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Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I will be your conference operator today. At this time, I would like to welcome you to the Oil States International, Inc. Fourth Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question at that time, please press star then the number one on your telephone keypad to raise your hand and enter the queue. To withdraw your question, simply press 1 again. Thank you. I will now turn the call over to Ellen Pennington, Vice President of Human Resources and Senior Counsel. You may begin. Ellen Pennington: Thank you, Colby. Good morning, and welcome to Oil States International, Inc.’s Fourth Quarter 2025 Earnings Conference Call. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. No one should assume these forward-looking statements remain valid later in the quarter or beyond, and such remarks should be weighed in the context of the many factors that affect our business, including those risks disclosed in our 2024 Form 10-K along with other recent SEC filings. This call is being webcast and can be accessed at the Oil States International, Inc. website at investors.oilstatesintl.com. A replay of the conference call will be available two hours after the completion of this call and will continue to be available for 12 months. I will now turn the call over to Cynthia B. Taylor. Cynthia B. Taylor: Thank you, Ellen. Good morning, and thank you for joining our conference call today where we will discuss our fourth quarter 2025 results and provide our thoughts on market trends in addition to discussing our company-specific strategy and outlook for 2026. We are pleased to report strong fourth quarter results with adjusted EBITDA exceeding our guidance and quarterly cash flows from operations at historically high levels. We generated $50 million of cash flows from operations, which was used to retire an equivalent amount of our outstanding convertible senior notes. Following the repayment, our cash on hand exceeded outstanding debt by $15 million at year-end. We continue to progress our multiyear strategy to optimize Oil States International, Inc.’s business mix in favor of operations focused in the offshore and international markets. Our consolidated fourth quarter results were driven by backlog conversion, disciplined execution, and improved margins in our Completion and Production Services and Downhole Technologies segment as both segments are showing positive trends following restructuring. Fourth quarter consolidated revenues increased 8% both sequentially and year-over-year with revenue growth tempered by our strategic decisions to exit certain underperforming U.S. land-based operations. These actions have resulted in a shift in our business mix with 77% of our revenues generated from offshore and markets in the current quarter compared to 72% in the prior-year period. Going forward, our sharpened focus on more differentiated product and service lines should provide sustained incremental margins and cash flows to support returns to our stockholders. Our Offshore Manufactured Products segment delivered another standout quarter with revenues and adjusted segment EBITDA increasing 1,312% sequentially. Backlog continued to increase, totaling $435 million, the highest level since March 2015, supported by bookings of $160 million, yielding a quarterly book-to-bill ratio of 1.3 times. Importantly, in our Completion and Production Services segment, our recent focus on high-grading technologies and service lines has translated into improved adjusted EBITDA margins and cash flow. In our Downhole Technologies segment, we are focused on market introductions of our revamped technology domestically along with international expansion of our full product suite. Despite it being early days into these strategies, we realized improved contributions from our perforating and completion products during the quarter. During 2025, Oil States International, Inc. secured multiple new contracts and successfully deployed advanced offshore technologies that reinforce our leadership in high-specification offshore and international markets. Continued adoption of our managed pressure drilling system and the first successful deployment of our low-impact workover package demonstrated meaningful operational improvements for our customers including reduced nonproductive time, enhanced safety, and improved project efficiency. In addition, following quarter-end, Oil States International, Inc.’s Merlin deep sea mineral riser system achieved a record deployment in water depth of over 18,000 feet, or three and a half miles below the surface of the water, underscoring our differentiated engineering capabilities and strong positioning in emerging ultradeepwater and offshore resource applications. With our extensive portfolio of differentiated technologies, expanding margins, and strong cash generation, we believe we are well positioned to support disciplined capital allocation and to continue returning capital to stockholders. These attributes taken together reflect a company that is more focused, more resilient, and better positioned to generate sustainable returns across industry cycles. Lloyd will now review our operating results along with our financial position in more detail. Lloyd A. Hajdik: Thanks, Cindy, and good morning, everyone. During the fourth quarter, we generated revenues of $178 million, up 8% sequentially from the third quarter, and adjusted consolidated EBITDA of $23 million, representing a 9% sequential increase and at the top of the guided consolidated EBITDA range that we provided on our third quarter 2025 earnings call. We reported a net loss of $117 million, or $2.04 per share, which included long-lived asset impairments, restructuring charges, and valuation allowances established on U.S. deferred tax assets. Noncash impairments of our long-lived assets and inventory were recorded in our Downhole Technologies segment, principally related to intangible assets recorded at the date of acquisition in 2018. Our adjusted net income totaled $8 million, or $0.13 per share, after excluding these charges. For the full year, we generated adjusted consolidated EBITDA of $83 million, adjusted net income of $22 million, and adjusted EPS of $0.37 per share. Cash flow performance was a clear highlight during the fourth quarter and the full year, reflecting solid underlying operational performance of the company. During the quarter, we generated $50 million of cash flow from operations, up 63% sequentially. Investments in CapEx totaled $3 million in the fourth quarter, offset by $6 million in proceeds from asset sales. For the full year, cash flow from operations totaled $105 million and free cash flow totaled $94 million, representing increases of 129% and 92%, respectively, year-over-year and exceeding the full-year cash flow guidance we provided last quarter. We ended 2025 with cash on hand exceeding our total debt by $15 million. Turning to segment performance. Our Offshore Manufactured Products segment generated revenues of $123 million and adjusted segment EBITDA of $25 million in the fourth quarter, resulting in an adjusted segment EBITDA margin of 20%. Our backlog totaled $435 million as of December 31. We achieved a 1.3 times book-to-bill ratio in the fourth quarter and for the full year. Our backlog continues to reflect a diversified mix of offshore energy, international, and military programs. Backlog strength and execution continue to support earnings visibility into 2026 and beyond, with a significant portion of our backlog expected to convert to revenues within the year. Our Completion and Production Services segment delivered $23 million in revenues, and adjusted segment EBITDA of $7 million in the fourth quarter, with adjusted segment EBITDA margins expanding to 32% from 29% in the third quarter, reflecting benefits of the restructuring actions taken in 2025. During the quarter, the segment recorded facility exit and other restructuring charges totaling $5 million. These quarterly charges will reduce in 2026 once the underlying equipment and facilities are sold. In our Downhole Technologies segment, we generated revenues of $32 million, up 11% sequentially, and grew adjusted segment EBITDA to $1.3 million. During the fourth quarter, the Downhole Technologies segment recorded noncash long-lived asset and inventory impairment charges totaling $112 million. Older product technology is being abandoned in favor of our revamped products. Intangible assets established at the acquisition date in 2018 have been written down to reflect current estimates of fair market values. In January, we entered into a four-year cash flow-based credit agreement which provides for borrowings of up to $75 million under a revolving credit facility and $50 million available under a multidraw term loan facility, which replaced our asset-based lending credit agreement. We had $53 million in principal amount of our convertible senior notes outstanding at December 31, and cash on hand of $70 million. We intend to use U.S. cash on hand and borrowings under our new credit agreement to retire these notes on or before their maturity on 04/01/2026. In addition to purchasing $71 million in principal amount of our convertible senior notes in 2025, we also repurchased a total of $17 million of our common stock, representing about 5% of shares outstanding as of 01/01/2025. We will remain opportunistic with additional purchases of our common stock as we continue to prioritize returns to shareholders. Now Cindy will offer some market outlook and concluding comments. Cynthia B. Taylor: Thank you, Lloyd. Before looking ahead, I want to briefly reflect on what we delivered in 2025. Over the year, we executed according to our strategic priorities by expanding our offshore and international exposure, growing backlog to a decade-high level, strengthening margins, and generating substantial free cash flow while deleveraging the balance sheet. Our results and accomplishments reflect disciplined execution across the organization with meaningful progress in repositioning Oil States International, Inc. for more durable performance across industry cycles. As we look ahead into 2026, we believe we are well positioned to build on that progress. Our Offshore Manufactured Products segment backlog continues to grow, and our business mix is increasingly weighted towards offshore and international markets, with longer-cycle visibility, stronger margins, and more favorable cash flow characteristics. Our balance sheet strength provides additional flexibility, allowing for prudent capital allocation. While U.S. land activity is expected to remain relatively subdued, we believe the actions we have taken over the last couple of years, including high-grading our portfolio, sharpening our technology focus, and maintaining disciplined execution, have provided a more resilient operating model. Now let us discuss guidance for the full year 2026 and the first quarter individually. We expect 2026 full-year revenues to range between $680 million and $700 million and full-year EBITDA to range between $90 million and $95 million, both metrics up meaningfully year-over-year. As a reminder, our first quarter is historically our weakest quarter in terms of revenue, EBITDA, and cash flows due to the timing of order releases, material deliveries, and working capital uses. Our first quarter guidance calls for revenues in a range of $150 million to $155 million and EBITDA of $18 million to $19 million. Cash flows from operations are expected to remain strong in 2026, in a range of $60 million to $65 million, down from 2025 due to expected working capital build. Investments in CapEx of $20 million to $25 million are planned for 2026. Across the business, our priorities remain consistent: advancing differentiated technologies and services aligned with customer needs, driving margin durability, generating free cash flow, and delivering long-term stockholder value creation. We entered 2026 as a more focused, financially flexible, and cash-generating company, which is being recognized by investors leading to stock price appreciation, as the market has begun to understand and embrace our strategic initiatives. With a strong balance sheet, expanded margins, and a growing offshore and international footprint, we are confident in our ability to continue the momentum achieved in 2025. That concludes our prepared remarks. Colby, please open the call up for questions. Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, you can press 1 again. We will pause just for a moment to compile the roster. Your first question comes from Stephen David Gengaro with Stifel. Your line is open. Stephen David Gengaro: Thanks, and good morning, everybody. Operator: Good morning. Stay safe. Stephen David Gengaro: So two for me. One, I think, is probably pretty straightforward. On the Completion and Production side, has the restructuring, or at least that is the wrong word, but the exiting of underperforming businesses—Is that completely reflected in the 4Q revenue run-rate levels? Cynthia B. Taylor: I think the answer to that is yes. I am going to let Lloyd do a little back-of-the-envelope for me as we talk about that. I will just make a comment. We have reported, and you have seen, fairly significant EBITDA add-backs throughout the year on a quarterly basis. Think of that as runoff of operations, closing up facilities, severance costs, etc., as you exit facilities. One of the key things I am focused on is mitigating that and reducing that as we go forward. Those adjustments will continue probably through the first half, but be much lower than what you have seen. Two comments there: you will see probably an increase overall in assets held for sale. That is clear messaging that those facilities have now been exited. The workforce, the machinery, the equipment, the inventory has been relocated, and those are being prepped for sale and disposition. But as you know, there are going to be ongoing property tax, insurance, utilities until we monetize those. On the balance sheet, I think it separates assets held for sale, which approximate $17 million. And then there are still a handful of operating facilities yet to be fully exited. Just know there is a lot of inventory and equipment yet to be monetized, but we are in process. Again, that will be much less significant than what we have seen in the past. Importantly, Stephen, if you look at our year-over-year EBITDA margins, you should notice material improvement as we have progressed. You have to look at adjusted EBITDA, obviously, because we have had the drag of exiting these. But I believe, Lloyd, what were our EBITDA margins in Q4? 32%. Thirty-two percent. Again, much more indicative of the go-forward level of activity that we have. I will also point out generally what we have left is our extended reach technology, which is very differentiated in the market, and that is largely, of course, a land-based operation, not only in the United States, but also in Canada supporting operations there. Our Gulf of Mexico operations is wireline and production services support activity, and then our international equipment as well, largely dedicated to the Middle East. We do have residual operations in the Bakken area that is a bit less competitive, I will call it. That is our focus going forward. Again, revenues will be down, but you have already seen that margins go up, indicating the very marginal nature that we were getting from both previously in 2023, 2024 flowback operations and some of our frac and isolation assets that we felt compelled to exit. The good thing is you are not only reducing some of the low margin or no margin activity, you are going to mitigate CapEx, achieve higher margins, and free cash flow in the process. I will let Lloyd add anything to that. Lloyd A. Hajdik: Yeah. Thanks, Cindy. So, Stephen, your question. In the fourth quarter, there is about $1 million of revenues from the exited operations. Just as a frame of reference, for the full year 2025, the $669 million of consolidated revenue includes about $21 million derived from those exited operations. Stephen David Gengaro: Great. That helps. Thank you. And then you created more questions in my mind, Cindy, but I will ask one and get back in line. When we think about the backlog levels in the Offshore Manufactured Products business, obviously, you had great order flow. Overhead absorption should clearly help. Is the embedded margin profile materially better right now than it was exiting the year 8–12 months ago? Cynthia B. Taylor: I just looked at—we have had, if you look to our decades of history in that business, consistent overall margin improvement. But as you know, there are a lot of things that go into that. One is the mix that you have across your global operations. Again, we are not a single product focused competitive landscape company. Some enjoy higher margins than others depending upon the proprietary nature of the equipment. The second one, of course, is absorption and utilization of our various facilities around the world. That being said, we are targeting fairly consistent margins on a blended basis for 2026, but on strong revenues at the end of the day. Mix could alter that to the benefit, as an example. Absorption could create some upside there as well. We had taken initiatives for the long term to improve our overall margin performance, particularly with the new facility that we now have up and running in Batam, Indonesia, that got kicked off last year but certainly is not yet at the revenue run rate that we think it is capable of. In addition to that, we are evaluating bringing in a broader range of products being manufactured out of that facility. Again, it is hard to say that next quarter is going to be up and to the right, but these are all embedded strategies that over the course of time will elevate that overall. I think most importantly, as you point out, it is a backlog-driven business, and despite growing revenues, we had a book-to-bill in 2025 of 1.3 times that we are very proud of. Our indications and our outlook are that we will exceed a one-time book-to-bill again in 2026. I think the trends are there, but this business is not the cyclical up and down that you see in North American-based businesses. If you look at our performance over a continuum of five to ten years, you are going to say it has been rather impressive. Lloyd A. Hajdik: Yeah. We have had a book-to-bill in excess of one for the past five years on a year-by-year basis. Stephen David Gengaro: Okay. Great. Thanks. Just one quick one, and I will get back to it. The CPS margins in the quarter—was there anything unusual in that 32% that we should be thinking about? I know you have seasonality in the