should expect this to be significantly lower than Ebglyss in the contribution for Almirall. And lastly, when should we expect the readouts for these studies? Carlos Gallardo Piqué: Thank you, Joaquin, for the questions. We are very excited about our alopecia areata and 2 of the HS products that we have in place. Why? Because, one, it's an area of tremendous unmet need, sort of still patients suffering with inadequate treatments for these conditions. And secondly, because we believe that we have our treatments that are now in Phase II have the potential to really transform the standard of care and become first-line for patients. In terms of how many patients out there, there are prevalence data, maybe Karl can help me here with some data. Here, it is important to note that for all programs in our pipeline, we have global rights. So if you compare it to what we have today, with Ebglyss and Ilumetri, Ilumetri only have European rights. So probably these indications are of lesser prevalence, but we have worldwide rights. So the potential is way higher than what we see with Ebglyss and Ilumetri today. And that's why we are super excited. The opportunity to help patients, but also create a significant opportunity from a financial perspective to the company. Can you... Karl Ziegelbauer: Happy to add a bit more color. So alopecia, as Carlos mentioned, is an indication of high unmet medical need. The only available systemic treatment are check inhibitors with not only their known challenges around the side effect profile, but also it is reported that once this treatment is not recurrence rate is very high, which has a very significant impact as once hair fall out again, it takes like 3 months to regrow. The prevalence is 0.1% to 0.2%. As mentioned, it's also an important indication for children. And the market size is estimated to be around, let's say, $1.4 billion by Evaluate Pharma in 2030. HS, again, another area of high unmet medical need. Currently available treatments are seem to be rather having a modest effect. What experts have told us is due to the complexity of the disease, it's recommended to think about inhibiting multiple pathway, not only a single one. And that's what we're doing with both of our assets. The prevalence is estimated between 0.4% and 2% and with the potential higher prevalence in the U.S. and especially in Afro-American and the estimated market size by Evaluate Pharma is about $5 billion in 2030. Operator: [Operator Instructions] We will now take the next question from the line of Jaime Escribano from Banco Santander. Jaime Escribano: So 2 follow-up questions from my side. One, if we look to -- regarding the guidance 2026, if we look to the consensus right now, for example, Visible Alpha in Ebglyss is EUR 188 million. And in the case of Ilumetri, around EUR 260 million. I would like to ask how comfortable you feel with these numbers? And the second question more for Karl. Karl, within the 3 products you guys have in Phase II right now, what is the one you are more excited if you had to pick one in terms of potential efficacy and probability of being successful? Carlos Gallardo Piqué: Thank you, Jaime, for the follow-on questions. On the guidance for our biologics, we feel very comfortable with the figures that you have mentioned. And let's go to Karl for... Karl Ziegelbauer: That is always a very difficult question. Now we are talking about 2. One is an anti-IL-1RAP antibody and the reasons why we are so excited about this antibody that antibodies that have targeted individual components, for example, one against IL-1 alpha and IL-beta, but also another one against IL-36 has shown some initial efficacy in this disease. And we believe combining those 2 activity has the chance for, let's say, improving the efficacy. On the IL-2 mutein that is a completely novel mechanism stimulating regulatory T cells. And what makes us optimistic is that there is evidence that this mechanism could work in both diseases, alopecia areata and atopic dermatitis based on initial studies that come from low-dose IL-2, but also from a competitor readout using a PEGylated version of IL-2. So in summary, both are very exciting programs, and we look forward to then having starting readout end of 2026, beginning of 2027. Operator: There are no further questions at this time. I would now like to turn the conference back to Pablo Divasson for closing remarks. Pablo Divasson Fraile: Thank you very much, Sandra. If there are no further questions, ladies and gentlemen, this concludes our today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the HELLA Investor call on the preliminary results for the fiscal year 2025. The call will be hosted by Dr. Peter Laier, the CEO; and Philippe Vienney, the CFO. [Operator Instructions] Let me now turn the floor over to your host, Dr. Peter Laier, CEO. Peter Laier: Yes. Thank you very much, and good morning. A warm welcome to everybody for our call in regard of HELLA's 2025 preliminary results. We have structured the presentation today in 4 parts. If you could go to the next slide, please. The first is an introduction of myself because I'm newly assigned as a CEO of the company. The second will then be focused on preliminary results 2025, followed by a company outlook and the strategic priorities at the end, then we will summarize the key takeaways for all of you and then open the call for questions. Yes, let me start first with a brief introduction of myself. I'm now since somehow 3 decades. If you could go on Slide 4, please. Thank you. I'm now since around about 3 decades in automotive industry, started my career at Continental Automotive, where I used to work 13 years in electronics and sensorics, used to work in Asia, leading the Continental Automotive business in Japan and Korea and then were responsible for chassis and for brake systems. After that, I joined OSRAM in 2013 as a CTO, did the spin-off with the Board of OSRAM at that point of time. And after that, joined Benteler as a COO of the company. And the next stage was Knorr-Bremse as being a Board member responsible for the commercial vehicle business. And then joined ZF Friedrichshafen, where I was responsible for commercial vehicles and industry business and for operations and purchasing for ZF globally and now being assigned as a new CEO at HELLA since 16th of February. So pretty new in this role. And in that role, I'm pretty happy to welcome you here in this first preliminary result call for the HELLA results of 2025. Okay. Then let's look to the preliminary results. If we could go then further in the presentation on Chart 6. Thank you. Yes, to summarize, the organic sales of HELLA in 2025 were somehow stable with EUR 8 billion. 2025 was characterized by strong net cash flow performance and an increase of profitability. How does it look a little bit more in detail? As I mentioned, the HELLA Group organic sales were at prior year level of around about EUR 8 billion, including a negative FX down by 2.1%. So we had a strong sales development in Electronics across all regions, for example, notably driven by our radar sensor business, our battery management systems and our car access to just give some examples of growth. On the other side, our Lighting business was affected by the phaseout of some programs, which we partially could compensate by a ramp-up of new headlight and rear combination lamp business in this business group. In Lifecycle Solutions, we had a positive organic sales development in second half year 2025. That resulted in an operating income for HELLA in 2025 of EUR 474 million in comparison to EUR 446 million in 2024. And this resulted again in an operating income margin increased by 48 basis points to 6%. What we see is that the acceleration of our cost reduction measures with savings, particularly in R&D, drove efficiency and with that structural adjustments. On the other side, the positive effects out of those measures were partially influenced by negative volume and mix effects and that resulted in the mentioned operating income and margin. If you look shortly to net cash flow, we increased the net cash flow in comparison to 2024 by EUR 129 million to a remarkable level of EUR 318 million in 2025. So that led to a ratio to sales of 4% in regard of net cash flow and that in comparison to prior years, 2.4%, a significant increase. So we had a higher cash flow on the one side from operating activities, EUR 58 million improvement and the other improvement came out of CapEx savings, a part of our improvement program, EUR 105 million savings here. In regard of order intake, we had again EUR 10 billion, which is showing a strong demand for our core products as well as for our innovations. If you look a little bit deeper to order intake, what we see is an intensified business, which we could achieve in North and South America with -- on the other side, with local OEMs in China, some gains in Japan and in India, that leads to an overall more than 50% share of order intake outside of Europe. This shows that we have a strong demand for our HELLA core products and our new technologies, for example, like intelligent power distribution modules or zonal modules, some of our core innovations and new technologies. If you look now a little bit deeper in the business group, I hand over for that to Philippe Vienney, our CFO. Philippe, please. Philippe Vienney: Thank you, Peter. So good morning to all of you. So looking at some more details per business group. Let's start with Lighting. So Lighting, we had total sales in '25 of EUR 3.7 billion versus EUR 4 billion in '24, with an operating income of EUR 106 million, which represents 2.9% of sales versus 3.2% in '24. So in Lighting, we are suffering from discontinuation and very large volume series projects, especially in America and in China, which are going down, which is impacting the top line of Lighting. We have also to face some weakness in the European market on some specific products impacting the Lighting business group as well. On the other side, we have some ramp-ups and increase of volumes for U.S. OEMs, but which is not enough to compensate the sales drop that we are facing in China and in Europe. So at the end, the operating margin of Lighting is at 2.9% against EUR 106 million, so yes, mostly impacted by the volume and the loss of revenues, so which is impacting the gross profit, which have been partially offset by some structural measure on SG&A and R&D, but not enough to sustain the margin that we have posted in '24. When we look at Electronics segment, here, we are reaching sales of EUR 3.4 billion versus EUR 3.3 billion in '24. Operating margin at EUR 269 million, which is representing 7.8% of sales versus 6.9% in the year '24. So here, the sales are still highly driven by radar and electronic power system, mostly in Americas and in Europe, so which is benefiting to the top line. We have also a good start-up with the smart access system in Europe and in Asia. And we have also in China, the low-voltage battery, which is also ramping up and adding sales as well. So here, we have an operating margin of 7.8%. So the volume is helping us a bit. We have also had the SEK sales or tooling sales, which have helped us in Q4 to increase the margin. And we are also spending much less in R&D, and we are doing some savings in administration as well, which is helping the operating margin versus what we have been doing in '24. Looking at Lifecycle Solutions. Here, we have sales which are nearly stable at EUR 1 billion like in '24, with an operating margin at EUR 109 million, which is 11.1%. So here, we have basically a stable market or stable sales on the spare part business. So reported sales is slightly negative due to FX rate, but the activity is mostly stable on the spare parts. On the other hand, we have lower demand on the commercial and agricultural businesses. And we have -- but we have some rebound or some slight increase in H2 '25 on this market, which is -- which has helped a little bit the year '25. Operating margin at 11.1%. So here, we have an increase on the gross profit due to the savings and the restructuring. Plan, which had been undertaken in this. And we have also some savings on the R&D side and distribution costs, which have also helped the operating margin. Now if we look at the demand and the order intake, I hand over again to you, Peter. Peter Laier: Thanks, Philippe. Yes, if you could go to the next slide, you see there are some order intake highlights for 2025. As I already mentioned, more than 50% of our order intake share came from regions outside of Europe and that you will see as well in the different business groups. So let me start with Lighting, where we had some further acquisition successes in the Americas as well as in Asia. You see here on the chart some examples like, for example, car body lighting and headlamp business for different mass market models for European OEMs. And I think that's an important message that we are penetrating further the mass market now as well with a Lighting business. We won some headlamp packages for different models of European OEMs for the U.S. market with SOPs in '28 and '29 and some headlight packages, including adaptive lighting technology for 3 different series of U.S. OEM for SOP in '28. I think remarkable in Lighting is as well that we won different headlamp and car body lighting packages for Chinese OEMs for several car models with SOPs in '26 and beyond. And this is executing of our strategy that we want to grow with Chinese OEMs and confirms that we are here on the right path. If we look to Electronics, we are further winning business to reinforce our position as a market and technology leader in the selected areas where we are going to play and win. And you know that we have a long tradition in selecting those areas carefully and play to our strengths. So you see here with the first example, we have 1 billion orders for intelligent power distribution management and zonal modules from an international premium OEM with SOPs staggered from '25 and '28, which is remarkable. That's confirming our strategy in regard of going in the direction of zonal modules or ECUs. Then we continue with our success story on radars with a 3 million-digit order for our Gen 5 and Gen 7 radar technology from a European OEM and Gen 7 radar solution for Japanese OEM for the Indian market with the SOP in '27. In addition, 3 million-digit order intake for smart car access from a U.S. OEM confirms here that we are on the right path. If we look to Lifecycle Solutions, we have new order wins, which increases our customer outreach and which clearly indicates that there is a strong demand for our customized technologies. So for example, we have won a fully customized FlatLight technology for a Dutch bus maker or a customized lighting for an off-road vehicle of a premium manufacturer with SOP in '26. We have different LED front lighting systems, which we won for the European OEM for the Indian market or LED rear lamp for international trailer manufacturer for the Indian market, which confirms as well here the internationalization of our business. And last but not least, we won an LED headlamp from international manufacturer for agriculture technology with the SOP in '27. Yes, so far to our 2025 preliminary results and related informations for order intake. With that, I would now go into 2026 and would start to talk about our outlook for 2026, followed then by some strategic priorities. If we could switch to Page 10, please. What I would just start with is we are seeing somehow sluggish, stable development of our vehicle production globally and the details will be presented by Philippe. Philippe, handing over to you. Philippe Vienney: Thank you. So yes, we see a stagnating market in '26 based on the latest figures published by S&P in February '26. So minus 0.2% in '26 versus '25 after '25, which was relatively good in terms of worldwide production. So per region, we see Americas, Europe and even Asia Pacific going slightly down versus '25. So with this outlook in terms of market. We go to the prognosis or the outlook for '26 for HELLA. So we see -- we would like to guide the sales between EUR 7.4 billion and EUR 7.9 billion. So here, again, taking into account a stable market and still facing some top line revenues issues on Lighting. We have detailed in former calls that we are expecting a rebound for Lighting in '27. So we are still facing this drop in revenues in '26 for Lighting. So leading us to this guidance in terms of sales, EUR 7.4 billion to EUR 7.9 billion. Operating margin between 5.4% and 6% of sales, also taking into account the revenues, which would be slightly difficult for Lighting. And also having in mind that the full benefit of the turnaround plan of Lighting with the adjustment measures and restructuring measure will take full impact in '27 and '26 will be still the turnaround year. In terms of net cash flow, we say at least 1.8% of sales. So here versus '25 achievement, basically, this 1.8% is built on slightly lower funds from operations, but we also do expect more cash out linked to the restructuring program with, let's say, people leaving in '26, then the cash will be out as well in '26. So higher restructuring spend in '26. And we also do plan some higher CapEx in '26. We have said that we have been able to reduce the CapEx in '25 by EUR 100 million. We do not expect to do exactly the same in '26, and we are planning to have EUR 50 million more, I would say, in '26 in terms of CapEx to prepare the future, the launches and the rebound, which is expected in '27. So that's all in all, what is behind this outlook for '26. And maybe then we can go to the strategic priorities to figures. Peter Laier: Yes. Thank you, Philippe. Then I'm taking over for that. Again, in regard of our strategic priorities, if we go to Chart 12, please, we see 3 strategic priorities, which determines HELLA. The first is best-in-class performance, the second is business transformation and the third is invigorating culture and organization. If we look a little bit more in detail to best-in-class performance, that means for us, we need to secure best-in-class execution across all business groups and functions and improve cash flow because this brings us in a position to further invest in the future-proof positioning of the company and in our growth areas. That means we have started a program in the company to simplify all functions to a level of functional excellence on the one side. And as you have seen in the figure presentation of Philippe, we have to transform our Lighting business. And here, we have a strong focus on. In addition, we will continue our competitiveness program where we see already first improvements out of that in the results of 2025 and we will continue in 2026 and do some further structural adjustments. In regard of business transformation, we will diversify further our regions and our customer base. So we want to become more international and the acquisition of more than 50% of non-European business is showing that we are already on a good path. And with that, we want to strengthen our resilience and with that we want to focus on further growth and a future-proof portfolio. That means we will do rigorous portfolio management with focus on growth and affordability and with clear priority setting. We will then achieve a lower dependency on the European market and strengthen the relationship specifically with Asian and American OEMs. And we will further derisk our global supply chains. In regard of invigorating culture and organization, we will develop our culture further with a clear focus on the pair of empowerment and accountability and further simplify our structures. That means we want to reduce our complexities in our organization and streamline the processes, and we want to further establish and strengthen regional teams to access local customers, which supports then the mentioned internationalization where we are focusing on. And we will reshape our engineering organization towards the digital age, including using of AI. If we go to the next chart, let's look a little bit deeper what that means as focus for our business groups. For Lighting, in regard of best-in-class performance, we will definitely focus on affordability of innovations, on simplified functions and reduced development lead times, specifically with a focus on Chinese OEMs. And we will work further on competitiveness in regard of Lighting, and that has a strong focus specifically on the transformation of our plants in Europe and in the Americas. In regard of Electronics, we will do a best-in-class performance and enhanced regional footprint and focus on R&D efficiency. Then we will work on CapEx and resources. We will allocate our invest in CapEx to the strategically identified selected growth segments. I will talk a little bit more about that as well on the Capital Market Day tomorrow. And on Life Cycle Solutions, we will consequently use digitalization and leverage AI, and we will further work on our functional excellence and adjust further our footprint in operations. If we look then to business transformation, diving deeper in the business groups, that means for Lighting, very clear highest focus is that we have to transform Lighting and achieve a turnaround over there to improve margins again sustainably. We will work on a future-proof product portfolio, and that means specifically that we want to address much more the volume segments of the Lighting market and we will work further on balancing our customer mix, and that means specifically working with Asian customers and penetrate more the market in the Americas. In Electronics, I think we have unique capabilities and know-how in the company, and we will leverage them specifically in regard of battery and power modules for all different electric powertrain vehicles. That means from mild hybrids, plug-in hybrids, range extenders to full battery electric vehicles, where in all areas, these battery and power modules are needed for efficiency. We will use our scale as a first mover to roll out zonal modules, where, as I mentioned before, where we have already remarkable business wins. And we will focus as well here on business wins in the Americas and in Asia. In regard of Lifecycle Solutions, business transformation, focus for us is on the one side, we will start further product initiatives in the independent aftermarket. We will extend our focus to the mid-price segment and leverage our channel here. And as well here, we focus on international growth in North America and EMEA specifically. If you look to invigorating culture and organization in Lighting, we will implement a new leadership model in all areas, not only in Lighting, and we will implement organizational responsibilities for our people in an enhanced manner that is the part of empowerment I talked about before. We will work in all business groups on digital AI tools, which we will implement, and we will streamline the decision-making and increase internationalization. Based on that, if we look to the next chart, in regard of our midterm targets in regard of Lighting, if you can go to the next chart, please. I think you see the presentation anyhow, I will continue. In regard of Lighting, we will transform the business to a sustainably improved profitability situation, and we will broaden the customer base. Based on that, we will further act as a top player in the market, but serving both in the future, premium and volume segments. In regard of Electronics, I already talked about our unique skill and know-how set. And with that, we will further expand the business systematically and increase profitability. We will here clearly select our business arenas carefully and with that further realize profitable growth. And that means we will use our technology leadership and with that, grow disproportionately in those areas which are characterized by innovation. And last but not least, in Lifecycle Solutions, we will leverage our market position, our channels to the market and our brand to sustain double-digit margin. And with that, we will play here in the top 10 independent aftermarket player league and in addition, working on further commercial vehicle business and work as a workshop product supplier here further. With that, I would like to come to the key takeaways. As a summary, if we look to 2025, I think we can summarize that, that was overall a solid performance of HELLA in financial year 2025. Page 16, please. With -- can you go on 16, please? Overall, a solid performance in financial year 2025 with stable sales at EUR 8 billion, supported by growth in Electronics. We have an increase in profitability driven by acceleration of cost reduction. In addition, we had R&D savings and increased efficiency. This led to a significant improvement of net cash flow, driven by the mentioned operational performance measures and CapEx savings. And with that, we met the financial outlook for 2025 fully. If we are now looking to outlook for the financial year 2026, as I mentioned, we are not expecting tailwinds from the market. And based on that, our outlook for 2026 financial year is a sales between EUR 7.4 billion and EUR 7.9 billion and OI margin between 4.5% and 6% and the net cash flow to sales ratio at least at 1.8%. To remind you, our outlook is based on around 92.8 million light vehicles produced. And as mentioned, we are still expecting a volatile and challenging industry market situation for 2026. The 3 strategic priorities going forward are best-in-class performance across all business groups and functions, the business transformation to strengthen the resilience of our business model and the invigorating culture of empowerment and accountability. Yes, with that, I would like to close our presentation part of preliminary results of HELLA in 2025 and the outlook. And with that, we are opening the floor for questions, handing back to the operator. Operator: [Operator Instructions] So we have the first question from Sanjay Bhagwani from Citi. Sanjay Bhagwani: Maybe the first one, just zooming into a little bit on the guidance. So is the guidance -- I mean, generally, what we have seen over the past few years is HELLA generally tends to be a bit conservative on guiding, but manages to get to more or less to the upper end of the guidance range for most of the years, except for what we have seen in '21, '22, which was semiconductor crisis. So is there some element of conservatism baked here? Or is the Lighting, I understand you mentioned as a key driver here, so just trying to understand how much of that is conservatism? And what do you think for the Lighting, how bad it can be for '26 before it gets better in '27? That's my first question. I'll just follow up with the next one. Peter Laier: Yes. First, thank you, Sanjay, for the question. Maybe I'm starting and then hand over to Philippe. 2026 will be, again, a year with challenges for our Lighting business. As we mentioned, we have a discontinuation of some big business, which is further influencing sales in 2026 for Electronics as well as for Lifecycle Solutions, we will be at least stable in this year. And then we have to consider the challenging market conditions we mentioned in the presentation that brought us basically to the top line guidance in -- on the level as you have seen. But furthermore, Philippe, handing over to you. Philippe Vienney: Yes, it's true that the guidance is coming from Lighting, where we see the further sales drop, which is more or less representing the full drop for next year in '26. So Lighting is really the driver of this guidance, which could be seen as a low guidance, but that's the main impact is basically Lighting. Sanjay Bhagwani: That's very helpful. So if you think like the -- if Electronics and the other division is stable, then if we just back calculate, what we get for Lighting is roughly 9% to 10% decline in top line. Is there a specific program, which is driving this? Or it's broad-based some specific -- so maybe if you can just recap us what is driving Lighting down for '25 and if this continues at a 10% rate in '26? Is that your assumption? Peter Laier: Philippe? Philippe Vienney: Yes, I think we continue to see the same trend as we had in '25 and started to see in '24. We continue to have some reduction in China with some, again, large programs, which are still going down, not fully replaced. And we also have some weaknesses in Europe, which is also the case in '25. So we continue to see the same trend. And again, some additional sales coming from North America, but as in '25, not enough to fully compensate the drop that we will face in the other 2 regions. So yes, the new programs that we have been able to get will really give us the impact in '27. That's why the '26 is still continuing on the same path as in the past for Lighting. Sanjay Bhagwani: That's very helpful. Lighting is very clear. And for the other divisions in terms of margin expansion, are you expecting any other like the cost-saving programs may feed into some sort of margin this year for electronics and LCS? Peter Laier: I think as you have heard, we have started our improvement program and this improvement program will have as well some related costs, which we will see in 2026. Therefore, we have in 2026 some influences out of that, which is as well then seen in the bottom line performance, but that will then be the basis for further improvement for the years after that. Operator: [Operator Instructions] And we have one more question from Thomas Besson from Kepler Cheuvreux. Thomas Besson: First, I'd like you to help us bridging the performance in Q4 versus the message you had given in Q3. Clearly, vehicle production was stronger, but there seems to be more than that. I mean, at Q3 stage, you had said that Lighting would be probably as bad as in Q3, and it proved to be a lot better. You mentioned some tooling support in Electronics. Could you give us a magnitude of that figure and explain if there's any one-off related to R&D reimbursement or something helping Lighting in Q4 versus expectations? That's the first question. Philippe Vienney: Yes. So it's true that basically, we had the Q4 SEK sales and tooling were more or less 50% of what we have been booked, so cumulatively until end of September. So strong activity on the 2 E&D and leases, which are also helping in Q4. And then we have some -- finally, some adjustment on claims and pricing also, which have been materialized in Q4 for Lighting, which has also helped a little bit the Q4 results. Thomas Besson: Okay. So coming back to the previous questions, I mean, you're suggesting that Lighting is entirely responsible for the guidance for lower revenues and profitability. So do you expect these adjustments you've mentioned for Lighting not to be sustained in '26 and therefore, margins in Lighting to decline? I'm not sure I understand. And can you confirm that you are making no assumption in terms of perimeter on the guidance? Peter Laier: So yes, Lighting, so we do see -- so the tooling sales and SEK sales are more or less not, let's say, more one-off sales or are not part of the -- it could be a bit fluctuating from 1 year to the other. And the second point is all the benefit from the turnaround plan that we are implementing in Lighting and the restructuring and structural adjustment will have a benefit. But it's -- as I said, it's also part of the restructuring is still going on. We're going to have some headcount reduction really implemented in '26. So the full effect is probably more coming in '27 than in '26. So '26, we will have a partial effect of the restructuring plan and the turnaround plan. Thomas Besson: Another question on input costs. Can you say a few words about what you're assuming in terms of headwinds? I mean we've seen steel, copper prices, memory prices, even the access becoming more complicated. Can you share with us what you've assumed in the guidance and whether this may eventually complicate the task of improving Electronics margins as well in '26? Peter Laier: Yes. So I think you are referring to the inflation, the material price inflation, which we see more or less now at not new level or not new specific increase, so we think that we are more or less at -- it's more behind us than in front of us. So we don't assume a huge inflation in terms of material price. Obviously, we can have crisis like we had with Nexperia in '25. but we have been able to basically have new sources for products that were delivered by Nexperia. So we have alternative sources. So we are not expecting to be so much impacted by this type of crisis and especially with Nexperia products in '26, thanks to this double sourcing. And we think that the situation is stabilizing a little bit with Nexperia. So this is what we are assuming. So no major impact is expecting on the inflation in '26 to summarize. Thomas Besson: Clear. I have a last one, if I can squeeze it in. Is there already a comment on the dividend you may propose for 2025? Or do we have to wait a bit for that? Peter Laier: I think that is too early. You have to wait for the final call when we announce and as well dividend, that's too early today. Operator: [Operator Instructions] So there are no further questions at the moment. Peter Laier: Great. Then I would like to thank everybody for participating in the call. Thank you for the questions. And wishing you all the best. Talk to you soon, latest with announcement of the final results. Thank you very much. All the best. Bye-bye. Philippe Vienney: Thank you.
David Riches: Okay, everyone. We'll get started. Just around 1:00. Good morning, good afternoon, everyone, depending on what state you're in. David Riches, Managing Director of GenusPlus Group, and we got Damian Wright, CFO, online as well. This morning, this afternoon, we're here to present the half year results for GenusPlus Group and look forward to going through. Obviously, if anyone's got any questions, you can either hold to the end or jump in if you require. Absolutely fantastic result. We had a really strong half at Genus, $535 million of revenue, $46.3 million of EBITDA, $24.9 million NPAT. We held up the -- we converted heap of work to the order book, and we've held up the tendered pipeline, cash of $178 million, and we've announced an interim dividend of $0.02. So if we just pause there for a moment and those that have been on the journey with us for a period of time now, obviously, the business has really changed over the last few years and it's just super exciting times and I take the hat off to all of the Genus management team, a very strong half and likewise, thank the support of the shareholders that have been with us on the journey. Some of the highlights through that half. Obviously, we won an extremely large job in our home ground with Western Power, and we managed to back on another $110 million worth of revenue to that job. The Alinta Wagerup project is a fantastic opportunity for our Energy & Engineering business, FMG decarbonization contracts. So, we're seeing some of our miners work towards the decarbonization that the rest of Australia is working towards and an outstanding effort with Genus-Acciona JV to secure the Western Renewables Link at $1.6 billion. Some of the highlights on the corporate side. We've executed a $429 million syndicated facility. We appointed a new Director on the Board, Tony. I welcome Tony to the Genus family. And our acquisitions integration continues. Obviously, we've done a number of acquisitions over the years, and we feel very comfortable on integrating them into the group and going well with the ones we did over the last year to 18 months. Snapshot of the segments. For those that are newer to the call, Genus is a one-stop shop for anything in the energy market, anything from a service item, right up to a $1.6 billion transmission line or infrastructure asset. As I said before, $535 million for the group. We just -- I honestly couldn't be prouder here today. We're seeing all 3 segments really go well. Still some room for improvement. So, I don't think everything is a perfect day, but we'll get to them as we go through the segments later, but still a very, very strong outcome. Infrastructure at $345 million for the half. Energy & Engineering, another outstanding performance at $151 million and our Services business that we're really trying to not forget about those lower-end services and stuff that will back up our larger projects. The outlook, it's a pretty important page as we had a massive conversion of work last 6 months ago, and we've been able to continue to convert that work to order book and we've actually continued to grow our tendered pipeline as well. We used to talk about some of the opportunities in the area, but it became quite a large number of opportunities that's out there for Genus, and we'll look more to that in the look ahead for the segments. But there is an absolute wide range of opportunities. We get to see some of our work sometimes very early at Genus as a part of an asset that's getting built, or a farm that's getting built or a connection that's going to happen to the grid. So, there's a range of opportunities, but these are the most important metrics, which is order book and tendered pipeline. We're not forgetting our recurring works or our more service type works, that continues to grow as well. But yes, I think the main standout here is a tendered pipeline of another $2.6 billion is a fantastic result. We are seeing significant opportunities through the group in the transition to the energy -- into the new energy world. And we're certainly not taking our eyes off M&A opportunities, and we'll continue to bring them to market as they arise. I'll let everyone read the charts and obviously, through their own presentations. But just pausing for a minute to see that continuous growth throughout the business and taking a step back to realize we have to invest in the business many years ago to build the systems to be able to do what we're doing today. We did that. We've obviously paused and reflected to our system many times over the years and made sure it's strong enough. And I think we're seeing the results of that as we continue to grow without hiccup. So it's a true testament to the executive team at Genus to build those systems and keep launching into the future. Financial overview. So record revenue, obviously, for the half, up 60% on the PCP. Record EBITDA at $46.3 million, record statutory NPAT at $24.9 million. Our normalizations in there is acquisition and legal costs -- acquisition, legal and advisory costs as per normal as we continue to look for M&A opportunities. We have to close out some old claims in one of our acquisitions from years gone by, EC&M. That's in there. Our acquisition amortization is $1.1 million and a strong EPS position. The financial position, strong cash at $178 million. Net cash $127 million, with $22 million in restricted term deposits. Our franking credits are very healthy, but the standout is really this new facility we've put in place, giving us $278 million of headroom at December for growth. Obviously, there is a range of opportunities, and we've had several meetings altogether where we've lifted our pre-contracts team some time back now to try and really leverage into one, the energy and engineering space and the transmission space. But to have that type of headroom, obviously, is very comfortable for us to grow. And a fully franked dividend -- interim dividend of $0.02 will be paid. Cash flow. So, we generated $91 million in cash -- operating cash flows. Conversion rate was 199%. Our CapEx, we spent $34 million to date. We are managing our CapEx as responsibility and strictly as we can. But with the influx of these larger projects and wanting to own the key assets on that project, we need to invest for those projects. Some of our key equipment, you wouldn't be able to hire anyway. So, we do need to buy it. We are managing that CapEx and want to manage that through to a $40 million, $45 million for the year, just depending on how the second half goes. We'll continue to manage CapEx. We understand as a business. But at the same time, we do need to feed these larger projects or we won't be there at the start line. I'll drop into the segments now and have a bit of a look at the -- have a look at the future and maybe talk to some of these segments. So, our Infrastructure segment, which for those that are new, obviously, builds a range of activities from very small power lines to very big ones, substations and anything in that and now moving into the rail sector to see if we can push on our skill sets in the rail sector. Revenue of $345 million. The EBIT followed down at 54% growth. That's a 5.2% EBIT. That's similar to where we were in the last half. We do believe that sort of -- obviously, with the larger projects coming in, we're just being responsible on how we recognize the revenue on those projects. We think it's there, and we've got some margin improvement to do. But I also want to be responsible and make sure we look at these large projects. Obviously, we've told everyone we want to get 5% EBIT out of those projects or better. We will continue to strive for that. We have a range of other work in infrastructure that we'll work closer to our sort of 8%. We try and aim at Genus between 4% and 8% EBIT. But I think you will see -- certainly, I'm not expecting that margin to come down. It's sort of flattened out there, and we've got everyone's expectations in line with a far bigger business. So, I think it's a fantastic result and we are continuing to look at these bigger projects as they come in alongside the smaller, more typical projects we've done over the last 10 to 20 years. HumeLink is fully underway now. The last activity to start is stringing, but all other activities are up and running. We are building HumeLink. It is a live project. We're spending time. We've got a management team on site. We're going well. Acciona is our JV partner. There's a lot of effort going into HumeLink. So far, it's a great job. We're getting on with it. We're doing it when we're going to build it. So, we have no issues at this point in time with HumeLink or our JV relationship or any of those things. So, we'll continue to strive to the outcome. And at this stage, there's 18 months -- 18, 20 months to go. So, we'll just continue to build that. TasNetworks ECI, which we spoke about over the last 12 months, that will wrap up over this next half and we look towards the start date for TasNetworks. This is a massive opportunity for Genus Infrastructure. It's a fantastic client down there at TasNetworks in Tasmania. It's a job we've built plenty of times before at Genus. It's right in our sweet spot. So, we're really looking forward to getting that job started in this half we're hoping, and we will -- and start to see the revenue come through from TasNetworks over the -- into next year over the coming 3 or 4 years. Hunter-Central Coast, another major project. Early works was done. There were some early works done at the end of last year, but construction started now and we're underway at Hunter-Central Coast. So, we'll see that revenue come through over the next 2 years. Western Power Clean Energy, that was already a massive project for us and we backed in another $110 million. So, that's -- it's become a very significant opportunity in our home patch for Western Power. And MGC rail integration continues to go well with infrastructure. And the plan, obviously, for those that can picture what we build every day of the week, we build power lines down the road. We build substations. We build pit and pipe electrical, overhead electrical. That all sits in the range of the utility power work. It's no different in the rail. So, there's a raft of opportunities in substations and lines and overhead lines and service and maintenance in rail. And that's really where we want to see is how we can use our skill sets from all of the things we've learned over the years and pivot that into the rail work. So, we actually -- it's a perfect acquisition. We've been working with the founders of MGC or I have. And yes, it's going really well, and we're very like-minded. So, I think stay tuned on that. That will be a good growth area over the next couple of years for infrastructure. But if we take a step back, maybe change page. But if we look at -- we all sit here with our infrastructure business on the market drivers and we look at the rewiring the nation, and it is a fantastic opportunity. But there's just so many other opportunities in this area as well. If we look at the connections, the end-of-life assets, just maintenance work on transmission. And we're really starting to see that over East revenue from transmission start to come through now with Humelink starting to put some meaningful revenue into the last 6 months and some smaller transmission opportunities that we've started over that 6 months as well. So, we're seeing that smaller business as usual type work and that Humelink work. But we're not seeing 20 of those projects yet. So, there's still a long way to go from a revenue point of view on our over East expansion in transmission. And those opportunities are going to come from not just rewiring the nation. Every asset needs to be connected to the grid. And whilst you're connecting to the grid, there may be changes to the grid. There may be upgrades to the grid and there may be end-of-life assets that need to be fixed on the grid as well. And if we take a step back from that, we can't forget about our mining and private customers that still need us to do their connections. Taking a further step back from that, our distribution arm. We are still very, very strong in distribution, and that was the forefront of the national expansion for Genus 5 or 10 years ago is we expanded in the distribution market, and we continue to find new opportunities in the distribution market similar to the transmission market, which is that's really in the streets and working with the utilities, keeping the lights on. And then if we look at that a bit more holistically, again, we really -- we know we certainly have a huge substation presence in Western Australia. We've always got 4 or 5 substations on the go or starting in Western Australia at times. But we really haven't seen any meaningful revenue out of the substation market in the East as well. So some really -- I suppose you've got some old stuff in infrastructure that continues to grow. We've got some new stuff that's starting to grow now, and we've got to make sure we do a good job at that. And there's still some room for new business where we can take a skill set from the West or even likewise now, we might be able to take a skill set from the East and put it back in the West. So, I just think there's a long way to go with infrastructure, and they're already looking at new areas such as rail as well on top of that. so, that's my update on the market drivers for Infrastructure. Energy & Engineering. So, this has been a fantastic business for us or segment for us. It all started with a $1.7 million acquisition of ECM. That's where we started, and this is where we are today. And you can see the bottom point, the Electrical and Instrumentation work that came through from ECM. We haven't forgotten about that. We're actually starting to grow that. But revenue of $151 million, EBITDA of $10.9 million, a great result out of Energy & Engineering. And over the last couple of years, we've really been able to balance this business out with the acquisition of CommTel