first quarter, but that is a fairly healthy number and a fairly good number to base forward assumptions off of. Cynthia B. Taylor: I think it is in reality. Now we may have had a one-off facility or equipment sale gain. Honestly, I do not remember in that level of detail quarter by quarter. There have been some facility sale gains of some consequence every quarter as we have exited all of this. But we are comfortable with EBITDA margins for that business in the 30% to, I do not know, 33%, 34% range. Stephen David Gengaro: Great. Thanks, and congrats on all the progress. Cynthia B. Taylor: Thank you. Thanks, Stephen. Operator: Your next question comes from the line of James Michael Rollyson with Raymond James. Your line is open. James Michael Rollyson: Hey, good morning, Cindy, Lloyd, everybody. Great job on the way you finished out the year for sure. Curious just to circle back to your answer on Steve’s question. He was talking about backlog margins and, obviously, in part of that answer, you talked about book-to-bill being north of 1x five years in a row. It is interesting because offshore spend took a little bit of a dip as we went through the last 18 months or so, and yet you have continued to crank out well above one-times type of order flow. As we maybe pulse back up in offshore, at least that is the expectation as we go into late 2026, 2027, 2028, I am curious—you go back, look at historical levels, you are at ten-year highs, but you have been higher. I am curious if the revamp of spend offshore over the next couple of years continues to drive well north of 1x backlog to where, two, three years out, you are back to the old highs from several years ago. I am curious how things are shaping up with the macros trending, the spend levels trending, your product line trending. Are we just going to keep going up and to the right for the next couple of years? Cynthia B. Taylor: Well, all I can say is I certainly hope so. I want to drill down and give you a little more color on that answer. I would say, first of all, it seems like our—I cannot even remember the last peak backlog. It is probably 2014 at the peak market time frame, so well over a decade ago. $600 million. I would go on to say, number one, we have the same global footprint that we had then. Two, we actually have added two very new enhanced facilities, one being in our U.K. operations near Edinburgh, and two, our new Batam facility. One could say that from a facility and manufacturing footprint perspective, we are actually more capable than we were a decade ago. Limitations could be some amount of labor, but typically we have been able to flex over time. It all depends on timing and magnitude of the ramp that we are hypothetically talking about. I want to point out, 2025—it is easy to say, well, how did you do the 1.3 book-to-bill in what was not a heroic spending environment? I think that is your question. I have to remind everybody, we have brought new products to market, in particular our MPD assets. That did not exist a decade ago. We are continually trying to enhance the offering we provide to our customers globally. That being one, and I point on that to the MPD; I could also point to our mineral riser system. This is a completely new operation that did not exist ten years ago, dedicated to trying to find these rare earth metals and minerals to support electrification. Those things are additive and they both could absolutely grow as we progress into the next five to ten years. We have invested in things that have no revenue yet, or not substantial revenue, including our offshore wind platform. We are doing a lot of bidding and quoting, and we do not have any anticipation in our 2026 results that we would have revenue at this point in time. It creates some long-term upside potential for the business. I might—oh, and Lloyd reminded me—we, with increased defense spending, as you know, Jim, have oftentimes had a military revenue stream. It has generally been in the range of 10% of the segment, OMP segment, revenues, and we got a healthy amount of military awards this year, particularly late in the year. That was non-oil and gas spending related. I have spoken to the broad base of the product line and the exposures that we have. I think our facilities are in good place. Importantly, we just recently were seeing some larger bid opportunities come in that in the past you might say, what is the CapEx required? What is the working capital investment that you have to make? Having the strength of our balance sheet as we move into the next decade is also going to prove beneficial to us. James Michael Rollyson: Appreciate all that color, and that actually brings up my follow-up question, which is on the balance sheet and cash flow. You are in a position now where you have more cash than you have debt, with that coming due April 1. You will be basically close to debt free. You are certainly net debt free here soon. If I did my math right, you are kind of zeroing in around $40 million of free cash flow, and I presume that is before asset sales, because, Cindy, you talked about the assets held for sale growing to $17 million. You could very well be, on the timing of that, somewhere in the $50-plus million free cash flow range. I am curious, as you just get past the debt repayment on the convert, do you deploy the majority of your free cash flow back to shareholders in share repurchases? Or do you go on offense at all, now that you are in much better shape than you were two or three years ago, Just curious kind of how you think about the balance sheet and the ability to use that. Lloyd A. Hajdik: Yes. Thanks, Jim. Your math is correct. That $40 million is free cash flow excluding potential proceeds from asset sales, which could boost that. In terms of deploying the free cash flow, share repurchases—we were very public at $17 million last year. After we pay the debt off, we should be opportunistic in buying back more shares and obviously have more optionality to look at M&A as a result. Cynthia B. Taylor: I will tag into Lloyd’s comment. As we get more globally diversified, we are going to look—comparable companies would be on our target list more so than anything that is land-based U.S. because that is the pivot we have made. We have made some very good small tuck-ins there, but they are few and far between. I think in the near term you are going to see us focused on shareholder returns via share repurchases, but you know us. We are continually looking for good tuck-ins across the globe that fit our product suite and our capabilities. That will not stop, obviously. But it is nice to have a currency that is not a deterrent to getting things done. Lloyd A. Hajdik: Correct. Yep. James Michael Rollyson: Absolutely. And then just one last thing for a little color. We do not often talk about military products because that is not your core focus, but it has clearly been a beneficiary to your bookings and even your free cash flow, thanks to timely government payments. With an administration that is seemingly willing to spend more money on the defense side, maybe just a reminder of what you provide there and how you think about the outlook given the strong back ’25 as we go into ’26 and ’27? Cynthia B. Taylor: These are legacy products that we supplied to the military for as long as I have been here, quite frankly. It is an adaptation of some of our flex joint technology that is used in sound and vibration dampening applications on submarines. So it is exposed to the Navy, obviously. I am always asking how do I grow this base even more? The Navy has been very good about doing R&D and engaging with us on R&D on different technologies. We do hope to work together to expand that product offering. The main thing is this is a legacy product we have had for many years. There are ebbs and flows depending upon defense spending and the investments made by the U.S. government. We also have some small orders that we are beginning to get from the Australian defense sector. Hopefully, there are ways to grow that even further. It is a good base of business for us. Working for the government requires very high standards. I think that is a testament to the strength of our quality processes and our manufacturing overall. James Michael Rollyson: Great. Appreciate all the color, guys. Thanks again. Cynthia B. Taylor: Thank you. Thanks, Jim. Operator: Your next question comes from the line of Joshua James with Daniel Energy Partners. Your line is open. Joshua James: Good morning. Thanks for taking my questions. First one, Cindy, maybe you could walk through the offshore world geographically—where you see the most opportunities and how you are positioning yourself for continued growth given that backdrop, and maybe even highlighting some of the facilities that you have mentioned and how increasing utilization there could ultimately play into you growing your market share moving forward? That is my first question. Cynthia B. Taylor: The great thing is we do have a global base of operations. The first thing I will say—it will not shock you—is that Brazil has been and will continue to be a very strong base, and Petrobras is the larger deepwater player and investor in the world right now. We have a great base there, good strong leadership in-country, and we have been there for over twenty years. It is not a new market entrance that experiences the vagaries of working. I feel very good about that. We are really trying to expand all of our capabilities and bring all of our total company products and services into that market. It will not shock you that Guyana is another strong base of operations when I look to the south. Southeast Asia has been a legacy foothold for us for decades, from Singapore and now more manufacturing in Batam, Indonesia. You also pick up Australia with that kind of presence. Emerging activity—probably recovering activity—beginning in West Africa. I am trying to think of any real basin that is not showing more activity. I would say most of our Middle East activity right now is on land, really not offshore. Anything else I have missed there? Lloyd A. Hajdik: Actually, for Southeast Asia, for more of the product side. Yeah. Cynthia B. Taylor: Southeast Asia—again, that is not just OMP. We are trying to do the best that we can in the Middle East, as an example, to introduce our frac equipment into the market, our through-tubing into the market, and perforating across the world. There has been a dual strategy on recovering the perforating market. One is an improved product offering that we can offer to the domestic market, and I will check the box. It has been hard to get into the market given the weakness we have seen on land U.S. over the last two years. But the technology is there. Thankfully, we are positioned well going forward. International expansion has been the second tier of that. I would say right now the various target markets internationally—but the lead for our perforating equipment is going to be Middle East and likely both Brazil and Southeast Asia. That will evolve over a few years. It will not happen immediately. We are optimistic to show improvement there in that perforating business as well. Think of us as doing the best that we can to expand the full breadth of our product and service offering on a global basis through the installed base that we have in the market. Joshua James: That is helpful. As my follow-up, I want to follow up on one of the questions about the 2015 backlog. Maybe offer your thoughts on where you believe we stand in the offshore cycle for your business, because we have had some white space over the last couple of years. Do you think where you sit today is more a reflection of the lull of activity in the last 18 to 24 months and some catch-up there? Or do you believe we are in the early stages of a five-, seven-, ten-year offshore cycle just with where capital is moving? I also see—and you mentioned it in one of the answers—when you have riser systems, MPD, military, that all was not in your backlog back then. It seems like you have a lot of room to grow and run in that business from where we were previously. Cynthia B. Taylor: I think to be in this business, you have to believe in the macro—i.e., the long-term demand for crude oil and natural gas—which I do. I always have. The U.S. land can flex quicker up and down. The reduced activity you have seen today is simply because crude prices have dipped close to or below $60 a barrel. That has put a dampening effect on international and deepwater activity too. I think that is where the “white space” has come in. The different recognition is that we are clearly underinvesting for the long term if you believe in the ultimate demand for crude oil. I think that is recognized. The second thing I will tell you, there is a long lead time when you talk about particularly deepwater and international activity that I think there is a recognition we have to get going. It is public to follow the offshore rig companies. You see white space on the drilling cycle. You take that as an indicator of weaker activity. We are beginning to see those white space gaps be filled in, and so rig equipment will tend to lead the recovery, and that can be riser systems, MPD systems for us—the things that we offer—as well as the upgrade and service cycle around that equipment. It all feeds deepwater infrastructure which is kind of bread and butter for us. That plays into our more proprietary products. It is a long-winded way of answering a question that I believe we have underinvested. We are going to have to commit capital. Then you are going to argue where does it come from. The last twenty years, most of the increased production has come from U.S. shale efficiency. There is the perception that that incremental growth is waning. Therefore, you have to look at other basins around the world to provide the supplies. I think that plays into our manufacturing capabilities and the equipment that we offer over the long term. Joshua James: Thanks. I will squeeze one more in, if I may, because the news is out this morning. It sounds as though the Supreme Court struck down Trump’s sweeping tariffs, and so there could be an impact reversing the tariffs coming in 2026 or 2027. Could you remind us what your impact was? That will be my final question. Thank you. Cynthia B. Taylor: I would say that so much of what we do in the Offshore Manufactured Products segment is for international locations that we benefit from temporary import bonds. I will say it is incredibly difficult to claim those. Generally, OMP has not suffered too much in the way of tariffs. The one that hit us front and center, particularly midyear 2025, was on perforating because we and everybody else sourced gun steel out of China. We do bring it in the U.S. The value add from the machining and finishing is done here in the U.S. It is much more difficult to identify whether those guns are going domestically or internationally, and how much of that gun body would be subject to tariffs. We got hit pretty hard in our cost of goods sold because of orders in place that—when the tariff rate went from 25% to 98% about midyear. Part of our improvement in our perforating operation was delayed because of tariffs. I will call it welcome news that the go-forward might be a more predictable cost structure. With a weaker market in the U.S. and a lot of competition that came into the market, it was very hard to pass those costs on to our customers. More stability in our supply chain and lower tariff costs would be favorable, but it would really be reflected predominantly in our perforating side of our business. Joshua James: Thanks for taking my questions. I will turn it back. Operator: Thanks, Josh. Your next question comes from the line of Stephen David Gengaro with Stifel. Your line is open. Stephen David Gengaro: Thanks, and thanks for taking the follow-up. I know this came up a little bit earlier, Cindy. When we think about potential additions to your portfolio, is there any geographic region we should be thinking about? Would it be offshore international, or would you do something on U.S. land that made sense? I am not sure about calling any product lines, but how should we think about it? Cynthia B. Taylor: What we are looking for is differentiated technology and differentiated opportunities, whether that is an organic investment or through M&A. You and I have been doing this a long time. It is hard for me to think of things that are truly differentiated on land that cannot be replicated in short order. It has always been a challenge for us because we do all the diligence, all the upfront R&D work, patent the technology, and then it is amazing how quickly companies come in. Then you are asking, do I sue them? It is going to cost me probably $5 to $10 million to do so. It is a tough business to have long-standing differentiated technology. I am not saying no, but I am saying we would be very selective. Stephen David Gengaro: Great. Thanks for the color. Thanks, Stephen. Operator: With no further questions in queue, I would like to turn the conference back over to Cynthia B. Taylor for closing remarks. Cynthia B. Taylor: Thank you all for your time today and for the thoughtful questions. We remain focused on executing our strategy, strengthening our portfolio, and maintaining discipline around future capital allocations. We look forward to catching up with all of you as the year progresses. Operator: Thank you again for joining us today. This concludes today’s conference call. You may now disconnect.
Operator: Excuse me, everyone, we now have Sean Reilly and Jay Johnson in conference. [Operator Instructions] In the course of this discussion, Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals, plans and objectives, including with respect to the amount and timing of any distributions to stockholders and the impacts and effects of general economic conditions, including inflationary pressures on the company's business, financial condition and results of operations. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ materially from anticipated results. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's fourth quarter 2025 earnings release and in its most recent annual report on Form 10-K. Lamar refers you to those documents. Lamar's fourth quarter 2025 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on the Form 8-K this morning and is available on the Investors section of Lamar's website, www.lamar.com. I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may begin. Sean Reilly: Thank you, Angela. Good morning all, and welcome to Lamar's Q4 2025 Earnings Call. We ended 2025 with encouraging sales momentum with both local and national delivering growth in Q4 despite a challenging political comp in October. Excluding political, revenues grew more than 4% on an acquisition-adjusted basis in the quarter. We delivered increases across both analog and digital billboards as well as in airports and logos. Our revenue growth, combined with solid discipline on expenses, allowed us to exceed the top end of the revised full year AFFO guidance that we provided in August. The sales strength continued in Q1 and pacings for the balance of this year remain promising. Based on those pacings and as noted in the release, we anticipate full year AFFO to be between $8.50 and $8.70 per share representing year-over-year growth of 4.1% in AFFO per share at the midpoint. The midpoint of the guidance also implies revenue growth of approximately 3.5% on an acquisition-adjusted basis, with expenses increasing approximately 3% on that same basis. Expense growth should taper as we get to the back half of 2026. I would also note that the midpoint of the range implies consolidated operating margins of over 47%, the best in the company's history. In the meantime, back to Q4, categories of strength included services, health care, building and construction and financial, while telecom and beer and wine were weaker. For the quarter, local was up 1.7%, while national/programmatic grew 3.3%. This is the third consecutive quarter that national has been up. We had a real nice pharmaceutical buy that helped the health care category and boosted national's growth. Programmatic was again strong, up approximately 19% year-over-year. Excluding programmatic, national's growth was 1.5%. As mentioned, political was a headwind in Q4 and for the full year, but that, that dynamic should reverse in 2026. For the quarter, political was down about $11 million versus 2024. Again, headwind last year, tailwind this year. We added 111 digitals in Q4, ending the year with 5,553 operating units. On a same-store basis, digital revenue increased 3.7% in Q4, demonstrating that advertisers continue to value the flexibility that digital provides. In light of that, we intend to remain aggressive and are targeting approximately the same number of additional internal digital deployments this year as last year. We closed 13 acquisitions in Q4 for approximately $57 million in cash, bringing the full year total to 50 acquisitions for $191 million in cash. In addition, of course, last year, we completed the Verde deal, the first UPREIT transaction in the history of the out-of-home space. Our integration of the Verde assets as well as our other acquisitions in 2025 is going well, and I anticipate another active M&A year in 2026. We're actually off to a good start. As of yesterday, we've completed 7 acquisitions since January 1 for a total purchase price of approximately $40 million. Before I turn it over to Jay, I want to thank our employees for their contributions in 2025. From sales to ops to real estate, our consistent growth on the top and bottom line demonstrates that Lamar has the best team in out-of-home, and I look forward to seeing what we can achieve together in 2026. Jay? Jay Johnson: Thanks, Sean. Good morning, everyone, and thank you for joining the call. We had a solid fourth quarter and are pleased with our results, which exceeded internal expectations across revenue, adjusted EBITDA and AFFO. Growth in AFFO continued in the fourth quarter. Diluted AFFO per share increased 1.4% to $2.24 versus $2.21 in the fourth quarter of 2024. In addition, the company ended the year above the high end of our revised AFFO outlook, driven by outperformance in December with acquisition-adjusted revenue growing almost 6% and acquisition adjusted EBITDA increasing 13.5% during the month. Operating expense growth decelerated in the fourth quarter with adjusted EBITDA margin remaining strong at 48.5%, an expansion of 40 basis points over a year ago. Adjusted EBITDA for the quarter was $288.9 million compared to $278.5 million in 2024, which was an increase of 3.7%. On an acquisition-adjusted basis, adjusted EBITDA was up 2.1%. Also in the quarter, depreciation and amortization expense decreased $151.3 million, returning to a more normal level. As you may recall, in the fourth quarter of 2024, we revised the cost estimate included in calculation of the company's asset retirement obligations, or ARO. ARO accounts for Lamar's obligation to dismantle and remove over 71,000 billboard structures on leased land and restore the sites to original condition. We test our ARO estimate annually and the cost to retire these assets rose substantially in 2024, which led to an increase in our depreciation and amortization expense during Q4 2024. As a noncash item, this has no impact on the company's adjusted EBITDA or AFFO. For the full year, acquisition-adjusted revenue increased 2.1% to $2.27 billion compared to $2.22 billion the prior year. Operating expenses grew approximately 2.6% and adjusted EBITDA was $1.06 billion, which represents an increase of 1.4% on an acquisition-adjusted basis. Adjusted EBITDA margin was 46.7% for the full year, essentially flat versus a year ago. We were pleased to see margin hold steady given continued pressures on the expense side. The company ended 2024 with full year diluted AFFO of $8.26 per share, which was above the top end of our revised guidance. For the 12 months ended December 31, diluted AFFO per share increased 3.4% compared to full year 2024. Local and regional sales accounted for approximately 78% of billboard revenue in Q4, similar to the same period in 2024 and growing for the 19th consecutive quarter. This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our peer group. Now moving to capital expenditures. Total spend for the quarter was approximately $63 million, including $20.8 million of maintenance CapEx. And for the full year, CapEx totaled $180.8 million with maintenance CapEx comprising $57.3 million. As for our balance sheet, we have a well-laddered debt maturity schedule with no maturities until the AR securitization in October 2027 and no senior notes maturity until February 2028. We currently have approximately $3.4 billion in total consolidated debt and our weighted average interest rate is 4.5% with a weighted average debt maturity of 4.6 years. As defined under our credit facility, we ended the quarter with total leverage of 2.92x net debt to EBITDA, which remains amongst the lowest level ever for the company. Our secured debt leverage was 0.6x at year-end, and we are in compliance with both our total debt incurrence and secured debt maintenance tests against covenants of 7x and 4.5x, respectively. As a result of the continued focus on our balance sheet, the company is well positioned on the acquisition front. Last year, we refinanced $1.1 billion of debt, extending our maturity profile and significantly improving liquidity. Lamar has an investment capacity of well over $1 billion and has the ability to deploy this capital while remaining at or below the high end of our target leverage range of 3.5 to 4x net debt to EBITDA. Our liquidity and access to capital both remain strong. As of December 31, we had just over $800 million in total liquidity, comprised of $64.8 million of cash on hand and $742.2 million available under our revolver. The company's AR securitization was fully drawn with $250 million outstanding. In this morning's press release, we provided full year AFFO guidance of $8.50 to $8.70 per share, reflecting AFFO growth of 2.9% to 5.4% over 2024. At the midpoint of guidance, we expect acquisition-adjusted top line growth of about 3.6% with acquisition-adjusted operating expenses anticipated to grow modestly slower than revenue during the year. As we did last year, we are assuming SOFR remains flat for purposes of cash interest and have included $154 million in our guidance. Our maintenance CapEx budget for the year is anticipated to be $64 million in 2026 and cash taxes are projected to come in at approximately $10 million. During 2025, we paid a regular quarterly cash dividend of $1.55 per share, totaling $6.20 for the full year. Management's recommendation will be to declare a regular cash dividend of $1.60 per share for the first quarter, and we expect to distribute a regular cash dividend of $6.40 per share in 2026. On an annualized basis, the Q1 proposed dividend represents a yield of 4.8% at yesterday's closing stock price. As a reminder, the company's dividend is based on taxable income, subject to Board approval, and our dividend policy remains to distribute 100% of our taxable income. Again, we are pleased with our fourth quarter performance and strong finish to 2025 as well as the momentum we are seeing early this year, and we look forward to executing on our strategy in 2026. I will now turn the call back over to Sean. Sean Reilly: Thanks, Jay. And as Jay mentioned, we had an exceptional holiday season with December's pro forma growth hitting almost 6%. And ex political for Q4, we grew 4.3% pro forma. In terms of regional relative strength and weakness, our Atlantic and Southwest regions showed relative strength in Q4 with our Northeast region showing relative weakness. In Q4, digital grew to 33.7% of our book of business. For the full year, it grew to 31.6% of our total revenues. We are still at what I would call peak average annual occupancy. So the gains that we saw throughout the year and we will be seeing in 2026 are primarily coming through rate. As I mentioned, we ended the year with 5,553 digital units in the air, an increase of 111 over Q3 and an increase of 559 over year-end 2024, with approximately 320 of those being internally deployed and the rest through acquisition. And as I mentioned, on a same board basis, our digital billing grew 3.7% in Q4. With the help of a strong programmatic platform and that pharma buy, National had a strong Q4 and represented 22.4% of our revenues, the high watermark for the year. And as mentioned, programmatic grew 18.7% in Q4. Regarding categories of relative strength and weakness, I mentioned and called out service, health care and financial, buildings and construction, services being up 12% in Q1, health care up 13% in Q1; financial up 17% -- I'm sorry, Q4 for all of those and building and construction up 16% in Q4. For the full year, services were up 10%, health care up 6% and financial up 10%, building and construction up 16%. Categories of relative weakness, telecommunications, down 10% in Q4. Beverages, beer and wine down 20% in Q4, similar numbers down for the full year. I would note that it's nice to see that our largest verticals, that being service and health care are also among our healthiest. For a point of reference, telecom represents about 2% of our book. Beverages, beer and wine represents 1.5% of our book. Conversely, services represents about 19% of our book. Health care represents 10.5% of our book. So again, it's nice to see our largest verticals are also among our healthiest. With that, Angela, I will open it up for questions. Operator: [Operator Instructions] And we'll go first to Cameron McVeigh with Morgan Stanley. Cameron McVeigh: So Sean, I was curious your view on the state of the macro in the U.S. ad market as we're nearly 2 months into 2026. And then secondly, it sounds like a strong start on the M&A front. Curious how multiples are trending in the private market. And if you have an expectation or goal for the amount of acquisition spend over 2026. Sean Reilly: Yes. So on the acquisition front, to start with, it looks to us like we'll do at least as much as we did last year on the cash acquisition side, which was close to $200 million. I'd say that's a realistic goal for this year given what we're seeing. And multiples are basically where we talk about them year in and year out. Because of the synergies we can bring to bear, the multiple from the seller's point of view might look something slightly below the mid-teen-ish range. But by the time we bring our synergies to bear, it's something between 10% and 11% going forward for us. And that arithmetic is holding up out there. We're seeing a good ad spend climate for 2026. You've got some good things going on. Of course, we mentioned the political tailwinds this year, but you also have some additional spend in and around World Cup venues. We expect to pick up some of that. We are optimistic about where pharma is going to come in this year, and that's a pardon the pun shot in the arm for us. So yes, we feel good and pacings look good. Operator: Our next question comes from Jason Bazinet with Citi. Jason Bazinet: I just had a question on the decision by Clear Channel to sell themselves. I guess if that acquisition ends up going through, do you think that has any potential M&A implications for you to peel off some of their assets? Or would you view that as unlikely? Sean Reilly: I would say, number one, just in terms of structurally for the industry and strategically for how we're positioned and their position, we don't see any change in terms of what it means for the industry. Scott and his team are going to stay in place. So from that point of view, I think as they get financially more healthy, that's a good thing for the industry. Looking at the structure of the go private and the work that they're going to do to shore up the balance sheet as they do that, it looks to us like they don't need to sell assets to delever. So I would put it as in the probably not likely category for now. They may, for strategic reasons, decide that some markets don't fit their profile. But for now, I would call the whole transaction sort of steady as she goes for the industry. Operator: Our next question comes from Daniel Osley with Wells Fargo. Daniel Osley: How should we think about acquisition-adjusted growth in Q1 as a starting point after the strength you called out in December? And how do you see the growth cadence playing out for the full year? Sean Reilly: Good question. I think it's going to be one of those years where Q1 comes in maybe a tad below where the guide implies and then we pick up momentum as the year moves on. That's what the pacings are indicating. And I would also note that traditionally, political breaks late. So the fact that our pacings for the time being actually are showing that the guidance is a tad conservative. It may also be conservative given what we're anticipating political may do. Again, the political has been relatively easy to predict at the end of the year, but at the beginning of the year, given that it breaks late and the campaigns happen in September, October, November, again, the good news is it's not reflected in our pacings right now. So it can only get stronger as the year progresses. Daniel Osley: That's helpful. And maybe a quick follow-up. What are your expectations on local versus national for the year? And can you help us to quantify the benefit you'll have from the World Cup this year? Sean Reilly: So when you look at Lamar's footprint on the World Cup, we're not as well positioned to say OUTFRONT or Clear Channel, but we'll get our share. So we're anticipating, let's call it, $3 million to $4 million in incremental World Cup business. It's nice, and it's certainly going to help those local markets that have World Cup venues. We're feeling good about national. We've had a tough past few years until recently last year with our national book of business. Some of the verticals that were 2 years ago, a drag are now coming back in. I would highlight insurance, for example. So we're very positive on what's going on, on the national front. And of course, to the extent pharma comes in, in Q1 or 2, that's a lift that we didn't have last year in the first half. Operator: We'll go next to David Karnovsky with JPMorgan. David Karnovsky: On the 3% cash OpEx growth, I think that's a little above the kind of 2.5% traditional increase, Sean, as you termed it. Should we think about that delta as largely driven by the ERP? And can you just update on where you are in that process? Sean Reilly: Sure. I'll let Jay hit the ERP. But yes, some of it is the ERP. Some of it, though, is also health care. There's no question, but that health insurance has inflation that is running a little hotter than the rest of what happens on our expense side. It's about 0.5%. So the difference between 2.5% and 3%, you can look at it as somewhat being fed by the -- what's going on in our health insurance costs and again, somewhat driven by ERP, which Jay can hit. Jay Johnson: Yes. And it's been driven by ERP over the last couple of years. This year, that will moderate as we look to go live later this year with the second phase of our technology initiatives. From a corporate perspective, because of that, expenses have kind of normalized a little bit and should be -- corporate expenses should grow below 2% this year. I would reiterate the health care expenses. It's been quite a headwind for us over the last 3 years or so, you're talking high single-digit growth on the health care line with very little ability to foresee it or forecast it. So that's one that continues to plague us on the expense line. David Karnovsky: Okay. And then, Sean, you mentioned pharma several times. Maybe just you could speak broadly to where you are with the vertical or where you stand also with just bringing on some other nascent national categories as well. Sean Reilly: So yes, so the pharma story is a good one, and it's good for the industry, by the way. The basic driver is, number one, a change in FDA rules around disclosures that pharma is required to do for their advertising of drugs. Essentially, if you don't say what the drug is going to cure, then you don't have to do all the disclaimers of the possible side effects, which means you can say the name of the drug, you can say the name of the drug company, have pretty pictures and then say call your doctor. And that essentially opened up our medium to be an effective voice for pharma. They also have a data set that proves out their campaigns. They use a company called Crossix to prove out campaigns across all media and Crossix has developed a way to do attribution studies for our media, which again has helped pharma prove out the efficacy of using us to get their word out. So yes, that's a good one, and we have high hopes that it can move the needle. Operator: [Operator Instructions] We'll go next to Jonnathan Navarrete with TD Bank. Jonnathan Navarrete: How much of a benefit are you expecting from political in terms of dollars? And how does that compare in terms of -- when you compare it to a presidential election year? And my last question is, should we expect most of the benefit from political to come in the third or fourth quarter? Sean Reilly: Yes. The answer to the last part of the question is yes. Like I said, it typically breaks late. It doesn't show up in our pacings until the -- really and truly until the back half. In terms of the delta, one way to look at it is the difference between '24 and '25 was a little less than $20 million. So that's one way to think of it. That -- of course, '24 was a presidential year. And so I wouldn't anticipate quite that much. And so something maybe conservatively around $12 million, $13 million, $14 million in incremental this year political over last year's political. Operator: At this time, there are no further questions in queue. I will now turn the meeting back to Sean Reilly. Sean Reilly: Again, thank you all for your interest in Lamar, and we look forward to getting together again for the Q1 call in a few months. Thank you, Angela. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: At this time, I would like to welcome everyone to the Barings BDC, Inc. conference call for the quarter and year ended December 31, 2025. All participants are in a listen-only mode. A question-and-answer session will follow. Today’s call is being recorded, and a replay will be available approximately two hours after the conclusion of the call on the company's website at www.baringsbdc.com under the Investor Relations section. I will now turn the call over to Joseph Mazzoli, Head of Investor Relations for Barings BDC, Inc. Please note that this call may contain forward-looking statements, including statements regarding the company's goals, beliefs, strategies, future operating results, and cash flows. Although the company believes these statements Joseph Mazzoli: Are reasonable, actual results could differ materially from those projected in forward-looking statements. Statements are based on various underlying assumptions that are subject to numerous uncertainties and risks, including those disclosed under the sections titled “Risk Factors” and “Forward-Looking Statements” in the company's annual report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the Securities and Exchange Commission. Barings BDC, Inc. undertakes no obligation to update or revise any forward-looking statements unless required by law. I will now turn the call over to Tom McDonald, Chief Executive Officer of Barings BDC, Inc. Thanks, Joe, and good morning, everyone. On the call today, I am joined by Barings BDC, Inc.’s President, Matthew Freund, Chief Financial Officer, Elizabeth A. Murray, Barings Head of Global Private Finance and BBDC Portfolio Manager, Bryan D. High. Before I discuss our quarterly and annual results, I would like to take a moment to speak about the leadership transition that we recently implemented and my involvement with the BDC franchise going forward. As many of you know, I assumed the role of CEO of Barings BDC, Inc. effective January 1. Prior to stepping into this position, I spent most of my career deeply rooted in fundamental credit research and underwriting, portfolio management, and investor alignment across multiple strategies within Barings. Having navigated multiple credit cycles and managed leveraged credit businesses for decades, I bring a perspective that reinforces my conviction in the strength and durability of our investment process, and importantly, in our continued ability to deliver value for our shareholders. What has been immediately clear in my early months is what I long believed to be true. Barings BDC, Inc. benefits from a best-in-class direct origination platform focused on the core middle market. This differentiated sourcing capability, paired with our disciplined underwriting and strong alignment with shareholders, represents a powerful combination—one that positions us well to drive attractive long-term risk-adjusted returns. While I bring a fresh perspective, the strategy, process, and philosophy that define BBDC remain firmly intact. Our approach is working, and my focus is on enhancing the processes that already operate effectively and complementing the strengths of an exceptional existing team. It is my intention to accelerate existing initiatives and implement additional initiatives, all with a clear focus on ultimately improving ROE. Tom McDonald: I have had the privilege of connecting with many of our stakeholders following the leadership transition, and I look forward to continuing that dialogue in the weeks and months ahead. In the fourth quarter, BBDC delivered strong net investment income accompanied by excellent credit performance within the Barings-originated portion of the portfolio. Origination activity across the platform during the fourth quarter reflected continued success in our core strategies. Net deployment was influenced by fund-level leverage, and the fourth quarter reflected a period of net repayments consistent with our prior guidance. A strong and highly diversified portfolio, combined with a benign credit environment and our focus on top-of-the-capital-structure investments in middle market issuers, has continued to serve our investors well. We focus on the core middle market given its lower leverage and stronger risk-adjusted returns, making it the most compelling segment for BBDC and our shareholders. In addition, our emphasis on sectors that perform resiliently across economic environments provides an additional level of stability to our portfolio. This combination of senior secured financing solutions, core middle market focus, defensive non-cyclical sectors, and a global footprint offers our investors strong relative value and a meaningful differentiation within the broader BDC landscape. BBDC’s portfolio has performed largely as designed. Our defensive diversified issuer base is built as an all-weather portfolio. We believe this approach serves investors well regardless of the broader macroeconomic conditions, which, as Matt will touch on momentarily, we feel are broadly favorable. At the same time, we are beginning to see increased dispersion across managers in the space. Our experience suggests that underwriting rigor often reveals itself over multi-year periods rather than quarters. As investors in private credit know, it can take three, four, or even five years for the portfolios to season and for credit performance to materialize. Importantly, we have avoided ARR loans, deeply cyclical issuers, and creative financing structures that appear to be presenting headwinds to the sector. As we continue through 2026 and into 2027, we are confident that BBDC will continue to demonstrate the merits of rigorous credit underwriting, fundamental credit analysis, and a long track record within the asset class. Turning to our results, net asset value per share was $11.09 per share, substantially unchanged from the prior quarter. Net investment income for the quarter was $0.27 per share compared to $0.32 per share in the prior quarter. These results reflect continued strength in Barings-originated investments, ongoing credit stability, and disciplined capital allocation. Now digging a bit deeper into the portfolio, we continue to actively maximize the value in legacy holdings acquired from MVC Capital and Sierra. During the fourth quarter, we accelerated the rotation of the Sierra portfolio, exiting approximately $50,000,000 of legacy positions on a combined basis between directly owned assets and assets held in the Sierra JV, as Elizabeth will comment on shortly. As of quarter end, Barings-originated positions now make up 96% of the BBDC portfolio at fair value, up from 76% at the beginning of 2022. Turning to the earnings power of the portfolio, the weighted average yield at fair value was 9.6%, reflecting a slight reduction from the prior quarter due to a reduction in base rates. Our Board declared a first quarter dividend of $0.26 per share, consistent with the prior quarter. On an annualized basis, the dividend level equates to a 9.4% yield on our net asset value of $11.09. As Matt will cover momentarily, BBDC is well positioned to navigate the current market volatility and deliver consistent risk-adjusted returns in the quarters ahead. I will now turn the call over to Matt. Matthew Freund: Thanks, Tom. I would first like to comment on my excitement to have you as part of our team. Barings manages nearly $0.5 trillion of capital, primarily in credit and credit-related investments. Tom McDonald: Point five. We recognize the increasing convergence between various markets, Matthew Freund: And know that your significant experience in high yield, stressed, and distressed markets augments the capabilities of our team that will benefit our investors in the quarters to come. Turning to the topic on many investors’ minds: software and the prospects of AI impacting underlying credit portfolios. Software accounts for approximately 14% of the fair market value of the BBDC portfolio. For those that follow our public filings, you will notice that we have long used the Moody’s industry hierarchy for our industry classifications, which does not separate software as a distinct industry. Nevertheless, after reviewing our information, 14% of the portfolio is invested in issuers primarily providing software to their underlying customers. Our portfolio is under-indexed relative to other private credit portfolios, as we have historically avoided both annual recurring revenue loans as well as highly leveraged software issuers. We rarely provided the most aggressive leverage packages. As a consequence, we are often not perceived to be competitive in the eyes of the issuers and sponsors for these software assets. We stuck to our historical knitting, and the resulting software exposure reflects this approach. With that said, we believe the rhetoric related to an existential crisis within the software vertical is overblown. The current market tone is reminiscent of a few other periods in recent memory. During 2018, the U.S. initiated a trade war with China, with justified concerns that industrial and manufacturing businesses would experience headwinds, causing bankruptcies across the country. At the onset of the COVID pandemic during 2020, logical arguments were made that healthcare companies would be forever transformed, and loans to 2022, interest rates began a historical rise, ultimately leveling off at more than 500 basis points by mid-2023. The rapid rise in interest rates caused many investors to express concern about indebted companies and the confidence and sustainability of various industries. Within the context of Barings-managed portfolios, we did not experience a wave of industrial defaults, healthcare defaults, or general industry defaults due to any of these events. What we did witness, however, was that during these periods of rapid industry change, businesses of weak management, poor business models, and questionable value propositions did experience stress. And some companies did fail. But it was not the macroeconomic events that drove losses; it was the fact that macroeconomic events exacerbated weaknesses that already existed. We believe we stand on the precipice of another period of rapid industry evolution, and in this case, within the software ecosystem. Business models will be tested, and some may ultimately fade away, but well-run businesses managed by smart and capable people are expected to continue exhibiting success. Poorly run businesses will experience the same business cycle that all poorly run businesses ultimately experience. Products will become obsolete, customers will leave, and the relevance will be diminished. One area we are most interested to follow in the months to come is the performance of ARR-related loans. As both Tom and I have commented on, and in particular, those that were expected to transition to cash flow or EBITDA-based covenants but have not. We do not have exposure to issuers such as these, and would encourage investors to try and stratify the risk to these kinds of financings, as we anticipate headwinds will be over-indexed in this segment of the software ecosystem in the quarters to come. Turning now to the state of originations. We ended 2025 with sequential improvement in deployment as compared to the prior three quarters. Our outlook into 2026 takes a more measured tone. As the new year is upon us, we are again hearing early indications that 2026 will represent a banner year for M&A opportunities in the coming twelve months. Given our strategy to focus on the core of the middle market, large market transactions, which we define as financings for issuers with more than $100,000,000 of EBITDA, are less relevant to our business. And while financings of this size may materialize, it will have a muted impact on our overall deployment at Barings. Our continued commitment to the core of the middle market will benefit from our incumbent positions, which is likely to provide compelling deployment opportunities regardless of what the future may hold. We are highly focused on the trends in both base rates and interest rate spreads. Base rates continue to gradually migrate lower from post-COVID highs. Narrowing spreads have begun to show some level of support. The benefits of the active portfolio rotation we have previously discussed are coming into sharper focus. BBDC shareholders benefit from a largely invested portfolio that can selectively redeploy capital into the most attractive middle market opportunities across the Barings franchise. Given the size of the portfolio and the illiquid nature of the underlying positions, our ability to rotate the portfolio takes quarters, not months, but we are continuing to see the benefits of this effort. Turning to an overview of our current portfolio, constituting first-lien securities. 75% consists of secured investments, with approximately 70% of investments. Interest coverage within the portfolio remains strong, with weighted average interest coverage this quarter of 2.4x, above industry averages and consistent with the prior quarter. We believe strong interest coverage demonstrates the merits of our approach of focusing on leading companies in defensive sectors and thoroughly underwriting their ability to weather a range of economic conditions. The portfolio remains highly diversified. The top two positions within the portfolio, Eclipse Business Capital and Rocade Holdings, being strategic platform investments. These investments provide BBDC shareholders with access to differentiated, compelling opportunities to invest in asset-backed loans and litigation funding—two specialized areas we believe provide attractive total returns and diversification benefits. Turning to the portfolio quality, risk ratings exhibited stability during the quarter, as our issuers exhibiting the most stress, classified as risk rating 4 and 5, were 7% on a combined basis and unchanged from the immediately preceding quarter. Non-accruals, excluding the assets that are covered by the Sierra CSA, accounted for 0.2% of assets on a fair value basis versus 0.4% of assets on a fair value basis in the immediately preceding quarter. During the quarter, we exited one non-accrual investment, removed one asset from non-accrual status that was restructured, and moved one additional asset onto non-accrual. We remain confident in the credit quality of the underlying portfolio. We expect BBDC’s differentiated reach and scale, coupled with its core focus on middle market credit and unmatched alignment with shareholders, to continue driving positive outcomes in the quarters and years to come. As previously noted, BBDC is a through-the-cycle portfolio designed to withstand a variety of macroeconomic conditions. With that, I would now like to turn the call over to Elizabeth. Elizabeth A. Murray: Thanks, Matt. As both Tom and Matt said, BBDC continues to deliver strong, consistent earnings, maintain exceptional credit quality, and provide attractive risk-adjusted returns for our fellow shareholders. Turning to our results for the fourth quarter, NAV per share ended the year at $11.09, which was essentially flat compared to the third quarter at $11.10, representing less than a 0.1% decrease quarter over quarter. The slight quarter-over-quarter movement reflects a combination of modest realized losses of $0.05 per share, offset by $0.02 per share of unrealized appreciation, $0.01 per share from share repurchases, and continued stable earnings generation from the portfolio, over-earning the dividend for the fourth quarter by $0.01 per share. The net realized loss on the portfolio was driven primarily by the loss on the exit of our investments in Ruffalo and Avanti and the restructuring of our investments in Eurofence, partially offset by the sale of our equity investments in Jones Fish and CJS Global. These exits and restructures were predominantly reclassed from net unrealized depreciation. The valuation of the Sierra credit support agreement increased by approximately $7,700,000 from $52,800,000 in the third quarter to $60,500,000 as of December 31. This increase was primarily driven by the sales, repayment, and return of capital within the underlying portfolio of the remaining Sierra investments, as well as updated assumptions around the maturity profile. During the fourth quarter, the Sierra portfolio generated approximately $24,300,000 of sales and repayments, along with a $21,900,000 return of capital distribution from the Sierra JV. At year-end, we had 12 positions remaining in the portfolio with a value $70,000,000 of repayments of approximately $32,000,000, down from 16 positions and $79,000,000 as of September 30. On a year-over-year basis, we reduced the Sierra portfolio by roughly 75%, including sales and return of capital. In addition, during the year, we completed the early termination of the MVC credit support agreement, resulting in a one-time $23,000,000 payment from Barings to BBDC. This strategic action reduced structural complexity within the BDC and further concentrated our portfolio with income-producing assets. We reported net investment income of $0.27 per share for the quarter versus NII of $0.32 per share in the prior quarter and $0.28 per share for 2024. For the year, net investment income was $1.12 per share compared to $1.24 per share for 2024. Net investment income was primarily driven by recurring interest income across our diversified senior secured portfolio, complemented by contributions from our joint ventures and our platform investments in Eclipse and Rocade. The decrease in net investment income year over year was primarily due to sales and repayments on the portfolio and declining base rates. It is important to note that net investment income exceeded our regular dividend of $1.04 per share. Our net leverage ratio, which is defined as regulatory net leverage, net of unrestricted cash and net unsettled transactions, was 1.15x at quarter end, down from 1.26x as of September 30, well within our long-term leverage target of 0.90x to 1.25x. This reflects our intentional positioning to support origination activity and planned asset transfers to our Jocassee joint venture. Our capital structure