and Partum. It's now adding in a lot of engineering revenue alongside our construction revenue. So it's a really well-balanced business. Meanwhile, the Partum and CommTel skill sets allow Genus anywhere in Genus, but mainly in Energy & Engineering to fully life cycle their project and own the project and be that Tier 1, the principal contractor on site, which was what our aim always was. We saw some conversions of projects in that 6 months with Wagerup and Atmos. So, they're continuing to win work. A few years -- well, probably 18 months to 2 years ago, we lifted the pre-contracts team, and we probably always had 1 or 2 projects in the middle and starting, one finishing. We're trying to lift that up to sort of 5 projects going at once, and we're continuing to work to that strategy. But the Electrical and Instrumentation part of the business, there's a lot of oomph in the market out there around such assets as data centers, et cetera, which is a very -- the skill set of our E&I business can do that, and we're looking at opportunities around those types of opportunities as well as, say, your solar and your BESS and your substations that we build in and around those assets. Another big driver, we really want to see a wind opportunity coming here. This Energy & engineering, this slide gives you a look at some of the percentages of green energy in the States. But we really want to add in that whole piece, like if this segment is going to become a full power asset business that can build any asset that's converting something to power. And we've put some notes here on the side of this page, which really tells the story on how we've become that principal contractor through using the market growth, having strong partnerships and proven execution. Our Services segment, probably more of our newer segment and started with just comms. For those that are a bit newer to the call, we know we bought -- we had a very small comms piece. And we bought another comms piece, which was a business out of admin called Tandem, which we rebuilt and looked at opportunities around that comms piece. From there, we moved our asset -- management part of the business into this segment and added on vegetation over the last 12 months. So, an absolute this business. It was a loss-making segment for us when we first started, if you take yourself back 2 or 3 years, so sooutstanding effort. And it's got a bit of a more modest growth to this business, but it's a services business. It's long-term contracts. It's really, really -- it's a very, very strong contracting play, and that's what we want this business to be. We want all the long-term, 10-year type contracts. If we can get them, certainly 3s and 5-year contracts in this part of the business. And we've been working at building a -- like we did with Energy & Engineering a few years ago, building the foundations of getting this business to a size where its foundations are strong. So, it's ready for either to win that large multi-year contract because that's what they've chosen to do, and that's the opportunity or likewise, M&A. Both of them, you need a strong foundation and that's what we've been doing. And true credit to that is we've seen a lot of growth through the PFA business over the years and we've been able to maintain healthy margins. Our Telstra and NBN relationships continue to be strong and now stepping into some multi-year vegetation management contracts. Where to next? For services. So, we could put up the charts of the total spend of comms and the total spend of asset management and vegetation. But realistically, these are our 3 service areas at the moment. And on the right-hand side of the page is why aren't we looking at some of these areas? We need to take our skill sets or add on new skill sets and take them into these areas on the right-hand side of the page, which are very close to what we're already doing or we're already doing, e.g., mining, for example. We're already doing a lot of work for mining. Why can't we leverage that service piece into there? Everyone knows the size of the pie with the defense work. So, we'll continue to monitor opportunities there. Facility management, once -- that's where the really long-term contracts come. Water. Water is how can we not take -- this is our -- we do a range of asset management for our power utilities. We need to move that into those water utilities and social infrastructure as well, which is like roads and public transport and things like that. Again, how do we take our asset management business and grow it in these areas, or vegetation management? And obviously, telecommunications is a massive piece. I certainly don't believe telecommunications is finished yet. I was away on the long weekend in -- with my family on Australia Day and you go to a small town and you can't even download a very simple page off the Internet. So, obviously, we've still got a long way to go, in my opinion, with remote telecommunications or towns. And that's where we want to be as a partner to NBN and Telstra to roll that work out. Other metrics and certainly some very, very important stuff on this page. It may be towards the back of the presentation. But our injury statistics are at 3.5. We have an aim to be under 3, and we're going to keep striving that. Without safety, we are nothing, make that clear. I can speak for half an hour prior to this on all the good things and all the opportunities in front of us, but getting our people home at night safe or getting them home the same as condition they came to work is by far the most important for us and also making those people feel comfortable that the safe system of work does has experience. We've got 20 years of experience -- not quite 20 years in powerlines plus and through to Genus of actual real-life experience that goes into our safety systems. And we're not going to stop investing on that, so that it's ready for the growth as we go. Sustainability and ESG, we need to follow the Corps Act and the requirements around that moving forward, and we've got the right consultants and we've done a lot of homework on that. So, we're well in front of the curve and ready for that. Our apprentices and trainees, we are working hard here. We have seen some growth in it, but not as much as we want. This is a key focus area. We need to train more people. We did do a massive overseas drive over the last couple of years. That has worked very well, and we welcome all those people into our family. But we also need to continue striving to train local people and local young people. So, we want to continue to put effort into this. And hopefully, we see the outcome of more effort over the next couple of years. And talking back to those systems and the hard work that got put in over the last 10 years to see the people now nearly 2,000 people and us handling it and not under pressure is because we've done the work in the past. So, that sort of wraps it up, everybody. I'm happy to take some questions from there if there's any online. Unknown Analyst: I'll jump in with a couple of questions, Dave. Congrats on a good result. Just firstly, if we look at the tender pipeline, it's good to see that it's grown versus the FY '25 balance. Just keen to get some color on the mix there. Like how is the pipeline for BESS work, transmission work? Like are you seeing a concentration of the tender pipeline towards some of the larger-scale projects? And just also keen to get your views on other markets like mining infrastructure as well. David Riches: Yes, no, we're not seeing it. It moves around a little bit from time to time. But no, it's -- we wouldn't see too many. The panels in the services business probably sit more either in that recurring work or are new, so to speak. So, lesser in the services space and when it comes to tender. But certainly, I think on a size, the infrastructures 2/3, let's say and 1/3 to Energy & Engineering. We would normally see that be similar to that, and we can lift our pre-contract teams and BD teams if we need to, to push that a bit harder if we wanted to or likewise, we can sort of hang back a little bit if we're getting very, very busy. So, I haven't seen that materially change in a couple of years now, like the amount of in-rush is still there and still very live. We are trying to partner with some key people in Energy & engineering. It's sort of -- because you do a fair bit of early work in that, you're going to go and look at the big BESS project. You'll do some ECI work. So, we are working with those key partners to see how long their journey is as well. And that might give us some more color to that question, but we are certainly asking those questions. But it's still very, very busy. in my opinion. And I'm not sure how to put that in a spreadsheet, but it's very, very busy. Unknown Analyst: Great. That's great color. And maybe just looking at the guidance, 35% EBITDA growth. I know North West Transmission Development has a fair chunk of ECI in FY '26. But if we kind of strip that out, is there any assumptions around the major construction work that kind of flows into FY '26? Or is that more commencing in FY '27 and contributing to that outlook? David Riches: It's probably on a more -- no, it doesn't need to be here, essentially, is the answer to that question. It's more '27, but they are -- these projects are getting a fair bit keener today to get started from probably where we were 2 years ago when there's a lot of environmental constraints and things that need to be signed off. We're seeing that free up a bit, to be honest. So, I think it has a chance to potentially start. So, I won't write it out for now, but I don't essentially need it either to look at that budget. Unknown Analyst: Understood. And just maybe lastly, if we look at the Services segment, you've now delivered 2 reporting periods, consecutive reporting periods with EBITDA margins in the teens. How should we think about the EBITDA margin going forward, maybe in the short to medium term? Should we be thinking there's a floor in the teens or potentially even grow from here? David Riches: I think we are achieving fantastic percentage results. So, I'd probably -- if I was working on your side and things, I'd hold where you are at the moment. And I think that we've enjoyed that margin conversion, which we've -- for those that have been around a couple of seasons, you know what I'm talking about. We've really converted that. And it came out stronger than I -- like I could see that it could do that because I knew some parts of the business we are doing it early on, but it's done it probably more holistically than I pictured. So, a very strong result. The idea now will be to try and hold and grow that revenue line now. A bit the same as what we've done with the other 2 businesses in the years gone by with the other 2 segments. Any other questions or queries? Unknown Analyst: I might jump back on with another question if there are none. Maybe just on the M&A pipeline, how is that looking? I know you've been a bit quiet for the last 6 months versus FY '25. The cash balance is up. Are you thinking more aggressively on acquisitions? Are there any advanced opportunities that you're entertaining? David Riches: We're certainly very keen. M&A and organic growth has worked for us now for 3 or 4 years. We've had both, and we've been able to handle both. And I think we're in -- I think there is absolutely -- from a bench strength point of view, we are well and truly capable of doing some M&A activity. We probably have lifted that size a little bit throughout this year, where you've seen us typically do some smaller acquisitions. And not to say they won't still flow from time to time. There might be a geographical footprint we want to own or someone in the market a bit smaller is retiring, et cetera, right? So, let's always keep that door open for a smaller piece of the pie, which makes sense for Genus. But we've lifted that size. So, we spent a lot of time last year just having a look at what opportunities would -- how big could we go, how small should we go? Should we go left? Should we go right? And where are our key focus areas around where we want to do M&A? So, we have a plan on that, and we've got to execute that plan. So, we're going to be as responsible, disciplined as we can here, right? But we do -- when Genus says it wants to do something, it normally does. That's the business we are. So, I suspect stay tuned, and we'll continue to update the market. But we certainly are keen to see if we can bolt some M&A in at the right time. Any other questions? We wrapped it up a bit early. Maybe a little bit too quick, everyone. Sorry. You all get a bit of time back in your day. Thank you very much, everyone, for joining. We look forward to seeing some of you over the next 6 months. And if not, we'll see you at the next presentation. Damian Wright: Thanks, everyone.
David Riches: Okay, everyone. We'll get started. Just around 1:00. Good morning, good afternoon, everyone, depending on what state you're in. David Riches, Managing Director of GenusPlus Group, and we got Damian Wright, CFO, online as well. This morning, this afternoon, we're here to present the half year results for GenusPlus Group and look forward to going through. Obviously, if anyone's got any questions, you can either hold to the end or jump in if you require. Absolutely fantastic result. We had a really strong half at Genus, $535 million of revenue, $46.3 million of EBITDA, $24.9 million NPAT. We held up the -- we converted heap of work to the order book, and we've held up the tendered pipeline, cash of $178 million, and we've announced an interim dividend of $0.02. So if we just pause there for a moment and those that have been on the journey with us for a period of time now, obviously, the business has really changed over the last few years and it's just super exciting times and I take the hat off to all of the Genus management team, a very strong half and likewise, thank the support of the shareholders that have been with us on the journey. Some of the highlights through that half. Obviously, we won an extremely large job in our home ground with Western Power, and we managed to back on another $110 million worth of revenue to that job. The Alinta Wagerup project is a fantastic opportunity for our Energy & Engineering business, FMG decarbonization contracts. So, we're seeing some of our miners work towards the decarbonization that the rest of Australia is working towards and an outstanding effort with Genus-Acciona JV to secure the Western Renewables Link at $1.6 billion. Some of the highlights on the corporate side. We've executed a $429 million syndicated facility. We appointed a new Director on the Board, Tony. I welcome Tony to the Genus family. And our acquisitions integration continues. Obviously, we've done a number of acquisitions over the years, and we feel very comfortable on integrating them into the group and going well with the ones we did over the last year to 18 months. Snapshot of the segments. For those that are newer to the call, Genus is a one-stop shop for anything in the energy market, anything from a service item, right up to a $1.6 billion transmission line or infrastructure asset. As I said before, $535 million for the group. We just -- I honestly couldn't be prouder here today. We're seeing all 3 segments really go well. Still some room for improvement. So, I don't think everything is a perfect day, but we'll get to them as we go through the segments later, but still a very, very strong outcome. Infrastructure at $345 million for the half. Energy & Engineering, another outstanding performance at $151 million and our Services business that we're really trying to not forget about those lower-end services and stuff that will back up our larger projects. The outlook, it's a pretty important page as we had a massive conversion of work last 6 months ago, and we've been able to continue to convert that work to order book and we've actually continued to grow our tendered pipeline as well. We used to talk about some of the opportunities in the area, but it became quite a large number of opportunities that's out there for Genus, and we'll look more to that in the look ahead for the segments. But there is an absolute wide range of opportunities. We get to see some of our work sometimes very early at Genus as a part of an asset that's getting built, or a farm that's getting built or a connection that's going to happen to the grid. So, there's a range of opportunities, but these are the most important metrics, which is order book and tendered pipeline. We're not forgetting our recurring works or our more service type works, that continues to grow as well. But yes, I think the main standout here is a tendered pipeline of another $2.6 billion is a fantastic result. We are seeing significant opportunities through the group in the transition to the energy -- into the new energy world. And we're certainly not taking our eyes off M&A opportunities, and we'll continue to bring them to market as they arise. I'll let everyone read the charts and obviously, through their own presentations. But just pausing for a minute to see that continuous growth throughout the business and taking a step back to realize we have to invest in the business many years ago to build the systems to be able to do what we're doing today. We did that. We've obviously paused and reflected to our system many times over the years and made sure it's strong enough. And I think we're seeing the results of that as we continue to grow without hiccup. So it's a true testament to the executive team at Genus to build those systems and keep launching into the future. Financial overview. So record revenue, obviously, for the half, up 60% on the PCP. Record EBITDA at $46.3 million, record statutory NPAT at $24.9 million. Our normalizations in there is acquisition and legal costs -- acquisition, legal and advisory costs as per normal as we continue to look for M&A opportunities. We have to close out some old claims in one of our acquisitions from years gone by, EC&M. That's in there. Our acquisition amortization is $1.1 million and a strong EPS position. The financial position, strong cash at $178 million. Net cash $127 million, with $22 million in restricted term deposits. Our franking credits are very healthy, but the standout is really this new facility we've put in place, giving us $278 million of headroom at December for growth. Obviously, there is a range of opportunities, and we've had several meetings altogether where we've lifted our pre-contracts team some time back now to try and really leverage into one, the energy and engineering space and the transmission space. But to have that type of headroom, obviously, is very comfortable for us to grow. And a fully franked dividend -- interim dividend of $0.02 will be paid. Cash flow. So, we generated $91 million in cash -- operating cash flows. Conversion rate was 199%. Our CapEx, we spent $34 million to date. We are managing our CapEx as responsibility and strictly as we can. But with the influx of these larger projects and wanting to own the key assets on that project, we need to invest for those projects. Some of our key equipment, you wouldn't be able to hire anyway. So, we do need to buy it. We are managing that CapEx and want to manage that through to a $40 million, $45 million for the year, just depending on how the second half goes. We'll continue to manage CapEx. We understand as a business. But at the same time, we do need to feed these larger projects or we won't be there at the start line. I'll drop into the segments now and have a bit of a look at the -- have a look at the future and maybe talk to some of these segments. So, our Infrastructure segment, which for those that are new, obviously, builds a range of activities from very small power lines to very big ones, substations and anything in that and now moving into the rail sector to see if we can push on our skill sets in the rail sector. Revenue of $345 million. The EBIT followed down at 54% growth. That's a 5.2% EBIT. That's similar to where we were in the last half. We do believe that sort of -- obviously, with the larger projects coming in, we're just being responsible on how we recognize the revenue on those projects. We think it's there, and we've got some margin improvement to do. But I also want to be responsible and make sure we look at these large projects. Obviously, we've told everyone we want to get 5% EBIT out of those projects or better. We will continue to strive for that. We have a range of other work in infrastructure that we'll work closer to our sort of 8%. We try and aim at Genus between 4% and 8% EBIT. But I think you will see -- certainly, I'm not expecting that margin to come down. It's sort of flattened out there, and we've got everyone's expectations in line with a far bigger business. So, I think it's a fantastic result and we are continuing to look at these bigger projects as they come in alongside the smaller, more typical projects we've done over the last 10 to 20 years. HumeLink is fully underway now. The last activity to start is stringing, but all other activities are up and running. We are building HumeLink. It is a live project. We're spending time. We've got a management team on site. We're going well. Acciona is our JV partner. There's a lot of effort going into HumeLink. So far, it's a great job. We're getting on with it. We're doing it when we're going to build it. So, we have no issues at this point in time with HumeLink or our JV relationship or any of those things. So, we'll continue to strive to the outcome. And at this stage, there's 18 months -- 18, 20 months to go. So, we'll just continue to build that. TasNetworks ECI, which we spoke about over the last 12 months, that will wrap up over this next half and we look towards the start date for TasNetworks. This is a massive opportunity for Genus Infrastructure. It's a fantastic client down there at TasNetworks in Tasmania. It's a job we've built plenty of times before at Genus. It's right in our sweet spot. So, we're really looking forward to getting that job started in this half we're hoping, and we will -- and start to see the revenue come through from TasNetworks over the -- into next year over the coming 3 or 4 years. Hunter-Central Coast, another major project. Early works was done. There were some early works done at the end of last year, but construction started now and we're underway at Hunter-Central Coast. So, we'll see that revenue come through over the next 2 years. Western Power Clean Energy, that was already a massive project for us and we backed in another $110 million. So, that's -- it's become a very significant opportunity in our home patch for Western Power. And MGC rail integration continues to go well with infrastructure. And the plan, obviously, for those that can picture what we build every day of the week, we build power lines down the road. We build substations. We build pit and pipe electrical, overhead electrical. That all sits in the range of the utility power work. It's no different in the rail. So, there's a raft of opportunities in substations and lines and overhead lines and service and maintenance in rail. And that's really where we want to see is how we can use our skill sets from all of the things we've learned over the years and pivot that into the rail work. So, we actually -- it's a perfect acquisition. We've been working with the founders of MGC or I have. And yes, it's going really well, and we're very like-minded. So, I think stay tuned on that. That will be a good growth area over the next couple of years for infrastructure. But if we take a step back, maybe change page. But if we look at -- we all sit here with our infrastructure business on the market drivers and we look at the rewiring the nation, and it is a fantastic opportunity. But there's just so many other opportunities in this area as well. If we look at the connections, the end-of-life assets, just maintenance work on transmission. And we're really starting to see that over East revenue from transmission start to come through now with Humelink starting to put some meaningful revenue into the last 6 months and some smaller transmission opportunities that we've started over that 6 months as well. So, we're seeing that smaller business as usual type work and that Humelink work. But we're not seeing 20 of those projects yet. So, there's still a long way to go from a revenue point of view on our over East expansion in transmission. And those opportunities are going to come from not just rewiring the nation. Every asset needs to be connected to the grid. And whilst you're connecting to the grid, there may be changes to the grid. There may be upgrades to the grid and there may be end-of-life assets that need to be fixed on the grid as well. And if we take a step back from that, we can't forget about our mining and private customers that still need us to do their connections. Taking a further step back from that, our distribution arm. We are still very, very strong in distribution, and that was the forefront of the national expansion for Genus 5 or 10 years ago is we expanded in the distribution market, and we continue to find new opportunities in the distribution market similar to the transmission market, which is that's really in the streets and working with the utilities, keeping the lights on. And then if we look at that a bit more holistically, again, we really -- we know we certainly have a huge substation presence in Western Australia. We've always got 4 or 5 substations on the go or starting in Western Australia at times. But we really haven't seen any meaningful revenue out of the substation market in the East as well. So some really -- I suppose you've got some old stuff in infrastructure that continues to grow. We've got some new stuff that's starting to grow now, and we've got to make sure we do a good job at that. And there's still some room for new business where we can take a skill set from the West or even likewise now, we might be able to take a skill set from the East and put it back in the West. So, I just think there's a long way to go with infrastructure, and they're already looking at new areas such as rail as well on top of that. so, that's my update on the market drivers for Infrastructure. Energy & Engineering. So, this has been a fantastic business for us or segment for us. It all started with a $1.7 million acquisition of ECM. That's where we started, and this is where we are today. And you can see the bottom point, the Electrical and Instrumentation work that came through from ECM. We haven't forgotten about that. We're actually starting to grow that. But revenue of $151 million, EBITDA of $10.9 million, a great result out of Energy & Engineering. And over the last couple of years, we've really been able to balance this business out with the acquisition of CommTel and Partum. It's now adding in a lot of engineering revenue alongside our construction revenue. So it's a really well-balanced business. Meanwhile, the Partum and CommTel skill sets allow Genus anywhere in Genus, but mainly in Energy & Engineering to fully life cycle their project and own the project and be that Tier 1, the principal contractor on site, which was what our aim always was. We saw some conversions of projects in that 6 months with Wagerup and Atmos. So, they're continuing to win work. A few years -- well, probably 18 months to 2 years ago, we lifted the pre-contracts team, and we probably always had 1 or 2 projects in the middle and starting, one finishing. We're trying to lift that up to sort of 5 projects going at once, and we're continuing to work to that strategy. But the Electrical and Instrumentation part of the business, there's a lot of oomph in the market out there around such assets as data centers, et cetera, which is a very -- the skill set of our E&I business can do that, and we're looking at opportunities around those types of opportunities as well as, say, your solar and your BESS and your substations that we build in and around those assets. Another big driver, we really want to see a wind opportunity coming here. This Energy & engineering, this slide gives you a look at some of the percentages of green energy in the States. But we really want to add in that whole piece, like if this segment is going to become a full power asset business that can build any asset that's converting something to power. And we've put some notes here on the side of this page, which really tells the story on how we've become that principal contractor through using the market growth, having strong partnerships and proven execution. Our Services segment, probably more of our newer segment and started with just comms. For those that are a bit newer to the call, we know we bought -- we had a very small comms piece. And we bought another comms piece, which was a business out of admin called Tandem, which we rebuilt and looked at opportunities around that comms piece. From there, we moved our asset -- management part of the business into this segment and added on vegetation over the last 12 months. So, an absolute this business. It was a loss-making segment for us when we first started, if you take yourself back 2 or 3 years, so sooutstanding effort. And it's got a bit of a more modest growth to this business, but it's a services business. It's long-term contracts. It's really, really -- it's a very, very strong contracting play, and that's what we want this business to be. We want all the long-term, 10-year type contracts. If we can get them, certainly 3s and 5-year contracts in this part of the business. And we've been working at building a -- like we did with Energy & Engineering a few years ago, building the foundations of getting this business to a size where its foundations are strong. So, it's ready for either to win that large multi-year contract because that's what they've chosen to do, and that's the opportunity or likewise, M&A. Both of them, you need a strong foundation and that's what we've been doing. And true credit to that is we've seen a lot of growth through the PFA business over the years and we've been able to maintain healthy margins. Our Telstra and NBN relationships continue to be strong and now stepping into some multi-year vegetation management contracts. Where to next? For services. So, we could put up the charts of the total spend of comms and the total spend of asset management and vegetation. But realistically, these are our 3 service areas at the moment. And on the right-hand side of the page is why aren't we looking at some of these areas? We need to take our skill sets or add on new skill sets and take them into these areas on the right-hand side of the page, which are very close to what we're already doing or we're already doing, e.g., mining, for example. We're already doing a lot of work for mining. Why can't we leverage that service piece into there? Everyone knows the size of the pie with the defense work. So, we'll continue to monitor opportunities there. Facility management, once -- that's where the really long-term contracts come. Water. Water is how can we not take -- this is our -- we do a range of asset management for our power utilities. We need to move that into those water utilities and social infrastructure as well, which is like roads and public transport and things like that. Again, how do we take our asset management business and grow it in these areas, or vegetation management? And obviously, telecommunications is a massive piece. I certainly don't believe telecommunications is finished yet. I was away on the long weekend in -- with my family on Australia Day and you go to a small town and you can't even download a very simple page off the Internet. So, obviously, we've still got a long way to go, in my opinion, with remote telecommunications or towns. And that's where we want to be as a partner to NBN and Telstra to roll that work out. Other metrics and certainly some very, very important stuff on this page. It may be towards the back of the presentation. But our injury statistics are at 3.5. We have an aim to be under 3, and we're going to keep striving that. Without safety, we are nothing, make that clear. I can speak for half an hour prior to this on all the good things and all the opportunities in front of us, but getting our people home at night safe or getting them home the same as condition they came to work is by far the most important for us and also making those people feel comfortable that the safe system of work does has experience. We've got 20 years of experience -- not quite 20 years in powerlines plus and through to Genus of actual real-life experience that goes into our safety systems. And we're not going to stop investing on that, so that it's ready for the growth as we go. Sustainability and ESG, we need to follow the Corps Act and the requirements around that moving forward, and we've got the right consultants and we've done a lot of homework on that. So, we're well in front of the curve and ready for that. Our apprentices and trainees, we are working hard here. We have seen some growth in it, but not as much as we want. This is a key focus area. We need to train more people. We did do a massive overseas drive over the last couple of years. That has worked very well, and we welcome all those people into our family. But we also need to continue striving to train local people and local young people. So, we want to continue to put effort into this. And hopefully, we see the outcome of more effort over the next couple of years. And talking back to those systems and the hard work that got put in over the last 10 years to see the people now nearly 2,000 people and us handling it and not under pressure is because we've done the work in the past. So, that sort of wraps it up, everybody. I'm happy to take some questions from there if there's any online. Unknown Analyst: I'll jump in with a couple of questions, Dave. Congrats on a good result. Just firstly, if we look at the tender pipeline, it's good to see that it's grown versus the FY '25 balance. Just keen to get some color on the mix there. Like how is the pipeline for BESS work, transmission work? Like are you seeing a concentration of the tender pipeline towards some of the larger-scale projects? And just also keen to get your views on other markets like mining infrastructure as well. David Riches: Yes, no, we're not seeing it. It moves around a little bit from time to time. But no, it's -- we wouldn't see too many. The panels in the services business probably sit more either in that recurring work or are new, so to speak. So, lesser in the services space and when it comes to tender. But certainly, I think on a size, the infrastructures 2/3, let's say and 1/3 to Energy & Engineering. We would normally see that be similar to that, and we can lift our pre-contract teams and BD teams if we need to, to push that a bit harder if we wanted to or likewise, we can sort of hang back a little bit if we're getting very, very busy. So, I haven't seen that materially change in a couple of years now, like the amount of in-rush is still there and still very live. We are trying to partner with some key people in Energy & engineering. It's sort of -- because you do a fair bit of early work in that, you're going to go and look at the big BESS project. You'll do some ECI work. So, we are working with those key partners to see how long their journey is as well. And that might give us some more color to that question, but we are certainly asking those questions. But it's still very, very busy. in my opinion. And I'm not sure how to put that in a spreadsheet, but it's very, very busy. Unknown Analyst: Great. That's great color. And maybe just looking at the guidance, 35% EBITDA growth. I know North West Transmission Development has a fair chunk of ECI in FY '26. But if we kind of strip that out, is there any assumptions around the major construction work that kind of flows into FY '26? Or is that more commencing in FY '27 and contributing to that outlook? David Riches: It's probably on a more -- no, it doesn't need to be here, essentially, is the answer to that question. It's more '27, but they are -- these projects are getting a fair bit keener today to get started from probably where we were 2 years ago when there's a lot of environmental constraints and things that need to be signed off. We're seeing that free up a bit, to be honest. So, I think it has a chance to potentially start. So, I won't write it out for now, but I don't essentially need it either to look at that budget. Unknown Analyst: Understood. And just maybe lastly, if we look at the Services segment, you've now delivered 2 reporting periods, consecutive reporting periods with EBITDA margins in the teens. How should we think about the EBITDA margin going forward, maybe in the short to medium term? Should we be thinking there's a floor in the teens or potentially even grow from here? David Riches: I think we are achieving fantastic percentage results. So, I'd probably -- if I was working on your side and things, I'd hold where you are at the moment. And I think that we've enjoyed that margin conversion, which we've -- for those that have been around a couple of seasons, you know what I'm talking about. We've really converted that. And it came out stronger than I -- like I could see that it could do that because I knew some parts of the business we are doing it early on, but it's done it probably more holistically than I pictured. So, a very strong result. The idea now will be to try and hold and grow that revenue line now. A bit the same as what we've done with the other 2 businesses in the years gone by with the other 2 segments. Any other questions or queries? Unknown Analyst: I might jump back on with another question if there are none. Maybe just on the M&A pipeline, how is that looking? I know you've been a bit quiet for the last 6 months versus FY '25. The cash balance is up. Are you thinking more aggressively on acquisitions? Are there any advanced opportunities that you're entertaining? David Riches: We're certainly very keen. M&A and organic growth has worked for us now for 3 or 4 years. We've had both, and we've been able to handle both. And I think we're in -- I think there is absolutely -- from a bench strength point of view, we are well and truly capable of doing some M&A activity. We probably have lifted that size a little bit throughout this year, where you've seen us typically do some smaller acquisitions. And not to say they won't still flow from time to time. There might be a geographical footprint we want to own or someone in the market a bit smaller is retiring, et cetera, right? So, let's always keep that door open for a smaller piece of the pie, which makes sense for Genus. But we've lifted that size. So, we spent a lot of time last year just having a look at what opportunities would -- how big could we go, how small should we go? Should we go left? Should we go right? And where are our key focus areas around where we want to do M&A? So, we have a plan on that, and we've got to execute that plan. So, we're going to be as responsible, disciplined as we can here, right? But we do -- when Genus says it wants to do something, it normally does. That's the business we are. So, I suspect stay tuned, and we'll continue to update the market. But we certainly are keen to see if we can bolt some M&A in at the right time. Any other questions? We wrapped it up a bit early. Maybe a little bit too quick, everyone. Sorry. You all get a bit of time back in your day. Thank you very much, everyone, for joining. We look forward to seeing some of you over the next 6 months. And if not, we'll see you at the next presentation. Damian Wright: Thanks, everyone.
Operator: Good day, and welcome to the Nickel Industries Limited 2025 Full Year Results. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Justin Werner, Managing Director, to begin the conference. Justin, over to you. Justin Werner: Thank you very much. If I could ask the moderator to please turn to Page 3. Welcome, everyone, to the Nickel Industries annual results presentation. I'd like to start off, firstly, with safety, 17.8 million safe man hours worked, a significant increase on the man hours worked in 2024 and over 26.1 million man hours of work being worked since our last reported LTI back in 2021. So you can see our LTIFR and TRIFR significantly below the world steel average. In terms of ESG, we continue to be a leader in Indonesia. You can see a number of awards there, including awards from prestigious companies such as CNBC and improving scores as judged by S&P and other third-party groups and the Best Community Award at the Global CSR and ESG Summit in Vietnam. So the company continues to perform very well on the safety and ESG metrics. If we could just go to Slide 4, please. Despite a challenging year, which saw the LME price down another 10% versus the 2024 average, we were still able to deliver a robust EBITDA, pleasingly with a number of records set, including record nickel and cobalt tonnes at HNC, record NPI tonnes of 1,055,000 and record mine production of 19.2 wet metric tons million with sales of 9.9 million wet metric tons. By the numbers, revenue of $1.65 billion, adjusted EBITDA of USD 282.8 million. I should note that on the 2024 numbers, at the end of last year, Q4, there was some challenges due to using up the full RKAB for last year. That resulted in USD 21.5 million of standby costs to mine contractors. And it reduced our Q4 EBITDA from -- to $37.5 million versus the $87 million that was delivered in the third quarter, so about USD 50 million delta. Had that not occurred, if you add the USD 50 million on to the $282 million that delivered -- that we delivered, that gives you about $332 million, which is in line with our 2024 result of about USD 326 million. In 2025, we paid a dividend of $0.015 per share. And currently, net debt sits at $861.8 million. In terms of our processing operations, USD 207.7 million of adjusted EBITDA, or 133,000 tonnes of nickel produced. And ENC HPAL construction schedule is progressing very well and scheduled for commissioning in the first half of this year. Another busy year on the corporate front. We had a very successful bond refinancing. We raised $800 million, 5-year bullet senior unsecured notes. We were able to reduce the coupon from 11.25% to 9%. We also -- this removed the amortization. We did go out initially to raise USD 500 million. We had about USD 6 billion of orders. So it was very well supported. And pleasingly, the mix of investors was about 1/3 North America, 1/3 Europe and 1/3 Asia, where typically we've seen a majority of investors come out of Asia. We had approval just last week of increased RKAB sales quota, which is a very positive result given the significant cuts that have been occurring in country, and I'll talk about that a little bit later on. We announced the sale of a 10% interest in the ENC project to a strategic partner, Sphere, who is the super alloy supplier to SpaceX. And again, we see that as a very strong endorsement of the quality of the ENC project. We also announced supply of -- or supply -- signing of an MOU for supply of up to 14 million wet metric tons of ore from our Sampala project, where development is progressing very well. On the mining front, we delivered USD 91.6 million in EBITDA from mine operations, and I mentioned the record nickel ore sales of $9.9 million. And we've been able to successfully increase that from $9 million last year to $14.3 million this year, so almost 60% increase. If we could just go to the next slide, please. What this slide shows is the robustness of our business through the cycle, and we believe that we've come out of cyclical lows, which we experienced in 2025. If you look at the EBITDA number across the top there, you can see in 2022, it was USD 339 million, USD 403 million in '23, USD 326 million in '24 and USD 283 million in '25. That's despite the nickel price going from almost $30,000 in early 2024 to lows of $14,000 in 2025. We've been able to maintain a strong dividend over that period of time. And really how we've been able to maintain this strong EBITDA profile when a lot of other businesses have actually gone out of -- have left the market is the growth through the cycle. So you can see in 2022, our processed nickel tonnes were 70,000. Last year in 2025, it was 134,000. That is set to grow this year with the commissioning of ENC, which will bring another 72,000 to 80,000 tonnes of new nickel units at a very high margin. And our mine ore sales, which have increased from $3.5 million in 2022 to $9.9 million in 2025, and we now have approval to go to $14.3 million in 2026. If you could just go to the next slide, please. In terms of revenue, you can see there, down slightly to about $1.65 billion. Gross profit also down and operating profit. The key drivers have been there was a decrease in the NPI price versus 2024 of 2.8% and the LME nickel price was also down 9.8% versus 2024. I mentioned at the start of the call, the RKAB license did significantly impact the profit and EBITDA for this year and did also have an impact on grade and production volumes. Pleasingly, though, in the things that we can control, HNC production increased by 6.3%. HM sales increased 10%, as I mentioned, with potential for another 60% this year. And RKEF cash costs decreased 1.8%. So that, in summary, delivered about USD 283 million in adjusted EBITDA for 2025. If we could just go to the next slide. In terms of the balance sheet, we have a very robust balance sheet despite margin compression across 2025. As of 31st December, cash, USD 357 million, debt of USD 1.2 billion, so net debt of USD 866 million. That debt comprises USD 800 million of unsecured notes maturing September 2030 and USD 423 million of syndicated bank loan facilities with ranging maturities with an additional undrawn USD 50 million. There was an impairment charge of USD 8.1 million, and that was in relation to writing down of some of the limonite inventory. And that's unfortunately inventory that was sterilized for the construction of the ENC tailings facility. If we go to the next slide, please. Here, you have the reconciliations by waterfall. I won't talk through the numbers, but you can see that there. And if there's any questions in relation to the waterfall, happy to answer those at the end of the call. If we could just go to the next slide, please. In terms of our RKEF operations, I mentioned at the start of the call, record NPI production of 1,055,658 tonnes. Sorry, moderator, next slide, please. Cash costs were 1.8% lower and that was driven by lower nickel ore price given that it is linked to the LME price and lower power costs. The contracted price of $11,187 a tonne was lower than 2024. And so that resulted in a decline in adjusted EBITDA. And we saw about a $261 a tonne reduction in adjusted EBITDA per tonne. So it was down about 22% on the previous year. The good news is, and I'll touch on that later in this call, is that we are seeing -- we've seen a significant increase in the NPI price, and it's already more than 2 times what our average EBITDA per tonne price was for 2025. If we could just go to the next slide, please. Our HPAL operations performing very strongly. Again, another record 8,500 of attributable nickel tonnes to NIC and 802 of attributable cobalt tonnes. HNC continues to operate well above nameplate capacity, at around 40% above nameplate capacity. Cash costs increased slightly, mostly attributed to