continued to strengthen in 2025 as we repaid $112,500,000 of private placement unsecured notes, completed the annual extension of our corporate revolver in November, and further diversified our funding sources with the issuance of $300,000,000 senior unsecured notes in September. More broadly, our funding profile remains strong and thoughtfully aligned with our disciplined approach to asset-liability management. Our liabilities are well diversified by duration, seniority, and structure, with an industry-leading share of unsecured debt in our capital structure at roughly 84% of our outstanding debt balances. Liquidity remains robust and well diversified, supported by undrawn capacity on our revolving credit facility and incremental flexibility from our joint venture with Jocassee. Near-term maturities remain limited, and our continued access to a broad set of funding positions us to proactively navigate refinancing needs while maintaining balance sheet strength. Subsequent to quarter end, on February 26, we will fully repay $50,000,000 of private placement notes at par, including accrued and unpaid interest. Now on to capital allocation. Our net investment income for the quarter of $0.27 per share covered our regular dividend of $0.26 per share. As previously mentioned, the Board continued its strong focus on returning capital to shareholders and declared a first quarter dividend of $0.26 per share, representing a 9.4% distribution yield on NAV. Looking ahead to 2026, we expect the declining base rates reflected in the trajectory of the forward SOFR curve will likely put downward pressure on net investment income, and as a result, our regular dividend may decrease from current levels. While our earnings profile remains resilient and benefits from our industry-leading 8.25% hurdle rate, low base rates naturally reduce the income generated on our floating rate portfolio. Even so, our diversified portfolio of senior secured investments, well-laddered capital structure, and disciplined underwriting continue to provide meaningful support to earnings. In addition, we currently hold spillover income of approximately $0.80 per share, representing about three quarters of our regular dividend and offering flexibility as rates normalize. Taken together, although a lower regular dividend in 2026 is possible given the rate backdrop, the durability of our earnings and the strength of our balance sheet positions us well to navigate this transition and continue delivering attractive risk-adjusted returns. Share repurchase activity continued during the year and contributed $0.02 per share to NAV. We repurchased over 450,000 shares in the fourth quarter for a total of over 700,000 shares for 2025. In addition, the Board authorized a new $30,000,000 share repurchase plan for 2026, underscoring our commitment to enhancing shareholder value. Stepping back, 2025 was a year of steady earnings, strong liquidity, and active portfolio rotation. Despite lower base rates, we continue to produce durable NII, maintain solid credit performance, and execute on our balanced approach to capital allocation, including consistent dividends and meaningful share repurchases. As we look ahead to 2026, we remain confident in the resilience of the portfolio and the strength of our platform. We are well positioned to continue delivering attractive risk-adjusted returns for our shareholders. With that, I will turn the call back to the operator for questions. Operator: Thank you. We will now be conducting a question-and-answer session. Our first question today is coming from Finian O’Shea from Wells Fargo Securities. Your line is now live. Finian Patrick O’Shea: Hey, everyone. Good morning. I will start with, I guess, Tom, some interesting opening remarks on initiatives—anything you are—you find yourself working on in terms of the accelerating existing initiatives part? And then also on the new ones, to improve ROE as you outlined—any sort of heavy lifting or big changes we might anticipate there? Tom McDonald: Yes. Thanks, Fin. So yes, a number of initiatives that we have undertaken here. I think in part, really, they are a continuation of what the team has already done. So as you know, we have got many assets on the balance sheet, legacy assets that have come over from some of the integration of the other companies we have acquired. So my focus has been really on trying to accelerate exits of those. Many of those, as you know, do not earn interest. So as we can redeploy some of those proceeds into interest-earning assets and accelerate our exit from those, obviously, that is an immediate enhancement for ROE. So that has been a big focus of mine. I think within the CSA, another area where we have tried to make an effort to wind down the assets there to the extent that we can. We know that the CSA has clearly been a story for us for quite some time. I think it has been very beneficial for shareholders in protecting them from losses, but that thing is beginning to grow in size. And so as you know, earlier this year, we did terminate one of those. And so while we cannot guarantee anything, it is our effort—going to be a strong effort of ours as a team—to make sure we address that in a timely manner and again to try to have some sort of an event around that where we could potentially realize proceeds there and again redeploy those into interest-earning assets. Along the same lines, we continue to wind down some of the JVs that—some of them have been problematic for us. We are focused on Jocassee, obviously, as a JV that has worked to our benefit. We continue to believe that is actually a great partnership and look to continue to potentially expand that one as well. So those are a couple of the initiatives. I would say initiatives we do not have to take, but exist, that I think are going to be very shareholder-friendly, ROE-friendly, are going to be the hurdle rate, as you know, is quite high relative to our peers. And I think as base rates come down, that is going to be an immediate benefit to our earnings and ROE. So those are a couple of the initial ones. I would also like to point out, as you all know, I have been here at Barings for twenty-plus years. There are just many other parts of Barings, other private asset things that we can consider. Clearly, our core is always going to be GPF in this strategy, but there are a number of things I think that we can explore that we have expertise in across the platform at Barings. And so I think that we will bring some of those to bear as potential investment opportunities as we continue to look to enhance ROE and to shareholders. Finian Patrick O’Shea: Okay. A lot there. Yes. Interesting on expanding Jocassee. Would that look any different? Because we have had some discussions with investors, and there is a view that you sort of do not get enough of the pie there. You are—is it something like 9% of the equity, and the partner also gets the equity-like return. It is not a preferred return. And it looks like something that could be better. That is not to say it is bad. It is doing what it is supposed to do at mid-teens, but it looks like the person you want to be is the account that gets that for free. So is there a way that this might tilt more return toward BDC shareholders? Tom McDonald: Yes. No, I think that—I do not know that we increase the percentage ownership, but I certainly think we can increase our investment there in direct activity down there. So—and therefore, increase absolute dollars back in—in sort of form of the dividend. So as we consolidate the other JVs and wind those down, and they are virtually at this point wound down, I think we redirect investment into that entity. And again, we share all the same risk at the BDC level as we do down at Jocassee, and you will get the benefit of the leverage down there and the enhanced return to shareholders. So I think that will be a focus as we move forward. And I think it has been very successful for us over time. And we continue to believe it will be. Finian Patrick O’Shea: Appreciate that. Thanks. I will do one final sort of market question. I am not sure if the esteemed Joseph Mazzoli is microphone-eligible, but a lot of news in the non-traded BDC market. It feels like the ground is shaking again this week. Anything you all are seeing or feeling on the ground of private retail investor sort of reluctance or hesitation or jitters on that sort of product format? Tom McDonald: Yes. So Joe is not mic’d up, but I will certainly take that. We are working hand in hand on that as a team as well. And so—so obviously, the headlines have not been our friends really for four months now, and clearly news this week is not helping on that front at all. So for us, it is up to us to really reach out to investors and be a little more front-footed as we address some of the issues in the market. And I think we have done a good job with that. Our flows there have been good. We have not seen any material degradation in the pace of flows relative to what we saw last year. So we continue to believe that that is the case moving forward in the first couple of months of this year. I guess everybody will see it at the end of the first quarter here on what redemptions might look like. But as of now, we are just sort of fighting the battle of the headlines, and we do believe that that is what it is. And so, you know, I think everybody here is knowledgeable about the space and truly understands private credit, understands that it is a very viable—and I think we are in a good position there, but it is on us really to get that message out and to make sure that we alleviate investor concerns on that front. Elizabeth A. Murray: Thanks, Tom. Tom McDonald: Welcome. Operator: Thank you. Our next question today is coming from Casey Alexander from Compass Point. Your line is now live. Casey Alexander: Yes, morning. And Matt, I appreciate your comments trying to bring some relative perspective to the software market. I do have a follow-up question to that that I am actually going to direct to Tom because, Tom, you have a long history in the liquid credit markets. And an issue that you know investors continue to raise and would like to hear some commentary on is that in the liquid credit markets, the average price for a software loan is actually trading, in recent reports, around 90. And so I would like to hear how much you think that matters and how much you think that influences Barings and the third-party independent valuation firms when they go to mark the books at the end of the first quarter. Is that a relevant comp? Does it come into it? How much does it influence it? And what should investors expect? Tom McDonald: Yes, that is a great question. So I believe that in the broadly syndicated loan space, the predominant player there are CLOs. And CLOs are very ratings-sensitive. They are also somewhat price-sensitive. But the reality is there has just been so much noise around it that I think people are just sort of hitting the sell button where they can. In a $2,000,000–$3,000,000 position, you have four or five people doing that—immediately you are going to see a two- to three-point backup in that loan. It will be a perfectly good credit. There will be no issues with it. Reasonable leverage, good cash flow. The businesses, in our opinion, are good. We have got a great analyst that covers that up there. So I think that a lot of that has to do with, not necessarily forced selling, but repositioning ahead of potential downgrades. I do not even see that really as something that is coming in the near term. We are going to have to see multiple quarters of results to see if some of the negative headlines come to fruition. Our personal belief is that it does not happen. The way that we across the Barings platform underwrite software is the recurring nature. It has got to be sort of vertically integrated enterprise value stuff. It is sort of really integral to companies’ core operations. And so where we are invested is in companies like that. So unfortunately, the headlines just force people into that sort of sell mode—sell first and sort of ask questions later—especially if it is only a $2,000,000 to $3,000,000 position, as many CLOs sort of have. And then so that then leads to who is going to buy that. And so with all the headlines, folks do not necessarily want to back up the truck on names like that, that are trading at a two- or three- or four-point discount. It just does not really make sense from a three-year DM perspective that they would look at on buying. And then also just increasing software exposure becomes more of a story that managers have to tell their investor base. So with that, you get the price gap when you see sellers move in like that. And again, not based on fundamentals, in my opinion, because it just does not warrant that. So how does that translate into our space? I do not know necessarily that it does, because these are broadly syndicated loans—again, they are liquid, but only to a certain point and to a certain depth. And then you begin to see prints that do not make sense. So I do not know how that is going to translate into valuation. You know, again, with our platform and the way that we look at it, you know, we do not see any need at all and do not view there to be any reason for us on our software exposure to be making any marks down associated with that. So we feel pretty good about our exposure. There will clearly be a knock-on effect from that. It is the topic of the hour, if you will, and what is going on in the space. But again, we believe that it is overblown, and people are just reacting to headlines, and it is our job to get in front of that with our investors and make sure that they understand the stability of the underlying credits in our portfolio, particularly as it relates to software. Casey Alexander: Well, that is a great answer. Thank you for that. My follow-on would be, in the past, when the liquid credit markets have offered a better risk-adjusted rate of return than the directly originated markets have, Barings has been willing to step into that market and try to take advantage of it to create, you know, some positive NAV accretion as some of those opportunities present themselves. Is that something that you are watching, thinking about? Is that a possibility at some point down the road if the mismatch between the liquid credit markets and the directly originated private credit markets gets too wide? Tom McDonald: Yes. Yes. Absolutely. We would consider that. We do a lot of work with the high yield team. I obviously came from that group, and so a lot of respect for the team up there. And so they do a lot of work around this, and we will step into it where we think there is opportunity there. And so that is something that is clearly on our screen. And, you know, the way we approach BSLs, we will be very tactical about it. And so I do think there is an opportunity there as we need to see some of this air pocket in some of the names or if there is a general sell-off in BSLs. You know, we do know what sort of the top picks up there are. And so you can move in there, take very little credit risk, and just take advantage of the volatility. And so considering those names. And so you could see us potentially do that. It is a strategy that we are considering as we see that spacing or, you know, see the market evolve in terms of pricing there. Thank you for taking my questions. Casey Alexander: All right. Thank you. Operator: Thank you. Our next question today is coming from Robert Dodd from Raymond James. Your line is now live. Hi, good morning, everyone. Congrats on the quarter. You are one of the few green names on my screen today. On the two kind of like strategic initiatives. I mean, you talked about ideally liking to crystallize the Sierra CSA as well. But I mean, where would you like—if that—if you did, right, in the not too distant future, what are the areas that you would like to put that cap—I mean, obviously, you are talking about, you know, putting more into Jocassee. That is an equity—strategic equity—effectively, you know, Eclipse and Rocade have been great, but they do up as equity. They are income producing. Very different thing from what normal equity is. I mean, how would you like to allocate incremental capital across the different types of strategies you have done between straight lending, some strategic equity? I mean, what is kind of the vision for the mix over the next, you know, couple of years, so to speak? Tom McDonald: Yes. So I mean, again, across the platform at Barings, you know, we have got great origination everywhere. I think we have leaned into sort of our capital—the complexity piece of private credit—and got excellent returns there. You referenced Rocade and Eclipse; those are two. We continue to work with the group there. I am actually on that investment committee as well. And so there are some really interesting risk-adjusted return investment opportunities on that platform that we will continue to do. I think that is definitely one area we will look to do that. As you know, I am a big believer in diversification in credit. So as more opportunities come there, I think you could see us diversify holdings in some of those names that have the complexity premium and very interesting opportunities there that come at 200–300 basis points wider on spread than what you can get right now in private credit. So that would be sort of one area of focus. As well, across the platform, sort of the asset-based lending opportunities, I think, that we may have as well could be interesting, as well as being tactical, right, because we see more volatility in the space. Clearly, the BSL piece would be an area where we could see some interesting opportunities. I think BB CLOs is an opportunity for us. So I think what you will see us do is be just a little more tactical in areas like that. And then again, always focused on the core of our GPF assets. But I think looking at a number of the origination platforms here on the private credit side at Barings, there is just a lot of opportunity for us—so we will continually evaluate where those stack up relative to GPF spreads and opportunities there. So there is a lot of choices we can make along that. And so that is part of my focus—one of the strategic initiatives, again, is to utilize the entire Barings origination platform to find the best risk-adjusted return opportunities and put them to work here. Robert Dodd: Got it. Got it. Thank you. And then flipping to software, if I can. I mean, the average liquid bid is 90, but that is not a uniformed number, right? I mean, you know, it is—it is—you know, there is a lot trading higher than that. There are a few trading much lower than that, for example. When you look at your book, you know, the 14% that you said