higher sulfur ore costs. MHP contract prices increased by 8% to around USD 14,990 a tonne. And the margins -- EBITDA per tonne margins were higher in 2025 versus 2024 of around $6,677. We've seen a very strong increase as well in EBITDA per tonne margins, particularly in January, where we're over USD 10,000 a tonne. ENC update, progressing very well. It's integrated nickel refinery for both the cathode and the nickel and cobalt sulfate plants is complete, and you can see that in the photos in the top there. The HPAL smelter itself is also nearing completion. We're starting to buy some of the consumables and outlaying working capital. Mechanical tests have commenced on key pieces of equipment, such as the CCD circuit, thickness, precipitation tanks, slurry storage tanks, reagent tanks and things like that. And there's been a reallocation of additional resources to ensuring the timely completion of the ENC plant. If we could just go to the next slide, please. We were delighted to announce the acquisition of 10% interest in the ENC project at a USD 2.4 billion valuation on 100%, which is above the USD 2.3 billion that Nickel Industries invested at. That investment was made by Sphere, KOSDAQ-listed premium alloy supplier. They're one of only 5 accredited SpaceX suppliers, and they're the only one that has a 10-year supply contract. So they supply all of the super alloy products, which are particularly nickel intense, to the SpaceX rocket program. We see this as a huge endorsement of the quality of the ENC project. And what it will also do is it opens up the potential for ENC product to go into other sectors within -- or other players within that aerospace and aeronautical industry, which is a very -- which is a growing industry. If we could just go to the next slide, please. There is a short video here, which moderator, are you able to click on that link? If it doesn't work, we can just bypass this page. If you're not able to open it, look, I would encourage everyone to visit this link and to open it. It will give you -- it's a very short video, and it shows the size and the scale and the tremendous progress that has been made at the ENC project. If we could just go to the next slide, please. Mining operations, I mentioned another record year of production, 19.2 million wet metric tons and sales of 9.9 million wet metric tons. Despite the limonite nickel grade decreasing, the limonite contract price increased 31%. That's related to increased demand for limonite ore from -- for Indonesian HPAL projects that are nonintegrated that we've been selling to. Again, this bodes extremely well for ENC, which will be fully integrated. So we will have a significant limonite cost advantage to HPAL producers that aren't integrated with their mine. And I mentioned at the start of the call, unfortunately, there was about $21.3 million in standby charges in the December quarter related to the RKAB extension. But pleasingly, we were able to -- we've been able to recently increase that to U.S. -- it's 14.3 million wet metric tons for 2026. Unfortunately, that -- that delay in the RKAB did see our adjusted EBITDA versus 2024 down slightly. If we just go to the next slide, please. The Sampala project is progressing very well. Of the required 24 kilometers of haul road that's required to link up the project with the IMIP, we are about 90% through completion of that first 8 kilometers. We've also been progressing the permitting. We've submitted feasibility studies for both the ANN and the ETL projects, and we're expecting approval of the feasibility study in the coming weeks. And for the ANN project, we've incorporated a slurry plant for an expansion of the ENC project, which is related to the MOU that was signed for the supply of 14 million tonnes of limonite a year for Sampala. So that will allow us to monetize the very significant limonite resources that we have at Sampala. We've been very aggressively drilling the project through the course of 2025, over 100,000 meters, and we're very confident of a resource of over 1 billion wet metric tons, which taking today's margin of around $12 a tonne, you can see the value of the Sampala project. And we have about USD 20 million, USD 30 million of CapEx left to bring that project into production. So it's a world-class ore body, and we're making good progress there in the development of that project. If we could just move to the next slide, please. There's 3 big catalysts that we've been telling people that we're aiming to deliver for 2026. The first of those is the increase in the Hengjaya mine RKAB, whilst it was short of the $19 million that we were seeking, I think the loss of 4 million to 5 million tonnes, which equates to sort of USD 50 million to USD 60 million in EBITDA has been more than outweighed in the significant increase that we've seen in the NPI and LME nickel price. And I'll talk about what that has done to our January results and what it means for us looking forward. To date, we are the only company that has achieved an increase, with larger companies being cut by almost 2/3 from their 2025 quota. So we think, again, strong endorsement of Hengjaya Mine's environmental and ESG track record. The additional $5.3 million will obviously -- should increase the EBITDA for the Hengjaya mine for 2026. The second catalyst is the commissioning of ENC and as you've just seen, that's progressing extremely well. And we reported HPAL margins of over $10,000 a tonne in January at 72,000 tonnes of nameplate capacity. But remembering that HNC is running at about 40% above nameplate. It's not unreasonable to think that there will be some outperformance at ENC as well. So we look forward to the commissioning and ramp-up of ENC over the course of this year and then first full year of production in 2027. And then finally, the Sampala mine, as I've just touched on, progressing well in terms of development. And that will add significant additional EBITDA as well, particularly given that we already have an MOU for 14 million tonnes of limonite on an annual basis. If we could just go to the next page, please. So the closing share price of $1.01 as of last week and a market capitalization of around USD 3.1 billion. We think we are very undervalued if you look forward for what we can deliver in 2026 and in 2027. The broker consensus forecast gives us an EV/EBITDA multiple of about 7.1x, but that's on about a $500 million EBITDA estimate for 2026. I would note that from our NPI -- well, in January, we delivered USD 50 million in EBITDA, and that consisted of NPI margins jumping over around 150% from about $1,114 a tonne for the December quarter of last year to $2,800 a tonne in January. We haven't yet captured that full NPI increase. So if you take our annualized NPI production of over 130,000 tonnes of nickel in NPI and apply a $3,000 a tonne margin, you can see that there's potential for close to USD 400 million in EBITDA just to be delivered this year, assuming pricing stays the same from our NPI business. We then have the HPAL margins at above $10,000 a ton, taking a conservative number of 20,000 to 30,000 tonnes for ENC for this year, there is another USD 200 million to USD 300 million in EBITDA. So we're already well past that $500 million broker consensus number. And then taking the $14.3 million RKAB and applying a $12 a tonne margin, that's another USD 170 million for calendar year 2026. So that puts us up around USD 700 million to USD 800 million, significantly reduces that EBITDA multiple back to sort of 4 times. So again, we think that the significant growth that we're looking forward to in 2026 is not yet priced into the stock. And as I said, looking forward into 2027, we'll have the first full year of ENC as well as the -- hopefully, the commissioning of the Sampala mine, which will deliver again, more incremental EBITDA. Any -- the final point, we're extremely well leveraged to any change in the nickel price given our significant volume. And I've just touched on the volumes for 2026 and additional volume growth coming in 2027. All of this growth is fully funded, requires minimal sustaining CapEx. We're the beneficiary of significant tax holidays and any improvement in the nickel price offers significant EBITDA upside. And I think that's been strongly evidenced in our January results alone. And so looking forward to 2026, assuming no change from where we sit now, and that price increase is being driven by the significant RKAB quota cuts, we're looking forward to a very strong 2026. With that, I hand over to questions. Operator: [Operator Instructions] And your first question comes from the line of Austin Yun from Macquarie. Austin Yun: Just a couple of questions. The first one is on the mining operations. I understand there was a mining landslide incident happened after the RKAB update. I'm just wondering if that had any implications of the Hengjaya mine to continue mining with that mining quota? Or has there been any changes since that event, the land slide event? Justin Werner: Yes. Austin, I think you're referring to a QMB tailings bridge. That's not our operations and has nothing to do with our mining operations. Austin Yun: Yes. Understood. That's a third-party mine, but I just wonder if -- okay, it sounds like no impact. The second one is on, I believe your RKEF and ENC is fully covered by this new RKAB quota. Just keen to understand for the HNC HPAL process, what's the source of ore and given the recent cut to Weda Bay, has that had any impact on the HNC operation? Justin Werner: Yes. So this quota will allow us to provide 100% of the ore requirements for ENC for 2026. It will also mean that we will be able to supply the same amount of saprolite that was supplied last year to our RKEF in IMIP. So that puts them at about 60% self-sufficiency. So there's no change there. We currently don't supply to HNC. They are supplied by another third-party. So that we will only supply moving forward this year. Once we start commissioning 100% of our limonite, we'll be going to ENC and no other parties. Austin Yun: And just lastly, on the capital allocation. It's good to see that the cash flow pressure is taking off a bit by the sell-down of the ENC. Given we're entering a period of high nickel price, just keen to understand your capital allocation priority for the next 12 months and how you think about balancing between debt reduction versus shareholder return? Justin Werner: Yes. So we have about USD 46 million remaining for 2% in ENC, which is due in the end of March of this year. In terms of any other CapEx payments, there's just USD 20 million to USD 30 million for the development of the Sampala project. So look, that's it for this year. We'll have around USD 100 million of interest payments. So I think looking forward, we should generate some strong free cash flow. How we will be looking -- taking a look midway through the year and looking at, is it appropriate to look at -- to revisit the dividend, to look at the share buyback and obviously, any debt payments. So we'll be making that decision as a Board later in the year. We have been working and -- throughout last year, and we'll be continuing to do the same this year to really optimize that debt stack, bring down the interest rate, try to remove as much amortization as we can and push out the maturities. And so we continue to work on optimizing that debt stack moving forward. Operator: Your next question comes from the line of Richard Knights from Barrenjoey. Richard Knights: Just on the 14.5 million tonne quota, I presume you'll be looking to try and increase that midyear. I mean, how do you think about the phasing of production over the next sort of 6 months? Should we be just sort of flatlining it at -- or flatlining sales at a sort of 14.5 divided by 12 monthly number? Justin Werner: Yes. We are able to make another application midway through the year to increase the RKAB. So we will be doing that. In terms of the sales numbers, once ramped up, and I think you could sort of look at around sort of September of this year, we will need about 1 million wet metric tons of limonite on a monthly basis. So we will be looking at sort of maintaining where we are at the moment. And so we shouldn't see a significant change on a monthly basis. And we've sort of now reduced our limonite supply to third-parties. And so we're more focused on saprolite at the moment. Richard Knights: Yes. Okay. And I think you mentioned in the call that Sampala, you're now looking at a 2027 start. Is that right? And when -- if that's the case, when do you think you'll have to make the incremental payment to the landowner there? Justin Werner: Yes. So we're very focused on permitting there. And unfortunately, as with a lot of things in Indonesia, there is permitting approvals that are required that are outside of our control. But we obviously are doing everything similar to what we did with the RKAB to ensure that we can progress those on a timely manner in a -- with a good outcome. In terms of the resource development and closing of that project, we are looking to get an update out to shareholders this week. Richard Knights: Right. Okay. Yes. Okay. So we'll wait for that. And then is Chris on the line at all? I just had a couple of nitpicky questions about some of the expenses. In particular, there was a financing expense line of $22 million in there that didn't include the bond issue costs. Just wondering what that was? Christopher Shepherd: There's -- it's not the bond issue costs, the early takeout of the October '28 bonds. And obviously, taking that earlier, there was a make-holder pay on that. Richard Knights: Got it. Got it. And then just in other expenses, there was a $15 million other expense, $15.6 million, that was quite a big number. Just wondering if you can share any flavor of the kind of things that were in there? Christopher Shepherd: Yes, there were some increased selling expenses out of our RKEF operations and also a write-off of the loan of some of the loans to -- which is in Note 8. We carry some loans for the Sao Paulo transaction, but that's the majority of the differences. Operator: Your next question comes from the line of David Coates from Bell Potter Securities. David Coates: Great. Most of my questions have been answered actually. But a couple of smaller ones. Justin, would you mind just running through the swing factors on the Hengjaya mine expansion? You touched on at the start of the call. Could you just outline those again for us, please, in terms of the impact on profitability? Justin Werner: Yes. There was obviously -- the significant one was the USD 21.5 million in standby costs in the December quarter. Other than that, margins remained fairly stable throughout 2025. We did see some price increases in limonite ore. But look, that -- the big factor in Hengjaya mine performance was really that -- those standby costs pretty much for the whole of the December quarter. We were only able to mine for the last 19 days of December. David Coates: And what was the sort of, I guess, sort of a lost production that came out of that, that you might estimate out of that? Justin Werner: Yes. Look, given that prior to that, we actually had 2 record months before we stopped of over 1.5 million, potentially at sort of 4.5 million tonnes. So probably USD 45 million. That's at a $10 margin, probably more than that at $12, which is what we -- sort of we're seeing. So that sort of USD 50 million to USD 60 million in lost EBITDA. So I think that's sort of -- putting that back into the adjusted EBITDA numbers, it would have seen us on a pretty even kill to the 2024 adjusted EBITDA number. David Coates: And Chris, just again, a little bit of a detailed one. D&A charges for heading into 2026, what sort of an increase would we be looking to see roughly? If you can illustrate any [indiscernible] indication of that at all? Christopher Shepherd: Off the top of my head, I'd be guessing, so I'm not going to do so -- I'll come back to you. Operator: [Operator Instructions] And your next question comes from the line of Jonathan Tan from BlackRock. Jonathan Tan: I think I just got a couple of clarification points, right? So the first one is that I know that you are producing above nameplate capacity for the RKEF plants. But how much [ores ] does ENC and the RKEF plants require separately on a full year of nameplate capacity? Justin Werner: Yes. Thanks, Jonathan. ENC will require about -- at full nameplate about USD 12 million to USD 14 million -- sorry, 12 million to 14 million tonnes of limonite and our HPAL operations roughly require about 1 million to 1.2 million tonnes of saprolite ore on an annual basis, and we have 12 lines, 4 of those, I would note, are at a smaller capacity. So our saprolite requirements are about sort of 10 million to 11 million a year. So that's where the -- we sold close to $6 million in saprolite last year. So that's where we're sort of sitting at about that 60% self-sufficiency. Jonathan Tan: Okay. Then I guess the follow-up question to that will be what's the cost difference between being self-sufficient and having to purchase the required ores? And I guess, do you see any difficulty in purchasing the required ores because it looks like it's like [ 20 to 25 ] in total versus your 14.5 million quota? Justin Werner: Yes. So there is a cost -- big cost advantage in being self-sufficient. The reason for that is that given the shortages, there is a premium over and above the market price. That premium has ranged anywhere from sort of $10 up to almost $30. And so given that ore is about 35% of your cost base for your operations, there is an impact to the profitability of the RKEF. But I think that's been more than outweighed if you look at the NPI price increase, as I mentioned, it's up over -- there's a significant increase in the NPI price. And that led to, if you look at January, 150% increase in our EBITDA per tonne margins. So there is an impact, but the increase in the NPI price for us is far outweighing the increase in -- any increase in the ore costs. In terms of supply, Indonesia consumed about 270 million tonnes of ore last year. The current RKAB quota is about $250 million. That's what the government is looking to set. So there may be some shortages that will be filled by ore from the Philippines. But we don't see any risk to our operations of being able to secure ore supply. We think the risk will be smaller nonintegrated players that won't be able to purchase ore and don't have the power advantage. They have -- already have a much higher cost. Jonathan Tan: Got it. I think I just have one last question. So in terms of your Sao Paula mine, what's the expected quota for 2027, I mean, given that it got kind of tightened? Justin Werner: For Sampala, our initial target will be about 6 million ramping up to -- we obviously would need about $14 million to meet our -- the requirement for our MOU. We -- reason we're confident in being able to achieve that is Sampala actually has 3 different IUPs. So each IUP makes an individual application. So we think we'll probably have a better chance of -- let's say, we want to do -- we want to get to 18 million tonnes. We think we'll have a better chance of doing an aggregate of 6 million tonnes per company per IUP rather than trying to get a headline 18 million tonnes out of just one IUP. Operator: Your next question comes from the line of Dim Ariyasinghe from UBS. Dim Ariyasinghe: Just a couple of ones. First on the ENC ramp-up. So you talked to commissioning over this quarter. Just in terms of like first sales though, can you walk us through that? Have you got the license to commercially produce, I think, IUI? Yes, what does that look like over the course of the year? Justin Werner: Yes. So the IUI, we can't actually apply for that until there's sort of mechanical completion and a closing off of the investment CapEx by the government. And then in terms of first sales, we're probably targeting somewhere around July. Given that first sales out of the HPAL plant, you're talking about a 2 to 3-week resonance time from feeding first ore to achieving first product and about a 40-day resonance time from feeding MHP into the cathode and sulfate refineries to produce product from those refineries. Dim Ariyasinghe: That's clear. And then just on the broader RKAB news. Is there any -- and so somewhat positive that you got more than previous years, but not what you requested. Is there any signs between -- in -- so you're getting allocated 14 versus Weda Bay, I think, getting 12 and requesting 42. Yes. Can you walk through the rationale there? Or is it pretty opaque, I guess? Justin Werner: Look, that is something that we have raised with the government. We think that providing more transparency would certainly be well received by miners in Indonesia. I mean, Weda Bay, we were told that their number was calculated based off -- they only have 8 RKEF lines. So it was the 8 RKEF lines, which require about 8 million tonnes a year, plus they were given 30% over that. Our number was based on what we did last year in saprolite, plus the 8 million tonnes of limonite that's required for ENC this year, given that it's not a full year of production. And so it's not the 12 million to 14 million that's required next year. So look, they've told us that there is some science behind it, but they haven't provided any sort of transparency in terms of how it was actually calculated or they haven't provided transparency certainly to the broader market either. Slightly frustrating. But look, I think it's not also just that. It is what is your rehabilitation track record and your environmental track record? Are you up to date on payment of royalties and taxes? And have you been a good payer of royalties and taxes rather than being someone who's been slow or relaxed? So I think there's other things that go into it. So as I said, unfortunately, it's not transparent at this point, but something that I think a lot of miners in Indonesia are pushing the government for moving forward. Operator: Your next question comes from the line of Mitch Ryan from Jefferies. Mitch Ryan: Just following on from Dim's question there, given the material cuts to some of the feed sources for WIP, what happens to your capacity within that if you're unable to source appropriate feed? Or how do we think about just the broader facility there? Does everyone get scaled back accordingly? Or do some lines get turned off if you're unable to source the 100% required feedstock over the course of this calendar year? Justin Werner: Yes. Look, we actually had a Board meeting end of last week with Tsingshan. And they are confident that there will be no scaling back, that they'll be able to source the required ore from other third-party ore suppliers. And coming back to the numbers, I mean, there was only $270 million produced of all sales made last year, and there was over $350 million of RKAB quota issued. So a lot of companies were issued quota and didn't even use it. The $250 million that they've introduced this year, assuming everyone reaches it because, obviously, it's very valuable. We think there's only a small requirement of ore. And that $20 million will most likely be to other nonintegrated players that as I said earlier, I think they'll struggle to source that ore in the market. Mitch Ryan: Okay. And then just with the ENC ramp-up, can you give us -- you've obviously got performance guarantees within that agreement. Can you just remind us of some of the key milestones for those and how that would work if for any reason that ramp-up was slightly delayed? Justin Werner: Yes. That's something in terms of those guarantees that we'll be working through Tsingshan in the coming months as we move forward with the commissioning and ramp-up. Operator: Your next question comes from the line of Tim Win from Win Dragon Family Trust. Unknown Analyst: It's been covered. Operator: [Operator Instructions] And your next question comes from the line of Jit Ming Tan from Barclays Bank. Jit Ming Tan: I just wanted to get some clarity on the ENC's 10% acquisition by Sphere. There have been some changes to the final terms from what was originally announced. Can you just walk us through why that was the case, especially the credit enhancement that Nickel Industries provided as well as Nickel Industries stake which was, I think, originally intended to be 55% at the final end, but is now at 46%? Justin Werner: Chris, do you want to take that one? Christopher Shepherd: Yes, that's fine, Justin. Thanks for the question, Jit Ming. The first one, I think what you might be referring to, I don't think there has been any change -- sorry, I don't think there has been any change in what we've announced. Sphere is always taking 10% of the -- of ENC for $2.4 billion. $30 million of that is in an equity payment, which they have made in full as of today and the remaining $210 million in debt. The important thing around the $210 million in debt, when we're in conversations with Sphere towards the end of 2025, Sphere was a $200 million market -- listed market cap -- listed company in Korea with a market cap of around USD 200 million, very difficult for anyone at that level to acquire to make a $240 million acquisition. We saw the strategic advantage in bringing -- or strategic benefit of bringing SpaceX into our supply chain -- into our customer chain, sorry, and being a supplier effectively to SpaceX with Sphere being the intermediary. So we -- the 3 lenders who provided that loan are very well known to Nickel Industries. There are -- 2 of the 3 are existing lenders to Nickel Industries. And -- so we were very comfortable -- and they were very comfortable taking effectively Nickel Industries risk. And so we provided guarantees to Sphere for that $210 million. As set out throughout the report, you can see that it positions us very well. If for whatever reason Sphere ever defaulted, which based on the cash flows that we're seeing out of HNC and what we expect for ENC, we cannot see that, that could be the case, but we would simply step into Sphere's shoes for that 10%, effectively acquire that for -- and then take over the loan. So effectively acquire that remaining 10% for a significantly higher -- a significantly lower amount than what we were previously looking to pay for our remaining 11% for ENC. The reason why we've gone -- so that left us still sitting at 44% rather than going up to 55%. The reason why we've announced another 2% increase is predominantly because we wanted to be the largest shareholder in ENC. And so we -- and then Shanghai Decent was very happy with that. So we increased -- bought 2% and they obviously sold us down 2%, or they will sell us down. We've got a remaining $46 million payment to make by 31 March, and that will be our final payment for ENC. What it also does, bringing -- not making those final payments, as you can see in our announcement, is it releases another $207 million of commitments that we were going to make 2 payments, one on 1 July this year and one on 1 October. So it's really a way to also strengthen our balance sheet going forward. And as we continue to watch the margins, hopefully, the margin stays steady. I'm not going to try to predict margins. So just releasing in the near-term, that commitment of over $200 million through conversations with various interested stakeholders was considered to be very prudent balance sheet management. Jit Ming Tan: Appreciate that, Chris. If I can follow up, can you talk a bit about when Sphere's offtake arrangement will start and if you are in discussion with any other third-party customers for offtake arrangements as well out of ENC? Christopher Shepherd: Sphere is a 10% equity holder in ENC now, has rights to 10% of the product that comes out. So as soon as production starts coming out, as products are sent from ENC, Sphere will receive its share of the products. In terms of other customer or other potential offtakers, Justin, do you want to talk to that? Justin Werner: Yes. So look, we are in discussions with a number of other offtakers. Obviously, the Sphere announcement has been positively received. So we will continue to have those discussions as we near first -- production of first product. Operator: There are no further questions at this time. So I would like to hand back for closing comments. Justin Werner: Thanks again, everyone. As I finished on, given the significant strengthening in the NPI and LME nickel price and the delivery of USD 50 million in EBITDA from operations in January alone, we think that we're extremely well placed in 2026 for a very strong year. And obviously, with ENC commissioning at the current $10,000 a tonne margin in the HPAL business, we're set up for a very good year, and we look forward to delivering EBITDA that is -- that should be significantly stronger than last year, which was obviously a tough year given it's probably the lowest nickel price we've had in the last couple of years. But despite that, we were still able to deliver robust EBITDA. So thank you, everyone, for your time today. Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the HELLA Investor call on the preliminary results for the fiscal year 2025. The call will be hosted by Dr. Peter Laier, the CEO; and Philippe Vienney, the CFO. [Operator Instructions] Let me now turn the floor over to your host, Dr. Peter Laier, CEO. Peter Laier: Yes. Thank you very much, and good morning. A warm welcome to everybody for our call in regard of HELLA's 2025 preliminary results. We have structured the presentation today in 4 parts. If you could go to the next slide, please. The first is an introduction of myself because I'm newly assigned as a CEO of the company. The second will then be focused on preliminary results 2025, followed by a company outlook and the strategic priorities at the end, then we will summarize the key takeaways for all of you and then open the call for questions. Yes, let me start first with a brief introduction of myself. I'm now since somehow 3 decades. If you could go on Slide 4, please. Thank you. I'm now since around about 3 decades in automotive industry, started my career at Continental Automotive, where I used to work 13 years in electronics and sensorics, used to work in Asia, leading the Continental Automotive business in Japan and Korea and then were responsible for chassis and for brake systems. After that, I joined OSRAM in 2013 as a CTO, did the spin-off with the Board of OSRAM at that point of time. And after that, joined Benteler as a COO of the company. And the next stage was Knorr-Bremse as being a Board member responsible for the commercial vehicle business. And then joined ZF Friedrichshafen, where I was responsible for commercial vehicles and industry business and for operations and purchasing for ZF globally and now being assigned as a new CEO at HELLA since 16th of February. So pretty new in this role. And in that role, I'm pretty happy to welcome you here in this first preliminary result call for the HELLA results of 2025. Okay. Then let's look to the preliminary results. If we could go then further in the presentation on Chart 6. Thank you. Yes, to summarize, the organic sales of HELLA in 2025 were somehow stable with EUR 8 billion. 2025 was characterized by strong net cash flow performance and an increase of profitability. How does it look a little bit more in detail? As I mentioned, the HELLA Group organic sales were at prior year level of around about EUR 8 billion, including a negative FX down by 2.1%. So we had a strong sales development in Electronics across all regions, for example, notably driven by our radar sensor business, our battery management systems and our car access to just give some examples of growth. On the other side, our Lighting business was affected by the phaseout of some programs, which we partially could compensate by a ramp-up of new headlight and rear combination lamp business in this business group. In Lifecycle Solutions, we had a positive organic sales development in second half year 2025. That resulted in an operating income for HELLA in 2025 of EUR 474 million in comparison to EUR 446 million in 2024. And this resulted again in an operating income margin increased by 48 basis points to 6%. What we see is that the acceleration of our cost reduction measures with savings, particularly in R&D, drove efficiency and with that structural adjustments. On the other side, the positive effects out of those measures were partially influenced by negative volume and mix effects and that resulted in the mentioned operating income and margin. If you look shortly to net cash flow, we increased the net cash flow in comparison to 2024 by EUR 129 million to a remarkable level of EUR 318 million in 2025. So that led to a ratio to sales of 4% in regard of net cash flow and that in comparison to prior years, 2.4%, a significant increase. So we had a higher cash flow on the one side from operating activities, EUR 58 million improvement and the other improvement came out of CapEx savings, a part of our improvement program, EUR 105 million savings here. In regard of order intake, we had again EUR 10 billion, which is showing a strong demand for our core products as well as for our innovations. If you look a little bit deeper to order intake, what we see is an intensified business, which we could achieve in North and South America with -- on the other side, with local OEMs in China, some gains in Japan and in India, that leads to an overall more than 50% share of order intake outside of Europe. This shows that we have a strong demand for our HELLA core products and our new technologies, for example, like intelligent power distribution modules or zonal modules, some of our core innovations and new technologies. If you look now a little bit deeper in the business group, I hand over for that to Philippe Vienney, our CFO. Philippe, please. Philippe Vienney: Thank you, Peter. So good morning to all of you. So looking at some more details per business group. Let's start with Lighting. So Lighting, we had total sales in '25 of EUR 3.7 billion versus EUR 4 billion in '24, with an operating income of EUR 106 million, which represents 2.9% of sales versus 3.2% in '24. So in Lighting, we are suffering from discontinuation and very large volume series projects, especially in America and in China, which are going down, which is impacting the top line of Lighting. We have also to face some weakness in the European market on some specific products impacting the Lighting business group as well. On the other side, we have some ramp-ups and increase of volumes for U.S. OEMs, but which is not enough to compensate the sales drop that we are facing in China and in Europe. So at the end, the operating margin of Lighting is at 2.9% against EUR 106 million, so yes, mostly impacted by the volume and the loss of revenues, so which is impacting the gross profit, which have been partially offset by some structural measure on SG&A and R&D, but not enough to sustain the margin that we have posted in '24. When we look at Electronics segment, here, we are reaching sales of EUR 3.4 billion versus EUR 3.3 billion in '24. Operating margin at EUR 269 million, which is representing 7.8% of sales versus 6.9% in the year '24. So here, the sales are still highly driven by radar and electronic power system, mostly in Americas and in Europe, so which is benefiting to the top line. We have also a good start-up with the smart access system in Europe and in Asia. And we have also in China, the low-voltage battery, which is also ramping up and adding sales as well. So here, we have an operating margin of 7.8%. So the volume is helping us a bit. We have also had the SEK sales or tooling sales, which have helped us in Q4 to increase the margin. And we are also spending much less in R&D, and we are doing some savings in administration as well, which is helping the operating margin versus what we have been doing in '24. Looking at Lifecycle Solutions. Here, we have sales which are nearly stable at EUR 1 billion like in '24, with an operating margin at EUR 109 million, which is 11.1%. So here, we have basically a stable market or stable sales on the spare part business. So reported sales is slightly negative due to FX rate, but the activity is mostly stable on the spare parts. On the other hand, we have lower demand on the commercial and agricultural businesses. And we have -- but we have some rebound or some slight increase in H2 '25 on this market, which is -- which has helped a little bit the year '25. Operating margin at 11.1%. So here, we have an increase on the gross profit due to the savings and the restructuring. Plan, which had been undertaken in this. And we have also some savings on the R&D side and distribution costs, which have also helped the operating margin. Now if we look at the demand and the order intake, I hand over again to you, Peter. Peter Laier: Thanks, Philippe. Yes, if you could go to the next slide, you see there are some order intake highlights for 2025. As I already mentioned, more than 50% of our order intake share came from regions outside of Europe and that you will see as well in the different business groups. So let me start with Lighting, where we had some further acquisition successes in the Americas as well as in Asia. You see here on the chart some examples like, for example, car body lighting and headlamp business for different mass market models for European OEMs. And I think that's an important message that we are penetrating further the mass market now as well with a Lighting business. We won some headlamp packages for different models of European OEMs for the U.S. market with SOPs in '28 and '29 and some headlight packages, including adaptive lighting technology for 3 different series of U.S. OEM for SOP in '28. I think remarkable in Lighting is as well that we won different headlamp and car body lighting packages for Chinese OEMs for several car models with SOPs in '26 and beyond. And this is executing of our strategy that we want to grow with Chinese OEMs and confirms that we are here on the right path. If we look to Electronics, we are further winning business to reinforce our position as a market and technology leader in the selected areas where we are going to play and win. And you know that we have a long tradition in selecting those areas carefully and play to our strengths. So you see here with the first example, we have 1 billion orders for intelligent power distribution management and zonal modules from an international premium OEM with SOPs staggered from '25 and '28, which is remarkable. That's confirming our strategy in regard of going in the direction of zonal modules or ECUs. Then we continue with our success story on radars with a 3 million-digit order for our Gen 5 and Gen 7 radar technology from a European OEM and Gen 7 radar solution for Japanese OEM for the Indian market with the SOP in '27. In addition, 3 million-digit order intake for smart car access from a U.S. OEM confirms here that we are on the right path. If we look to Lifecycle Solutions, we have new order wins, which increases our customer outreach and which clearly indicates that there is a strong demand for our customized technologies. So for example, we have won a fully customized FlatLight technology for a Dutch bus maker or a customized lighting for an off-road vehicle of a premium manufacturer with SOP in '26. We have different LED front lighting systems, which we won for the European OEM for the Indian market or LED rear lamp for international trailer manufacturer for the Indian market, which confirms as well here the internationalization of our business. And last but not least, we won an LED headlamp from international manufacturer for agriculture technology with the SOP in '27. Yes, so far to our 2025 preliminary results and related informations for order intake. With that, I would now go into 2026 and would start to talk about our outlook for 2026, followed then by some strategic priorities. If we could switch to Page 10, please. What I would just start with is we are seeing somehow sluggish, stable development of our vehicle production globally and the details will be presented by Philippe. Philippe, handing over to you. Philippe Vienney: Thank you. So yes, we see a stagnating market in '26 based on the latest figures published by S&P in February '26. So minus 0.2% in '26 versus '25 after '25, which was relatively good in terms of worldwide production. So per region, we see Americas, Europe and even Asia Pacific going slightly down versus '25. So with this outlook in terms of market. We go to the prognosis or the outlook for '26 for HELLA. So we see -- we would like to guide the sales between EUR 7.4 billion and EUR 7.9 billion. So here, again, taking into account a stable market and still facing some top line revenues issues on Lighting. We have detailed in former calls that we are expecting a rebound for Lighting in '27. So we are still facing this drop in revenues in '26 for Lighting. So leading us to this guidance in terms of sales, EUR 7.4 billion to EUR 7.9 billion. Operating margin between 5.4% and 6% of sales, also taking into account the revenues, which would be slightly difficult for Lighting. And also having in mind that the full benefit of the turnaround plan of Lighting with the adjustment measures and restructuring measure will take full impact in '27 and '26 will be still the turnaround year. In terms of net cash flow, we say at least 1.8% of sales. So here versus '25 achievement, basically, this 1.8% is built on slightly lower funds from operations, but we also do expect more cash out linked to the restructuring program with, let's say, people leaving in '26, then the cash will be out as well in '26. So higher restructuring spend in '26. And we also do plan some higher CapEx in '26. We have said that we have been able to reduce the CapEx in '25 by EUR 100 million. We do not expect to do exactly the same in '26, and we are planning to have EUR 50 million more, I would say, in '26 in terms of CapEx to prepare the future, the launches and the rebound, which is expected in '27. So that's all in all, what is behind this outlook for '26. And maybe then we can go to the strategic priorities to figures. Peter Laier: Yes. Thank you, Philippe. Then I'm taking over for that. Again, in regard of our strategic priorities, if we go to Chart 12, please, we see 3 strategic priorities, which determines HELLA. The first is best-in-class performance, the second is business transformation and the third is invigorating culture and organization. If we look a little bit more in detail to best-in-class performance, that means for us, we need to secure best-in-class execution across all business groups and functions and improve cash flow because this brings us in a position to further invest in the future-proof positioning of the company and in our growth areas. That means we have started a program in the company to simplify all functions to a level of functional excellence on the one side. And as you have seen in the figure presentation of Philippe, we have to transform our Lighting business. And here, we have a strong focus on. In addition, we will continue our competitiveness program where we see already first improvements out of that in the results of 2025 and we will continue in 2026 and do some further structural adjustments. In regard of business transformation, we will diversify further our regions and our customer base. So we want to become more international and the acquisition of more than 50% of non-European business is showing that we are already on a good path. And with that, we want to strengthen our resilience and with that we want to focus on further growth and a future-proof portfolio. That means we will do rigorous portfolio management with focus on growth and affordability and with clear priority setting. We will then achieve a lower dependency on the European market and strengthen the relationship specifically with Asian and American OEMs. And we will further derisk our global supply chains. In regard of invigorating culture and organization, we will develop our culture further with a clear focus on the pair of empowerment and accountability and further simplify our structures. That means we want to reduce our complexities in our organization and streamline the processes, and we want to further establish and strengthen regional teams to access local customers, which supports then the mentioned internationalization where we are focusing on. And we will reshape our engineering organization towards the digital age, including using of AI. If we go to the next chart, let's look a little bit deeper what that means as focus for our business groups. For Lighting, in regard of best-in-class performance, we will definitely focus on affordability of innovations, on simplified functions and reduced development lead times, specifically with a focus on Chinese OEMs. And we will work further on competitiveness in regard of Lighting, and that has a strong focus specifically on the transformation of our plants in Europe and in the Americas. In regard of Electronics, we will do a best-in-class performance and enhanced regional footprint and focus on R&D efficiency. Then we will work on CapEx and resources. We will allocate our invest in CapEx to the strategically identified selected growth segments. I will talk a little bit more about that as well on the Capital Market Day tomorrow. And on Life Cycle Solutions, we will consequently use digitalization and leverage AI, and we will further work on our functional excellence and adjust further our footprint in operations. If we look then to business transformation, diving deeper in the business groups, that means for Lighting, very clear highest focus is that we have to transform Lighting and achieve a turnaround over there to improve margins again sustainably. We will work on a future-proof product portfolio, and that means specifically that we want to address much more the volume segments of the Lighting market and we will work further on balancing our customer mix, and that means specifically working with Asian customers and penetrate more the market in the Americas. In Electronics, I think we have unique capabilities and know-how in the company, and we will leverage them specifically in regard of battery and power modules for all different electric powertrain vehicles. That means from mild hybrids, plug-in hybrids, range extenders to full battery electric vehicles, where in all areas, these battery and power modules are needed for efficiency. We will use our scale as a first mover to roll out zonal modules, where, as I mentioned before, where we have already remarkable business wins. And we will focus as well here on business wins in the Americas and in Asia. In regard of Lifecycle Solutions, business transformation, focus for us is on the one side, we will start further product initiatives in the independent aftermarket. We will extend our focus to the mid-price segment and leverage our channel here. And as well here, we focus on international growth in North America and EMEA specifically. If you look to invigorating culture and organization in Lighting, we will implement a new leadership model in all areas, not only in Lighting, and we will implement organizational responsibilities for our people in an enhanced manner that is the part of empowerment I talked about before. We will work in all business groups on digital AI tools, which we will implement, and we will streamline the decision-making and increase internationalization. Based on that, if we look to the next chart, in regard of our midterm targets in regard of Lighting, if you can go to the next chart, please. I think you see the presentation anyhow, I will continue. In regard of Lighting, we will transform the business to a sustainably improved profitability situation, and we will broaden the customer base. Based on that, we will further act as a top player in the market, but serving both in the future, premium and volume segments. In regard of Electronics, I already talked about our unique skill and know-how set. And with that, we will further expand the business systematically and increase profitability. We will here clearly select our business arenas carefully and with that further realize profitable growth. And that means we will use our technology leadership and with that, grow disproportionately in those areas which are characterized by innovation. And last but not least, in Lifecycle Solutions, we will leverage our market position, our channels to the market and our brand to sustain double-digit margin. And with that, we will play here in the top 10 independent aftermarket player league and in addition, working on further commercial vehicle business and work as a workshop product supplier here further. With that, I would like to come to the key takeaways. As a summary, if we look to 2025, I think we can summarize that, that was overall a solid performance of HELLA in financial year 2025. Page 16, please. With -- can you go on 16, please? Overall, a solid performance in financial year 2025 with stable sales at EUR 8 billion, supported by growth in Electronics. We have an increase in profitability driven by acceleration of cost reduction. In addition, we had R&D savings and increased efficiency. This led to a significant improvement of net cash flow, driven by the mentioned operational performance measures and CapEx savings. And with that, we met the financial outlook for 2025 fully. If we are now looking to outlook for the financial year 2026, as I mentioned, we are not expecting tailwinds from the market. And based on that, our outlook for 2026 financial year is a sales between EUR 7.4 billion and EUR 7.9 billion and OI margin between 4.5% and 6% and the net cash flow to sales ratio at least at 1.8%. To remind you, our outlook is based on around 92.8 million light vehicles produced. And as mentioned, we are still expecting a volatile and challenging industry market situation for 2026. The 3 strategic priorities going forward are best-in-class performance across all business groups and functions, the business transformation to strengthen the resilience of our business model and the invigorating culture of empowerment and accountability. Yes, with that, I would like to close our presentation part of preliminary results of HELLA in 2025 and the outlook. And with that, we are opening the floor for questions, handing back to the operator. Operator: [Operator Instructions] So we have the first question from Sanjay Bhagwani from Citi. Sanjay Bhagwani: Maybe the first one, just zooming into a little bit on the guidance. So is the guidance -- I mean, generally, what we have seen over the past few years is HELLA generally tends to be a bit conservative on guiding, but manages to get to more or less to the upper end of the guidance range for most of the years, except for what we have seen in '21, '22, which was semiconductor crisis. So is there some element of conservatism baked here? Or is the Lighting, I understand you mentioned as a key driver here, so just trying to understand how much of that is conservatism? And what do you think for the Lighting, how bad it can be for '26 before it gets better in '27? That's my first question. I'll just follow up with the next one. Peter Laier: Yes. First, thank you, Sanjay, for the question. Maybe I'm starting and then hand over to Philippe. 2026 will be, again, a year with challenges for our Lighting business. As we mentioned, we have a discontinuation of some big business, which is further influencing sales in 2026 for Electronics as well as for Lifecycle Solutions, we will be at least stable in this year. And then we have to consider the challenging market conditions we mentioned in the presentation that brought us basically to the top line guidance in -- on the level as you have seen. But furthermore, Philippe, handing over to you. Philippe Vienney: Yes, it's true that the guidance is coming from Lighting, where we see the further sales drop, which is more or less representing the full drop for next year in '26. So Lighting is really the driver of this guidance, which could be seen as a low guidance, but that's the main impact is basically Lighting. Sanjay Bhagwani: That's very helpful. So if you think like the -- if Electronics and the other division is stable, then if we just back calculate, what we get for Lighting is roughly 9% to 10% decline in top line. Is there a specific program, which is driving this? Or it's broad-based some specific -- so maybe if you can just recap us what is driving Lighting down for '25 and if this continues at a 10% rate in '26? Is that your assumption? Peter Laier: Philippe? Philippe Vienney: Yes, I think we continue to see the same trend as we had in '25 and started to see in '24. We continue to have some reduction in China with some, again, large programs, which are still going down, not fully replaced. And we also have some weaknesses in Europe, which is also the case in '25. So we continue to see the same trend. And again, some additional sales coming from North America, but as in '25, not enough to fully compensate the drop that we will face in the other 2 regions. So yes, the new programs that we have been able to get will really give us the impact in '27. That's why the '26 is still continuing on the same path as in the past for Lighting. Sanjay Bhagwani: That's very helpful. Lighting is very clear. And for the other divisions in terms of margin expansion, are you expecting any other like the cost-saving programs may feed into some sort of margin this year for electronics and LCS? Peter Laier: I think as you have heard, we have started our improvement program and this improvement program will have as well some related costs, which we will see in 2026. Therefore, we have in 2026 some influences out of that, which is as well then seen in the bottom line performance, but that will then be the basis for further improvement for the years after that. Operator: [Operator Instructions] And we have one more question from Thomas Besson from Kepler Cheuvreux. Thomas Besson: First, I'd like you to help us bridging the performance in Q4 versus the message you had given in Q3. Clearly, vehicle production was stronger, but there seems to be more than that. I mean, at Q3 stage, you had said that Lighting would be probably as bad as in Q3, and it proved to be a lot better. You mentioned some tooling support in Electronics. Could you give us a magnitude of that figure and explain if there's any one-off related to R&D reimbursement or something helping Lighting in Q4 versus expectations? That's the first question. Philippe Vienney: Yes. So it's true that basically, we had the Q4 SEK sales and tooling were more or less 50% of what we have been booked, so cumulatively until end of September. So strong activity on the 2 E&D and leases, which are also helping in Q4. And then we have some -- finally, some adjustment on claims and pricing also, which have been materialized in Q4 for Lighting, which has also helped a little bit the Q4 results. Thomas Besson: Okay. So coming back to the previous questions, I mean, you're suggesting that Lighting is entirely responsible for the guidance for lower revenues and profitability. So do you expect these adjustments you've mentioned for Lighting not to be sustained in '26 and therefore, margins in Lighting to decline? I'm not sure I understand. And can you confirm that you are making no assumption in terms of perimeter on the guidance? Peter Laier: So yes, Lighting, so we do see -- so the tooling sales and SEK sales are more or less not, let's say, more one-off sales or are not part of the -- it could be a bit fluctuating from 1 year to the other. And the second point is all the benefit from the turnaround plan that we are implementing in Lighting and the restructuring and structural adjustment will have a benefit. But it's -- as I said, it's also part of the restructuring is still going on. We're going to have some headcount reduction really implemented in '26. So the full effect is probably more coming in '27 than in '26. So '26, we will have a partial effect of the restructuring plan and the turnaround plan. Thomas Besson: Another question on input costs. Can you say a few words about what you're assuming in terms of headwinds? I mean we've seen steel, copper prices, memory prices, even the access becoming more complicated. Can you share with us what you've assumed in the guidance and whether this may eventually complicate the task of improving Electronics margins as well in '26? Peter Laier: Yes. So I think you are referring to the inflation, the material price inflation, which we see more or less now at not new level or not new specific increase, so we think that we are more or less at -- it's more behind us than in front of us. So we don't assume a huge inflation in terms of material price. Obviously, we can have crisis like we had with Nexperia in '25. but we have been able to basically have new sources for products that were delivered by Nexperia. So we have alternative sources. So we are not expecting to be so much impacted by this type of crisis and especially with Nexperia products in '26, thanks to this double sourcing. And we think that the situation is stabilizing a little bit with Nexperia. So this is what we are assuming. So no major impact is expecting on the inflation in '26 to summarize. Thomas Besson: Clear. I have a last one, if I can squeeze it in. Is there already a comment on the dividend you may propose for 2025? Or do we have to wait a bit for that? Peter Laier: I think that is too early. You have to wait for the final call when we announce and as well dividend, that's too early today. Operator: [Operator Instructions] So there are no further questions at the moment. Peter Laier: Great. Then I would like to thank everybody for participating in the call. Thank you for the questions. And wishing you all the best. Talk to you soon, latest with announcement of the final results. Thank you very much. All the best. Bye-bye. Philippe Vienney: Thank you.
Operator: Thank you for standing by, and welcome to the Ampol Limited Full Year 2025 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Matt Halliday, Managing Director and CEO. Please go ahead. Matthew Halliday: Thank you. Good morning. My name is Matt Halliday. I'm the Managing Director and CEO of Ampol Limited. Welcome to our 2025 full year results call. During the presentation, we'll be referring to the documents lodged with the ASX this morning. Before beginning, I draw your attention to the notice on Slide 2. I'm joined by our CFO, Greg Barnes, who will discuss the financial results in more detail. I'll start on Slide 4. In 2025, personal safety performance in Convenience Retail and Z continued to trend at close to historical best levels. And as we said at the half, while we did have some incidents related to electrical safety in New Zealand, they did not result in injuries. In response, Z conducted a standdown for safety, and we initiated a contractor safety uplift program to reinforce safe work practices. In F&I, we have seen a small increase in incidents, which led us to initiate a safety reset to refresh our safety management processes. Our commitment remains unchanged, ensuring every team member goes home safely at the end of each workday. Turning to process safety. We had 1 Tier 1 and 2 Tier 2 incidents in F&I. The Tier 1 was a loss of crude oil from a tank due to damage during Cyclone Alfred, which was safely contained in the bund, as designed. Repair work continues to replace the tank roof and there were no injuries. Our teams right across the business managed the preparations and aftermath of Cyclone Alfred, with the professionalism that I believe is a trademark of the Ampol team. Turning now to the performance overview on Slide 5. Looking at our financials first and with all numbers quoted on an RCOP basis, EBITDA was $1.4 billion, EBIT $947 million and NPAT $429 million, excluding significant items. EBIT was up more than 30% and NPAT more than 80% on prior year. Convenience Retail continued its consistent growth trajectory, delivering EBIT of $374 million, which was up 4.8% on prior year. Over the past 5 years, the team has delivered an EBIT average annual growth rate in excess of 5%, demonstrating the strength of our retail model, our focus on premium fuels and our improving in-store execution. Premium fuels now represent 56.5% of retail fuel volumes, supporting higher fuel margins, while shop gross margin increased to 40% post waste and shrink. It's this track record which gives us confidence that we have the capability to drive value from the EG acquisition, which is currently going through the ACCC clearance process. In F&I, EBIT more than doubled to $406 million. Lytton returned to profitability, delivering EBIT of $163 million, following reliability improvements implemented in late '24 and a stronger second half margin environment. These outcomes reflect deliberate decisions taken to improve operational performance and resilience. As part of the F&I result, our infrastructure-backed commercial business in Australia also grew EBIT by over 8%, benefiting from some repositioning of its portfolio and a sharpened focus on returns. The New Zealand business delivered EBIT of $234 million, broadly in line with the prior year despite a more challenging third quarter in a weak economy. Importantly, earnings recovered strongly in the fourth quarter to levels consistent with the first half quarterly run rate, demonstrating the underlying resilience of the business. From a balance sheet perspective, leverage has returned to within our target range at 2.3x adjusted net debt to EBITDA. This positions us well to progress our strategic priorities, including the proposed acquisition of EG Australia while continuing to deliver returns to shareholders. The Board declared a final dividend of $0.60 per share fully franked, bringing total 2025 dividends to [ $1.00 ] per share fully franked, reflecting confidence in the sustainability of our earnings and balance sheet. This is an increase over the $0.65 per share paid last year. Thank you. I'll now hand over to Greg. Greg Barnes: Thank you, Matt. Good morning, everyone. I'll turn to Slide 8, where you can see the detail behind total fuel sales volumes. All in all, we're pretty pleased with the underlying sales volumes during the year that reflect not only our focus on profits and returns, but also the resilient nature of our value chain. At a headline level, two factors need to be taken into account. Firstly, Australian wholesale volumes were down modestly once the movement in the very low-margin industry buy-sell arrangements are taken into account. And secondly, as communicated throughout the year, rolling geopolitical uncertainties created significant volatility. This led to the Ampol team focusing its efforts on risk and margin management to take a more targeted approach to discretionary activity and to prioritize securing barrels efficiently for the Australian and New Zealand system. In terms of each business, the Australian wholesale volumes ex buy-sell were down 2.6%. This was predominantly in our third-party retail sales channels. Importantly, Australian wholesale volumes were up 3.2% in the fourth quarter compared to the prior corresponding period, giving us real momentum coming into 2026. Within Australian wholesale, our B2B volumes were in line with the prior year and were the source of the wholesale volume momentum in Q4 and into 2026. Australian Convenience Retail continued to focus on the premium end of the market. This strategy, combined with continued improvements at the store level has seen profits grow consistently, but at the expense of largely base grade petrol volume. And while the U-GO strategy is on track, with 19 of 46 Australian U-GO in market for the full 12 months, it had a modest impact on group volumes. And Matt is going to come back and talk more to that later. The segmented strategy in New Zealand is proving effective. Volumes for the year in New Zealand were flat, which is a great result in a tough economy for much of the year. If I turn to Slide 8, you can see the group P&L in some detail -- sorry, Slide 9. Looking at the full year result, the group delivered EBITDA of $1.44 billion, which was up 20%, and it delivered RCOP EBIT of $947 million, up 32% year-on-year. We reported an RCOP NPAT before significant items of $429 million, which was up 83% and a statutory NPAT of $82 million. The statutory result includes $136 million of inventory losses after tax, reflecting the adjustment to bring cost of sales to the historical cost for statutory accounting purposes in a period where refined product prices trended down over the period. Significant items were $210 million after tax. I'm going to expand on two key contributors, and I'll refer you to Slide 44 for further detail later. Firstly, the simplification of Energy Solutions contributed to significant items, where we incurred a one-off restructuring cost and unwound unrealized gains on electricity derivatives that had previously gone through significant items. In return, we received cash proceeds of $70 million for divestments of the Australian and New Zealand electricity businesses. Secondly, we recognized a noncash impairment of our investment in SEAOIL. While the Philippines remains a growing market for fuel, the country has seen a substantial uplift in storage capacity and competition in recent years, particularly since the invasion of Ukraine. So while our outlook for the business is in line with current performance, we have tempered our view on the growth beyond current performance in terms of outlook for the foreseeable future. This has led to a noncash impairment of $90 million. Importantly, this does not take into account the value of supply by Ampol into SEAOIL and the region more broadly, the value of which sits in other divisions within the group. Slide 10 just gives you an overview of the key movements in group EBITDA and EBIT. I'm going to dive into each of these in subsequent slides. As I said, the contribution to the group's earnings growth was quite broad-based, which is really pleasing. And to build on Matt's earlier comments, the consistent growth in Convenience Retail over several years and the successful acquisition of Z Energy and its subsequent performance has strengthened both the quality and ratability of Ampol's earnings base. Similarly, F&I Australia also performed well and Lytton took advantage of stronger margins in the fourth quarter. Our trading and shipping capability in Singapore and Houston played an important role in the group in 2025, securing crude sustaining supply during Cyclone Alfred and leveraging the short into Australia and New Zealand while managing risk to ensure each business' competitiveness. The vast majority of the contribution to the group resides in those divisions. However, third-party volumes, which is what is reflected in F&I International, were down. Our expectations for this part of the business were well telegraphed and International finished down $15 million in EBIT terms for the year. As we announced at the half year, we refocused our efforts in Energy Solutions to concentrate on EV charging. This is reflected in the $10 million improvement in 2025. We're expecting further benefits in 2026, as the full year effect of these decisions flows through to earnings. So if we look at each business, we'll start on Slide 11, which shows the continued growth in earnings for Convenience Retail. Convenience Retail has delivered 5.4% annual EBIT growth since 2020, including almost 5% earnings growth this year. Ultimately, this consistency boils down to a few key drivers. The high-grading of the Ampol Foodary branded network. We've also built significant capability in the organization, and we've repositioned our offer and lifted our in-store execution. You can see this playing out in the metrics on Slide 11 that drive our profitability. We've seen consistent increases in our mix of premium fuels. In 2025, the mix of premium fuel volumes increased by 1.1 percentage points to 56.5%, helping grow overall fuel margin year-on-year. The good progress in shop performance continued with shop sales ex tobacco, up 2.8%. The strong store performance has come via growth in high-margin categories like beverages, chilled perishables, bakery and general merchandise. On tobacco, sales fell over 20% during the year as the new public health rules and packaging came into force. That accelerated the move of this category into the illicit market. Having reduced our reliance on tobacco sales over the years, it now represents 16% of total store sales and 3% of total fuel and shop margin. As you can see, the contribution of these dynamics plays out in the average basket value and gross margin percentage. To maintain average basket value in line with last year, given the tobacco decline is another terrific result. This has been driven by effective price and promotions management, including a deeper understanding of attachment in executing these activities. Similarly, the changing product mix through growth in high-margin product categories and falling volumes in low-margin tobacco has led to store margins growing 2.7 percentage points year-on-year. Slide 12 provides more color on the key contributors to Convenience Retail growth. As we discussed, earnings growth year-on-year was driven by the continued focus on premium fuels and our consistent prioritization of profitability over volume is continuing to pay off. Store income grew on nontobacco performance and ongoing productivity initiatives in terms of labor and rostering, as well as the benefits of the U-GO model on premium -- on previously underperforming stores. Slide 13 shows the trends in New Zealand's key retail metrics over the past 6 years, including the time before Ampol acquired Z. This slide is presented in New Zealand dollars. It was another very good year for New Zealand given the backdrop and the challenges in that economy for much of the year. As we flagged in our third quarter trading update, we had a disrupted Q3 in terms of trading and competitive behavior. While it's not entirely clear what led to this disruption, it did coincide with a step-up in unfuel site conversions -- or unstaffed fuel site conversions, I should say, including U-GO, combined with structural or transaction-related activity among competitors. Had it not been for this, New Zealand would have exhibited similar trends to our Australian Convenience Retail business in year-on-year terms. This was evident in Q4 and is continuing into the new year. Z store refresh strategy is working and is a contributor to growth in total shop revenue, notwithstanding the U-GO conversions. Sales growth was in nontobacco categories, while tobacco sales remained flat year-on-year, which is obviously a very different experience to what we're seeing in Australia. That improved mix led to gross margin increasing to 33.7%. Average basket value on the bottom right graph peaked during the height of COVID, but has been consistent over time. Z, like the Australian Retail business, is focused on higher-margin on-the-go categories such as food and beverages. As I said earlier, fuel volumes were quite stable during the year, and the benefit of segmentation strategy was evident with an uptick in the discount channel through the relationship with Foodstuffs and our own launch of U-GO. On Slide 14, you can see the waterfall for the New Zealand segment. This is inclusive of supply benefits for our trading team, which are incorporated into the integrated fuel margin. It's also presented in New Zealand dollars. Integrated fuel margins grew over the period. Given the lower penetration of premium fuels in New Zealand and a generally price-sensitive consumer, this is a very good outcome. The sale of our interest in Channel Infrastructure completed in March 2025. And as a result, we did not receive the final dividend explaining the variance year-on-year in the waterfall. We did, however, receive a $3.4 million interim dividend prior to disposal. That will not repeat having now divested of that business. If we turn to Slide 15, we'll take a further look at the Lytton result. You can see how the refinery benefited from the improvement in refiner margins throughout the second half. Improved reliability enabled the refinery to capture these benefits as well as the benefit from increased production compared to the prior year. Product improvements have also been -- productivity improvements have also been a real focus for the team, and you can see the OpEx savings reflected in the waterfall net of inflation. So we're now on Slide 16. Similar to New Zealand, F&I Australia is our Australian fuel supply chain downstream of the refinery and includes our commercial fuels and the benefits of trading and shipping into this market. It's pleasing to see the recovery in performance. The Australian supply chain was also a beneficiary of improved refinery reliability in terms of not needing to source more product domestically at short notice. As I mentioned earlier, adjusted for [ buy/sold ] movements, total sales volumes were 14.7 billion liters, with Australian wholesale ex of the net buy/sell was down 2.6%, largely in retail third-party channels. Slide 17 shows the F&I International result, and that business leverages Australia's and New Zealand supply chain positions to create additional value in other markets. In 2025, due to the escalation of geopolitical tensions, tariffs and changing sanctions, we focused the team on supplying the Ampol short in Australia and New Zealand with earnings from these activities flowing to their respective P&Ls. As the team's focus was mostly directed away from discretionary activity, third-party earnings were lower. As we've mentioned before, this part of the business consumes little capital, provides the potential for significant upside and is ultimately part of a team that delivers significant value across the rest of the Australian and New Zealand supply chain. On Slide 18, as the strapline says, we finished the year back within our targeted leverage range. This is a great outcome. And it obviously positions Ampol ahead of our anticipated completion of the EG acquisition in the middle of the year. That, of course, is subject to regulatory approval. We exited the year with net borrowings of just over $2.9 billion. Now this was inclusive of net CapEx of $563 million this year, and that's a year where we saw CapEx investment peak given the activity at the refinery and major investments in Convenience Retail. We're able to partially mitigate the cash outflows through divestments, which provided $175 million of cash inflows, primarily via the divestment of Channel Infrastructure and the sale of Flick and the Australian energy businesses. I'll also note that the second phase of our minimum stock obligation or MSO obligations added about $100 million to working capital during the year. Finally, before I hand back to Matt, I just wanted to update on our funding platform, particularly as we look forward to the completion of EG Australia, subject to the commission's approval. Firstly, I'd like to acknowledge the terrific job the treasury team has done again this year. Their efforts and Ampol's consistent approach to capital allocation have been rewarded. A few highlights include Moody's support for the EG Australia transaction, which they've noted is credit positive. We've also entered a subordinated note arrangement in Q4 2025 that was both attractively priced and removed the equity conversion feature that existed in other previous notes. And finally, towards the end of the year, we also entered an additional subordinated note with similar terms to the other note I just referred to and also included a unique deferred drawdown mechanism. This means we have the flexibility of drawing this note down during 2026, without incurring the cost of carry, while securing attractively priced terms now. Once an existing note matures in 2026, our maturity profile will extend from 4.1 years to 5.3 years. This will extend further in 2027. This is a great place to be with over 5 years of maturity profile, average maturity profile, a more diversified counterparty list and on more attractive terms. So with that, I'll hand back to Matt and come back for questions. Matthew Halliday: Great. Thanks very much, Greg. Turning now to our strategic priorities on Slide 21. Our strategy remains clear and consistent, built around 3 pillars: enhancing the core business, expanding a rejuvenated fuels and convenience platform, and evolving our offer in line with customer needs. Under the enhanced pillar, we are focused on maximizing the value of our existing assets. At Lytton, the priority has been reliability and disciplined execution. The actions taken in late '24 and through '25 have delivered tangible results with the refinery returning to profitability and operating more consistently. Looking ahead, the commissioning of the ultra-low sulfur fuels project in 2026 will further strengthen the resilience and long-term relevance of the asset. We also remain focused on productivity across the group. In 2025, we delivered our $50 million nominal cost reduction target, helping to offset inflationary pressures. After adjusting for the impact of bonuses, the productivity steps we took more than offset the impact of inflation in 2025. Under the expand pillar, our priority is growing earnings from our fuels and convenience platform. In Australia, we continue to execute our segmentation strategy across the retail network. The performance of our U-GO sites and the sustained earnings growth in Convenience Retail demonstrate that this strategy is working and scalable. The proposed acquisition of EG Australia is a natural extension of that strategy. While the transaction remains subject to regulatory approval, our focus has been on preparation. With leverage back in our target range, we are well positioned to progress the acquisition and following approval to commence integration in a controlled and value-focused manner. In New Zealand, we are continuing to refine our segmentation strategy, supported by the rollout of U-GO sites, premium store refreshes and the continued development of the Z Rewards loyalty program. These initiatives are aimed at strengthening customer engagement and supporting earnings growth comparable to our Australian Convenience business over time. Under the evolve pillar, we are taking a pragmatic and disciplined approach to the energy transition. We have simplified the Energy Solutions business to focus on areas where we see the clearest pathway to value creation. Our public EV charging networks in Australia and New Zealand continue to grow, and we will adjust the pace of investment in line with customer uptake. We are also progressing opportunities in lower carbon liquid fuels for the hard-to-abate heavy transport sectors and developing a view of available returns, which will ultimately depend heavily on the policy settings that are in place. Now on Slide 22. We remain excited about the delivery of U-GO. Sites in Australia are delivering more than 50% fuel volume uplift, average EBITDA improvements greater than $350,000 per site and payback periods of around 1 year with CapEx around $280,000 per conversion. Our observation is the sites take roughly 6 months to ramp up to maturity, and we view U-GO as a scalable model that supports continued segmentation and high returning earnings growth, as well as creates an important source of value for EG. Moving now to Slide 23. We strongly believe in the potential for the proposed EG acquisition to accelerate our network segmentation, including scaling of both U-GO and premium formats. The identified $65 million to $80 million of synergies are predominantly cost related with further upside potential when you benchmark that network to our own comparable site performance. The strong performance of our own retail business gives us the confidence in the integration to deliver on this potential. The completion of the acquisition is on track for mid-'26. We are currently in Phase 2 of the new merger regime with an announcement of the notice of competition concerns due shortly. Critically, the test at the end of Phase 2 relative to Phase 1 is whether the transaction would rather than could give rise to a substantial lessening of competition. Ampol remains confident in its position and is working constructively with the commission during this phase. On Slide 24, we show that transport fuel demand in Australia and New Zealand remains near all-time highs, with growth driven by diesel and jet offsetting the gradual decline in gasoline. The demand profile supports the long-term relevance of Ampol's integrated supply chain, especially when transition options look to be pushing out as the complexity and cost of this challenge becomes clearer. I'll now talk to our key priorities for 2026 on Slide 25. We are focused on delivering the EG Australia acquisition and commencing delivery of the targeted synergies. At Lytton, we expect to commence commissioning of the ultra-low sulfur fuels project in Q2 this year. We are also focused on closing out Phase 1 of the FSSP review and then engaging with government on a broader review of the industry in Phase 2 to determine the longer-term settings required to enable ongoing investment. We remain focused on productivity, and we'll build further on our track record of continuous improvement to deliver a further $50 million of nominal cost reductions across 2026 and '27. In 2026, our aim is to again offset the majority of inflation and more than offset it at Lytton. We will continue to build momentum in executing our retail strategy and segmentation in Australia and New Zealand, building on our track record of growing earnings. We will also continue to advance our EV charging business and explore lower carbon liquid fuels in both cases at a disciplined pace aligned to demand and with a commitment to appropriate returns. I'd like to close out today with a view of the current trading conditions on Slide 26. We have started the year very strongly, particularly in Convenience Retail in Australia and in New Zealand, reflecting higher retail margins and continued strength in shop performance. F&I ex Lytton has also experienced a strong start. At Lytton, January LRM has weakened relative to a strong Q4 in 2025. We remain mindful of the normal seasonal dynamics in global refining markets, particularly for gasoline and continue to expect volatility in global oil markets driven by geopolitical uncertainty. It remains the case that the integrated nature of our supply chain provides flexibility and resilience in managing these conditions. Current margins also reinforce the importance of the FSSP to reduce downside volatility, and we expect Phase 1 of the review with government to be finalized in the first quarter. For 2026, we expect net CapEx of around $600 million, reflecting continued investment in safety and reliability, growth opportunities in retail and the scheduled refinery turnaround and finalization of the low sulfur fuel upgrade. I'm now on Slide 28, and I'll finish with why we believe Ampol represents a compelling investment. First, we have built a higher quality and more resilient earnings base. Over the past 5 years, we have deliberately grown our fuel and convenience earnings in Australia and New Zealand, supported by strong retail execution and the acquisition of Z. Convenience Retail has delivered an EBIT CAGR of more than 5% over that period and fuel and convenience earnings are now a core pillar of the group, representing around 2/3 of earnings on an EG pro forma basis. Second, fuel demand fundamentals remain supportive. Transport fuel demand in both Australia and New Zealand is at or near all-time highs, led by diesel and jet growth. These products represent the majority of our volumes underpinned by the critical and hard-to-abate sectors such as freight, aviation, and mining. Third, we own and operate an integrated fuels value chain backed by high-quality strategic infrastructure that underpins the efficient and reliable delivery of fuel into highly ratable demand from our retail and commercial customers. The value of this infrastructure in underpinning resilient and secure fuel supply in an increasingly challenging geopolitical environment should not be underestimated. Fourth, we have a clear and disciplined growth pathway. Our segmentation strategy in retail is working in Australia and New Zealand as demonstrated by the performance of U-GO and our premium offer. The proposed acquisition of EG Australia extends that strategy, enhancing scale and accelerating value creation. Fifth, we are approaching the energy transition pragmatically. We are investing where we see clear customer demand and returns while maintaining the flexibility to adjust the pace as markets and policy evolve. And finally, we are disciplined in capital management. Leverage is back within our target range. We maintain a strong investment-grade balance sheet, and we have a proven track record of returning capital to shareholders while investing for growth. In short, Ampol combines resilient fuel demand, improving earnings quality, strategic infrastructure and disciplined capital allocation. We believe that positions the company well to deliver growing higher-quality earnings and shareholder returns over time. That ends our presentation. Now Greg and I will take your questions, and we also have Brent, Kate, Lindis, and Michelle online, and I may direct questions over to them. With that, we'll take our first question, please. Operator: [Operator Instructions] Today's first question comes from Michael Simotas with Jefferies. Michael Simotas: Can we start with U-GO, please? It looks like a pretty pleasing outcome so far. It's not often in this space that you get more earnings upside than you expect with less investment. But can you just give us a little bit more color on how you're measuring that $350 million -- sorry, $350,000 earnings uplift on presumably the 19 sites that you had in place for the full year? And maybe just a little bit more direction around what happens with retail fuel margin. You've given us some detail on volumes. So anything else you can do to help us understand the upside there, please? Greg Barnes: Thanks, Michael. Maybe I'll -- it's Greg here. Maybe I'll take it at the first cut. So look, as you say, we're really pleased with it. We are seeing -- it's taking a few months, about 6 months for the local market to settle when we convert to that operating model, but we're really pleased with the success we're seeing once it takes hold. The way we're comparing it is we're comparing sites, the exact site pre and post the conversion. And obviously, the first layer of benefits is the removal of store labor net of store margin foregone and then fuel, the value of fuel margin at a sharper price across the 50% or higher uplift in volume we're seeing. In terms of pricing, I think, was the other part of your question. I won't get too specific on it, but its objective is really to compete in that second-tier typically franchise operator end of the market. So it's proving effective there in terms of its -- the volume we're seeing and also in terms of its product mix, which skews towards base grade petrol volume, which is obviously when you look at our headline volumes is where we've leaked a little bit of volume, but we've done it at the expense of site profitability. So I think the thesis is playing out well. And our Ampol Foodary network is continuing to go from strength to strength. So we're very confident we've got the balance right, and it lends itself nicely to EG once that we get through the regulator there. So hopefully, that answers your questions. Michael Simotas: It does. Just one question it does raise though. The $350,000 uplift, does that include some ramp-up for some of the sites? Or have you adjusted that number for that? Greg Barnes: So the $350,000 is basically an annualized number once you're through that ramp-up period. Michael Simotas: Okay. Second question on the debt. Your debt came in quite a bit higher than what consensus was expecting. Now there's a lot of moving parts in that and oil price, et cetera. You've talked about $100 million investment for the second stage of MSO. Is there anything else that's sort of a temporary factor pushing debt up or anything else we need to think about in terms of more working capital investments going forward? Greg Barnes: So there's nothing that's coming up. I think what's been a feature in the industry over the last few years, it's not unique to this year, has just been that supply chains have lengthened, right? So it's -- the product isn't all coming out of the region. It's coming from further afield. That's both an advantage to Ampol, from a margin perspective, in terms of leveraging our infrastructure and our ability to bring LR or larger ships into the country and unload on a lower per unit cost landed. But it does mean at times, you've got longer -- the product on the water, perhaps when previously you didn't. So you do have longer supply chains. That's been a feature for a while. But this is the sort of the second lift in MSO. So that's been a feature over the last couple of years. I don't think we've made any secret that we're going through a period of step-up in CapEx. I think that's been well telegraphed. But other than that, they're the 2 primary drivers. And probably the third is after a period of very limited tax payments, the company has been back in a tax payable situation in recent years as well. They're probably the big drivers if you look through the last couple of years. Operator: Our next question today comes from David Errington at Bank of America. David Errington: I don't know who this is Matt or Greg. You've lost me a little bit on the fuel volumes. When I look at Slide 24, it looks to me as if the Australian and the New Zealand markets are growing. Yet when you look at your slide on Slide 8, you're taking quite a big hit in particularly Australian wholesale. Greg, you lost me a little bit on this buy-sell stuff and your wholesale is down 2.5% because what worries me is that you are leaking a lot of volumes. And I know that's base grade petrol. And I know you've got a strategy and it looks like a winning strategy with U-GO. But that does concern me how much volume you are leaking in generally all markets, whether it be diesel, whether it be petrol, whatever. Can you just go through your volume strategy, please? Because to me, what worries me with a very high fixed cost base is that leakage in volume. And even when you take into account buy/sell, which I don't understand, you're still down 2.5%. So can you go through that whole volume equation, how it relates to margin and how it fits in with the whole strategy? Because you are leaking market share by the looks of your own statistics that you've provided in the pack. Matthew Halliday: I'll start and Greg can build, David. Yes. Look, we -- if you set aside the buy/sell, which I think is a temporary factor around Perth, in particular, in the second half of last year, yes, our volumes were down as we repositioned the portfolio. There are some particular drivers to that. But critically, and as we called out in our trading update and Greg called out in his notes, we saw growth in Q4. So B2B volumes were up around 3.2% in Q4, and we're seeing strong momentum there. Yes, there are some -- there is a drag in -- certainly in the retail-linked channels and EG has been part of that, that won't surprise you. When we look at U-GO, when we look at the strategy and the proposed acquisition of EG and the momentum that we have within the business to exit the year and start this year, we're pretty confident in the volume trajectory that we have in the underlying business. David Errington: So look, you're expecting that to turn around in '26, we should start seeing volumes growing. Would that be a fair call? Or do you think you're still you've got a bit of leakage there elsewhere? I don't know, what... Matthew Halliday: No, that's what we expect to see. We exited -- Q4 showed for our B2B volumes 3.2%. We continue to see growth and flowing through the start to this year, and that helps support the commentary we've made in the outlook statement. So I think we're well positioned when you look at the strategic steps we're taking with U-GO and obviously, EG is an important response to that. And the wholesale business is demonstrating good momentum to exit the year and start this year. David Errington: Second question I've got is around the CapEx and particularly when I look at this relating to the depreciation. Now I'm not asking this question from a negative angle. I'm actually asking it from a positive angle, hopefully. Hopefully, you take it that way. But you look at your CapEx to depreciation ratio and when I look at your annual report, your actual depreciable assets are less than $300 million. I mean you've got right-of-use assets there, but I'm assuming that's probably rent. So you're running CapEx well above 2x depreciable assets. Now can you give us a bit of an outlook as to how much of that is growth CapEx that we can expect in the next FY '26, '27, '28, where we can expect cost efficiencies coming through, we can expect growth coming through. So can you give us a bit of an outlook? I don't know if this is -- Greg, this is your domain. How much of that CapEx, which is another $600 million in '26, which is a high number, how much can we expect that to be leveraging into future growth as opposed to just stay in business? Because that 2x depreciation is a big number, and I'd like to see growth really picking up in the near future -- from that number. I don't know if you can elaborate on that. That's probably more of a statement than a question. But if you could elaborate on that, it is an issue that some investors are raising that high CapEx number. Greg Barnes: Yes. So look, maybe I'll have the first crack and there's lots of threads to that question. So we run the risk of going down a deep burrow quickly. But the short answer, as I would put it is, I would expect this business in a normal year to be doing something in the order of $450 million of capital expenditure. So the delta over and above that. Now that will always have an element of year-on-year growth CapEx in it like the rollout of EV charging and things like that. But $450 million is about where this business would operate in a normal year. The delta is a combination of highway sites that we've invested in. So the M1s Pheasants Nest in New South Wales and most recently, the Eastern Creek or M4 sites and the required upgrade to the refinery for the low sulfur fuels project, which has been the bigger single contributor to that. And that project comes to an end in 2026, as Matt outlined. So they're the big drivers. We have all the usual investment hurdles you would expect on growth CapEx. And as we telegraphed previously, we expect low sulfur fuels will add value to the earnings line. But