is software. I mean, obviously, you have avoided the types of—or tried to avoid the types of—business that are particularly vulnerable to AI displacement, and those are the ones that are trading with the—the ones that the market is concerned about. The ones in the liquid market—those are the ones that trade in the big discounts. How much exposure, if any, do you have to the same kind of businesses the liquid market has really, you know, taken out behind the woodshed, so to speak? I mean, obviously, I think it is low. You have been avoiding it, but do you have any? Tom McDonald: Yes. No. We do not. We do not have any that are—you are talking about the liquid loans that are trading now in the low 80s. Those are the ones that are more highly levered names that are clearly—the ability for AI to disrupt some of those models is much more evident. And I think those are the ones. So there has been massive dispersion. So good high-quality names in software in syndicated are probably in the mid-90s at this point to 98 and just trading because they are associated with software. And then the ones that actually have real credit concerns, as you mentioned, are in the mid-80s and even lower. And so those are the ones that have been legacy investments for quite some time and have been sitting around four or five years. Many of them have already faced or are facing LME-type events. And so then you will see the trading price really gap down significantly. So we do not have exposure to those on the GPF platform. We have—AI has not come along as something that is a risk that recently we identified. It has been something that has been a core part of the underwriting for the team going back years now. So I think that is always something that has been considered, and we just do not have anything on our radar screens that would indicate that we have issues like that, where AI is an immediate disruptor and therefore will have future impacts on quarterly earnings, EBITDA, etcetera. So we feel pretty good about our investments in that space within the 14% exposure we have there. Robert Dodd: Got it. One more if I can, to make Elizabeth’s life maybe more awful. Any consideration to shift throughout this categorization to GICS? I mean, GICS is increasingly becoming standard. Most BDCs use it. The fact that you do not does make it harder to compare between BBDC and, you know, most of the—universes—the liquid loan markets even disclose in GICS categories now. I mean, so yes, Moody’s has been your industry categorization for a long time, but would there be value in your view to actually switching to what is becoming more the industry standard? Elizabeth A. Murray: Yes, Robert. Thanks for the question. And it is something that we have been talking about internally. Again, especially with the software piece, right? I know Matt kind of alluded to it in his commentary. So it is something that we are constantly looking at and discussing, especially from an SEC reporting perspective. But thank you for your question. Operator: Okay. 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. Tom McDonald: Okay. Thank you, operator, and thank you to all who participated today. As I begin my tenure as CEO, I look forward to deepening our engagement with investors and advancing our strategic priorities with the full BDC leadership team. BBDC is strongly positioned for the future, and we remain focused on delivering consistent value for our shareholders. Thank you. Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Hello, and thank you for joining us for i-80 Gold Corp. 2025 Fourth Quarter and Full Year Results Conference Call and Webcast. Today's company presenters include Richard Young, President and Chief Executive Officer of i-80 Gold Corp., Paul Chawrun, COO, and Ryan Snow, CFO. Before we continue, please note that today's comments may contain forward-looking statements, which involve risks and uncertainties. Actual results could differ materially. I ask everyone to refer to slide two of the presentation, which is available on i80gold.com to view the cautionary notes regarding the forward-looking statements made on this call and the risk factors related to these statements. Following today's formal presentation, we will open the call to your questions. I will now hand the call over to Richard Young. Please go ahead. Well, thank you, Joanna. Richard Young: And hello, and thank you for joining today. Starting with slide three. In 2025, we made significant progress advancing our development plan and recapitalizing the company's balance sheet towards our goal of creating a mid-tier gold producer. From an operating standpoint, we achieved our 2025 production guidance with consolidated gold output of just under 32,000 ounces. That would have been at the higher end of the range had we not had the buildup in inventory at the end of the quarter, and Ryan and Paul will talk about that in a few minutes. Our production does continue to ramp up as Granite Creek ramps up. In parallel we advanced drilling, technical studies, and permitting across our portfolio of projects during the year, keeping us on track towards delivering on key project milestones in our development plan. Drill results, particularly at Granite Creek, were highly encouraging and support our decision to expand the infill and resource expansion programs in 2026. From a development perspective, we began construction of Archimedes, the company's second underground mine. We also capped off the year with the completion of the engineering study for the refurbishment of the Lone Tree process plant, which remains the cornerstone asset in our hub-and-spoke strategy to process material from our three underground mines. The board has approved the notice to proceed to Hatch Engineering for the full $400,000,000 Lone Tree refurbishment. We also executed on a series of recapitalization initiatives and, subsequent to year-end, secured a financing package of up to $500,000,000. The recapitalization is transformational for us as it allows us to advance our development plan unencumbered by the balance sheet. Importantly, the capital that was raised was secured with top-tier financial partners, including Franco-Nevada, National Bank of Canada, and Macquarie, who all share our long-term vision for the company and follow extensive due diligence. Their participation is a testament to the quality of our projects, our team, and our execution plan. I will now turn the call over to Paul Chawrun for a detailed update on the development work. Paul? Thank you, and hello, everybody. Turning to slide four. Operations and development work progressed well over the quarter. Paul Chawrun: With mining at Granite Creek and advancement rates at Archimedes performing better than planned. We continue to increase our bench strength by hiring talented personnel in the key areas essential to execute on our growth plan, such as geology, mining and metallurgical engineering, as well as supply chain, community relations, and the Lone Tree project owners’ team. I am also pleased to report we achieved our safety performance targets, finishing the year with an improved TRIFR of 0.62, including an incident-free fourth quarter. At Granite Creek Underground, mining activities continued to ramp up due to reduced water-related impact to mine operations, adjustments to the mine sequencing, and the delineation of additional high-grade areas through short-term drilling that were not included in the original resource model. As a result, we mined more mineralized material for the fourth quarter and the full-year period year-over-year. In the fourth quarter, we mined just over 41,000 tonnes of high-grade mineralized material, including approximately 15,000 tonnes of high-grade oxide material at a grade of 11.19 grams per tonne gold, approximately 26,000 tonnes of high-grade sulfide material at just over 9 grams per tonne gold, plus an additional 19,000 tonnes of incremental low-grade oxide material at just over 3 grams per tonne gold. For the year, we mined approximately 142,000 tonnes of high-grade mineralized material, including just over 70,000 tonnes of oxide mineralized material at over 11 grams per tonne gold, close to 72,000 tonnes of sulfide material at 9.08 grams per tonne gold, plus an additional 73,500 tonnes of incremental low-grade material at just below 3 grams per tonne gold. Total gold production was 3,600 ounces and 23,000 ounces for the quarter and full-year period, respectively. And this refers to the gold available for sale at the third-party processing facility, which contributes to the total gold sold of approximately 5,200 ounces and 21,600 ounces for the quarter and full-year period. Due to timing delays with the third-party processing, the sulfide stockpile was higher than expected at an estimated 6,500 ounces of recovered gold. We expect to process this material in 2026. Water inflows remained stable during the quarter. The upgraded pumping system that was commissioned in the third quarter facilitated effective water mitigation in active mining areas, and as a result, we expect to exceed waste development this year as the main decline rate increases. Construction of a second larger water treatment plant commenced in December and is tracking to begin operating by the end of 2026. This plant is designed to facilitate the ultimate discharge of water away from the underground workings, as currently the water removed is recirculating back into the system. Overall, I am pleased with the operational improvements at Granite Creek and this is a credit to the operating team at site. Moving to exploration on slide five. We completed the infill drilling program in the South Pacific zone along with seven target tests in December, which included approximately 16,000 meters of core drilling over 46 holes, and an additional six infill holes to test and confirm the continuity of mineralization. Assay results outlined in the January 2025 press release demonstrate robust high-grade mineralization throughout the South Pacific zone, suggesting the potential for expansion to the north and at depth. Encouraged by what we are seeing, drilling advanced beyond the current structural boundaries, opening a new untested area to potentially expand the mineralized envelope. As we continue to drill, we are focused on an initial spacing to about 140 feet for the overall deposit and progressively narrow that spacing to increase our understanding as we move closer to planned mining areas. We have since established a preliminary resource estimate to support the Granite Creek Underground feasibility study. Due to additional work required on the mine plan, such as optimization of sequencing with the new resource model, incorporation of ongoing productivity improvements based on current performance, and the incorporation of geotechnical engineering work, the feasibility study for Granite Creek Underground is now planned for completion in the second quarter. Results from the 2025 drill program will be combined with infill drilling data from 2023 and 2024 to produce an updated mineral resource estimate using three years of additional data. A $10,000,000 exploration drill program is planned in 2026 to test high-potential targets and to further delineate resources. Overall, we remain encouraged by the longer-term potential at Granite Creek Underground. Turning to the Ruby Hill property on slide six. Construction of Archimedes commenced in early September. Underground development is advancing ahead of expectations, reaching approximately 680 meters by year-end. Beyond permitting and development, a key focus over the coming months is advancing towards the exploration drift to support continued feasibility-level technical work with initial mineralization expected to be intercepted by the third quarter. Infill drilling commenced in the Upper 426 zone in Archimedes during the fourth quarter. A substantial $25,000,000 to $30,000,000 drilling program is planned for Archimedes in 2026 comprised of over 175 holes and over 60,000 meters. This work will form the basis of a feasibility study planned for completion in 2027, which is earlier than indicated in the PEA by approximately one year. Moving to the Mineral Point open pit project on slide seven, which also sits on the Ruby Hill property. Engineering and technical work continues to support permitting and define the timing of a prefeasibility or feasibility-level study. In 2025, approximately 8,600 meters of surface core drilling was completed to support the geotechnical, metallurgical, and hydrogeology studies for baseline data to advance permitting engineering work. A substantial $40,000,000 to $45,000,000 drilling campaign is also planned for Mineral Point in 2026, targeting approximately 131,000 meters, plus an additional $5,000,000 for permitting and technical work. Mineral Point currently hosts the company's largest gold and silver mineral resources, with the potential to become the company's largest gold-producing asset. It currently sits within Phase III of the development plan; however, we now have the financial flexibility to accelerate the feasibility study and permitting, thanks to the recent financing package. Turning to slide eight. Cove is an advanced-stage exploration project and the company's third planned underground mine. Over the last two years, roughly 41,000 meters of infill drilling was completed on 30-meter spacing across the Gap and Helen zones. The results of this work delivered meaningful advances for the Cove project, which significantly strengthened our geological understanding and improved our confidence in continuity and grade. It also improved our understanding of the metallurgical response to optimize feed and gold recovery in the autoclave. The Cove feasibility study is nearly complete; however, additional work is required to revise the mine plan and cut-off grades to the new gold price estimates and to further evaluate the capital cost reduction and design optimization opportunities with the dewatering program in parallel, which has pushed completion into early Q2. Permit applications are also underway as part of an ongoing EIS process. Moving to slide nine. At Granite Creek open pit, work to advance the project continues. Technical work has been underway to advance the project towards either a prefeasibility or feasibility-level study, and trade-off analyses are being conducted to optimize the project economics. Geotechnical drilling in support of baseline site investigation engineering was deferred in 2025 due to ongoing operating permit updates for Granite Creek Underground located on the same property, pushing the start of drilling into 2026, resulting in a timeline that is under review. Early-stage permitting activities will continue in 2026, followed by commencement of baseline field studies in 2027 in preparation of an EIS. Turning to slide 10 for a look at the Lone Tree plant. During the fourth quarter, we completed a class three engineering study for the Lone Tree plant refurbishment, as Richard mentioned. We recently received a positive construction decision from the board. Lone Tree is a cornerstone asset central to i-80 Gold Corp.’s hub-and-spoke mining and processing strategy designed to process high-grade refractory feed from our three underground gold projects: Granite Creek, Archimedes, and Cove. The autoclave is designed to process up to 2,268 metric tonnes per day, delivering a total annual throughput of approximately 820,000 metric tonnes assuming an 85% plant availability. The processing circuit will incorporate an integrated pressure oxidation and carbon-in-leach circuit capable of processing both refractory and non-refractory mineralized material. Work is progressing as planned with Hatch Engineering, such as advancing long-lead engineering packages, further optimization of the execution plan, operating permit-related engineering, and the progression of detailed engineering to support a first gold pour in December 2027. The submission of the necessary permit applications for the primary environmental permits are on track and are planned to be completed in 2026. The plant is permitted for the existing operational components in use; however, the approval of new and revised permit applications pertaining to the air quality, water pollution, mercury emissions, and reclamation management for the new plant design requires updating. Restarting the autoclave will mark a major turning point in advancing the company's development plan by providing increased processing capacity, meaningful improvements to our margins per ounce of gold, and translate into stronger free cash flow generation. Ryan Snow: Slide 11 outlines the company's 2026 guidance. Overall, the 2026 guidance is largely in line with the preliminary economic assessments published in 2025 with the following exceptions. At Granite Creek, as previously disclosed, the impact of groundwater was not reflected in the PEA. Key aspects of the 2026 mine plan, when accounting for the water ingress impacts from 2025, are an increased development rate compared to the PEA to recover lost development time, higher growth capital due to the additional dewatering infrastructure, and higher recovery rates and increased processing costs associated with the toll milling agreement entered into after the PEA was completed. As a result, for 2026, when compared to the most recent Granite Creek PEA, approximately 20% more material is expected to be mined. Mining, G&A, development and sustaining costs are in line. And the infill and step-out drill programs have expanded due to the successful outcome of the 2025 program. At Archimedes, tonnes and grade mined and development costs are largely in line with the most recent Archimedes PEA. The exception is production and processing costs related to the new toll milling agreement entered into after the PEA was finalized. And the feasibility study-related costs have been brought forward to 2026 from 2028. The cost to bring forward the Archimedes infill drill program is approximately $10,000,000 higher so that an exploration drift can be constructed and cover the additional cost of drilling longer holes earlier than was planned from the upper levels. For Mineral Point, technical and permitting work was brought forward from 2028 to 2026, where an overall infill and step-out drilling, technical work, and early permitting activities are expected to total approximately $50,000,000, the costs of which are covered under the new Franco-Nevada royalty. Other permitting, technical work, and holding costs are largely in line with the PEAs. And with that, I will now turn over the call to Ryan Snow for the financial review. Ryan Snow: Thank you, Paul. Turning to slide 12. Gold sales for the year increased to approximately 28,200 ounces, compared to 21,500 ounces in the prior-year period, reflecting the advancements made at Granite Creek as Paul outlined earlier, slightly offset by a lag in the timing of third-party processing. This lag resulted in over 6,500 ounces of sulfide mineralized material in inventory, which we expect to process in the first quarter. When reconciling tonnes mined, gold produced and gold sold, there are two factors to keep in mind. First, there is often a timing difference between mining and production when using a third-party processor, and our agreement allows for up to 120 days for delivered material to be processed. Second, our high-grade oxide material is subject to a 59% payability factor, which impacts gold sold relative to contained ounces produced. We effectively forego 41% of contained ounces per ounce sold. Total revenue from gold sales increased to approximately $95,000,000 for the year, compared to $50,000,000 in the prior year due to selling approximately 6,700 more ounces at an increased realized price of about $1,000 an ounce, despite the inventory buildup referenced earlier. Gross profit for the year improved to $11,500,000 compared to a gross loss of $15,700,000 in 2024, mainly due to the gross profit from Granite Creek being positive in 2025. The company reported a net loss of just under $200,000,000, or $0.10 per share, while adjusted loss was $123,000,000 compared to $111,000,000 the prior year. The roughly $75,000,000 difference between net and adjusted loss was related to non-cash fair value revaluation losses, which are mainly attributable to the increase in metals prices and our share price during 2025, and a non-cash write-down at Lone Tree for assets that were deemed obsolete under the updated refurbishment estimate released in December. The adjusted net loss was largely due to increased predevelopment, evaluation, and exploration expenses as development work increased across multiple projects as part of the company's development plan. Also, as a reminder, under US GAAP, which we transitioned to in 2024, predevelopment, evaluation, and exploration costs are expensed until we declare mineral reserves. We closed the quarter with a cash balance of approximately $63,000,000, down from the previous quarter due to a larger-than-normal buildup of finished goods and stockpile inventories at year-end, as well as the continued investment in drilling programs to support the plan's technical studies and the development plan, investments in Archimedes and Granite Creek development, along with early-stage activities under the limited notice to proceed at Lone Tree. The year-end balance is in line with our expectations under the recapitalization plan. Ryan Snow: Moving to slide 13, I am very pleased to present the status of our recapitalization plan. We recently announced the culmination of a very competitive process that resulted in a financing package of up to $500,000,000. This financing package includes a commitment with Franco-Nevada for a $250,000,000 royalty, and a gold prepayment facility for up to $250,000,000 with National Bank of Canada and Macquarie Bank. The $250,000,000 Franco-Nevada royalty is in exchange for a 1.5% life-of-mine net smelter return royalty, stepping up to a 3% life-of-mine net smelter return royalty on 01/01/2031. This royalty will apply to production from all mineral properties in the portfolio. On closing, $225,000,000 will be made available to the company, of which $25,000,000 is required to be allocated to the advancement of Mineral Point in 2026. An additional $25,000,000 of the royalty financing is also expected to be made available in 2026 to further the advancement of Mineral Point following the expenditure of the initial disbursement towards the project. This will allow us to allocate $50,000,000 for resource expansion infill drilling, technical work, and early-stage permitting activities at Mineral Point in the year. The gold prepayment facility with National Bank and Macquarie includes an initial advance of $150,000,000 at closing with the obligation to deliver approximately 40,000 ounces of gold over a 30-month period beginning in January 2028. It also includes an accordion feature that provides access to an additional $100,000,000 for a 24-month period upon closing of the facility, and subject to customary conditions and lender approval. We anticipate executing the accordion feature in 2027, at which point the number of additional gold ounces to be delivered will be determined. Total ounces to be delivered for the full $250,000,000 gold prepayment facility are expected to represent less than 15% of total gold output over the projected period of January 2028 to June 2030. The company established the facility with National Bank and Macquarie with a goal of transitioning the gold prepay into a corporate revolver to fund the development of Mineral Point following the completion of Phase One in the development plan. Moving to slide 14, proceeds from the financing package, combined with the previously disclosed equity offerings completed by the company in 2025, represent over $800,000,000 in funding to support i-80 Gold Corp.’s growth objectives. This assumes the full exercise of warrants related to the May 2025 equity financing over the next 18 months. The company expects the final steps to complete the recapitalization plan, targeting an overall amount of $900,000,000 to $1,000,000,000 to be completed by the end of the first quarter. The company recently issued a notice of redemption of its existing convertible debentures as part of the recapitalization plan to provide the required security under the financing package. The convertible debentures are expected to be extinguished on March 16. Once complete, the recapitalization is expected to fully fund Phase One and Phase Two of our development plan, which is anticipated to increase annual production to approximately 300,000 to 400,000 ounces of gold from less than 50,000 ounces currently. Finally, I would be remiss if I did not take this opportunity to thank all the internal and external parties that have been involved in this process and led to this great outcome. With that, I'll turn the call back over to Richard Young. Richard Young: Well, you, Ryan, and finally turning to slide 15. As we look ahead, we are entering a pivotal period that positions the company to unlock meaningful shareholder value. Fifteen months ago, we laid out a new development plan. Twelve months ago, we filed five PEAs that demonstrated the value within that development plan. And then we spent the last twelve months moving that plan forward, advancing the technical work, and completing the recap. As we look forward over the next twelve to eighteen months, we will publish feasibility studies for our three high-grade underground projects, as well as likely a prefeasibility for our flagship Mineral Point project and potentially our Granite Creek open pit project. We will commence and be well advanced in the refurbishment of the Lone Tree autoclave, and we will be ramping up Archimedes production, our second underground mine. So the goal of the board and the management team over the next twelve to eighteen months is to move our current valuation from trading at a very significant discount to NAV to something closer to NAV as we continue to execute on the development plan that we laid out fifteen months ago. So we appreciate your continued support, and we look forward to updating you as we continue to execute on this development plan. We will now open for questions. Thank you. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from John Tumazos at John Tumazos Very Independent Research. Please go ahead. John Tumazos: Thank you very much for taking my question. Maybe the press release was a little bit concise in describing the Lone Tree $400,000,000 plus CapEx to restart the autoclaves. On a very simple level, the autoclaves are fixed steel vessels, and if they sit there idle ten years, they are not going to rust through. What are the ancillary things that get changed or that became obsolete, or the changes in design? I do not think you are going to put oxide material through the autoclave vessels, so maybe there are separate circuits. Please describe all the different changes to account for the autoclave project costing so much money. Did you go out to other engineering firms besides Hatch and get alternative proposals? Paul Chawrun: Yeah, John. So first of all, the autoclave vessel needs to be rebricked. They actually call that refractory as well. So that is a bit of a cost. The other thing is the CIL circuit itself. The tanks need to be replaced. We need to install some vessels for some of the off-gas. The other big cost is the filtration system, so we are going with filtered tails and stacked facilities, so it will not be the conventional slurry. And then the other thing is just upgrading some of the instrumentation. And then you add that all up with all those components, and it comes to $430,000,000 in today's capital environment. This project has been worked on for approximately four years. So no. There is a full explanation on our website. I encourage you to take a look at those details. Richard Young: And, John, just as a reminder, Hatch actually built this facility back in the nineties and knew it better than any other group. They are a global leader in autoclave technology, and we are pleased to have the team on this refurbishment. Thank you. Thanks, John. Operator: Thank you. Ladies and gentlemen, as a reminder, should you have any questions, next question comes from Don DeMarco from National Bank. Please go ahead. Don DeMarco: Good morning, Richard and team. Thanks for taking my question. So first off, at Mineral Point, I see that some of the predevelopment work has been moved forward from 2028. By accelerating this work, does it provide the potential to develop or realize value on this project sooner than its current positioning in Phase Three? Okay. Great. Well, we will certainly look forward to that. And it is an interesting expansion opportunity there. My next question then, just looking at the production guidance, I mean, we are seeing higher production year-over-year. But without the details on costs or terms of the toll milling contracts, what is the best way to model these ounces and capture the year-over-year margin upside in a strong gold tape? So I guess a couple things. So the sulfide toll milling charge is about $275 to $280 per ton, which is about three times higher than what ultimately it will be when we put it through our own facility. You know, we are in a bit of a holding spot until the tech report is done. We will have the tech report completed in the second quarter. And with that, you will have a lot more detail on Granite Creek and the various elements of the cost structure. But until then, our hands are kind of tied. That news will come out in Q2, and just to remind everyone, we are now a US registrant, so we are not able to disclose the results of feasibility studies until the tech report is filed. And so that is why we will see the Cove and Granite Creek tech reports in Q2 as we complete those tech reports and publish them. But we will have a lot more detail on Granite Creek in Q2 as well as Cove, and then Archimedes to follow roughly about a year later. Okay. Great. Well, we will look forward to that. In the interim, we see that the production is higher year-over-year and the gold price is higher year-over-year. But anyway, I will jump back in the queue. That is all for me. Thank you. Richard Young: Don, yeah, thank you. Yes. So from our perspective and really even from the time that I joined, it was clear that Mineral Point was the most valuable asset within the portfolio, and anything that we could do to accelerate its development would be beneficial to shareholders. So as a result, and with higher gold prices and the recap that we have done, we now have the financial flexibility to advance the drilling and technical work and advance permitting, and we are looking at every option available to us to accelerate that permitting and the ultimate development, likely targeting ahead of the original schedule in the development plan. And just for a reminder to the broader group, based on the 280,000 ounces of gold-equivalent production over a 17-year mine life at basic cost of about $1,400 an ounce. Now with this infill and step-out program that Paul mentioned, we do believe that there are opportunities to expand the resource and ultimately reserve base of this project through the program that has been designed for 2026. Thanks, Don. And just as a reminder, we did generate gross profit at Granite Creek in the second half of the year as we had guided at the outset. And with these higher metal prices, it will generate free cash flow or be expected to even after development costs, growth capital, and the additional infill and step-out drill programs that we have got planned for 2026. Thank you. Operator: We have no further questions at this time. I will turn the call back over to Richard Young for closing comments. Richard Young: Well, I would like to thank everyone for joining us on this Friday morning. We are excited by the progress that we have made over the last fifteen months. And we believe over the next fifteen to eighteen months we are going to be a long way advanced on completing Phase One of our development plan, which will take production to 150,000 to 200,000 ounces per year at strong margins and free cash flow, as well as moving forward on Mineral Point and our Granite Creek open pit as part of Phase Two and Three. So a lot more news to come as we progress through the course of this year. So thank you very much for your time this morning. Operator: Ladies and gentlemen, this concludes your conference call for today. Thank you for participating, and we ask that you please disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the CTO Realty Growth Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jenna McKinney, Director of Finance. Please go ahead. Jenna McKinney: Good morning, everyone, and thank you for joining us today for the CTO Realty Growth Fourth Quarter 2025 Operating Results Conference Call. Participating on the call this morning are John Albright, President and Chief Executive Officer; Philip Mays, Chief Financial Officer; and other members of the executive team that will be available to answer questions during the call. I would like to remind everyone that many of our comments today are considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are discussed from time to time in greater detail in the company's Form 10-K, Form 10-Q and other SEC filings. You can find our SEC reports, earnings release, supplemental and most recent investor presentation on our website at ctoreit.com. With that, I will turn the call over to John. John Albright: Thanks, Jenna, and good morning, everyone. We are pleased to report a robust fourth quarter, highlighted by record high leased occupancy of 95.9% same-property NOI growth for our shopping centers of 4.3% and the previously announced acquisition of a shopping center in South Florida. Our strategic focus on shopping centers located in the higher-growth Southeast and Southwest markets of the U.S., along with the proactive asset management and leasing is producing strong results across all areas of our business. Nowhere is this better illustrated than in our retail leasing results. During the fourth quarter, we signed leases for 189,000 square feet including 167,000 square feet of comparable leases and a cash rent increase of 31%. For the full year, we signed leases for a record 671,000 square feet including 592,000 square feet of comparable leases at a cash rent increase of 24%. Further, we continue to make meaningful progress backfilling our 10 anchor spaces. As previously announced in the fourth quarter, we signed a lease with a national investment-grade retailer at Market Place at Seminole Town Center for 48,000 square feet. This single lease consolidated the 34,000 square feet formerly occupied by Big Lots, 9,000 square feet of small shop space and 5,000 square feet of new expansion space. Further, this lease brought us to 7 resolved anchor spaces in 2025, totaling 177,000 square feet. Additionally, we are in active negotiations for the three anchor spaces in the Value City at Carolina Pavilion which we expect to get back in early 2026. Notably, all combined, we expect to achieve a positive cash rent spread of approximately 60%, the high end of the targeted range previously disclosed. So while getting these boxes back did result in temporary downtime, it ultimately accelerated our ability to achieve higher rents and stronger tenant credits along with driving higher customer traffic to the respective center. More broadly, as of year-end, our signed-not-open pipeline stands at $6.1 million, representing approximately 5.8% of annual cash base rents. We believe this pipeline position us for meaningful earnings growth as reflected in our outlook, with almost half of the signed-not-open pipeline anticipated to be recognized in 2026 and 100% in 2027. Moving to investment activity. In December, we acquired Pompano Citi Center, an open-air retail center located on 35 acres in Pompano Beach submarket of Fort Lauderdale, Florida, for $65.2 million. The property consists of 509,000 square feet of operating space that is currently 92% occupied, plus 62,000 square feet of unfinished shelf space, primarily on the second level presenting future leasing opportunity. Pompano Citi Center is anchored by Burlington, T.J. Maxx, Nordstrom Rack, Ross Dress For Less and JCPenney. Further, the property enjoys a prime location at a high-traffic intersection offering great visibility and access. This acquisition provides another attractive opportunity to create long-term value through both strategic mark-to-market rent opportunities and incremental leasing. Including the acquisition of Ashley Park, an open-air lifestyle center acquired early in 2025 and $21 million of structured investments originated during 2025, we closed $166 million of investments during 2025 at a weighted average initial cash yield of 9%. Moving to dispositions. Last quarter, I provided an update about the significant leasing we completed at The Shops at Legacy North located in Dallas, Texas. During this quarter, we capitalized on those leasing efforts and sold The Shops at Legacy North for $78 million and a cash exit cap of low 5%. While the lease-up of this shopping center took longer than anticipated, we are pleased with the ultimate outcome and the ability to accretively recycle the proceeds into higher-yielding acquisitions. This transaction demonstrates our team's ability to execute value-add strategies at properties, retenanting, increasing occupancy and bringing rents up to market. As we look ahead, I do