the key thing is we expect that CapEx to return to something in the order of $450 million once we're through the project in the middle of 2026. Operator: Our next question today comes from Adam Martin at E&P. Adam Martin: Just back on U-GO, I'd interested in sort of what distribution of sort of performance you're seeing -- [ U-GO ] the other day. It looks like the competitors that all sort of dropped down to the same sort of pricing that U-GO was running and sort of thinking here about Tier 1 type operators. So I'm just wondering whether you are pulling down fuel margins across the industry. But yes, just what's the distribution you're seeing, please? Greg Barnes: Yes. Look, it varies, but what is consistent is an improvement in performance. That's the first thing I would say. And you always get the benefit of any sort of labor savings over the store margin that's your first hurdle. There is -- it's very difficult to get specific, but it is -- it does vary. So what I'm presenting is an average, but they are all performing above their benchmark performance, i.e., pre-conversion. That's the first step. There is nothing about what we're doing that is, for one of a better term, pulling prices down. What we do is we participate based on the quality of the site and given a local competitive dynamic, but it's typically pegged in line with what you would call some of those sort of second-tier players. So -- and it looks to compete there with a differentiated offer, i.e., unstaffed, but on what is typically higher quality dirt strength and a consistent experience. And that's what the Ampol brand presents: affordable fuel, a consistent, simple experience and good site quality and access, which is why it's doing very well. I think the other data point I would say is our Ampol fuel margins. And we're in a competitive segment, if you call the Tier 1 end of the market as a separate segment, that's competitive. And what you're seeing strong consistent fuel margins playing out there in part by virtue of our increase in premium fuel mix and then we're mopping up some of that discounted base grade unleaded through U-GO. But of course, we only had about 19 sites in market for the full 12 months. But we're really encouraged by it and not concerned about the impact on the market. Matthew Halliday: The only thing I'd add, Adam, to Greg's answer is U-GO does have a fundamental cost advantage in the market and the inflationary pressures are flowing through the rest of the market. So while Kate and the team have managed their cost base very well, so offsetting almost all inflation during the year and U-GO is an important part of that, but not all of that, the rest of the market is incurring significant cost inflation. When we look at the retail fuel margin environment, that's fundamentally what's driving it. Adam Martin: Second question, just international trading. It's obviously a difficult one to model. It felt like the message coming from the company last year, second half of the year that things are sort of improving a bit. I mean, you've previously talked about sort of high refining, better trading, all that sort of stuff. I mean, what can we expect in '26? Should we just expect pretty much what you did last half? Or are things going to start to improve there, please? Greg Barnes: So I'm happy to take it in the first instance. It is difficult to telegraph outcomes for a business that is largely opportunistic in terms of capturing opportunities and arbitrage opportunities when they arise. So we are being cautious in what we've said. I think what I would call out is second half on the same period the prior year was up. But in a market that is really the hallmark of the market is at the moment that the volatility is being driven by short-term new cycle events, not by just your typical sort of deviation from fundamentals that open up those arbitrage opportunities. And when you're a business that's managing within tight risk settings, you tend to want to take a more targeted view in your approach. And you're seeing that play out in volume, and you're seeing that play out in profit, notwithstanding the fact that one trading and shipping team is adding significant value elsewhere. So I think over time, you'll see that business recover, but I'm not one for telegraphing what's going to happen with geopolitical events and pronouncements week-to-week because it is varying a lot at the moment. So we'll stay cautious and take opportunities where we see them within our risk settings. There's anything you want to build? Matthew Halliday: I think that's a good summary. Operator: Our next question comes from Dale Koenders at Barrenjoey. Dale Koenders: Just wondering about the SEAOIL impairment. Why is that done now? What's the outlook for the rest of the business? And sort of what is the profit level that it's kind of making at the moment? Greg Barnes: Yes. Okay. I'll kick off again, Matt, you pick up anything you want to add. Look, we're actually -- the business is performing. Our view of outlook really doesn't deviate from the sort of performance we're seeing today and what we've seen over the last couple of years. It isn't quoted publicly. And I hasten to add, we're a 20% shareholder in this business. It wouldn't be appropriate for us to talk in a lot of detail about the performance of that business. Suffice to say, our view on outlook doesn't really differ from where it is today. What has changed is a combination of both capacity in terms of storage and the attractiveness of this market to traders as fuel volumes rebalanced around the region and the globe post the Russia invasion of Ukraine. They are the few -- the key drivers. Our carrying value invariably -- and the original investment case had more optimistic assumptions in terms of outlook. And after a couple of years where those assumptions aren't being realized, even though it continues to trade consistently, you're just not seeing the uplift you may have forecasted internally. Really, the accounting standards don't leave you much scope, and that is you need to mark the business back to what you are seeing. And hence, we took a noncash impairment. I would not take that as a view on its performance deteriorating from where it is today. That is not our view. And just to give you a guide, its current -- its revised value would be something in the order of our share of 6 turns or less of EBITDA for that business. So invariably, once you called on to do this, you take a reasonably conservative view of that business. The only other build is we supply into SEAOIL and specifically, but also more broadly into the region on the back of that volume. That value sits in our trading and shipping business and remains there, and that is not being taken into account when we've impaired the asset. Dale Koenders: Secondly, Greg, you've made the comment around sort of Australian wholesale fuel volumes down 2.6%, primarily retail reseller levels, which I assume is EG, and that sort of share of volume then implies EG volumes could be down in the order of 5% to 10%. How are you thinking about the earnings which is for the business in Australia that you've quoted at a 2024 level, but not revisited? Is there a risk that, that EBITDA is disappearing on you? Greg Barnes: I mean, again, we don't own the business. And so I've got to tread carefully. What I would say is our expectations for that business under our ownership have not changed and -- nor has our view of either earnings or cash flow accretion relative to what we said at the time of the announcement. Having gone back to triple check that last night, we stand behind the direction we gave at the time of that acquisition. You probably have noticed that the sector more broadly has seen some margin expansion. And you would imagine that, that business has been a beneficiary of that, and we haven't seen any real shift in their underlying earnings performance. I'll probably just leave it at that. Matthew Halliday: Yes. Everything we've seen, Dale, I would say, relative to when the deal was announced has only reinforced our conviction in the value we can deliver from that acquisition. Operator: Our next question today comes from Tom Allen at UBS. Tom Allen: I might just follow up with a couple of earlier questions on the balance sheet. So to 2.3x, I should say, adjusted net debt to RCOP EBITDA and then guiding higher net CapEx for '26 than what the market expected. Just on your current outlook for refining and noting that you've still got your hands full, obviously, with the Ultra Low Sulfur Fuels project and U-GO conversions. Can you just provide some color on the top 3 levers that could accelerate your deleveraging over the year? Greg Barnes: Yes. So I mean, there's a couple of things that work. I mean, this business is typically quite a high cash generator. And we had a question earlier on CapEx versus depreciation. As we come to the end of this cycle of having both upgraded and secured new highway sites and invested in the low sulfur fuels program, as well as 2026 is a period of major maintenance for the refinery. Those 3 drivers are all largely coming to an end during 2026. We'll, of course, invest in convenience retail where we see value and opportunity. But those big programs are coming to an end. So I think I talked earlier the CapEx starting to cycle back towards $450 million, absent another growth opportunity that would shift that. So that in itself will start to contribute positively to cash flow. We do expect and we are seeing with low sulfur fuels, which we're producing now, we are seeing that product spec is scarce in market. That is going to be supportive of refining margins. I think that's a real positive for the business and the continued improvement you're seeing on a very broad-based form across convenience in Australia, the New Zealand business underlying, particularly if you look through Q3, but also the strong consistent performance coming out of our F&I Australia businesses, I think, are all very supportive. And we are in discussions, as you know, in review of the FSSP, which we would expect some sort of decision on that, or update towards the end of this quarter. And I hope to have more to say on that prior to updating on Q1 results in April. Matthew Halliday: The only other couple of things I'd point to is we continue to remain very focused on productivity to offset more than inflation in our cost base in '25, I think, is a strong result, and we continue to remain absolutely focused on that through '26. And EG itself is a highly, highly cash accretive acquisition. So we talked in the order of not far off 20% sort of cash accretion metrics when we announced the deal. So EG and getting that deal done is also a big contributor. Tom Allen: Just following up your comment on the FSSP Phase 1. So can you comment perhaps without predicting the outcome of that review, but what percentage change you think you've seen in structurally higher refining costs over the last 2 to 3 years? And how we might interpret that change in cost into a new margin mark or breakeven threshold at Lytton directionally? Matthew Halliday: Yes. I think you can track costs over time in our results, Tom. I would say -- all I would say is there's an acknowledgment that costs have escalated, both in terms of operating costs and capital costs as far as the refineries are concerned. That's acknowledged, and we're in the process, and we're expecting that Phase 1 of that process to be finalized in the first quarter. Operator: Our next question today comes from Henry Meyer at Goldman Sachs. Henry Meyer: I guess CapEx, excluding the divestment proceeds for 2025 has come in a bit above guidance. Could you just step through what's driving that? I'm assuming it's to complete the Lytton upgrades and potential impacts from maybe not having online in time, Greg, though you say it is currently producing low sulfur fuel? Greg Barnes: Yes. So we are producing low sulfur fuel, just not at full rates. And as we said, we're commissioning in first half of 2026. So in terms of your question, just remind me... Henry Meyer: So CapEx... Greg Barnes: The CapEx, yes. So I would -- I actually would hold the view that our guidance on CapEx during the year. We did lift it at the start of the year slightly, but we guided to sort of something in the low 600s this year. That was net of the channel infrastructure investment. What is new news in our $563 million number is the cash proceeds on Flick. So CapEx came in at a gross level around where our expectations were and I believe were communicated to the market reasonably clearly, notwithstanding we did provide an update earlier in the year. And the $600 million reflects both the T&I that we're undertaking on the cracker in 2026 as well as the completion of that project. Full stop, I think. Is there anything you want to add to that? Matthew Halliday: No. And when we say we're producing low sulfur fuels, not from the new plant, which we expect to start commissioning in Q2, but the plant can produce some low sulfur fuels in its current configuration. That's what we're referring to. Henry Meyer: Sticking on refining, it's been a pretty eventful start to the year for geopolitics and oil markets. Margins have come down a bit over the last few months. Could you just share any perspectives on how you're thinking the potential for more heavy oil grades from Venezuela or Iran could impact crude spreads, broader complex refining margins and the flow on to simpler refinery like Lytton? Matthew Halliday: Yes, I might start briefly, and then I'll hand to Brent. What I would say is that in terms of the start of the year, and I made this remark in my comments, that gasoline, in particular, has started the year softly. The global system has effectively run strongly, and we're out of kind of turnaround season, but coming into it now and then the Northern Hemisphere driving season commences after that. So we're kind of in the cyclical phase of gasoline weakness, I would say, at the moment and middle distillate margins have actually -- or cracks have actually remained pretty strong. That tends to be a fairly typical part of the cycle, but I'll pass over to Brent to build on that. Brent Merrick: Yes. Thanks, Matt. Yes, so areas like Venezuela, we don't see as too dramatic an impact in the overall availability globally. It's going to take a capital investment in that market to grow production. We do see it's destination changing as the U.S., as an example, likely take more versus what China has in the past. Over the last, say, 6 months, we have seen a change in the sweet sales spread for reasons outside of Venezuela and Iran, things like impact on exporting of things like -- grades like CPC Blend, which is linked to Ukrainian attacks on loading facilities. There's been outages in the North Sea. There has been impact on U.S. production as well. So there has been a move between sweet sales spreads over the last few months. But going forward, we don't see Venezuela really driving the spreads and the performance for our refinery. And obviously, the whole world is watching carefully on what unfolds in the Middle East at the moment. So we're clearly watching that carefully. Operator: Our next question comes from Craig Woolford at MST Marquee. Craig Woolford: My question relates to the metrics on your convenience business, so Slide 11, which are all tracking really well. It's been a great journey, as you highlighted. With that increase in basket value outside of tobacco, can you just talk through some of the categories that have contributed significantly in that part? And do you still see further upside in the shop gross margin if we were to strip out the tobacco impact? Matthew Halliday: Yes. So I think I'll pass to Kate to give some more color, but I think it's been a pretty consistent growth in the food service categories, beverages, snacks. It's been fairly broad-based and consistent, which I think when you do look at that average basket value growth ex-tobacco, its CAGR over that 5-year period is nearly 6% pretty consistently. And I think it reflects growth in those high-margin categories, but I'll pass to Kate to give some more color on that. Kate Thomson: Thanks, Matt. So average basket movement is primarily driven by beverages, fresh, confectionery and some food service and our QSR business is also performing well. In terms of margin growth, it's a split between mix and rate. So some of it has been tobacco mix, but also growth in those categories that I talked that are driving ABV. And then we've got rate improvements through Metcash, which hasn't had the full year come through yet and also rate on things like beverages and confectionery. Craig Woolford: Second question is just on the outlook for net interest costs, mindful, not sure how to interpret the change of that disclosure on the merchant fees. And how should we think about capitalized interest impacts in 2026? Greg Barnes: So you'll have your own forecast of debt. As you can imagine, CapEx will -- given our commentary on low sulfur fuels, CapEx should skew more first-half than second-half. And you'll capitalize that interest until that product is commissioned and then it will drop back to the P&L and the capitalized portion will play through in depreciation of that asset post commissioning. I'm not really in a position to sort of guide on debt specifically, but obviously, we're back in the range. We're coming into the acquisition of EG, one hopes in June. And we have telegraphed previously, we expect it to be back in the range within 2 years of that transaction. Operator: Our next question today comes from Rob Koh at MS. Robert Koh: So I think you've given us great detail on the non-tobacco convenience performance, and congrats on that. I wonder if you could also maybe give us some color on what is happening in tobacco. If I measure your charts and then look at your Slide 11, it looks like tobacco sales were down half-on-half quite significantly. Any light at the end of the tunnel? Greg Barnes: So look, I think I said in my commentary earlier, volumes and sales were down 20% year-on-year. Now its margin and contribution at the site level to store, and fuel margin is now 3%. So over the last few years, through a combination of factors, it's now not a particularly material contributor to our profitability. It really accelerated when the fuel packaging and regulations and regime took hold in the lead up to that for 1 July or 30 June, it took hold really in that build. And there were sort of two tranches to it. One on sourcing of product, it was the first leg into April, and then the second leg was the sale of the previous packaged product in the second quarter. I wouldn't say it has eased. What you have seen, it's probably eased from its peaks, but we're still seeing volumes down year-on-year. What you are seeing in markets where there's been real active uplift in police activity to crack down on illicit trades in Queensland would be the standout is the decline has eased substantially. And that's probably all we can really say on that. The rest is really a matter for policy and the police. Yes. Matthew Halliday: I would say, just building on that, you've had -- there's a lot of conversation around this. I think it's getting a lot more attention. You're seeing different regulations put in place or laws put in place across the different states. But I'd call out Queensland, as Greg just mentioned, is the one where we've seen enforcement be quite effective. We haven't yet seen a material impact flow through anywhere else. Robert Koh: The next question I wanted to ask is in relation to your emissions targets and also maybe link that into the FSSP discussion. I'm reading here that you're going to resculpt your emissions intensity targets for Lytton to align with the safeguard mechanism and appreciate decarbonization there is never going to be a straight line. I wonder if you could just give us some more color on what's the change in target going to imply there? And then if the safeguard costs also factor into FSSP, please? Greg Barnes: Yes. So with the safeguard mechanism in place, you've essentially got a functioning market mechanism that drives our approach and incentivizes an approach, if you like, around decarbonization I think to have something that then overlays that becomes problematic. So that's really what underlies that change. We see opportunities to decarbonize operations there around the edges. At the end of the day, it is about reliable and efficient operations that are the biggest contributor when you're looking to limit your intensity, which is a per unit of production measure. And then ultimately, when we're doing things like assessing carrying values and what have you, we are linking our -- the life of the asset to our commitments for 2040. There's probably not a lot to say beyond that. But with safeguard in place, I think that's a natural point. Maybe 2 small builds. We do have a trade exposed relief for the refinery for the next 3 years -- he says looking afraid that it's 3 years -- which reduces the safeguard-related costs. And given their intention, the appropriate offsets are things we would contemplate in the equation when assessing decarbonization opportunities versus the purchase of offsets that makes sense to take a rational economic view and approach to that. Matthew Halliday: I think from an FSSP point of view, we talk about Phase 1 needing to acknowledge in our view, at least higher costs. This is one of those higher costs. And so we would expect it's part of that consideration set, and certainly, as we move into Phase 2 equally. I think in terms of the targets and the difference, it's just simplifying to move to the safeguard mechanism. It doesn't otherwise trigger any material change. Operator: Our next question comes from Mark Wiseman at Macquarie. Mark Wiseman: A couple of questions. Firstly, on the ultra-low sulfur gasoline project at the refinery. Are you in a position to talk about what the total CapEx of that project has been end-to-end? It seems like it's gone quite a bit over budget. And with the market focusing on your capital intensity, whilst that's a true compliance CapEx cost that you've incurred and should be taken into account with any government initiatives, it is sort of one-off in nature when we think about the capital intensity moving forward, it would be good to be able to strip that out. Matthew Halliday: Yes. I think we haven't called out the cost of the investment specifically. It has escalated certainly above where we thought CapEx was going to be originally when we approved the project. I think the key point Greg made earlier is we expect CapEx for this business to move back to somewhere around $450 million. This year, we've got the FCC turnaround at Lytton, and we've got just the tail end of that upgrade spend. But I think the key piece is when you look through the higher CapEx as over the last couple of years, we've been in the heat of our turnaround cycle. And we've had the one-off project with low sulfur fuels. We then get back to a number of around $450 million on a normalized basis. Mark Wiseman: Second question, just on convenience retail. I mean thinking about that 5% CAGR in earnings since 2020, congratulations, it's a great achievement. I mean, back then, our forecast for this year was $320 million, and you're printing $374 million. It's definitely been better than the market expected back then. I guess, looking forward over the next 5 years, you've got EG Group coming into the portfolio, which is a big investment, but we're facing difficult tobacco and fuel volume declines and more competition at the bottom end. Do you have any comments on how to think about that 5% CAGR on a forward basis from now to 2030? Matthew Halliday: Look, I think from our point of view, and Kate gave some color earlier, and I might ask her to comment or to build on my comments. But when we look at the underlying consistency of delivery in the business in terms of the right offer for the right local market, the -- at the lower end, the results of U-GO. At the upper end, we're seeing some really encouraging results from the premium segmentation and our highways. And when we look at our pipeline of activities that the team has -- we're really encouraged by that sort of performance, not being simply the turnaround of the business over the last 5 years, but a really strong platform from which to do something similar going forward, setting aside EG, where we've been clear on sort of the metrics we anticipate there. So we're really encouraged when we look at our plans that we can continue to see strong growth in this business over the next 5 years. Kate, do you want to build on that? Kate Thomson: Yes, sure. So we have a strong and stable team that's demonstrated that we've got the ability to grow with discipline. We're really pleased with the results we're seeing across the whole segmentation strategy. So as an example, across our premium segments, we're seeing double-digit growth in things like coffee, bakery, chilled perishables, healthy snacking. Our QSR business continues to grow, albeit that we're very disciplined with how we're selecting sites and making sure that we're ready to grow before taking next steps. But our M4 sites, add an additional 6 QSRs to our network just across those sites last year. We've got a pipeline for 40 further sites to be upgraded across our segmentation strategy this year, and we're confident we've got plans to grow beyond that. Matthew Halliday: I think the only other thing I would say touching on your higher competitive intensity comment at the lower end is that I think the execution strength and the strength of the team and the focus on productivity is an important part of the strength of our performance in addition to the comments that we're making in terms of the offer and the sites because the rest of the market, we would observe is feeling cost pressure. And I think Kate and the team are doing an excellent job at focusing on productivity and keeping costs under control. In nominal terms, our convenience retail costs were up just over 0.5 percentage point in 2025. I think that's great going. Operator: Our next question today comes from Bryan Raymond at JPMorgan. Bryan Raymond: My first question is just on the shop gross margin reaching 40%. Obviously, there's a bit of a tobacco tailwind in that. But on my math, it looks like there was some healthy underlying gross margin expansion sort of I'm estimating 50 to 100 basis points, I'm not sure if that's about right, in FY '25. I'd just like to understand the drivers of that a bit better and the sustainability, or if there's more to come from a gross margin perspective ex-tobacco, please. Matthew Halliday: Yes, that's about right. And you can see we talked about the average basket value growth on the bottom right-hand side of Page 11 shows you the strength in basket, which is at least partially margin related on the categories that Kate referenced earlier. But Kate, do you want to build on that? Kate Thomson: Yes, sure. So it's roughly 50% through mix, which is tobacco [ decline ], but also performance shifting to higher volume -- higher margin, sorry, categories such as beverages. And we're also seeing improvements in margin driven by our QSR business, which given we've got such high-performing highway sites is material across the portfolio. We're also seeing rate improvements across categories such as hot kitchens where that's through negotiation. And we have further improvements that we expect will come across some of the categories I've mentioned into this year. Bryan Raymond: Just as a follow-up there, was the Metcash contract into the full year as well because I think that was a bit of -- I think you've called that out in the past as a bit of a positive in terms of margin availability. Kate Thomson: Commencing April '25. So we haven't got the full year benefit through yet. Bryan Raymond: Right. And that's still all on track and continuing to -- is that a tailwind as well for gross margin? Or is that not as meaningful? Kate Thomson: The contract is meaningful. It's certainly not our only contracts that we have running through the business. We have others that we have the ability to negotiate as well, but all on track, fully implemented, and we should see the full year run rate this year. Bryan Raymond: Just my second one, just around the U-GO uplifts you're seeing up from $300,000 previously to $350,000 and how that plays out from the EG acquisition given 1/4 of the sites are planned to be converted there. Given that meaningful kind of uplift that you're seeing, should that translate into higher synergies, higher accretion when you get to the EG conversions as well? Or is there something else that we need to be considering? And also, what have you factored into the synergies in terms of uplift? Would it be -- would it have been consistent with $300,000 that you called out previously? Matthew Halliday: Yes. So it would have been just consistent with those base numbers that we quoted previously. I think what I would say is the [ 65 to 80 ]. But as I commented, actually, we see a lot of potential when we benchmark the performance of Kate's network against comparable sites. We see a fair bit of potential out of that business. So U-GO and doing more on U-GO offers us great flexibility. But it's not the only lever we can pull. And we see there's -- it is great to have that flexibility, but there is also a lot of value we see that we can extract out of the store on a number of those stores if we look at comp performance against our own network. So flexibility there. We're not going to change our numbers on synergy expectations at this stage, but it is a really important point to reinforce. Operator: Our next question today comes from Gordon Ramsay with RBC Capital Markets. Gordon Ramsay: Great results today. Now I got a question about the EG Phase 2 clearance assessment with the ACCC. And I know on Slide 23, you're highlighting that it's a would decision versus a could decision in Phase 1. The feedback I've picked up is that the ACCC is mentioning the divestment of potentially 115 sites, and you went into this transaction looking at divesting 19 sites. I just want to know how you're going to get closer to that 19 site number in the second phase of the assessment. Can you comment on that, please? Greg Barnes: Yes. So look, there is some basic parameters around concentration in terms of the number of branded banners in local market and overall concentration that go into the original sort of formula. When you're -- in terms of isolating the number of potential sites and then you've got to go a bit deeper in terms of looking at what's happening market by market to make a true competitive assessment, what are the geographic boundaries, et cetera. When you're in the first phase, what is evident -- remember, the commission is -- we're one of the first transactions in this new regime. What's evident is it was a relatively conservative approach, and hence we've used the language under the regulations around whether it could likely substantially lessen competition. They're taking a broader threshold than what would be past practice and would have supported past decision-making. As you move into Phase 2, the sort of 3 competitors or less and 40% is typically the benchmarks that are provided or applied in a local geographic market and then you look at some of these other unique conditions as it relates to those markets. So we're not going to speculate on sites. We are confident in our view, and our view is that we will end up with a result that is closer to our original estimate than the sort of numbers you just telegraphed then and were perhaps mentioned by the commission previously. So that's just part of the process. We had always estimated a completion in Q2 of this year and the timing of this Phase 2 review is consistent with that. So we're not surprised that a transaction of this complexity has gone to Phase 2, and we continue to work constructively with the commission. Gordon Ramsay: Second question relates around net operating cash flow. The market and ourselves were expecting a much higher number. I know that's a working capital issue there as well. But I think you mentioned MSO inventory loss contributing to it. Were there other factors that make up the difference between where the market was, let's say, like $1.1 billion versus kind of $795 million reported? Greg Barnes: I think if we're talking -- you must be quoting that number off our operating cash movement. The 2 drivers in there that would be a difference from reported EBITDA movements in working capital, cash payments of significant items and then lease payments because obviously, our EBITDA is on a post-AASB16 or apply the lease standard. So lease payments don't wash through EBITDA. When we report operating cash, we have to subtract those lease payments. I think if you take those 3 data points, you'll get very, very close to the number that's in that bar chart on our cash flow slide. Our cash generation generally is very good and really between the restructures we've talked about and what's pending in terms of completion of the low sulfur fuels project, you will see our cash flow return quite quickly. Operator: Our next question comes from Scott Ryall at Rimor Equity Research. Scott Ryall: Matt, probably for you. The first question is around Lytton. When you're talking with government -- and I understand there's a lot of detail to come, but when you're talking with government, is there much focus on looking back at the 5 years since the FSSP was introduced and the fact that there was a big spike in '22 and through the cycle, it's looked okay? Or is it more the fact that going forward, there's been a change -- structural change in costs as you've referred to? I guess as part of that, does the decision on the FSSP impact at all on your assessment of low carbon liquid fuels as you've indicated is a potential, and we all know what you're doing in that space as well. Does that come into the discussions? Matthew Halliday: So look, I think, Scott, there is an acknowledgment in terms of the structural cost increases that we've seen at Lytton and in refining. And I would say that's right at the crux of the review that's underway and that we expect will be completed in Q1. We then get into Phase 2, which is a broader review around kind of where is the industry heading in Australia, what do we see happening to costs and what do we see as necessary settings to enable the ongoing investment in the refinery. From our point of view, lower carbon liquid fuels is a separate topic, and there's a significant amount of policy work that is going to be required to get returns to a level that would be appropriate and enable further investment. So they are largely unrelated. Obviously, you need to -- it certainly helps to have an operating refinery and capability if the country is to move down a path of producing domestically lower carbon liquid fuels in the future, acknowledging that's some time away. Scott Ryall: Okay. But as you stand at the moment, when you look forward, the -- basically the returns -- this is just for the FSSP -- the returns at Lytton are not sufficient to justify ongoing the medium- to long-term operations as is. Is that a fair enough comment? Matthew Halliday: I think the intent is to -- when margins are low, so during a quarter when margins are low, we need the support to kick in. That hasn't consistently been the case. And the main reason that hasn't been the case is because costs have escalated significantly, and I think that's acknowledged. So I think that concludes the call. Thank you for your attention. I think it's a really strong result that is broad-based and right across the business, and look forward to engaging with you over the coming days to discuss it in more detail. Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Almirall Full Year 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pablo Divasson, Head of Investor Relations. Please go ahead. Pablo Divasson Fraile: Thank you very much, Sandra, and good morning, everyone. Thank you for joining us for today's quarterly earnings update and review of Almirall's full year financial results of 2025. As always, we are sharing the slides we are using today in the Investors section of our website at almirall.com. Please move to Slide #2. Let me remind you that the information presented in this call contains forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to materially differ from what we are sharing today. Please move to Slide #3. Presenting today Carlos Gallardo, Chairman and Chief Executive Officer; Jon Garay, Chief Financial Officer; and Karl Ziegelbauer, Chief Scientific Officer. Carlos will start with the guidance and business highlights of 2025, followed by an update specifically on biologics and the key growth drivers of our Medical Dermatology portfolio. Karl will provide you with an update on the pipeline and R&D programs. Jon will then walk through the financials before Carlos concludes the presentation, and we open for questions. I will hand over to Carlos Gallardo, our Chairman and CEO. Please move to Slide #5. Carlos Gallardo Piqué: Good morning to everyone in the call. Before turning to the highlights of the year, I'm pleased to report that we met our 2025 guidance in line with our midterm outlook. For 2025, we guided for net sales growth of 10% to 13% and delivered closer to the upper end with 12.4%, bringing net sales to EUR 1,108 million. On profitability, we expected EBITDA in the range of EUR 220 million to EUR 240 million and we closed the year at nearly EUR 233 million, comfortably within the range. Turning now to 2026. I'd like to share our guidance, which remains aligned with our medium-term targets. We expect net sales growth of 9% to 12% and EBITDA in the range of EUR 270 million to EUR 290 million. With that, let's revisit our midterm guidance on the next slide. We are pleased to reiterate our midterm guidance, which remains unchanged. Between '23 and 2030, we expect to deliver a double-digit compound annual growth rate in net sales and reached an EBITDA margin of around 25% by 2028. Together with the new 2026 guidance, this confirms our confidence in both short and medium term. Please turn to the next slide on the 2025 highlights. Almirall delivered solid performance in 2025, in line with our expectations, exceeding for the first time EUR 1 billion in net sales. Growth is supported by successful commercial and operational execution, particularly in the sales of biologics. We continue to deliver innovative treatments, broaden access for patients and support our physician community. Ilumetri continues to deliver steady growth, reaching EUR 234 million in sales and is on track to achieve peak sales of over EUR 300 million. Ebglyss maintained a strong momentum during 2025 as the rollout is now complete in all key European geographies and these markets begin to scale. The good performance reinforces our confidence in the product's positioning and growth potential. Regarding our products, Wynzora keeps its leading market share in key countries, while Klisyri maintains a strong performance across Europe. During 2025, we have focused on continuing the development of our strong presence in the Medical Dermatology field. We presented at major events such as the 2025 Annual AAD Meeting, and we reinforced our presence at the 2025 European Academy of Dermatology and Venereology Congress in Paris. On the clinical side, we are excited about the new developments in our pipeline. We have initiated 3 Phase II proof-of-concept studies and 3 other PoC studies are on track to enter Phase II in the upcoming quarters. Most of these assets are either first or best-in-class. Karl will soon provide a full update on the recent developments in our pipeline. Please move on to Slide 9 for our -- for an update on our biologics portfolio. In 2025, Ilumetri net sales reached EUR 234 million, representing a steady 12% year-on-year increase. The brand continues to perform consistently, and we remain firmly on track to deliver the more than EUR 300 million peak sales in net sales, even as both the product and the IL-23 class move into a more mature phase of their growth cycle. Ilumetri remains well positioned within the psoriasis market, maintaining its market share and remains one of the leading therapies within the class. The successful launch of the 200-milligram formulation provides enhanced dosing flexibility for patients, thereby strengthening the product's competitive profile and supporting long-term growth. Additionally, the 2-year positive study results presented at EADV 2025 further demonstrate Ilumetri's long-term value, highlighting meaningful real-word benefits in patient's wellbeing and reinforcing the product's clinical and commercial relevance. Please move to the next slide on Ebglyss highlights. Ebglyss continues to be the most successful atopic dermatitis launch in recent years. Since its approval in Germany in December 2023, it has quickly become our second best-selling product. The advanced therapy segment in AD across the EU5 nations continues to expand rapidly at around 30% growth annually. Full year sales more than tripled to EUR 111 million, up from EUR 33 million in 2024, reflecting the successful European rollout with healthy scaling across all key markets and encouragingly early traction in new country launches. This gives us a strong confidence in Ebglyss as a major growth driver in the coming years. Patient and physician acceptance along with good commercial and operational execution have been key elements to achieve this result. Clinically, our collaboration with Lilly remains highly productive. At EADV in 2025, we presented a wide set of Lebrikizumab data, including real-world evidence, long-term results up to 3 years, patient-reported outcomes and safety data, all showing rapid and sustained efficacy and reinforcing its differentiated profile. Please turn over to the next slide. We are working closely with our partner, Lilly, to build a growing data set for Ebglyss through a series of synergistic post Phase III studies on lebri. The objective is to strengthen the evidence base through life cycle management, supporting broader patient access, expanding our market presence and exploring additional indications for these advanced treatment. As part of this effort, Almirall recently initiated a new Phase III study in nummular eczema. Karl will provide you with additional details in the following section. Additionally, we will be conducting a face and neck study on lebrikizumab to further strengthen the profile of the product. Let me turn it over to Karl for the pipeline update. Karl Ziegelbauer: Thank you, Carlos, and good morning to everyone on the call. This slide gives an overview of our life cycle management activity for products that are already commercialized. And I would like to highlight the progress we made in recent months. Seysara was approved in China end of last year. We have also signed a partnership agreement with Sinomune to commercialize Seysara in China, strengthening our presence in this important market. Together with our partners, Sun Pharma and Eli Lilly, we continue to advancing label expansion opportunities for Ilumetri and Ebglyss respectively. Carlos has already shown what we expect in terms of clinical data flow for lebrikizumab. The next readout will be the week 16 data of the ADorable-1 study, which we expect to share in the coming weeks. ADorable-1 explores the safety and efficacy of lebrikizumab in pediatric patients with moderate to severe atopic dermatitis. As mentioned earlier, Almirall will also explore lebrikizumab in ADorable-1 nummular eczema. Next slide, please. Nummular eczema is a chronic inflammatory disease with a high unmet medical need. Today, treatment is largely limited to topical therapies, which often fail to provide adequate disease control, and there are currently no approved systemic treatment options. IL-13 is hypothesized to be a central cytokine, not only for atopic dermatitis, but also for nummular eczema. Given the proven efficacy of lebrikizumab in atopic dermatitis, we believe there is a strong rationale for meaningful symptom relief and quality of life improvement in patients with nummular eczema. We expect to start enrolling patients in Q2 2026. Next slide, please. This slide shows you the status of our early and mid-stage pipeline. Today, we have 3 proof-of-concept Phase II studies ongoing with 3 additional studies planned over the next 12 months. In 2025, we progressed our anti-IL-1RAP antibody into Phase II for hidradenitis suppurativa and our IL-2 mutant fusion protein for alopecia areata. In addition, our partner, Simcere, initiated a Phase II study of the IL-2 mutant fusion protein in atopic dermatitis. As a reminder, we retain global rights for this asset outside Greater China. Looking ahead, we plan to initiate 1 additional proof-of-concept study each for the IL-2 mutant fusion protein anti-IL-1RAP antibody in an inflammatory skin disease. The anti-IL-21 antibody we plan to explore in hidradenitis suppurativa. We also expect our bispecific antibody for atopic dermatitis to move into Phase I in the coming months. Furthermore, we have started preclinical development for an oral small molecule targeting Th2 diseases and a new approach using mRNA/LNP technology for non-melanoma skin cancer. Let me show some more details on the most advanced projects on the next slide. For hidradenitis suppurativa, we have 2 programs. The anti-IL-1RAP antibody has recently entered Phase II and the anti-IL-21 antibody is expected to start proof of concept in the coming months. The anti-L1-RAP antibody blocks anti-IL-1RAP inhibit signaling across the IL-1, IL-13 and IL-36 pathway. Inhibiting these pathways concurrently is intended to support deeper suppression of the inflammation and the relevance of the IL-1 and the IL-36 pathways in hidradenitis suppurativa is supported by existing clinical evidence. The second program targets IL-21 and is designed to modulate both B and T cell activity. We believe that this dual strategy targeting 2 distinct inflammatory pathways has the potential to provide meaningful differentiation compared to current treatment. Please change to the next slide. The IL-2 mutant fusion protein has entered Phase II development in alopecia areata. Alopecia areata remains an area of high unmet medical need with fewer than 30% of patients achieving a satisfactory symptom response with currently approved therapy. The disease has a prevalence of approximately 0.1% to 0.2%, a lifetime incidence of around 2% and 44% of cases are moderate to severe. It is also the third most common dermatosis in children. IL-2 mutant fusion protein is designed to selectively expand regulatory T cells with the aim of rebalancing the immune system. This mechanism is intended to support immune tolerance, addressing the underlying autoimmune component of the disease rather than only its symptoms. From those 6 proof-of-concept Phase II studies, we anticipate data readouts over the next couple of years, starting end of 2026, beginning of 2027. While these programs remain at an early stage, they address well-defined biological pathways and represent a range of first or best-in-class approaches. In summary, our investment over the past few years is beginning to translate into tangible progress in our pipeline. With that, I will hand over to Jon for the financial review. Jon U. Alonso: Thank you, Karl, for the update on our R&D programs and pipeline, and good morning, everyone. As Carlos mentioned earlier, company's consistent execution continues to translate into solid tangible results. In 2025, Almirall delivered a strong performance with net sales growing over 12% year-on-year, achieving our 2025 guidance. Our European dermatology portfolio remained the key growth engine, further reinforcing Almirall's path towards leadership in Medical Dermatology. Gross margin for the year reached 64.4%, reflecting continued royalty pressure from Ilumetri royalties, partially offset by the Q1 2025 divestment. EBITDA came in at EUR 233 million, up 21% year-on-year, driven largely by strong top line growth that outpaced SG&A increase. As expected, SG&A increased 7.9% to EUR 501 million with Q4 reflecting the previously announced uptick. R&D investment grew by roughly 11%, representing 12.5% of net sales, fully aligned with our annual targets and guidance. We closed December with a net debt-to-EBITDA ratio of 0. During the final quarter, we successfully completed the issuance of a new high yield bond at a 3.75% interest rate, a level that reflects the strong trust Almirall has built among financial markets. Company long-term credit rating by Standard & Poor's was improved to BB+, very close to investment grade. Our strong balance sheet gives us meaningful flexibility to pursue licensing opportunities and targeted bolt-on acquisitions as and when attractive opportunities arise. Overall, these results strengthen our confidence in delivering full year 2026 guidance and the midterm outlook we shared earlier. Let's move now to the details of our sales breakdown on the next slide. The European dermatology business delivered a strong performance with net sales up 25.6% year-on-year in 2025. Additional details will be shared on the next slide. In general medicine and OTC, European sales included the divestment of Algidol and the out-licensing of Sekisan. A softer allergy season for Ebastel and lower sales of cardiovascular products such as Crestor, were largely offset by a solid contribution from Eklira Performance in the U.S. declined and further details will be shared on the next slide. In the rest of the world, overall sales were broadly stable with rapid growth in dermatology offsetting a decline in general medicine. Let's take a closer look at the dermatology business on the next slide. Our European dermatology business continued to prosper positively. Ilumetri maintained its healthy year-on-year growth, while Ebglyss further strengthened its role as our primary growth engine. At the same time, we continued to build relevant market share for Klisyri and Wynzora with bought products continuing to gain traction across key European markets. Ebglyss delivered EUR 111 million in 2025, beating slightly consensus as European markets continue to scale up following launches in all key countries. This performance reinforces our confidence in its robust long-term growth potential. Across the rest of the portfolio, Ciclopoli sales remained broadly stable and Skilarence posted a solid improvement versus 2024. In the U.S., performance declined year-on-year. While Klisyri's large field launch continued to deliver some growth, these gains were offset by ongoing pressure on the legacy portfolio. Products such as Cordran, Tazorac and Aczone remain affected by persistent generic competition. In addition, Seysara sales declined, driven mainly by intensifying competition in the oral antibiotic segment for acne. In the rest of the world, dermatology sales increased year-on-year, supported by portfolio momentum and a minor contribution related to the recent Seysara partnership agreement in China. Overall, the performance of our dermatology franchise remained strong. Let's now review the remaining elements of the P&L, starting with some of the ones mentioned earlier. Gross margin came in at 64.4% in 2025, 30 basis points lower than prior year, reflecting margin pressure mainly due to higher royalty tiers associated with Ilumetri's growth. R&D spending represented 12.5% of net sales, broadly in line with last year and guidance. SG&A expenses increased 8% year-on-year, driven by ongoing support for Ebglyss launch across new markets and continued investment behind our key brands. As we highlighted previously, SG&A picked up in the final quarter due to some seasonality in the second half and ended align with expectations. Financial expenses improved versus last year, supported by a EUR 12 million positive impact from the equity swap valuation, reflecting share price gains year-to-date. Finally, our effective tax rate ended at 38%, an improvement by 24 basis points versus prior year, driven by the strong increase in the group's overall profitability, which materially reduces the relative impact of our U.S. business at the consolidated level. Please move to the next slide to take a look at the balance sheet. Our balance sheet remained very stable in 2025 compared with previous year. Capital expenditure were elevated in the final quarter, mainly reflecting the Ilumetri sales milestone of nearly EUR 50 million recently extended collaboration agreement with Simcere, capitalization of Ebglyss R&D programs and pipeline progress achieved in prior quarters. This increase was more than offset by higher depreciation, which resulted in a decline in goodwill and intangible assets. Our net debt ratio remains close to 0, providing us with a strong financial flexibility to pursue inorganic growth opportunities. The reduction in net debt primarily reflects solid cash flow generation in the third quarter. Let's take a look at the cash flow statement next. Company's free cash flow more than doubled in 2025 compared to last year. Cash flow from operating activities reached EUR 174.5 million, an increase of EUR 17 million versus prior year. It was mainly driven by a more than twofold increase in profit before taxes, partially offset by higher working capital needs linked to the growth in biologics volumes with the rollout of Ebglyss in Europe. Cash flow from investing activities was minus EUR 127 million, an improvement by EUR 13 million compared to the previous year. It reflects lower investment outflows versus prior year, which included the EUR 45 million Ilumetri sales milestone as well as milestone payments related to Ebglyss, Wynzora and pipeline progress. Cash flow from financing activities amounted to minus EUR 87 million, representing higher outflows versus the minus EUR 31 million recorded in 2024. The difference is mainly explained by the refinancing of the senior notes where the variance in nominal amounts combined with issuance costs had an impact of roughly EUR 55 million. In addition, we recorded a higher cash dividend selected by shareholders, which was partially offset by the positive EUR 12 million equity swap impact supported by the increase in our share price. I will now give some more color on our 2026 guidance. We anticipate quarterly performance to strengthen progressively as the year advances. In the first quarter, in particular, while being positive about the underlying growth of our business, we are going to face a tough comparison considering the divestment of Algidol and out licensing of Sekisan during the first quarter last year. Regarding the details of the 2026 guidance, I would like to outline some assumptions used regarding the rationale behind provided ranges. As in every other year, we have 4 main elements that may impact both net sales and EBITDA. Firstly, the speed and level of penetration of biologics in the overall market; secondly, underlying market growth and competitive dynamics; thirdly, performance of the legacy portfolio; and lastly, potential opportunities that may arise through portfolio management strategy. Any changes in these elements may influence the performance within the reasonable range we have announced this morning with 10.5% as a midpoint of net sales growth at EUR 280 million as midpoint of EBITDA level for 2026. Other than that, we are positive about ongoing performance of the business and confident in delivering a good set of results for 2026, driven mostly by our newer products and biologicals. We feel comfortable with market expectations for our biologics in 2026. Checking Bloomberg or Visible Alpha sources, Ilumetri seems to be in the range of EUR 260 million and Ebglyss seems to be in the range of EUR 180 million to EUR 190 million. At the same time, we reiterate our midterm guidance of double-digit CAGR growth in the period 2023 to 2030. In 2026, we will continue to experience a slight gross margin pressure given increasing royalty rates, particularly for Ilumetri. R&D investment is expected to stay at the level of 12% to 12.5% relative to net sales. And in 2026 and going forward, we continue expecting net sales to grow faster than the SG&A as we have seen in 2025, now Ebglyss has already been launched across Europe. Regarding the tax rate in 2026, it should continue going down towards the mid-20s target by 2028 as a strong increase in the group's overall profitability materially reduces the relative impact of our U.S. business at consolidated level. With this, I would like to thank you all for your attention this morning. I will pass the word to Carlos for his closing remarks. Carlos Gallardo Piqué: Thank you, Jon. Building on the strong achievements of 2025, let me highlight the momentum we are now carrying into 2026 across our biologics pipeline. We are well positioned to lead in an expanding dermatology market, supported by a broad and highly relevant portfolio. Our pipeline includes disruptive potential programs across immune-mediated skin diseases, rare dermatology and non melanoma skin cancer. Today, we already have 3 studies advancing through proof of concept and Phase II with 3 additional programs expected to start in the coming quarters. That gives us strong scientific foundation and a clear path to sustainable value creation. At the same time, we continue to evaluate opportunistic bolt-on acquisitions in commercialized assets and remain active in pursuing early-stage licensing opportunities in promising advanced therapies. Importantly, we are turning strategy into results through rigorous execution. Having delivered fully on our 2025 guidance, we remain firmly on track to achieve our midterm targets of double-digit sales growth and a 25% EBITDA margin. The Ebglyss launch continues to scale strongly across Europe, while we effectively manage Ilumetri's transition into its more mature growth phase. We are committed to shaping leadership in Medical Dermatology in Europe, turning innovation into growth and delivering lasting value for patients and shareholders. With this, we conclude the presentation, and I hand it back to Pablo for the Q&A session. Pablo Divasson Fraile: Thank you very much, Carlos. Sandra, back to you for the Q&A, please. Operator: [Operator Instructions] And the first question comes from the line of Shan Hama from Jefferies. Shan Hama: Two from me, please. So firstly, what is factored into the top and bottom end of the net sales guidance for 2026? And then secondly, if I can push you a little bit, why is the bottom end of the guide 9% when the midterm guide is double digit? Is there any way you can reconcile that? Carlos Gallardo Piqué: Thank you, Shan, for the question. Let me for this color, I think Jon can take this question. Jon U. Alonso: Absolutely. Thanks a lot, Carlos, and thanks a lot Shan, for your question. I think both questions can be replied basically into one for the low range. As you know, usually, the management portfolio strategy is part of our guidance. But as I have said during my script, in Q1 2025, we had the opportunity to execute 2 transactions. One was the divestment of Algidol and the other one was the out licensing of Sekisan computing for around EUR 12 million in Q1 2025 and around EUR 15 million on a full year basis. In order to be able to overcome the double-digit growth, we also need to replicate these 2 transactions or even more to compensate that amount of volume. So this is what it makes the lower range guidance that perhaps we are not able to close this year 2 transactions in the same way. Moving to the higher range, basically means a the other way that we are able to close 2 or even one, but basically that we are able to accelerate Ilumetri and Ebglyss further in the high range of provided guidance. These are basically the main levers for the low and the range, Shan. Operator: We will now take the next question from the line of Francisco Ruiz from BNP Paribas. Francisco Ruiz: I have 3 questions, very quick ones. The first one is, if you could give us an update on your peak sales that you expect on Klisyri and Wynzora, now they are gaining some weight on your P&L. The second one is, if you could give us some detail on Seysara's partnership in China and how much will contribute in the future for you? And then there are some question on modeling. I mean you commented on reducing the tax rate towards the 20% target. Could you give us some more detail for next year and also the milestone payment that you're expecting in '26 and '27? Carlos Gallardo Piqué: Francisco, thanks for your questions. So we are not providing a review on peak sales projections for Klisyri and Wynzora at that stage. I think both brands are progressing extremely well. We're happy with the progress, particularly in Europe. Seysara partnership, we are pleased of the approval. We're pleased of the partnership. The contribution at that stage, we prefer to be prudent, and we think it's going to be modest. And the modeling part, I'll pass it to Jon. I'm sure he will be -- he will do a much better job than me. Jon U. Alonso: Yes. Can you please repeat the question about the modeling part, Francisco? Francisco Ruiz: Yes. I mean -- so one is about the tax rate for next year, although you say that we should see 20% or mid-20% in the medium term, but for next year more specifically. And also on the milestones cash out as we should expect in '26 and '27? Jon U. Alonso: Yes. Thanks. So regarding the effective tax rate, yes, during my script, I have said the expression that by 2028, we expect to be in the range of mid-20s, and we will continue going into that direction. Guidance for 2026, we should expect a reduction at least I would say, mid-double digits is our intention to go in that path as we increase the group overall profitability. Regarding the other aspect about the CapEx payouts, reasonable investment CapEx, excluding recurring CapEx, will average around EUR 70 million to EUR 75 million in the upcoming years, excluding potential additional in-licensing deals. Basically, this covers milestones for in-licensed assets. When we talk about ordinary CapEx, ordinary CapEx are expected to be in the range of around EUR 70 million to EUR 80 million in 2026 and then go down in the upcoming years as we have some ongoing post Phase III studies that are capitalized, as Carlos has mentioned during his script, together with IT projects, industrial CapEx and other minor tax. Operator: Thank you. We will now take the next question from the line of Jaime Escribano from Banco Santander. Jaime Escribano: A couple of questions from my side. In terms of gross margin, what should we expect based on the product mix? I guess, Ebglyss and Ilumetri licensed products are putting a little bit of pressure there. And my second question would be on Almirall legacy. So there is a EUR 12 million one-off in 2025. So in 2026, what should we expect from the rest of the portfolio? If you can give us a little bit of color on the different moving parts there? Carlos Gallardo Piqué: So let me take the second question, and then I'll pass it to Jon for the gross margin question. So as we have shared with you on a number of occasions, we have a big product portfolio on the legacy bid. Our goal is always to keep an optimization strategy. That meaning if we see an opportunity to acquire something where we can add value, we do so, as we did 2 years ago. But also if we think that we are not the best owners of a certain asset because we are not promoting it and someone comes in and offers us a superior value than the value that it has in our hands, then also we divested it. And this is the case that we've done in Q1 last year. So it's difficult to make projections on this because this is business development. But our strategy will be to keep optimizing this portfolio, and it might entail some maybe small minor acquisitions or might entail some, again, divestitures. But it's difficult to anticipate any specific transaction at this point. Jon, do you want to take the gross margin question? Jon U. Alonso: Thank you very much, Carlos, and thanks for your question, Jaime. So regarding the gross margin expectation for next year, please let me start saying that the gross margin, you may appreciate in Q4 has been lower than expected, and it doesn't represent what you should be expecting. The margin in Q4 came in at 62.8% as a consequence of an accrual to cover potential inventory write-off related to quality observation in some time batches for minor products. Having said this, that this is a one-off, we should expect certain pressure taking the margin down for next year. We don't disclose guidance, but in my earnings call of Q3, I said that the Q3 margin we disclosed could be a good proxy for next year, something in the high 63% could be used as a base. And then coming back to the point of the EUR 12 million milestone you have commented, I linked to this in the reply to Shan, that we need to overcome it to be able to deliver double-digit CAGR growth this year as well. And that's why we have provided the range. But having said that, let me reiterate that we are fully convinced about the 10.5% midpoint of guidance on net sales we have provided this year. We feel comfortable with the market expectation for 2026 is for our biologics, Ebglyss and Ilumetri, and we reiterate the midterm guidance of double-digit CAGR growth between the period 2023 to 2050. Operator: Thank you. We will now take the next question from the line of Guilherme Sampaio from CaixaBank. Pablo Divasson Fraile: Guilherme, this is Pablo. We cannot hear you. We cannot hear you very well. Guilherme Sampaio: Hello? Yes, is this better? Pablo Divasson Fraile: Yes, no better. Guilherme Sampaio: Okay. Sorry. So the first one is for Karl. If you can comment on the relevance of IL-13 in the cascade of nummular eczema versus atopic dermatitis? And then 2 ones related to financials. The first one in terms of phasing of the growth for next year, I already mentioned that Q1 is going to be below the average. Just wanted to understand how do you expect this to evolve in the remaining quarters? And the third one, if you could provide a bit more details in terms of Klisyri. So there was some step-up in terms of sales in this quarter. Just wanted to understand how this should unfold over the coming quarters. Carlos Gallardo Piqué: Karl, you can go straight to question. Karl Ziegelbauer: Thank you, nummular Guilherme, for the question. I think that nummular eczema is a disease that is different from AD, sometimes there is certain comorbidities or certain coherence and it's characterized by pruritic discoid shape, well-demarcated, you know, some of the most lesions that are frequently occur both on the arms and the legs. IL-13 is hypothesized to be a key cytokine in both indications. And therefore, we believe that we have a good chance to see with lebrikizumab a meaningful treatment effect in this patient population. It is a disease where the prevalence is estimated between 0.1% and 9%. So there is a lot of variability reported. We believe it's at the lower end. And we think addressing this high medical need indication is a good opportunity both to help these patients, but also to expand the use of lebrikizumab. Carlos Gallardo Piqué: Jon, do you want to take number 2, number 3, there? Jon U. Alonso: Thanks a lot, Carlos. So in terms of phasing, yes, in Q1, we will face a tough comparison. I have already disclosed that we will be competing against a very challenging Q1 2025, where we reported the divestment of Algidol and the out licensing of Sekisan for about EUR 12 million in that specific quarter and EUR 15 million on a full year. Once we pass the Q1, Q2, we will come back to a more normalized comparison, but definitely, the growth will accelerate in Q3 and Q4. So we expect a stronger second half of 2026 versus a softer in half in 2026 due to this divestment. And then the third question was about Klisyri. Yes, I mean, Klisyri has basically 3 legs, Europe, U.S. and global. In the area of Europe, we have seen a good commercial execution that has driven the good results, nothing to compare. We work with a long-term vision. So some quarters can be better, some quarters can be not so good. We are pleased with the performance of the product in Q4, but nothing specifically to mention. Regarding the rest of the world, we have mentioned during the script that there is a minor contribution in other countries. For example, we signed the agreement with one partner in Asia Pacific during Q4, and it gave us an access. It's a testimony to the strength and scientific value that Klisyri brings to patients, the fact that they are global partners that they want to collaborate with us in territories that we do not operate. And then in the case of -- in the U.S., the performance in the quarter has been impacted by the FX rate. Well, you see our numbers reported for Q4, they are negative by 9% but the reality is the U.S. team is doing a good job. And in terms of volumes and dollars, we are growing in low single digits. The euro-U.S. dollar FX rate has had an impact in this case in Q4 isolated, where last year, the average was 1.15 to 1.17, while in Q4 2025, we are in the range of 1.05 more or less. Operator: We will now take the next question from the line of Damien Choplain from Stifel. Damien Choplain: This is Damien. Congrats on the strong full year results. I have a first question on your midterm guidance. So you have guided to a 25% EBITDA margin by 2028. But given that gross margin will remain under pressure and SG&A piece is already well optimized, what specific sources of operating leverage will support reaching your 2028 target? So this is my first question. And second one on Ebglyss. Could you provide some colors on what could be the market size for nummular eczema? And when should we expect the Phase III readout? Carlos Gallardo Piqué: Thank you, Damien, for the question. In terms of the midterm guidance, yes, there will be operational leverage, and that's where it's going to come this margin expansion. And again, as we've mentioned in previous calls, we've done all the investments that we needed in infrastructure to maximize the value of this asset. So we don't plan to increase or continue to invest in this type of infrastructure. And of course, we're also expecting productivity gains on SG&A. So overall, we are very comfortable with the guidance provided, and we are comfortable that we will deliver on these margins. On Ebglyss, please can you comment, Karl perhaps can do that. Karl Ziegelbauer: Happy to comment. So as mentioned, the study will enroll patients in Q2 this year, and we expect readout in the 2029 time frame. So far, this indication has not been included into our peak sales guidance. Operator: Thank you. We will now take the next question from the line of Alvaro Lenze from Alantra Equities. Alvaro Lenze Julia: The first one is on the rate of growth of Ebglyss. You've been adding roughly EUR 5 million of incremental revenue every quarter. I wanted to know how much of this comes from new launches and how much comes from growth in the -- mainly in Germany? My second question is on working capital. You have invested quite a bit in working capital this year more than in previous years. It doesn't seem to be inventory buildup because I see that your level of inventory is roughly stable. I don't know if this is just a seasonality thing of how some payments ended up in -- at the cutoff date on 31st December or if there is any fundamental reason driving this working capital and if we should see similar investments into working capital in 2026? And my last question would be on capital allocation. You're generating cash, the payments going forward are likely going to be lower than in the past few years in terms of milestones or capital -- cash flow generation should increase. So we were a bit surprised to see the issuance of an additional bond. So I don't know if you see plentiful investment opportunities or otherwise, why are you not reducing your debt levels? Carlos Gallardo Piqué: Thanks for the question, Alvaro. In terms of the rate of growth for Ebglyss, we're seeing strong contribution from all countries. We are in all the countries where we've launched, we've seen double-digit penetration in terms of dynamic market share. And lately, we're seeing also increased acceleration in terms of growth in some of the latest countries where we have launched such as Italy and France. So overall, very pleased with the rate of growth, very confident, very homogeneous across countries. So that gives us total confidence on delivering on our peak sales estimate. On working capital cash flow, Jon, do you want to take those questions? Jon U. Alonso: Yes. Thanks a lot, Carlos. Thanks a lot, Alvaro, for your question. Regarding your question about working capital, you are spot on. It's basically facing seasonality of collections. It has happened this year is not structural. So we will not see the same increase in the years to come. And then the third one, which is capital allocation and why we did the bond. First of all, let's start with the transaction that we bought in sale that I think we were able to obtain a very good price in the current environment. And I feel this is a testimony to our prudent financial approach and the good performance of the company. But having said that, I think the bond is very important for us because it represents the commitment to maintain a solid liquidity position to keep investing in early-stage R&D deals and bolt-on acquisitions as and when they come up. It may be in short term, it maybe in midterm, but we want to have this flexibility to execute. That's why we executed the bond, and that's why we reduced it from the prior EUR 300 million to the current EUR 250 million because we also believe we are going to generate positive cash flow in the upcoming years. Operator: We will now take the next question from the line of Joaquin Garcia-Quiros from JB Capital. Joaquin Garcia-Quiros: It's just on the alopecia areata and you have hidradenitis suppurativa. If you could give us a bit more color on the market that you see for this or maybe number of patients, if you can? And is this -- do you expect this to be -- with a similar size of Ebglyss? Or we should expect this to be significantly lower than Ebglyss in the contribution for Almirall. And lastly, when should we expect the readouts for these studies? Carlos Gallardo Piqué: Thank you, Joaquin, for the questions. We are very excited about our alopecia areata and 2 of the HS products that we have in place. Why? Because, one, it's an area of tremendous unmet need, sort of still patients suffering with inadequate treatments for these conditions. And secondly, because we believe that we have our treatments that are now in Phase II have the potential to really transform the standard of care and become first-line for patients. In terms of how many patients out there, there are prevalence data, maybe Karl can help me here with some data. Here, it is important to note that for all programs in our pipeline, we have global rights. So if you compare it to what we have today, with Ebglyss and Ilumetri, Ilumetri only have European rights. So probably these indications are of lesser prevalence, but we have worldwide rights. So the potential is way higher than what we see with Ebglyss and Ilumetri today. And that's why we are super excited. The opportunity to help patients, but also create a significant opportunity from a financial perspective to the company. Can you... Karl Ziegelbauer: Happy to add a bit more color. So alopecia, as Carlos mentioned, is an indication of high unmet medical need. The only available systemic treatment are check inhibitors with not only their known challenges around the side effect profile, but also it is reported that once this treatment is not recurrence rate is very high, which has a very significant impact as once hair fall out again, it takes like 3 months to regrow. The prevalence is 0.1% to 0.2%. As mentioned, it's also an important indication for children. And the market size is estimated to be around, let's say, $1.4 billion by Evaluate Pharma in 2030. HS, again, another area of high unmet medical need. Currently available treatments are seem to be rather having a modest effect. What experts have told us is due to the complexity of the disease, it's recommended to think about inhibiting multiple pathway, not only a single one. And that's what we're doing with both of our assets. The prevalence is estimated between 0.4% and 2% and with the potential higher prevalence in the U.S. and especially in Afro-American and the estimated market size by Evaluate Pharma is about $5 billion in 2030. Operator: [Operator Instructions] We will now take the next question from the line of Jaime Escribano from Banco Santander. Jaime Escribano: So 2 follow-up questions from my side. One, if we look to -- regarding the guidance 2026, if we look to the consensus right now, for example, Visible Alpha in Ebglyss is EUR 188 million. And in the case of Ilumetri, around EUR 260 million. I would like to ask how comfortable you feel with these numbers? And the second question more for Karl. Karl, within the 3 products you guys have in Phase II right now, what is the one you are more excited if you had to pick one in terms of potential efficacy and probability of being successful? Carlos Gallardo Piqué: Thank you, Jaime, for the follow-on questions. On the guidance for our biologics, we feel very comfortable with the figures that you have mentioned. And let's go to Karl for... Karl Ziegelbauer: That is always a very difficult question. Now we are talking about 2. One is an anti-IL-1RAP antibody and the reasons why we are so excited about this antibody that antibodies that have targeted individual components, for example, one against IL-1 alpha and IL-beta, but also another one against IL-36 has shown some initial efficacy in this disease. And we believe combining those 2 activity has the chance for, let's say, improving the efficacy. On the IL-2 mutein that is a completely novel mechanism stimulating regulatory T cells. And what makes us optimistic is that there is evidence that this mechanism could work in both diseases, alopecia areata and atopic dermatitis based on initial studies that come from low-dose IL-2, but also from a competitor readout using a PEGylated version of IL-2. So in summary, both are very exciting programs, and we look forward to then having starting readout end of 2026, beginning of 2027. Operator: There are no further questions at this time. I would now like to turn the conference back to Pablo Divasson for closing remarks. Pablo Divasson Fraile: Thank you very much, Sandra. If there are no further questions, ladies and gentlemen, this concludes our today's conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Stanmore Resources Limited 2025 Full Year Financial Results Investor Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Marcelo Matos, Executive Director and CEO. Please go ahead. Marcelo Matos: Good morning, everyone. Thank you for joining today's call as we present our full year results for 2025. I'm joined here once again by our CFO, Shane Young. Today's result marks our fourth set of full year results since our transformational acquisition of BMC back in 2022 and comes in what has been the most challenging operating conditions and market environment over that period. Nonetheless, I'm pleased to say that our well-capitalized business has demonstrated remarkable resilience as highlighted by a few of the opening snapshots on Slide #3. Safety and operational performance has been pre-reported in our recent quarterly update, but I'm very proud of our site teams to have safely delivered a record production year of 14 million tonnes. This translated into a strong sales volume performance of 14.1 million tonnes, which supported lower FOB cash costs year-on-year of USD 87.8 per tonne. This outcome is well within our revised guidance range, which was lowered early in the year. Underlying EBITDA of USD 385 million was generated over 2025 supporting robust cash flow generation to maintain a modest net debt position of USD 33 million at year-end. This strong balance sheet position, together with a liquidity position of almost USD 500 million has allowed us to step up shareholder returns with the declaration of a final dividend for 2025 of USD 0.089 per share, equivalent to USD 80 million. Shane will expand more on that later after I briefly discuss our operating and financial performance from Slide #6. Starting with safety. Our performance was solid in 2025, continuing a trend of serious accidents frequency rates consistently remaining below the industry average for surface coal mines in Queensland. Importantly, we also saw a 57% reduction in recordable injuries year-on-year, while the 2 serious accidents recorded late in the year were thankfully limited in their potential. As highlighted, the team delivered a record production year despite the significant amount of rainfall early in the year. This ultimately came down to a remarkable second half recovery, where we saw the business operate at an outstanding 15 million tonne annual rate of production. For the chart at the bottom section of the slide, this year saw us cap off a 6-year period of sequential growth in the production profile of our existing asset base, which also represents a 25% increase since we purchased the BMC assets. Looking at each asset in further detail on the next slide, Slide #7. South Walker Creek delivered record operational results across all metrics as it continued its growth trajectory following the conclusion of the CHPP expansion and the MRA2C creek diversion. The upgraded CHPP operated consistently above nameplate capacity during the second half, providing the salable production volume to deliver against the guidance range and support further cost improvement year-on-year. As highlighted throughout the year and in our recent quarterly, Poitrel had a standout year, delivering an all-time record of 5 million tonnes of saleable production. As Poitrel is geometrically constrained in the level of output, this performance is purely reflective of the very high level of productivity at that operation, which has been reinforced by a strengthening of the strike length from the recent investment into the Ramp 10 north development. Finally, the Isaac Plains Complex pulled off a strong recovery through the final quarter to deliver full year saleable production of 2.4 million tonnes within the revised guidance range. I'll now hand over to Shane to discuss the financial elements of our operating performance before moving to the overall financial results. Shane Young: Thanks, Marcelo. Looking at our FOB cash cost per tonne and underlying EBITDA walk forwards on Slide 8. 2025 FOB cash cost per tonne ended the year at $87.80, very close to the midpoint of our revised market guidance and $1.80 per tonne lower than 2024 despite the effect of noncontrollable year-on-year cost increases. As the waterfall shows, if we rebased 2024 FOB for the effects of inflation, FX and the impact of the Millennium mine closure, 2025 cost expectations would have been around $91 per tonne with a further $1.80 per tonne in cost and volume impacts from wet weather early in the year. The reduction year-on-year is, therefore, clearly attributable to the strong volume increases at South Walker Creek and Poitrel, along with the cost optimization program kicked off in mid-2025 to deliver a combined benefit of almost $5 per tonne year-on-year. These volume and cost improvements also translated into $170 million of additional underlying EBITDA to help partially mitigate the impacts of noncontrollable lower coal prices, inflation and wet weather. Finishing 2025 with underlying EBITDA of USD 385 million, which is over AUD 0.5 billion in a year of lower coal prices and significant wet weather is a testament to the strength of our platform to withstand adverse market and operating conditions throughout the cycle. Turning to the financial scorecard on Slide 10. Our overall financial results also demonstrated the resilient nature of our operations during a challenging period in the market. While we have already highlighted underlying EBITDA, this performance translated into a remarkable $381 million in operating cash flows and positive all-in cash generation during 2025 after adjusting for lease payments and debt servicing. This was supported by a reduction to steady-state capital expenditures at a timely point in the cycle, with key projects having been brought to a final investment decision quickly post the acquisition of BMC in 2022 and delivered ahead of schedule and under budget. Furthermore, and as highlighted by Marcelo, we are pleased today to have declared a fully franked final dividend of USD 0.089 per share, totaling USD 80 million. This announcement sees our shareholders being rewarded for their patience through a period of higher intrinsic capital allocation to enhance the resilience and optionality of the business. With respect to movements in net debt and balance sheet position on Slide 11, Stanmore's net debt position remained stable year-on-year with strong net operating cash flows, putting the company in a position to meet all capital allocation commitments during 2025. This included the capital expenditure program, the $25 million in stamp duty paid on the Eagle Downs acquisition, which remains under objection and $81 million in dividends paid with respect to the 2024 full year results. As highlighted previously, our liquidity position remains strong, approaching almost USD 500 million as of year-end. This was reinforced late in the year by an upsizing of our bank revolving credit facilities by $50 million with all USD 270 million in working capital style facilities remaining undrawn and available for use. This additional liquidity and low net debt supported the Board's decision to award a healthy final dividend for 2025, as also highlighted in our review of capital management on Slide 13. This chart aims to visualize the trend of dividends since 2022 as a percentage of our total capital allocation, which is comprised of shareholder returns, debt repayments, major projects and M&A-related payments. Importantly, please note that the dividend figures are on a declared in relation to basis regardless of the actual timing of dividend payments. As you can see, the proportion of dividends of our total capital allocation has stepped up as part of this 2025 result. This follows a period where our capital allocation strategy was very much focused on making the most of low-hanging fruit opportunities within the expanded portfolio and strengthening our balance sheet post the BMC acquisition in 2022. With these initiatives mostly behind us and before our next investment phases in the form of a life extension project with the Isaac Downs Extension Project or future growth in Eagle Downs, the Board considered it prudent to declare a surplus shareholder returns above and beyond our stated policy with reference also to our modest net debt position and targeted liquidity requirements, as mentioned earlier. Today's dividend announcement brings aggregate shareholder returns since the 2022 BMC-related equity raise to USD 0.342 per share, which is almost 50% of the equity raise price itself in Australian dollar terms. And before I hand back to Marcelo, let's look ahead briefly to 2026, starting with our guidance slide on 14. Slide 14 shows saleable production at South Walker Creek is expected to continue to ramp up towards its recently expanded capacity set in motion by the wash plant upgrade and MRA2C investments, while Poitrel's output is set to normalize after a record 2025. As flagged in our recent quarterly update, Isaac Plains will see a planned reduction in output from 2.4 million tonnes to 1.6 million tonnes at the midpoint of guidance. This reflects an intentional shift in strategy to focus on maximizing dragline utilization by reducing operations to a single fleet from midyear while focusing mining activity into the northern areas of the mine where strip ratios remain optimal. Overall, and similar to 2025, portfolio salable production is now expected to be somewhat second half weighted following the impacts of ex-tropical Cyclone Koji in early January. Nonetheless, barring any further impacts during the wet season, we are confident in meeting our full year production targets. Our 2026 capital program is expected to remain broadly in line with the steady-state levels of 2025 with only a small increase reflecting prior year deferrals and capital improvement opportunities. While CapEx is expected to be largely consistent, FOB cash costs will see an impact from inflationary cost pressures and a higher Australian dollar as illustrated on Slide 15. This chart demonstrates that we are forecasting to maintain a broadly stable cost profile this year after allowing for typical cost escalations from uncontrollable factors. This reflects a targeted approach to our mining strategy in 2026, which has provided sufficient cost savings to offset the FOB cost per tonne impact of lower volumes at the Isaac Plains Complex. Foreign exchange has emerged as a headwind this year, stepping up from an average rate of USD 0.645 in 2025 to levels above $0.70 that have not been seen since early 2022. However, if we remove this impact and look at costs in Australian dollars adjusted for inflation, we are expecting costs to remain stable year-on-year, further supporting the benefits of our capital reinvestment strategy and overall cost competitiveness in the industry. With that, I'll now hand back to Marcelo to take us through the remaining slides. Marcelo Matos: Thanks, Shane. As you are all aware, we have a great portfolio of capacity replacement and growth projects that we remain busy working towards. However, the key focus is on obtaining all regulatory approvals to enable an investment decision and the start of development of the Isaac Downs Extension Project, which is at least a couple of years away. We have also included a couple of slides to explain some of the near-term opportunities within the existing portfolio. At South Walker Creek on Slide 17, the focus is on maximizing the value we are getting from the recent investments into unlocking low strip ratio and capacity expansion. This comes from focusing output on the various pits within the MRA2C area, known within our mine plans as E, F and G pits. 58 million tonnes of run-of-mine coal at an average strip ratio of 8:1 are broadly available within the MRA2C area with the highest margin coal coming from G and F pits. While we are already mining in E pit this year, the Chase the Blue strategy, which is a reference to the blue collars used in our margin rank plots for the higher margin reserves, see us prioritizing access and maximizing mining activities within the G and F pits earlier than originally planned. Given the additional reserves unlocked in the pits above what was originally planned, additional preparation works are required in 2026 before we commence dragline activity in 2027 through the MRA2C area. This will ultimately improve margins compared to our previous mine plan and is believed to be value accretive across the life of mine, noting South Walker Creek possesses significant optionality to continue to unlock future low-cost mining areas in the MRA3, the Nebo West and the Bee Creek resource areas. It should be added that this strategy is consistent with our value-over-volume approach at the Isaac Plains Complex and in the medium term, may see us operate slightly below capacity compared to our volume maximization strategy with a view of optimizing cash generation. Nonetheless, given the significant amount of strike length available to us at South Walker Creek, we would always reserve the optionality to scale operations and capacity utilization up and down should prevailing market conditions incentivize us to do so. Moving on to Slide 18 for a brief look at Poitrel and the Isaac Plains complex. For Poitrel, the story over the next few years is one of making sure we get the most out of what we have, given the operations will always be naturally constrained within the geometric limits of the mining lease. As Shane highlighted, the team has delivered an exceptional few years, demonstrating their ability to continuously find efficiency improvements and incremental output. The latter has been supported by the investment into Ramp 10 North and the additional volumes from the Vermont 2 and 3 plays, which, as you recall, was an immediate opportunity that we took in the southern area of the mine to extract coal beneath a very small layer of interbud. As mining activity reduces in the southern area, in line with depletion and gradually concentrates towards the northern part of the mine, we anticipate production levels to normalize back to the expected run rate, which in case of 2026 is reflected in our guidance volumes. Meanwhile, at Isaac Plains, it is important to briefly reflect on the performance of the investment into Isaac Downs as we commence the twilight period for that operation before we begin the transition to the Isaac Downs Extension. As you all may recall, Isaac Downs, previously named Wotonga South was acquired as an exploration permit for a total consideration of AUD 30 million. After successfully converting the EPC to a fully approved mining lease in record time back in 2021, Stanmore invested the capital required for Isaac Downs, primarily comprised of transitioning the dragline into the new mining area and the construction of haulage related and pit infrastructure. Over the 4-year period from 2021 to 2025 and inclusive of the acquisition and capital costs, the Isaac Plains Complex has delivered over AUD 700 million in free cash flows after leasing providing significant value to shareholders over that time. Looking ahead, we have done a lot of work, including scenario analysis to understand the best path forward for the remainder of life at Isaac Downs. The mine has a clearly defined economic limit driven by a splitting of the Leichardt seam that has always been anticipated to set in across the whole operation around 2028. In the near term, higher strip ratios become more pronounced in the southern area of the pit. Hence, we have taken a decision to focus mining activity into the northern area and maximize the utilization and productivity of the dragline to help support unit costs. We believe this targeted approach is expected to deliver a favorable outcome from a value perspective compared to a higher cost, higher volume plan. Turning briefly to the medium and long-term growth opportunities on Slide 19. The Isaac Downs Extension remains our highest priority in the near term with the project providing crucial life extension and capacity utilization for the complex overall. As previously highlighted, finalization of the groundwater modeling and associated studies remain the key item on the critical path for submission of the full environmental impact statement. We also took the opportunity during this time to optimize our mine plans to minimize future backfilling requirement of residual voids, which will provide significant improvement to the economics of the project. The holdup on the groundwater data acquisition and modeling was the weather conditions through the first half of last year. We are also busy working through the various stakeholders agreements with native title holders and landholders, which are also key milestones. On Eagle Downs, we continue to progress our studies to determine the optimal development pathway for the project, and we will aim to provide an update to the market once our ongoing studies are concluded late this year. Moving on to a summary of the market conditions through 2025 on Slide 21. We have touched on the market a few times already through the call. But as you can see from the historical pricing chart, 2025 was a relatively soft year for metallurgical coal. Subdued prices generally traded sideways as demand conditions remained soggy with the ongoing glut of Chinese steel exports and generally healthy availability from competing North American, Mongolian and Russian producers, as shown on Slide #23. Nonetheless, Australian supply remained tight with ongoing outages at key mines and lower output across the board, limiting further downside risk to price. We have been of the view that pricing was consistently well inside the cost curve of production with only the lowest cost producers continue to generate positive free cash flows during the lowest points in the period. It was evident that there was limited meaningful supply rebalancing as producers came into the cycle with conservatively positioned balance sheets compared to previous cycles. Towards the end of the year, we started to see some green shoots in demand as the Chinese domestic prices for metallurgical coal recovered relatively to seaborne levels and importers recommenced a certain price formation on the seaborne market in light of improved outlook. This also coincided with returning demand from India with the commencement of restocking after running consistently low inventory days throughout the year to optimize their working capital positions. In the turn of the year, prices have rallied strongly, primarily off the back of supply concerns from the impact of the wet weather in early January 2026. However, prices have been relatively resilient through the course of February, and we are optimistic that the demand fundamentals are improved compared to this time last year. This is expected to be supported by firming demand in India, supported by the recent expansion of safeguard duties on Chinese imports of flat steel through to 2028, the continued rollout of blast furnace capacity and a recent uplift in economic data. With that, I'll now hand back to the moderator to handle the Q&A session. Operator: [Operator Instructions] Your first question today comes from Brett McKay from Petra Capital. Brett McKay: Just a few questions from me this morning. Firstly, if we just reflect on the 2025 year and a few sort of the minor details, can you just outline what some of the noncontrollable costs are that sort of sit in that -- under that umbrella that you've normalized for, maybe one for Shane. Shane Young: Yes. No worries, Brett. So as we've highlighted on the sort of noncontrollable area, it's primarily year-on-year inflation. So cost increases through rise and fall mechanisms within established contracts, through annual salary changes, and EA adjustments year-on-year as well as general CPI. And then the other major item through the sort of noncontrollable area are your foreign exchange impacts. I mean all of our costs, as you know, are denominated in U.S. dollars despite -- well, released and reported in U.S. dollars despite the fact that a number of them actually are in Australian dollars being an Australian company. So we are exposed in that regard when we start reporting and referencing U.S. dollar costs. Brett McKay: Can you disclose the FX assumption that you used for this year? I think last year, it was 64. What is it for this year? Shane Young: Yes. So going forward into 2026, we've assumed a $0.68 exchange rate for the year. Brett McKay: Okay. And just on, I guess, operational efficiencies in the business, it really looks like you're continuing to focus on those areas to maximize cash flow and making some adjustments there at South Walker Creek as well. How much more do you think you can do within the existing footprint of the business? You've obviously made the adjustments as well at Isaac Plains. Do you think that, that lemon sort of being largely squeezed for now? Or do you feel like you'll always be looking for those incremental improvements and then trying to quantify them along the way. Marcelo Matos: Brett, it's Marcelo. There is more in the tank. I think we have a very well packed improvement pipeline, okay? As some of those potential improvement initiatives mature throughout the, let's say, the studies. I mean, as we validate some of them, I think we start to bank them as part of our, let's say, forecast going forward. So I think that we have a pretty wide range from cost improvement to productivity improvements. Some of them may not be necessarily cost, maybe margin or revenue related. So I think the simple answer is yes. I think there's probably more improvement ahead of us. But obviously, we want to make sure we are conservative in making sure they are validated and they are achievable, especially when we look at guidance in the short term. Adjustments at Isaac, I think they're quite natural, okay, and expected. And I think as I explained, we are -- the target is to make sure that we set it up for the best cash outcome, not necessarily just chasing higher cost volume. As in South Walker, there's a lot of work going on now in understanding how we can accelerate mining within the MRA area to benefit from those higher-margin reserves as well. So a lot of work, probably depending on how we move with that strategy, it's not necessarily going to be something that's going to be benefiting 2026 necessarily because there's a lot of work in dewatering and demining some of those pits in 2026. But '27 onwards, there's a lot of potential opportunity to maximize cash generation there as well. Brett McKay: Is there scope to further lift the wash plant capacity? I know you've got a regulatory limit there. But is there any feeling that you might look at that at some point to make sure you're maximizing these volumes that are quite close to the wash plant and clearly higher returning? Marcelo Matos: Look, I think the existing wash plant is probably maxed out in terms of value-accretive expansion, and it's somehow real estate constrained as well, as you know. So I think what we've done in terms of the last expansion program was probably the limit in the existing plant, any expansions beyond that are probably going to require going somewhere else at the mine and probably going to be more expensive. So I think for the existing plant, I think we are probably at the optimum setup. We have been maximizing utilization of the existing operating hours, right, and throughput as much as possible. We've done that through the second half of last year. I mean, South Walker is an operation where I mean, with the wash plant being the constraint, especially for the second half of last year and somehow this year as well. We need to make sure that we have feed ahead of the plant and not -- I mean, especially during wet season that -- whether we don't lose those operating hours. Going forward, it's going to be all about margin, Brett, as you said, MRA2C is lucky to be close to the wash plant and to have high-yielding costs, maximizing mining in that area is definitely a priority. However, we are going to be constrained as well how much volume we can get from that specific area in terms of mining intensity within the MRA area. So it's going to be a trade-off between how much we can get from those southern pits, which are higher margin, but constrained by a certain intensity. And there's always going to be a trade-off against how much volume we can get in that sort of scenario, okay? So I think that's ongoing work, but a lot of optionality in South Walker for sure. Brett McKay: Yes. Okay, good. I'll just quickly move on and just ask 2 questions on your organic growth options in the portfolio. Just firstly, Isaac Downs Extension. You mentioned in the intro there, you are looking at some optimization initiatives with pit backfilling and the like. Will you provide an update to the market at some point once all of those numbers have been finalized? Or is that something that you'll just move straight into development once the permitting comes through? Marcelo Matos: I don't see any reason not to give the market an update. I think we are pretty well progressed with, let's say, development scenarios and mine plans. And I think we are in pretty good shape. Project looks good. As we always said, it's a reasonably low capital investment. So a very similar project to Isaac Downs, which we've done very successfully. I think focus now is on approvals. I don't think there's any critical path around actual development. We've been taking time, as I said, in optimizing, as you said, residual voids and backfilling requirements, working with the regulators on scenarios that, let's say, enable us to have a lower cost rehabilitation program and post-closure backfilling. And yes, I think so, I think we should be able to provide a bit more color on how the project looks like, but I think there's plenty of time between now and 2028 to do that. Brett McKay: Okay. Good. And just finally on Eagle Downs. You mentioned earlier that you'll provide the study outcomes towards the back end of this year. Is there anything really that you need to see from a market context point of view outside of the specific -- project-specific numbers that would give you the confidence to go ahead if you sort of saw the tailwind really strengthening through the course of the year around coal markets? Or would it be partnering with somebody or coming up with some sort of financing package that would sort of derisk the financing side of things. Out of those high-level key components, is there anything that we can expect to see or just trying to get a sense for key milestones that might give us a sense of the forward pathway for Eagle Downs, considering that is the key growth project in the portfolio? Marcelo Matos: Right, maybe I will just go back to some of the previous comments on Eagle Downs in previous calls. Eagle Downs, it could be a very natural replacement for Poitrel in the longer term, okay? As Poitrel, let's say, ramps down, especially from 2030, it has a world-class processing infrastructure. It has very important capacity to -- and it could be a very nice, let's say, natural sequence through -- with the development and ramping up of Eagle Downs. Moving or bringing Eagle Downs forward and developing earlier, I think we probably will need to have some good reasons to do that because there will be some overlap of production for a few years, which means we may need to -- we may have some constraints around washing and rail port, especially when Poitrel is still going strong. With Isaac ramping down, some of those constraints may actually not be as great. But I mean, that -- I think that part of the equation together with funding, as you said, the right funding solution, the right market conditions, I think it's -- they are all critical elements in the equation, okay? We are not done with the work yet. So I think we need to make sure that we are confident that the project is going to be an attractive project from all angles from what we can expect production-wise, how much that is going to cost us to build and to deal with some of those constraints. So I think we still have work to do. We have slowed down the pace, as we said before, given that we were actually working on cash preservation in the last 12 to 18 months, and it was unlikely that with the market conditions as they were that we're going to make an investment decision. So we are just taking the time to get the studies right, to get to the right outcomes in terms of development scenarios. So I think it's going to follow its natural course. We are aiming investment readiness by the end of this year. Whether or not investment decisions will be taken, it will depend on all those elements that I just listed. But I'm also going to say more, Brett, there will always be trade-offs, and we're always going to be looking at trade-offs, looking at the right investment settings in Queensland. I think there's a lot of dialogue happening with government around what's the right setting that producers need for -- to bring projects like Eagle Downs along given that we have a very benign royalty regime. And obviously, we're always going to be looking at M&A as well as growth options against greenfield development. So I think all those are going to be taken into consideration when we make a decision or not to bring Eagle Downs into development. Operator: Your next question comes from Tim Elder from Ord Minnett. Tim Elder: Just on the production uplift at South Walker Creek in calendar year '26, you talked to like annualizing the upgraded capacity in the prep plant. I'm just wondering if there's productivity benefits as well from the Golding fleet. Marcelo Matos: Yes. Look, we are getting brand-new trucks, right? There's a fleet of 31 brand-new trucks. They are -- some of them are already operating, some are still arriving. So yes, definitely, there is an expectation for us to get better productivity with that fleet. We have new diggers as well. So I think it's all very positive. They are part of the plan for sure. We are targeting optimization with the new fleets with the new gear. We have a mining services contract with Golding that we think will drive, let's say, more aligned incentives towards productivity and production as well relatively to the previous contract. So I think, yes, I think it's all pretty positive and so far, so good. Tim Elder: And then just on your resources and reserves. Just wondering if you can talk through some of the changes there at Isaac Plains with the inclusion of the extension? And then obviously, if there's been any change around kind of that existing operation at Isaac Downs? Marcelo Matos: No significant change in Isaac Downs, just formal depletion, just economic limits haven't changed. And it's basically -- what we've done is basically adjusted to reflect the expansion project. So yes, I think it's pretty much it, Tim. Tim Elder: And then just one more, just on your lease liabilities in calendar year '26. It looks like the current liability in your accounts for that has come in pretty low, like $90 million or so. Is that a useful benchmark thinking about how those costs are going to roll off? Or are they going to be more consistent with calendar year '25? Shane Young: Yes, Tim, it's Shane here. Yes, look, I think that is a good reference point to use. I mean we've seen a change in the makeup of some of the lease accounting around those lease liabilities that with the renewal of the Goldings contract, for example, that pushed some into noncurrent rather than current as we reestablished lease accounting around that contract. And also the lease structures we put in place for the new trucks, as Marcelo mentioned earlier. So yes, I think that's something that can be used as a reference point. Operator: [Operator Instructions] Your next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: Just wondering if you could help unpack the cost a little bit. Isaac Plains $94 for the year. First half was $101. So it suggests they fell below $90 in the back half. Is that just accounting? Or is something else going on? And then if you could maybe help me understand what's happening sort of on a qualitative or quantitative basis at your 3 mines. I know you've given us the guidance for the company at a whole, $93 to $97. But I was just wondering if you could maybe provide some color around which direction the 3 mines are heading. Marcelo Matos: Isaac was mostly just volume, right? I think that Isaac did a very low first half last year, a very strong second half and a very strong fourth quarter. That's basically -- it's the key driver. We got a big chunk of coal core flow in the fourth quarter with a lot of the coal from Pit 5. Pit 5 North was a small pit. So the timing between stripping and coal, I think we had batches of coal during the year and a large portion of those batches were in the second half and especially on the fourth quarter. That's basically -- I mean, they were basically the key drivers. As for 2026, I think Isaac will see a gradual, let's say, slowdown. So we're going to still be set up with a larger number of fleets in the first half, okay, especially because of recovery and catching up with some of the weather events. Actually, we were planning to start parking down some of those fleets a little earlier at the moment, as things stand, we should be doing that by midyear. So we're going to move from 4 fleets to -- down to a single excavator fleet and focusing a lot on dragline waste, okay, on Isaac, and that's going to be the new steady state. So that's a big cost driver for Isaac for sure. I think that's going to allow us as well to roll in on Isaac Plains without a significant strip ratio increase, okay, by just slowing down a bit the pace, as I said before, focusing on cash preservation for the last 2 or 3 years of mine life. Poitrel, there are no major changes. I think Poitrel is a rollover year-on-year, no significant changes. We are doing a truck rebuild campaign. We are finishing our tailings pumping project, which is going to allow us to save a bit of cost on the haulage of tailings now that we're going to pump tailings in the southern pits of the mine. And just a natural, as I said in previous call, the natural normalization of volumes as we transition the mining intensity to the northern part of the mine. South Walker, as I said, natural, let's say, gradual expansion of volume towards capacity, but with the optionality to focus mining in the next few years in the southern part, especially the MRA area where we have higher margin volumes. That may have a trade-off against maximizing volumes. But I mean, depending on market conditions and mining intensity in the second -- in the southern part of the mine, I think that those are decisions we're going to have to take if we want to maximize margins by looking at some of those lower strip ratio areas. I think that's basically summates what we expect for the next -- or for the short term. Glyn Lawcock: Okay. So if we look at your guidance, which is up 7%, which is FX and inflation, is that sort of -- you'd expect 7% across all the mines? Or is it going to be -- Isaac's going to see an even bigger jump and the others a little bit less when you think about it's the one with the big volume cut? Marcelo Matos: Look, if you look at the same approach that Shane explained previously, what we've done is we have assumed general CPI increase is uncontrollable. As you know, we have rising fall formulas. We have EA amendments and labor cost increases, which are preset. So we just plug a general CPI adjustment as an assumption, okay, to this waterfall. And then we also did a similar adjustment to FX, given that it's uncontrollable. And that rebases what would be the forecast for 2026. And from there, we then say, okay, there's a volume movement here for Isaac, which is kind of a controllable, but is a conscious decision to set it up with the right cost base. But then we were able to identify cost improvements or other improvements to be able to offset some of those impacts, okay? So obviously, the volume impact is mostly an Isaac Plains impact, okay? There's a small Poitrel volume impact, but that's mostly Isaac. And as for FX and the CPI assumption was just a general assumption for all assets with a lot of the improvements being spread amongst them. Glyn Lawcock: Yes. Understood. Maybe just jumping to Isaac Downs Extension quickly. You're saying late next year, calendar '27 for the approval. If you get it then, is there much of a gap between Isaac Downs and the extension. Can you avoid a gap? Or is that too late to avoid a gap between the 2 mines? Marcelo Matos: Unfortunately, that's one that we -- it's hard to control because I think the key risk for the extension project is on approvals and potential land court objections having to start a land court process. So we are working hard to avoid that, working closely with the Queensland government to make sure that we go as smooth as possible. If all goes well, we should be able to have a back-to-back ramp-up. That's what we are assuming now, and that's what we are hoping to achieve. But there will be a natural ramp down and ramp up, Glyn. So it's not going to be like a flat profile because we are already ramping down, right, as you see. And when we are down now to a single fleet, I think that's going to be a natural trend and then ramping up again from late 2028 onwards. Glyn Lawcock: All right. Understood. And then maybe just squeeze the last one in. Just any update you can give us on the Anglo sales process? I know it was only 4 weeks ago since I last asked that question. I was wondering if it's made any headway. Marcelo Matos: Unfortunately not. I can't give an update. You know that I can't comment on that. There's a process going on, and we always look at opportunities, as you know. Glyn Lawcock: All right. So it's still ongoing and you're still in the mix? Marcelo Matos: Those are your words. Operator: Thank you. There are no further questions at this time. I'll now hand back to Mr. Matos for any closing remarks. Marcelo Matos: Thank you for your questions and your time on today's call. As always, I would like to thank our employees, our contractors and the ongoing support of our investors. We look forward to connecting with all of you in the coming weeks. Thanks again. Good day. 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 Ampol Limited Full Year 2025 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Matt Halliday, Managing Director and CEO. Please go ahead. Matthew Halliday: Thank you. Good morning. My name is Matt Halliday. I'm the Managing Director and CEO of Ampol Limited. Welcome to our 2025 full year results call. During the presentation, we'll be referring to the documents lodged with the ASX this morning. Before beginning, I draw your attention to the notice on Slide 2. I'm joined by our CFO, Greg Barnes, who will discuss the financial results in more detail. I'll start on Slide 4. In 2025, personal safety performance in Convenience Retail and Z continued to trend at close to historical best levels. And as we said at the half, while we did have some incidents related to electrical safety in New Zealand, they did not result in injuries. In response, Z conducted a standdown for safety, and we initiated a contractor safety uplift program to reinforce safe work practices. In F&I, we have seen a small increase in incidents, which led us to initiate a safety reset to refresh our safety management processes. Our commitment remains unchanged, ensuring every team member goes home safely at the end of each workday. Turning to process safety. We had 1 Tier 1 and 2 Tier 2 incidents in F&I. The Tier 1 was a loss of crude oil from a tank due to damage during Cyclone Alfred, which was safely contained in the bund, as designed. Repair work continues to replace the tank roof and there were no injuries. Our teams right across the business managed the preparations and aftermath of Cyclone Alfred, with the professionalism that I believe is a trademark of the Ampol team. Turning now to the performance overview on Slide 5. Looking at our financials first and with all numbers quoted on an RCOP basis, EBITDA was $1.4 billion, EBIT $947 million and NPAT $429 million, excluding significant items. EBIT was up more than 30% and NPAT more than 80% on prior year. Convenience Retail continued its consistent growth trajectory, delivering EBIT of $374 million, which was up 4.8% on prior year. Over the past 5 years, the team has delivered an EBIT average annual growth rate in excess of 5%, demonstrating the strength of our retail model, our focus on premium fuels and our improving in-store execution. Premium fuels now represent 56.5% of retail fuel volumes, supporting higher fuel margins, while shop gross margin increased to 40% post waste and shrink. It's this track record which gives us confidence that we have the capability to drive value from the EG acquisition, which is currently going through the ACCC clearance process. In F&I, EBIT more than doubled to $406 million. Lytton returned to profitability, delivering EBIT of $163 million, following reliability improvements implemented in late '24 and a stronger second half margin environment. These outcomes reflect deliberate decisions taken to improve operational performance and resilience. As part of the F&I result, our infrastructure-backed commercial business in Australia also grew EBIT by over 8%, benefiting from some repositioning of its portfolio and a sharpened focus on returns. The New Zealand business delivered EBIT of $234 million, broadly in line with the prior year despite a more challenging third quarter in a weak economy. Importantly, earnings recovered strongly in the fourth quarter to levels consistent with the first half quarterly run rate, demonstrating the underlying resilience of the business. From a balance sheet perspective, leverage has returned to within our target range at 2.3x adjusted net debt to EBITDA. This positions us well to progress our strategic priorities, including the proposed acquisition of EG Australia while continuing to deliver returns to shareholders. The Board declared a final dividend of $0.60 per share fully franked, bringing total 2025 dividends to [ $1.00 ] per share fully franked, reflecting confidence in the sustainability of our earnings and balance sheet. This is an increase over the $0.65 per share paid last year. Thank you. I'll now hand over to Greg. Greg Barnes: Thank you, Matt. Good morning, everyone. I'll turn to Slide 8, where you can see the detail behind total fuel sales volumes. All in all, we're pretty pleased with the underlying sales volumes during the year that reflect not only our focus on profits and returns, but also the resilient nature of our value chain. At a headline level, two factors need to be taken into account. Firstly, Australian wholesale volumes were down modestly once the movement in the very low-margin industry buy-sell arrangements are taken into account. And secondly, as communicated throughout the year, rolling geopolitical uncertainties created significant volatility. This led to the Ampol team focusing its efforts on risk and margin management to take a more targeted approach to discretionary activity and to prioritize securing barrels efficiently for the Australian and New Zealand system. In terms of each business, the Australian wholesale volumes ex buy-sell were down 2.6%. This was predominantly in our third-party retail sales channels. Importantly, Australian wholesale volumes were up 3.2% in the fourth quarter compared to the prior corresponding period, giving us real momentum coming into 2026. Within Australian wholesale, our B2B volumes were in line with the prior year and were the source of the wholesale volume momentum in Q4 and into 2026. Australian Convenience Retail continued to focus on the premium end of the market. This strategy, combined with continued improvements at the store level has seen profits grow consistently, but at the expense of largely base grade petrol volume. And while the U-GO strategy is on track, with 19 of 46 Australian U-GO in market for the full 12 months, it had a modest impact on group volumes. And Matt is going to come back and talk more to that later. The segmented strategy in New Zealand is proving effective. Volumes for the year in New Zealand were flat, which is a great result in a tough economy for much of the year. If I turn to Slide 8, you can see the group P&L in some detail -- sorry, Slide 9. Looking at the full year result, the group delivered EBITDA of $1.44 billion, which was up 20%, and it delivered RCOP EBIT of $947 million, up 32% year-on-year. We reported an RCOP NPAT before significant items of $429 million, which was up 83% and a statutory NPAT of $82 million. The statutory result includes $136 million of inventory losses after tax, reflecting the adjustment to bring cost of sales to the historical cost for statutory accounting purposes in a period where refined product prices trended down over the period. Significant items were $210 million after tax. I'm going to expand on two key contributors, and I'll refer you to Slide 44 for further detail later. Firstly, the simplification of Energy Solutions contributed to significant items, where we incurred a one-off restructuring cost and unwound unrealized gains on electricity derivatives that had previously gone through significant items. In return, we received cash proceeds of $70 million for divestments of the Australian and New Zealand electricity businesses. Secondly, we recognized a noncash impairment of our investment in SEAOIL. While the Philippines remains a growing market for fuel, the country has seen a substantial uplift in storage capacity and competition in recent years, particularly since the invasion of Ukraine. So while our outlook for the business is in line with current performance, we have tempered our view on the growth beyond current performance in terms of outlook for the foreseeable future. This has led to a noncash impairment of $90 million. Importantly, this does not take into account the value of supply by Ampol into SEAOIL and the region more broadly, the value of which sits in other divisions within the group. Slide 10 just gives you an overview of the key movements in group EBITDA and EBIT. I'm going to dive into each of these in subsequent slides. As I said, the contribution to the group's earnings growth was quite broad-based, which is really pleasing. And to build on Matt's earlier comments, the consistent growth in Convenience Retail over several years and the successful acquisition of Z Energy and its subsequent performance has strengthened both the quality and ratability of Ampol's earnings base. Similarly, F&I Australia also performed well and Lytton took advantage of stronger margins in the fourth quarter. Our trading and shipping capability in Singapore and Houston played an important role in the group in 2025, securing crude sustaining supply during Cyclone Alfred and leveraging the short into Australia and New Zealand while managing risk to ensure each business' competitiveness. The vast majority of the contribution to the group resides in those divisions. However, third-party volumes, which is what is reflected in F&I International, were down. Our expectations for this part of the business were well telegraphed and International finished down $15 million in EBIT terms for the year. As we announced at the half year, we refocused our efforts in Energy Solutions to concentrate on EV charging. This is reflected in the $10 million improvement in 2025. We're expecting further benefits in 2026, as the full year effect of these decisions flows through to earnings. So if we look at each business, we'll start on Slide 11, which shows the continued growth in earnings for Convenience Retail. Convenience Retail has delivered 5.4% annual EBIT growth since 2020, including almost 5% earnings growth this year. Ultimately, this consistency boils down to a few key drivers. The high-grading of the Ampol Foodary branded network. We've also built significant capability in the organization, and we've repositioned our offer and lifted our in-store execution. You can see this playing out in the metrics on Slide 11 that drive our profitability. We've seen consistent increases in our mix of premium fuels. In 2025, the mix of premium fuel volumes increased by 1.1 percentage points to 56.5%, helping grow overall fuel margin year-on-year. The good progress in shop performance continued with shop sales ex tobacco, up 2.8%. The strong store performance has come via growth in high-margin categories like beverages, chilled perishables, bakery and general merchandise. On tobacco, sales fell over 20% during the year as the new public health rules and packaging came into force. That accelerated the move of this category into the illicit market. Having reduced our reliance on tobacco sales over the years, it now represents 16% of total store sales and 3% of total fuel and shop margin. As you can see, the contribution of these dynamics plays out in the average basket value and gross margin percentage. To maintain average basket value in line with last year, given the tobacco decline is another terrific result. This has been driven by effective price and promotions management, including a deeper understanding of attachment in executing these activities. Similarly, the changing product mix through growth in high-margin product categories and falling volumes in low-margin tobacco has led to store margins growing 2.7 percentage points year-on-year. Slide 12 provides more color on the key contributors to Convenience Retail growth. As we discussed, earnings growth year-on-year was driven by the continued focus on premium fuels and our consistent prioritization of profitability over volume is continuing to pay off. Store income grew on nontobacco performance and ongoing productivity initiatives in terms of labor and rostering, as well as the benefits of the U-GO model on premium -- on previously underperforming stores. Slide 13 shows the trends in New Zealand's key retail metrics over the past 6 years, including the time before Ampol acquired Z. This slide is presented in New Zealand dollars. It was another very good year for New Zealand given the backdrop and the challenges in that economy for much of the year. As we flagged in our third quarter trading update, we had a disrupted Q3 in terms of trading and competitive behavior. While it's not entirely clear what led to this disruption, it did coincide with a step-up in unfuel site conversions -- or unstaffed fuel site conversions, I should say, including U-GO, combined with structural or transaction-related activity among competitors. Had it not been for this, New Zealand would have exhibited similar trends to our Australian Convenience Retail business in year-on-year terms. This was evident in Q4 and is continuing into the new year. Z store refresh strategy is working and is a contributor to growth in total shop revenue, notwithstanding the U-GO conversions. Sales growth was in nontobacco categories, while tobacco sales remained flat year-on-year, which is obviously a very different experience to what we're seeing in Australia. That improved mix led to gross margin increasing to 33.7%. Average basket value on the bottom right graph peaked during the height of COVID, but has been consistent over time. Z, like the Australian Retail business, is focused on higher-margin on-the-go categories such as food and beverages. As I said earlier, fuel volumes were quite stable during the year, and the benefit of segmentation strategy was evident with an uptick in the discount channel through the relationship with Foodstuffs and our own launch of U-GO. On Slide 14, you can see the waterfall for the New Zealand segment. This is inclusive of supply benefits for our trading team, which are incorporated into the integrated fuel margin. It's also presented in New Zealand dollars. Integrated fuel margins grew over the period. Given the lower penetration of premium fuels in New Zealand and a generally price-sensitive consumer, this is a very good outcome. The sale of our interest in Channel Infrastructure completed in March 2025. And as a result, we did not receive the final dividend explaining the variance year-on-year in the waterfall. We did, however, receive a $3.4 million interim dividend prior to disposal. That will not repeat having now divested of that business. If we turn to Slide 15, we'll take a further look at the Lytton result. You can see how the refinery benefited from the improvement in refiner margins throughout the second half. Improved reliability enabled the refinery to capture these benefits as well as the benefit from increased production compared to the prior year. Product improvements have also been -- productivity improvements have also been a real focus for the team, and you can see the OpEx savings reflected in the waterfall net of inflation. So we're now on Slide 16. Similar to New Zealand, F&I Australia is our Australian fuel supply chain downstream of the refinery and includes our commercial fuels and the benefits of trading and shipping into this market. It's pleasing to see the recovery in performance. The Australian supply chain was also a beneficiary of improved refinery reliability in terms of not needing to source more product domestically at short notice. As I mentioned earlier, adjusted for [ buy/sold ] movements, total sales volumes were 14.7 billion liters, with Australian wholesale ex of the net buy/sell was down 2.6%, largely in retail third-party channels. Slide 17 shows the F&I International result, and that business leverages Australia's and New Zealand supply chain positions to create additional value in other markets. In 2025, due to the escalation of geopolitical tensions, tariffs and changing sanctions, we focused the team on supplying the Ampol short in Australia and New Zealand with earnings from these activities flowing to their respective P&Ls. As the team's focus was mostly directed away from discretionary activity, third-party earnings were lower. As we've mentioned before, this part of the business consumes little capital, provides the potential for significant upside and is ultimately part of a team that delivers significant value across the rest of the Australian and New Zealand supply chain. On Slide 18, as the strapline says, we finished the year back within our targeted leverage range. This is a great outcome. And it obviously positions Ampol ahead of our anticipated completion of the EG acquisition in the middle of the year. That, of course, is subject to regulatory approval. We exited the year with net borrowings of just over $2.9 billion. Now this was inclusive of net CapEx of $563 million this year, and that's a year where we saw CapEx investment peak given the activity at the refinery and major investments in Convenience Retail. We're able to partially mitigate the cash outflows through divestments, which provided $175 million of cash inflows, primarily via the divestment of Channel Infrastructure and the sale of Flick and the Australian energy businesses. I'll also note that the second phase of our minimum stock obligation or MSO obligations added about $100 million to working capital during the year. Finally, before I hand back to Matt, I just wanted to update on our funding platform, particularly as we look forward to the completion of EG Australia, subject to the commission's approval. Firstly, I'd like to acknowledge the terrific job the treasury team has done again this year. Their efforts and Ampol's consistent approach to capital allocation have been rewarded. A few highlights include Moody's support for the EG Australia transaction, which they've noted is credit positive. We've also entered a subordinated note arrangement in Q4 2025 that was both attractively priced and removed the equity conversion feature that existed in other previous notes. And finally, towards the end of the year, we also entered an additional subordinated note with similar terms to the other note I just referred to and also included a unique deferred drawdown mechanism. This means we have the flexibility of drawing this note down during 2026, without incurring the cost of carry, while securing attractively priced terms now. Once an existing note matures in 2026, our maturity profile will extend from 4.1 years to 5.3 years. This will extend further in 2027. This is a great place to be with over 5 years of maturity profile, average maturity profile, a more diversified counterparty list and on more attractive terms. So with that, I'll hand back to Matt and come back for questions. Matthew Halliday: Great. Thanks very much, Greg. Turning now to our strategic priorities on Slide 21. Our strategy remains clear and consistent, built around 3 pillars: enhancing the core business, expanding a rejuvenated fuels and convenience platform, and evolving our offer in line with customer needs. Under the enhanced pillar, we are focused on maximizing the value of our existing assets. At Lytton, the priority has been reliability and disciplined execution. The actions taken in late '24 and through '25 have delivered tangible results with the refinery returning to profitability and operating more consistently. Looking ahead, the commissioning of the ultra-low sulfur fuels project in 2026 will further strengthen the resilience and long-term relevance of the asset. We also remain focused on productivity across the group. In 2025, we delivered our $50 million nominal cost reduction target, helping to offset inflationary pressures. After adjusting for the impact of bonuses, the productivity steps we took more than offset the impact of inflation in 2025. Under the expand pillar, our priority is growing earnings from our fuels and convenience platform. In Australia, we continue to execute our segmentation strategy across the retail network. The performance of our U-GO sites and the sustained earnings growth in Convenience Retail demonstrate that this strategy is working and scalable. The proposed acquisition of EG Australia is a natural extension of that strategy. While the transaction remains subject to regulatory approval, our focus has been on preparation. With leverage back in our target range, we are well positioned to progress the acquisition and following approval to commence integration in a controlled and value-focused manner. In New Zealand, we are continuing to refine our segmentation strategy, supported by the rollout of U-GO sites, premium store refreshes and the continued development of the Z Rewards loyalty program. These initiatives are aimed at strengthening customer engagement and supporting earnings growth comparable to our Australian Convenience business over time. Under the evolve pillar, we are taking a pragmatic and disciplined approach to the energy transition. We have simplified the Energy Solutions business to focus on areas where we see the clearest pathway to value creation. Our public EV charging networks in Australia and New Zealand continue to grow, and we will adjust the pace of investment in line with customer uptake. We are also progressing opportunities in lower carbon liquid fuels for the hard-to-abate heavy transport sectors and developing a view of available returns, which will ultimately depend heavily on the policy settings that are in place. Now on Slide 22. We remain excited about the delivery of U-GO. Sites in Australia are delivering more than 50% fuel volume uplift, average EBITDA improvements greater than $350,000 per site and payback periods of around 1 year with CapEx around $280,000 per conversion. Our observation is the sites take roughly 6 months to ramp up to maturity, and we view U-GO as a scalable model that supports continued segmentation and high returning earnings growth, as well as creates an important source of value for EG. Moving now to Slide 23. We strongly believe in the potential for the proposed EG acquisition to accelerate our network segmentation, including scaling of both U-GO and premium formats. The identified $65 million to $80 million of synergies are predominantly cost related with further upside potential when you benchmark that network to our own comparable site performance. The strong performance of our own retail business gives us the confidence in the integration to deliver on this potential. The completion of the acquisition is on track for mid-'26. We are currently in Phase 2 of the new merger regime with an announcement of the notice of competition concerns due shortly. Critically, the test at the end of Phase 2 relative to Phase 1 is whether the transaction would rather than could give rise to a substantial lessening of competition. Ampol remains confident in its position and is working constructively with the commission during this phase. On Slide 24, we show that transport fuel demand in Australia and New Zealand remains near all-time highs, with growth driven by diesel and jet offsetting the gradual decline in gasoline. The demand profile supports the long-term relevance of Ampol's integrated supply chain, especially when transition options look to be pushing out as the complexity and cost of this challenge becomes clearer. I'll now talk to our key priorities for 2026 on Slide 25. We are focused on delivering the EG Australia acquisition and commencing delivery of the targeted synergies. At Lytton, we expect to commence commissioning of the ultra-low sulfur fuels project in Q2 this year. We are also focused on closing out Phase 1 of the FSSP review and then engaging with government on a broader review of the industry in Phase 2 to determine the longer-term settings required to enable ongoing investment. We remain focused on productivity, and we'll build further on our track record of continuous improvement to deliver a further $50 million of nominal cost reductions across 2026 and '27. In 2026, our aim is to again offset the majority of inflation and more than offset it at Lytton. We will continue to build momentum in executing our retail strategy and segmentation in Australia and New Zealand, building on our track record of growing earnings. We will also continue to advance our EV charging business and explore lower carbon liquid fuels in both cases at a disciplined pace aligned to demand and with a commitment to appropriate returns. I'd like to close out today with a view of the current trading conditions on Slide 26. We have started the year very strongly, particularly in Convenience Retail in Australia and in New Zealand, reflecting higher retail margins and continued strength in shop performance. F&I ex Lytton has also experienced a strong start. At Lytton, January LRM has weakened relative to a strong Q4 in 2025. We remain mindful of the normal seasonal dynamics in global refining markets, particularly for gasoline and continue to expect volatility in global oil markets driven by geopolitical uncertainty. It remains the case that the integrated nature of our supply chain provides flexibility and resilience in managing these conditions. Current margins also reinforce the importance of the FSSP to reduce downside volatility, and we expect Phase 1 of the review with government to be finalized in the first quarter. For 2026, we expect net CapEx of around $600 million, reflecting continued investment in safety and reliability, growth opportunities in retail and the scheduled refinery turnaround and finalization of the low sulfur fuel upgrade. I'm now on Slide 28, and I'll finish with why we believe Ampol represents a compelling investment. First, we have built a higher quality and more resilient earnings base. Over the past 5 years, we have deliberately grown our fuel and convenience earnings in Australia and New Zealand, supported by strong retail execution and the acquisition of Z. Convenience Retail has delivered an EBIT CAGR of more than 5% over that period and fuel and convenience earnings are now a core pillar of the group, representing around 2/3 of earnings on an EG pro forma basis. Second, fuel demand fundamentals remain supportive. Transport fuel demand in both Australia and New Zealand is at or near all-time highs, led by diesel and jet growth. These products represent the majority of our volumes underpinned by the critical and hard-to-abate sectors such as freight, aviation, and mining. Third, we own and operate an integrated fuels value chain backed by high-quality strategic infrastructure that underpins the efficient and reliable delivery of fuel into highly ratable demand from our retail and commercial customers. The value of this infrastructure in underpinning resilient and secure fuel supply in an increasingly challenging geopolitical environment should not be underestimated. Fourth, we have a clear and disciplined growth pathway. Our segmentation strategy in retail is working in Australia and New Zealand as demonstrated by the performance of U-GO and our premium offer. The proposed acquisition of EG Australia extends that strategy, enhancing scale and accelerating value creation. Fifth, we are approaching the energy transition pragmatically. We are investing where we see clear customer demand and returns while maintaining the flexibility to adjust the pace as markets and policy evolve. And finally, we are disciplined in capital management. Leverage is back within our target range. We maintain a strong investment-grade balance sheet, and we have a proven track record of returning capital to shareholders while investing for growth. In short, Ampol combines resilient fuel demand, improving earnings quality, strategic infrastructure and disciplined capital allocation. We believe that positions the company well to deliver growing higher-quality earnings and shareholder returns over time. That ends our presentation. Now Greg and I will take your questions, and we also have Brent, Kate, Lindis, and Michelle online, and I may direct questions over to them. With that, we'll take our first question, please. Operator: [Operator Instructions] Today's first question comes from Michael Simotas with Jefferies. Michael Simotas: Can we start with U-GO, please? It looks like a pretty pleasing outcome so far. It's not often in this space that you get more earnings upside than you expect with less investment. But can you just give us a little bit more color on how you're measuring that $350 million -- sorry, $350,000 earnings uplift on presumably the 19 sites that you had in place for the full year? And maybe just a little bit more direction around what happens with retail fuel margin. You've given us some detail on volumes. So anything else you can do to help us understand the upside there, please? Greg Barnes: Thanks, Michael. Maybe I'll -- it's Greg here. Maybe I'll take it at the first cut. So look, as you say, we're really pleased with it. We are seeing -- it's taking a few months, about 6 months for the local market to settle when we convert to that operating model, but we're really pleased with the success we're seeing once it takes hold. The way we're comparing it is we're comparing sites, the exact site pre and post the conversion. And obviously, the first layer of benefits is the removal of store labor net of store margin foregone and then fuel, the value of fuel margin at a sharper price across the 50% or higher uplift in volume we're seeing. In terms of pricing, I think, was the other part of your question. I won't get too specific on it, but its objective is really to compete in that second-tier typically franchise operator end of the market. So it's proving effective there in terms of its -- the volume we're seeing and also in terms of its product mix, which skews towards base grade petrol volume, which is obviously when you look at our headline volumes is where we've leaked a little bit of volume, but we've done it at the expense of site profitability. So I think the thesis is playing out well. And our Ampol Foodary network is continuing to go from strength to strength. So we're very confident we've got the balance right, and it lends itself nicely to EG once that we get through the regulator there. So hopefully, that answers your questions. Michael Simotas: It does. Just one question it does raise though. The $350,000 uplift, does that include some ramp-up for some of the sites? Or have you adjusted that number for that? Greg Barnes: So the $350,000 is basically an annualized number once you're through that ramp-up period. Michael Simotas: Okay. Second question on the debt. Your debt came in quite a bit higher than what consensus was expecting. Now there's a lot of moving parts in that and oil price, et cetera. You've talked about $100 million investment for the second stage of MSO. Is there anything else that's sort of a temporary factor pushing debt up or anything else we need to think about in terms of more working capital investments going forward? Greg Barnes: So there's nothing that's coming up. I think what's been a feature in the industry over the last few years, it's not unique to this year, has just been that supply chains have lengthened, right? So it's -- the product isn't all coming out of the region. It's coming from further afield. That's both an advantage to Ampol, from a margin perspective, in terms of leveraging our infrastructure and our ability to bring LR or larger ships into the country and unload on a lower per unit cost landed. But it does mean at times, you've got longer -- the product on the water, perhaps when previously you didn't. So you do have longer supply chains. That's been a feature for a while. But this is the sort of the second lift in MSO. So that's been a feature over the last couple of years. I don't think we've made any secret that we're going through a period of step-up in CapEx. I think that's been well telegraphed. But other than that, they're the 2 primary drivers. And probably the third is after a period of very limited tax payments, the company has been back in a tax payable situation in recent years as well. They're probably the big drivers if you look through the last couple of years. Operator: Our next question today comes from David Errington at Bank of America. David Errington: I don't know who this is Matt or Greg. You've lost me a little bit on the fuel volumes. When I look at Slide 24, it looks to me as if the Australian and the New Zealand markets are growing. Yet when you look at your slide on Slide 8, you're taking quite a big hit in particularly Australian wholesale. Greg, you lost me a little bit on this buy-sell stuff and your wholesale is down 2.5% because what worries me is that you are leaking a lot of volumes. And I know that's base grade petrol. And I know you've got a strategy and it looks like a winning strategy with U-GO. But that does concern me how much volume you are leaking in generally all markets, whether it be diesel, whether it be petrol, whatever. Can you just go through your volume strategy, please? Because to me, what worries me with a very high fixed cost base is that leakage in volume. And even when you take into account buy/sell, which I don't understand, you're still down 2.5%. So can you go through that whole volume equation, how it relates to margin and how it fits in with the whole strategy? Because you are leaking market share by the looks of your own statistics that you've provided in the pack. Matthew Halliday: I'll start and Greg can build, David. Yes. Look, we -- if you set aside the buy/sell, which I think is a temporary factor around Perth, in particular, in the second half of last year, yes, our volumes were down as we repositioned the portfolio. There are some particular drivers to that. But critically, and as we called out in our trading update and Greg called out in his notes, we saw growth in Q4. So B2B volumes were up around 3.2% in Q4, and we're seeing strong momentum there. Yes, there are some -- there is a drag in -- certainly in the retail-linked channels and EG has been part of that, that won't surprise you. When we look at U-GO, when we look at the strategy and the proposed acquisition of EG and the momentum that we have within the business to exit the year and start this year, we're pretty confident in the volume trajectory that we have in the underlying business. David Errington: So look, you're expecting that to turn around in '26, we should start seeing volumes growing. Would that be a fair call? Or do you think you're still you've got a bit of leakage there elsewhere? I don't know, what... Matthew Halliday: No, that's what we expect to see. We exited -- Q4 showed for our B2B volumes 3.2%. We continue to see growth and flowing through the start to this year, and that helps support the commentary we've made in the outlook statement. So I think we're well positioned when you look at the strategic steps we're taking with U-GO and obviously, EG is an important response to that. And the wholesale business is demonstrating good momentum to exit the year and start this year. David Errington: Second question I've got is around the CapEx and particularly when I look at this relating to the depreciation. Now I'm not asking this question from a negative angle. I'm actually asking it from a positive angle, hopefully. Hopefully, you take it that way. But you look at your CapEx to depreciation ratio and when I look at your annual report, your actual depreciable assets are less than $300 million. I mean you've got right-of-use assets there, but I'm assuming that's probably rent. So you're running CapEx well above 2x depreciable assets. Now can you give us a bit of an outlook as to how much of that is growth CapEx that we can expect in the next FY '26, '27, '28, where we can expect cost efficiencies coming through, we can expect growth coming through. So can you give us a bit of an outlook? I don't know if this is -- Greg, this is your domain. How much of that CapEx, which is another $600 million in '26, which is a high number, how much can we expect that to be leveraging into future growth as opposed to just stay in business? Because that 2x depreciation is a big number, and I'd like to see growth really picking up in the near future -- from that number. I don't know if you can elaborate on that. That's probably more of a statement than a question. But if you could elaborate on that, it is an issue that some investors are raising that high CapEx number. Greg Barnes: Yes. So look, maybe I'll have the first crack and there's lots of threads to that question. So we run the risk of going down a deep burrow quickly. But the short answer, as I would put it is, I would expect this business in a normal year to be doing something in the order of $450 million of capital expenditure. So the delta over and above that. Now that will always have an element of year-on-year growth CapEx in it like the rollout of EV charging and things like that. But $450 million is about where this business would operate in a normal year. The delta is a combination of highway sites that we've invested in. So the M1s Pheasants Nest in New South Wales and most recently, the Eastern Creek or M4 sites and the required upgrade to the refinery for the low sulfur fuels project, which has been the bigger single contributor to that. And that project comes to an end in 2026, as Matt outlined. So they're the big drivers. We have all the usual investment hurdles you would expect on growth CapEx. And as we telegraphed previously, we expect low sulfur fuels will add value to the earnings line. But the key thing is we expect that CapEx to return to something in the order of $450 million once we're through the project in the middle of 2026. Operator: Our next question today comes from Adam Martin at E&P. Adam Martin: Just back on U-GO, I'd interested in sort of what distribution of sort of performance you're seeing -- [ U-GO ] the other day. It looks like the competitors that all sort of dropped down to the same sort of pricing that U-GO was running and sort of thinking here about Tier 1 type operators. So I'm just wondering whether you are pulling down fuel margins across the industry. But yes, just what's the distribution you're seeing, please? Greg Barnes: Yes. Look, it varies, but what is consistent is an improvement in performance. That's the first thing I would say. And you always get the benefit of any sort of labor savings over the store margin that's your first hurdle. There is -- it's very difficult to get specific, but it is -- it does vary. So what I'm presenting is an average, but they are all performing above their benchmark performance, i.e., pre-conversion. That's the first step. There is nothing about what we're doing that is, for one of a better term, pulling prices down. What we do is we participate based on the quality of the site and given a local competitive dynamic, but it's typically pegged in line with what you would call some of those sort of second-tier players. So -- and it looks to compete there with a differentiated offer, i.e., unstaffed, but on what is typically higher quality dirt strength and a consistent experience. And that's what the Ampol brand presents: affordable fuel, a consistent, simple experience and good site quality and access, which is why it's doing very well. I think the other data point I would say is our Ampol fuel margins. And we're in a competitive segment, if you call the Tier 1 end of the market as a separate segment, that's competitive. And what you're seeing strong consistent fuel margins playing out there in part by virtue of our increase in premium fuel mix and then we're mopping up some of that discounted base grade unleaded through U-GO. But of course, we only had about 19 sites in market for the full 12 months. But we're really encouraged by it and not concerned about the impact on the market. Matthew Halliday: The only thing I'd add, Adam, to Greg's answer is U-GO does have a fundamental cost advantage in the market and the inflationary pressures are flowing through the rest of the market. So while Kate and the team have managed their cost base very well, so offsetting almost all inflation during the year and U-GO is an important part of that, but not all of that, the rest of the market is incurring significant cost inflation. When we look at the retail fuel margin environment, that's fundamentally what's driving it. Adam Martin: Second question, just international trading. It's obviously a difficult one to model. It felt like the message coming from the company last year, second half of the year that things are sort of improving a bit. I mean, you've previously talked about sort of high refining, better trading, all that sort of stuff. I mean, what can we expect in '26? Should we just expect pretty much what you did last half? Or are things going to start to improve there, please? Greg Barnes: So I'm happy to take it in the first instance. It is difficult to telegraph outcomes for a business that is largely opportunistic in terms of capturing opportunities and arbitrage opportunities when they arise. So we are being cautious in what we've said. I think what I would call out is second half on the same period the prior year was up. But in a market that is really the hallmark of the market is at the moment that the volatility is being driven by short-term new cycle events, not by just your typical sort of deviation from fundamentals that open up those arbitrage opportunities. And when you're a business that's managing within tight risk settings, you tend to want to take a more targeted view in your approach. And you're seeing that play out in volume, and you're seeing that play out in profit, notwithstanding the fact that one trading and shipping team is adding significant value elsewhere. So I think over time, you'll see that business recover, but I'm not one for telegraphing what's going to happen with geopolitical events and pronouncements week-to-week because it is varying a lot at the moment. So we'll stay cautious and take opportunities where we see them within our risk settings. There's anything you want to build? Matthew Halliday: I think that's a good summary. Operator: Our next question comes from Dale Koenders at Barrenjoey. Dale Koenders: Just wondering about the SEAOIL impairment. Why is that done now? What's the outlook for the rest of the business? And sort of what is the profit level that it's kind of making at the moment? Greg Barnes: Yes. Okay. I'll kick off again, Matt, you pick up anything you want to add. Look, we're actually -- the business is performing. Our view of outlook really doesn't deviate from the sort of performance we're seeing today and what we've seen over the last couple of years. It isn't quoted publicly. And I hasten to add, we're a 20% shareholder in this business. It wouldn't be appropriate for us to talk in a lot of detail about the performance of that business. Suffice to say, our view on outlook doesn't really differ from where it is today. What has changed is a combination of both capacity in terms of storage and the attractiveness of this market to traders as fuel volumes rebalanced around the region and the globe post the Russia invasion of Ukraine. They are the few -- the key drivers. Our carrying value invariably -- and the original investment case had more optimistic assumptions in terms of outlook. And after a couple of years where those assumptions aren't being realized, even though it continues to trade consistently, you're just not seeing the uplift you may have forecasted internally. Really, the accounting standards don't leave you much scope, and that is you need to mark the business back to what you are seeing. And hence, we took a noncash impairment. I would not take that as a view on its performance deteriorating from where it is today. That is not our view. And just to give you a guide, its current -- its revised value would be something in the order of our share of 6 turns or less of EBITDA for that business. So invariably, once you called on to do this, you take a reasonably conservative view of that business. The only other build is we supply into SEAOIL and specifically, but also more broadly into the region on the back of that volume. That value sits in our trading and shipping business and remains there, and that is not being taken into account when we've impaired the asset. Dale Koenders: Secondly, Greg, you've made the comment around sort of Australian wholesale fuel volumes down 2.6%, primarily retail reseller levels, which I assume is EG, and that sort of share of volume then implies EG volumes could be down in the order of 5% to 10%. How are you thinking about the earnings which is for the business in Australia that you've quoted at a 2024 level, but not revisited? Is there a risk that, that EBITDA is disappearing on you? Greg Barnes: I mean, again, we don't own the business. And so I've got to tread carefully. What I would say is our expectations for that business under our ownership have not changed and -- nor has our view of either earnings or cash flow accretion relative to what we said at the time of the announcement. Having gone back to triple check that last night, we stand behind the direction we gave at the time of that acquisition. You probably have noticed that the sector more broadly has seen some margin expansion. And you would imagine that, that business has been a beneficiary of that, and we haven't seen any real shift in their underlying earnings performance. I'll probably just leave it at that. Matthew Halliday: Yes. Everything we've seen, Dale, I would say, relative to when the deal was announced has only reinforced our conviction in the value we can deliver from that acquisition. Operator: Our next question today comes from Tom Allen at UBS. Tom Allen: I might just follow up with a couple of earlier questions on the balance sheet. So to 2.3x, I should say, adjusted net debt to RCOP EBITDA and then guiding higher net CapEx for '26 than what the market expected. Just on your current outlook for refining and noting that you've still got your hands full, obviously, with the Ultra Low Sulfur Fuels project and U-GO conversions. Can you just provide some color on the top 3 levers that could accelerate your deleveraging over the year? Greg Barnes: Yes. So I mean, there's a couple of things that work. I mean, this business is typically quite a high cash generator. And we had a question earlier on CapEx versus depreciation. As we come to the end of this cycle of having both upgraded and secured new highway sites and invested in the low sulfur fuels program, as well as 2026 is a period of major maintenance for the refinery. Those 3 drivers are all largely coming to an end during 2026. We'll, of course, invest in convenience retail where we see value and opportunity. But those big programs are coming to an end. So I think I talked earlier the CapEx starting to cycle back towards $450 million, absent another growth opportunity that would shift that. So that in itself will start to contribute positively to cash flow. We do expect and we are seeing with low sulfur fuels, which we're producing now, we are seeing that product spec is scarce in market. That is going to be supportive of refining margins. I think that's a real positive for the business and the continued improvement you're seeing on a very broad-based form across convenience in Australia, the New Zealand business underlying, particularly if you look through Q3, but also the strong consistent performance coming out of our F&I Australia businesses, I think, are all very supportive. And we are in discussions, as you know, in review of the FSSP, which we would expect some sort of decision on that, or update towards the end of this quarter. And I hope to have more to say on that prior to updating on Q1 results in April. Matthew Halliday: The only other couple of things I'd point to is we continue to remain very focused on productivity to offset more than inflation in our cost base in '25, I think, is a strong result, and we continue to remain absolutely focused on that through '26. And EG itself is a highly, highly cash accretive acquisition. So we talked in the order of not far off 20% sort of cash accretion metrics when we announced the deal. So EG and getting that deal done is also a big contributor. Tom Allen: Just following up your comment on the FSSP Phase 1. So can you comment perhaps without predicting the outcome of that review, but what percentage change you think you've seen in structurally higher refining costs over the last 2 to 3 years? And how we might interpret that change in cost into a new margin mark or breakeven threshold at Lytton directionally? Matthew Halliday: Yes. I think you can track costs over time in our results, Tom. I would say -- all I would say is there's an acknowledgment that costs have escalated, both in terms of operating costs and capital costs as far as the refineries are concerned. That's acknowledged, and we're in the process, and we're expecting that Phase 1 of that process to be finalized in the first quarter. Operator: Our next question today comes from Henry Meyer at Goldman Sachs. Henry Meyer: I guess CapEx, excluding the divestment proceeds for 2025 has come in a bit above guidance. Could you just step through what's driving that? I'm assuming it's to complete the Lytton upgrades and potential impacts from maybe not having online in time, Greg, though you say it is currently producing low sulfur fuel? Greg Barnes: Yes. So we are producing low sulfur fuel, just not at full rates. And as we said, we're commissioning in first half of 2026. So in terms of your question, just remind me... Henry Meyer: So CapEx... Greg Barnes: The CapEx, yes. So I would -- I actually would hold the view that our guidance on CapEx during the year. We did lift it at the start of the year slightly, but we guided to sort of something in the low 600s this year. That was net of the channel infrastructure investment. What is new news in our $563 million number is the cash proceeds on Flick. So CapEx came in at a gross level around where our expectations were and I believe were communicated to the market reasonably clearly, notwithstanding we did provide an update earlier in the year. And the $600 million reflects both the T&I that we're undertaking on the cracker in 2026 as well as the completion of that project. Full stop, I think. Is there anything you want to add to that? Matthew Halliday: No. And when we say we're producing low sulfur fuels, not from the new plant, which we expect to start commissioning in Q2, but the plant can produce some low sulfur fuels in its current configuration. That's what we're referring to. Henry Meyer: Sticking on refining, it's been a pretty eventful start to the year for geopolitics and oil markets. Margins have come down a bit over the last few months. Could you just share any perspectives on how you're thinking the potential for more heavy oil grades from Venezuela or Iran could impact crude spreads, broader complex refining margins and the flow on to simpler refinery like Lytton? Matthew Halliday: Yes, I might start briefly, and then I'll hand to Brent. What I would say is that in terms of the start of the year, and I made this remark in my comments, that gasoline, in particular, has started the year softly. The global system has effectively run strongly, and we're out of kind of turnaround season, but coming into it now and then the Northern Hemisphere driving season commences after that. So we're kind of in the cyclical phase of gasoline weakness, I would say, at the moment and middle distillate margins have actually -- or cracks have actually remained pretty strong. That tends to be a fairly typical part of the cycle, but I'll pass over to Brent to build on that. Brent Merrick: Yes. Thanks, Matt. Yes, so areas like Venezuela, we don't see as too dramatic an impact in the overall availability globally. It's going to take a capital investment in that market to grow production. We do see it's destination changing as the U.S., as an example, likely take more versus what China has in the past. Over the last, say, 6 months, we have seen a change in the sweet sales spread for reasons outside of Venezuela and Iran, things like impact on exporting of things like -- grades like CPC Blend, which is linked to Ukrainian attacks on loading facilities. There's been outages in the North Sea. There has been impact on U.S. production as well. So there has been a move between sweet sales spreads over the last few months. But going forward, we don't see Venezuela really driving the spreads and the performance for our refinery. And obviously, the whole world is watching carefully on what unfolds in the Middle East at the moment. So we're clearly watching that carefully. Operator: Our next question comes from Craig Woolford at MST Marquee. Craig Woolford: My question relates to the metrics on your convenience business, so Slide 11, which are all tracking really well. It's been a great journey, as you highlighted. With that increase in basket value outside of tobacco, can you just talk through some of the categories that have contributed significantly in that part? And do you still see further upside in the shop gross margin if we were to strip out the tobacco impact? Matthew Halliday: Yes. So I think I'll pass to Kate to give some more color, but I think it's been a pretty consistent growth in the food service categories, beverages, snacks. It's been fairly broad-based and consistent, which I think when you do look at that average basket value growth ex-tobacco, its CAGR over that 5-year period is nearly 6% pretty consistently. And I think it reflects growth in those high-margin categories, but I'll pass to Kate to give some more color on that. Kate Thomson: Thanks, Matt. So average basket movement is primarily driven by beverages, fresh, confectionery and some food service and our QSR business is also performing well. In terms of margin growth, it's a split between mix and rate. So some of it has been tobacco mix, but also growth in those categories that I talked that are driving ABV. And then we've got rate improvements through Metcash, which hasn't had the full year come through yet and also rate on things like beverages and confectionery. Craig Woolford: Second question is just on the outlook for net interest costs, mindful, not sure how to interpret the change of that disclosure on the merchant fees. And how should we think about capitalized interest impacts in 2026? Greg Barnes: So you'll have your own forecast of debt. As you can imagine, CapEx will -- given our commentary on low sulfur fuels, CapEx should skew more first-half than second-half. And you'll capitalize that interest until that product is commissioned and then it will drop back to the P&L and the capitalized portion will play through in depreciation of that asset post commissioning. I'm not really in a position to sort of guide on debt specifically, but obviously, we're back in the range. We're coming into the acquisition of EG, one hopes in June. And we have telegraphed previously, we expect it to be back in the range within 2 years of that transaction. Operator: Our next question today comes from Rob Koh at MS. Robert Koh: So I think you've given us great detail on the non-tobacco convenience performance, and congrats on that. I wonder if you could also maybe give us some color on what is happening in tobacco. If I measure your charts and then look at your Slide 11, it looks like tobacco sales were down half-on-half quite significantly. Any light at the end of the tunnel? Greg Barnes: So look, I think I said in my commentary earlier, volumes and sales were down 20% year-on-year. Now its margin and contribution at the site level to store, and fuel margin is now 3%. So over the last few years, through a combination of factors, it's now not a particularly material contributor to our profitability. It really accelerated when the fuel packaging and regulations and regime took hold in the lead up to that for 1 July or 30 June, it took hold really in that build. And there were sort of two tranches to it. One on sourcing of product, it was the first leg into April, and then the second leg was the sale of the previous packaged product in the second quarter. I wouldn't say it has eased. What you have seen, it's probably eased from its peaks, but we're still seeing volumes down year-on-year. What you are seeing in markets where there's been real active uplift in police activity to crack down on illicit trades in Queensland would be the standout is the decline has eased substantially. And that's probably all we can really say on that. The rest is really a matter for policy and the police. Yes. Matthew Halliday: I would say, just building on that, you've had -- there's a lot of conversation around this. I think it's getting a lot more attention. You're seeing different regulations put in place or laws put in place across the different states. But I'd call out Queensland, as Greg just mentioned, is the one where we've seen enforcement be quite effective. We haven't yet seen a material impact flow through anywhere else. Robert Koh: The next question I wanted to ask is in relation to your emissions targets and also maybe link that into the FSSP discussion. I'm reading here that you're going to resculpt your emissions intensity targets for Lytton to align with the safeguard mechanism and appreciate decarbonization there is never going to be a straight line. I wonder if you could just give us some more color on what's the change in target going to imply there? And then if the safeguard costs also factor into FSSP, please? Greg Barnes: Yes. So with the safeguard mechanism in place, you've essentially got a functioning market mechanism that drives our approach and incentivizes an approach, if you like, around decarbonization I think to have something that then overlays that becomes problematic. So that's really what underlies that change. We see opportunities to decarbonize operations there around the edges. At the end of the day, it is about reliable and efficient operations that are the biggest contributor when you're looking to limit your intensity, which is a per unit of production measure. And then ultimately, when we're doing things like assessing carrying values and what have you, we are linking our -- the life of the asset to our commitments for 2040. There's probably not a lot to say beyond that. But with safeguard in place, I think that's a natural point. Maybe 2 small builds. We do have a trade exposed relief for the refinery for the next 3 years -- he says looking afraid that it's 3 years -- which reduces the safeguard-related costs. And given their intention, the appropriate offsets are things we would contemplate in the equation when assessing decarbonization opportunities versus the purchase of offsets that makes sense to take a rational economic view and approach to that. Matthew Halliday: I think from an FSSP point of view, we talk about Phase 1 needing to acknowledge in our view, at least higher costs. This is one of those higher costs. And so we would expect it's part of that consideration set, and certainly, as we move into Phase 2 equally. I think in terms of the targets and the difference, it's just simplifying to move to the safeguard mechanism. It doesn't otherwise trigger any material change. Operator: Our next question comes from Mark Wiseman at Macquarie. Mark Wiseman: A couple of questions. Firstly, on the ultra-low sulfur gasoline project at the refinery. Are you in a position to talk about what the total CapEx of that project has been end-to-end? It seems like it's gone quite a bit over budget. And with the market focusing on your capital intensity, whilst that's a true compliance CapEx cost that you've incurred and should be taken into account with any government initiatives, it is sort of one-off in nature when we think about the capital intensity moving forward, it would be good to be able to strip that out. Matthew Halliday: Yes. I think we haven't called out the cost of the investment specifically. It has escalated certainly above where we thought CapEx was going to be originally when we approved the project. I think the key point Greg made earlier is we expect CapEx for this business to move back to somewhere around $450 million. This year, we've got the FCC turnaround at Lytton, and we've got just the tail end of that upgrade spend. But I think the key piece is when you look through the higher CapEx as over the last couple of years, we've been in the heat of our turnaround cycle. And we've had the one-off project with low sulfur fuels. We then get back to a number of around $450 million on a normalized basis. Mark Wiseman: Second question, just on convenience retail. I mean thinking about that 5% CAGR in earnings since 2020, congratulations, it's a great achievement. I mean, back then, our forecast for this year was $320 million, and you're printing $374 million. It's definitely been better than the market expected back then. I guess, looking forward over the next 5 years, you've got EG Group coming into the portfolio, which is a big investment, but we're facing difficult tobacco and fuel volume declines and more competition at the bottom end. Do you have any comments on how to think about that 5% CAGR on a forward basis from now to 2030? Matthew Halliday: Look, I think from our point of view, and Kate gave some color earlier, and I might ask her to comment or to build on my comments. But when we look at the underlying consistency of delivery in the business in terms of the right offer for the right local market, the -- at the lower end, the results of U-GO. At the upper end, we're seeing some really encouraging results from the premium segmentation and our highways. And when we look at our pipeline of activities that the team has -- we're really encouraged by that sort of performance, not being simply the turnaround of the business over the last 5 years, but a really strong platform from which to do something similar going forward, setting aside EG, where we've been clear on sort of the metrics we anticipate there. So we're really encouraged when we look at our plans that we can continue to see strong growth in this business over the next 5 years. Kate, do you want to build on that? Kate Thomson: Yes, sure. So we have a strong and stable team that's demonstrated that we've got the ability to grow with discipline. We're really pleased with the results we're seeing across the whole segmentation strategy. So as an example, across our premium segments, we're seeing double-digit growth in things like coffee, bakery, chilled perishables, healthy snacking. Our QSR business continues to grow, albeit that we're very disciplined with how we're selecting sites and making sure that we're ready to grow before taking next steps. But our M4 sites, add an additional 6 QSRs to our network just across those sites last year. We've got a pipeline for 40 further sites to be upgraded across our segmentation strategy this year, and we're confident we've got plans to grow beyond that. Matthew Halliday: I think the only other thing I would say touching on your higher competitive intensity comment at the lower end is that I think the execution strength and the strength of the team and the focus on productivity is an important part of the strength of our performance in addition to the comments that we're making in terms of the offer and the sites because the rest of the market, we would observe is feeling cost pressure. And I think Kate and the team are doing an excellent job at focusing on productivity and keeping costs under control. In nominal terms, our convenience retail costs were up just over 0.5 percentage point in 2025. I think that's great going. Operator: Our next question today comes from Bryan Raymond at JPMorgan. Bryan Raymond: My first question is just on the shop gross margin reaching 40%. Obviously, there's a bit of a tobacco tailwind in that. But on my math, it looks like there was some healthy underlying gross margin expansion sort of I'm estimating 50 to 100 basis points, I'm not sure if that's about right, in FY '25. I'd just like to understand the drivers of that a bit better and the sustainability, or if there's more to come from a gross margin perspective ex-tobacco, please. Matthew Halliday: Yes, that's about right. And you can see we talked about the average basket value growth on the bottom right-hand side of Page 11 shows you the strength in basket, which is at least partially margin related on the categories that Kate referenced earlier. But Kate, do you want to build on that? Kate Thomson: Yes, sure. So it's roughly 50% through mix, which is tobacco [ decline ], but also performance shifting to higher volume -- higher margin, sorry, categories such as beverages. And we're also seeing improvements in margin driven by our QSR business, which given we've got such high-performing highway sites is material across the portfolio. We're also seeing rate improvements across categories such as hot kitchens where that's through negotiation. And we have further improvements that we expect will come across some of the categories I've mentioned into this year. Bryan Raymond: Just as a follow-up there, was the Metcash contract into the full year as well because I think that was a bit of -- I think you've called that out in the past as a bit of a positive in terms of margin availability. Kate Thomson: Commencing April '25. So we haven't got the full year benefit through yet. Bryan Raymond: Right. And that's still all on track and continuing to -- is that a tailwind as well for gross margin? Or is that not as meaningful? Kate Thomson: The contract is meaningful. It's certainly not our only contracts that we have running through the business. We have others that we have the ability to negotiate as well, but all on track, fully implemented, and we should see the full year run rate this year. Bryan Raymond: Just my second one, just around the U-GO uplifts you're seeing up from $300,000 previously to $350,000 and how that plays out from the EG acquisition given 1/4 of the sites are planned to be converted there. Given that meaningful kind of uplift that you're seeing, should that translate into higher synergies, higher accretion when you get to the EG conversions as well? Or is there something else that we need to be considering? And also, what have you factored into the synergies in terms of uplift? Would it be -- would it have been consistent with $300,000 that you called out previously? Matthew Halliday: Yes. So it would have been just consistent with those base numbers that we quoted previously. I think what I would say is the [ 65 to 80 ]. But as I commented, actually, we see a lot of potential when we benchmark the performance of Kate's network against comparable sites. We see a fair bit of potential out of that business. So U-GO and doing more on U-GO offers us great flexibility. But it's not the only lever we can pull. And we see there's -- it is great to have that flexibility, but there is also a lot of value we see that we can extract out of the store on a number of those stores if we look at comp performance against our own network. So flexibility there. We're not going to change our numbers on synergy expectations at this stage, but it is a really important point to reinforce. Operator: Our next question today comes from Gordon Ramsay with RBC Capital Markets. Gordon Ramsay: Great results today. Now I got a question about the EG Phase 2 clearance assessment with the ACCC. And I know on Slide 23, you're highlighting that it's a would decision versus a could decision in Phase 1. The feedback I've picked up is that the ACCC is mentioning the divestment of potentially 115 sites, and you went into this transaction looking at divesting 19 sites. I just want to know how you're going to get closer to that 19 site number in the second phase of the assessment. Can you comment on that, please? Greg Barnes: Yes. So look, there is some basic parameters around concentration in terms of the number of branded banners in local market and overall concentration that go into the original sort of formula. When you're -- in terms of isolating the number of potential sites and then you've got to go a bit deeper in terms of looking at what's happening market by market to make a true competitive assessment, what are the geographic boundaries, et cetera. When you're in the first phase, what is evident -- remember, the commission is -- we're one of the first transactions in this new regime. What's evident is it was a relatively conservative approach, and hence we've used the language under the regulations around whether it could likely substantially lessen competition. They're taking a broader threshold than what would be past practice and would have supported past decision-making. As you move into Phase 2, the sort of 3 competitors or less and 40% is typically the benchmarks that are provided or applied in a local geographic market and then you look at some of these other unique conditions as it relates to those markets. So we're not going to speculate on sites. We are confident in our view, and our view is that we will end up with a result that is closer to our original estimate than the sort of numbers you just telegraphed then and were perhaps mentioned by the commission previously. So that's just part of the process. We had always estimated a completion in Q2 of this year and the timing of this Phase 2 review is consistent with that. So we're not surprised that a transaction of this complexity has gone to Phase 2, and we continue to work constructively with the commission. Gordon Ramsay: Second question relates around net operating cash flow. The market and ourselves were expecting a much higher number. I know that's a working capital issue there as well. But I think you mentioned MSO inventory loss contributing to it. Were there other factors that make up the difference between where the market was, let's say, like $1.1 billion versus kind of $795 million reported? Greg Barnes: I think if we're talking -- you must be quoting that number off our operating cash movement. The 2 drivers in there that would be a difference from reported EBITDA movements in working capital, cash payments of significant items and then lease payments because obviously, our EBITDA is on a post-AASB16 or apply the lease standard. So lease payments don't wash through EBITDA. When we report operating cash, we have to subtract those lease payments. I think if you take those 3 data points, you'll get very, very close to the number that's in that bar chart on our cash flow slide. Our cash generation generally is very good and really between the restructures we've talked about and what's pending in terms of completion of the low sulfur fuels project, you will see our cash flow return quite quickly. Operator: Our next question comes from Scott Ryall at Rimor Equity Research. Scott Ryall: Matt, probably for you. The first question is around Lytton. When you're talking with government -- and I understand there's a lot of detail to come, but when you're talking with government, is there much focus on looking back at the 5 years since the FSSP was introduced and the fact that there was a big spike in '22 and through the cycle, it's looked okay? Or is it more the fact that going forward, there's been a change -- structural change in costs as you've referred to? I guess as part of that, does the decision on the FSSP impact at all on your assessment of low carbon liquid fuels as you've indicated is a potential, and we all know what you're doing in that space as well. Does that come into the discussions? Matthew Halliday: So look, I think, Scott, there is an acknowledgment in terms of the structural cost increases that we've seen at Lytton and in refining. And I would say that's right at the crux of the review that's underway and that we expect will be completed in Q1. We then get into Phase 2, which is a broader review around kind of where is the industry heading in Australia, what do we see happening to costs and what do we see as necessary settings to enable the ongoing investment in the refinery. From our point of view, lower carbon liquid fuels is a separate topic, and there's a significant amount of policy work that is going to be required to get returns to a level that would be appropriate and enable further investment. So they are largely unrelated. Obviously, you need to -- it certainly helps to have an operating refinery and capability if the country is to move down a path of producing domestically lower carbon liquid fuels in the future, acknowledging that's some time away. Scott Ryall: Okay. But as you stand at the moment, when you look forward, the -- basically the returns -- this is just for the FSSP -- the returns at Lytton are not sufficient to justify ongoing the medium- to long-term operations as is. Is that a fair enough comment? Matthew Halliday: I think the intent is to -- when margins are low, so during a quarter when margins are low, we need the support to kick in. That hasn't consistently been the case. And the main reason that hasn't been the case is because costs have escalated significantly, and I think that's acknowledged. So I think that concludes the call. Thank you for your attention. I think it's a really strong result that is broad-based and right across the business, and look forward to engaging with you over the coming days to discuss it in more detail. Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.