want to note a near-term anticipated acquisition. We are under contract to acquire a 384,000 square foot shopping center located in Texas for approximately $83 million. We look forward to announcing the closing of this acquisition in the first quarter of 2026 and providing more details at that time. Additionally, while we have plenty of liquidity under our revolving credit facility to acquire this property, we may elect to fund this acquisition by selling a stabilized property, thus accretively recycling the proceeds to further drive earnings. Finally, while both leasing and capital recycling will add to earnings growth in 2026 and 2027, we never rest here at CTO. We have identified 6 outparcels for development in our various stages of negotiations with tenants ranging from preliminary to detailed lease negotiations. Three of the 6 outparcels are for larger boxes and uses. We expect to drive significant foot traffic to their respective centers. While each specific opportunity is unique, in general, they average about $5 million of investment capital and low double-digit yield. If completed, we expect the capital to be invested over 2026 and 2027 with leases beginning to contribute to earnings in the second half of 2027. In summary, while we are pleased with our 2025 performance, we are even more excited about the future of CTO. We are beginning to reap the benefits of our strategic business plan, focusing on the right assets in the right markets, along with the proactive leasing and asset management. I'm immensely proud of the team here at CTO and what they have accomplished along with the performance and results they are driving for our shareholders. And with that, I will now hand the call over to Phil. Philip Mays: Thanks, John. On this call, I will highlight our earnings, provide an update on our balance sheet and discuss our initial 2026 outlook. Starting with operating results. For the fourth quarter, core FFO was $15.8 million, a $1.6 million increase compared to the reported in the comparable quarter of the prior year. On a per share basis, core FFO was $0.49 per diluted share compared to $0.46 per diluted share in the comparable quarter of the prior year. For the full year, core FFO was $60.5 million, a $12.6 million increase compared to $47.9 million reported in the comparable prior year. On a per share basis, core FFO was $1.87 per diluted share compared to $1.88 per diluted share in the comparable prior year. The change in core FFO per share for the full year reflects the reduction in leverage that took place late in 2024 when we reduced net debt to EBITDA by approximately a full turn. With regards to same-property NOI, total same-property NOI, including our 4 noncore properties, increased 1.1% for the fourth quarter. Same-property NOI for our noncore properties was impacted by Fidelity, vacating almost half of our 212,000 square foot office property located in Albuquerque, New Mexico and lower percentage rent from our beachfront restaurants in Daytona Beach, Florida. As previously disclosed, we have already released the portion of the building vacated by Fidelity to the state of New Mexico for an initial lease term of 10 years, making the property now 100% leased to two investment-grade tenants. Further, we currently expect the state of New Mexico to begin paying cash rent in the latter half of 2026. Notably, same property NOI for our shopping centers increased 4.3% in the fourth quarter. This growth was driven by leasing activity across our portfolio and a reduction in maintenance costs related to a property enhancement project completed in the fourth quarter of 2024. For context, shopping center properties represent 93% of total same-property NOI for the fourth quarter. However, given the relatively small nominal size of our same-property NOI, just $200,000 impacts quarterly growth by approximately 100 basis points and one tenant vacating together with the seasonal impact of percentage rent at a noncore property can obscure the same-property NOI trend at our shopping centers. Accordingly, we have updated our supplemental financial information this quarter to more clearly highlight the metrics related to our shopping center properties. Moving to the balance sheet. We started the fourth quarter in a strong financial position after completing the previously announced $150 million term loan financing at the end of the third quarter. The proceeds from these new term loans were used to retire a $65 million term loan scheduled to mature in March of 2026 and reduce the balance on our revolving credit facility to provide enhanced liquidity. Notably, we now only have $17.8 million of debt maturing in 2026. Also, as previously disclosed, early in the fourth quarter, we repurchased $5 million of common stock at a weighted average purchase price of $16.26 per share increasing our repurchases for the full year of 2025 to a total of $9.3 million at a weighted average purchase price of $16.27 per share. Regarding liquidity, we ended the year with $167 million of liquidity, consisting of $149 million available under our revolving credit facility and $18 million in cash available for use. This provides more than adequate capacity to initially fund the $83 million anticipated acquisition of a shopping center located in Texas that John discussed earlier. From a leverage perspective, we ended the fourth quarter with net debt to EBITDA of 6.4x, an improvement from 6.7x at the end of the third quarter. The anticipated acquisition in Texas will temporarily elevate our leverage to a level similar to that at the start of the quarter. However, we anticipate deleveraging from the sale of select assets as well as rent commencing from our signed-not-open pipeline. Now turning to our 2026 outlook. Our initial earnings guidance for the full year of 2026 is $1.98 to $2.03 for core FFO per diluted share and $2.11 to $2.16 for AFFO per diluted share. Key assumptions reflected in our initial guidance include: investment volume, including structured investments of $100 million to $200 million at a weighted average initial yield between 8% and 8.5%. The same-property NOI growth for shopping centers of 3.5% to 4.5% and general and administrative expenses of $19.5 million to $20 million. One last note, the cadence of our same-property NOI growth will improve over the year as tenants included in our signed-not-open pipeline take possession of their space and commence paying rent. And with that, operator, please open the line for questions. Operator: [Operator Instructions] The first question comes from Jay Kornreich with Cantor Fitzgerald. Jay Kornreich: First, I wanted to ask about backfilling the 10 vacant anchor centers. Could you just give us another color as to the timing of how rent from those already signed leases starts to get paid in 2026? And then for the three leases that have yet to be signed, any thoughts as to timing for that? And if that can also, I guess, hit the upper end of that 40% to 60% increase in leasing spreads you forecasted? John Albright: Yes, thanks. I'll kind of answer sort of the ones that we're still working on. We have -- we're in a fortunate situation with regards to the vacancies that are left where we have multiple tenants buying for the space, and we're trying to obviously optimize sort of the higher paying credit, what it does for the center, that sort of thing. So we're trying to move around the chess pieces. So -- and that's more talking about Carolina Pavilion and there's two boxes there. And so I would suspect that that's going to get resolved here in the next 6 months for sure. And then as we talked about before, these things tend to take a year at least to kind of get into operation. But I'll let Phil talk about the others that we've signed up. Philip Mays: Yes, Jay, on the ones that have already been completed, as far as contributing to the fourth quarter, it's really just the two Boot Barns, one at Rockwall and one at [ price ] that got opened really quick. We did get Slick City moved into Carolina, but it was very, very late in the year, it didn't contribute much this year. And then just going forward, it will ramp up about half in '26 and then they'll all be online in '27. Jay Kornreich: Okay. I appreciate that. And then just one follow-up. I guess looking at the office property in New Mexico, which now has this new lease worked out between the two tenants, I guess, how do you think about the value and opportunity to dispose of that asset now? And whenever that does happen, should it happen? What would your ideal use of the proceeds be? John Albright: Yes. So we're definitely in a fortunate position that now that we have the state of New Mexico, taking half the building and Fidelity another other half, we certainly have a marketable asset right now. So we are in early discussions with groups that have an interest in buying it. But as we get closer to the state of New Mexico's rent commencement, it's kind of really we're going to have higher values to us. So we're being patient with it, knowing that we have that opportunity and alternatively, to your question, we would look to reinvest those proceeds into an open air center, a larger open air center. And if we find a great candidate acquisition opportunity, we may speed up the process of selling that building in New Mexico. Operator: Our next question is going to come from Craig Kucera with Lucid. Craig Kucera: I want to talk about Pompano Citi Center. There is a mention of some potential mark-to-market lease-up opportunity there. Can you give us some color on what you think that might be? John Albright: Well, it's really -- I mean, look, JCPenney is the largest tenant and they literally pay nothing. And so if that company wherever to really go under or get back space or most likely is something where we buy out their space, that's a huge opportunity at that property. But really, the real opportunities, Craig, the lease-up, there's a fair amount of vacancy, and we're very active right now in -- with LOIs going out to prospective tenants. It's really turning this around, creating the excitement of the activity, and we're doing that. So we're really very optimistic about Pompano. So -- but there's -- it's more about lease-up than taking an old tenant and bringing in a new tenant at higher rent. But certainly, the largest one by far, JCPenney is that opportunity down the road. Craig Kucera: Right. That could be pretty significant if they're paying nothing. Changing gears, it was a very strong leasing quarter. Obviously, a lot going on at Seminole Town Center. But outside of that, were there just kind of a flavor of the market, are you seeing any particular categories that are really creating or are you finding demand in your shopping centers for? John Albright: It's really the strong national brands that are still very interested in spaces if you have them. You have the T.J. Maxx' of the world, the Ross and so forth. So I mean, you're actually seeing more development occur in different markets because those tenants are doing very well in this economy as we read the national headlines and so they're looking for store expansion. So if you have a big box in a good market and a good center, you really are in the driver's seat. Craig Kucera: Great. I saw you extended and increased the Revana loan and extended founders. Have you gotten any indication from Watters that they'll extend? Or you expect that to be repaid in the second quarter? John Albright: Yes. Unfortunately, we expect that to be repaid. We are hoping that it wouldn't, but it looks like it will. So we'll be on the hunt to replace that. Craig Kucera: Got it. And I saw that Revana paid down a portion of their balance but you would anticipate them drawing down the remaining $25 million or so available on that loan in 2026? John Albright: Yes. They have some basically users for some of the site and they need to do site work and put in the roads and all that kind of stuff, utilities. And so it's really master development work. And so yes, we expect that to be used to improve that site. Craig Kucera: Okay. Great. And just one more for me. Phil, this is on the ABR recognition timing on the signed-not-open. Can you give us any more granularity certainly relative to 2026? Is this like we -- should we assume something ratable? And as far as 2027, is that also throughout 2027, I would imagine? Or any additional granularity would be helpful for modeling purposes. Philip Mays: Yes. Ratable is pretty close. It may ramp up a little more towards the latter half of the year in '26. But if you're doing it ratable or a little bit stacked towards the latter part of the year, you're going to be pretty close. And same for '27, from what we can see now. Craig Kucera: You would say the same for '27 as well? Philip Mays: Yes, from what we can see now, yes. Operator: Our next question is going to come from John Massocca with B. Riley. John Massocca: So maybe thinking about the Texas acquisition that's in the pipeline, how does that property, you think, look compared to the portfolio today? And I guess, is there more kind of a value-add opportunity in that acquisition as you see it today? Or is that going to be something that's more stabilized or you're just getting it at a really solid yield and maybe there's some rent mark-to-market in the future that's attractive? John Albright: How about if I say all of the above? We're lucky that it's a stabilized asset with upside opportunity. There's actually a land parcel that comes along with it that there's definitely possibilities for and there is a little bit of lease-up and there is some below-market leases, but nothing near term so that you can get a hold out. So it hits all the boxes. So we're pretty excited about it. John Massocca: Okay. And then maybe thinking about acquisitions in the pipeline or in the guidance beyond that transaction and with the likely repayment of the one structured investment in mind, how much of that is maybe structured investments as you see it today? And how much of that would be additional shopping center purchases? John Albright: We're definitely on the hunt for the larger shopping center purchases. And we -- in the last week, I went to go see two larger ones that were definitely interested in. I would say that the market, there's not a lot on the market right now. There is a lot of talk about brokers doing a lot of valuations for sellers. And so we'll see whether that comes to fruition. But we're definitely looking to find some chunkier shopping centers this year. As we mentioned before, we still have some recycle opportunities in our portfolio where we've leased up properties and they're slower growth now. And if we can move them into, for instance, the Texas acquisition, where there's a ramp of cash flow increases and lease-up opportunity. That's kind of where we like to position ourselves. John Massocca: And as you think about -- I mean, I know if you bespoke based on whatever asset you decided to sell, but what's kind of the day one spread in yields between kind of dispositions and acquisitions? I mean you gave acquisition cap rates and guidance, but just kind of curious what the disposition side would be. John Albright: I mean at least 100 basis points, if not more, most likely more. John Massocca: To the positives? John Albright: Yes. John Massocca: Okay. And then last one for me. CapEx kind of came up a little bit in 4Q, is that kind of a better run rate level as we look at the portfolio today? Because I know you sold legacy, which is a little bit more of a CapEx-intensive asset. Just kind of curious how we should think about that going forward. Philip Mays: Yes, the fourth quarter was elevated. It did include the large anchor lease at Market Place at Seminole. That's the one John talked about where the anchor took the 34,000 square foot box and then also is absorbing 9,000 a small shop plus 5,000 square feet of expansion. And there was also a restaurant in there and the restaurants always carry a little heavier TI. So I would say the fourth quarter is probably a little higher than the run rate going forward. Those run rates are, for a portfolio our size, are better to look at an annual basis because it's just one lease like an anchor in any one quarter can skew it up significantly. And I would say just generally, the fourth quarter is a little higher than a good run rate. Operator: The next question is going to come from Gaurav Mehta with Alliance Global Partners. Gaurav Mehta: I wanted to follow up on the SNO timing of 47% in 2026. It seems like it's different than 76% you had in last quarter. So is it like the new leases that came in? Or was there any changes in the timing? Philip Mays: Yes. When you look at it from quarter-to-quarter, there's a lot of moving parts. So there was a tenant that moved off of it and into this year, right? And then you also -- you had where we sold legacy, so then that dropped off. And I think that's probably the biggest mover in your kind of reconciliation of the 76% that was previously there to 50% now. There was a lot of lease-up at legacy, as John discussed that we completed, and then with selling that, that drops out of the pipeline. And the amount did not decrease because we signed a lot of new leases, right? So the signed-not-open pipeline is still significantly large even with legacy falling off, but that's the change, the biggest driver of that change for '26. Gaurav Mehta: Okay. Understood. Second question I have is on your market allocation as you look to acquire new properties. I see that Atlanta seems to be much higher at 36% than rest of the market. And I'm just wondering if you could just maybe comment on how you think about allocating in any given market as far as exposure to cash ABR? John Albright: Yes. I mean, look, we're not looking to add to Atlanta. So you'll probably see Atlanta move down over time for sure. And so given that our portfolio is 85%, North Carolina, Florida, Texas, Georgia, we certainly have one of the strongest portfolios relative to the growth of markets where tenants want to be. And so you'll just see more of our investments in other markets kind of in that Southeast, Southwest, but less so in Atlanta. Operator: The next question will come from Jason Weaver with JonesTrading. Jason Weaver: Just first of all, when it comes to allocation, can you talk about the relative merits between grocery, anchor, lifestyle and power centers and of those, what you're most likely looking to target? John Albright: Yes. I mean, look, grocer is terrific, but it's a lower-yielding kind of product and a little bit slower growth sort of product. And so -- and then lifestyle is fantastic. We've had some great success, but they're a little bit more expensive to operate. You need more of that security element and everything because you have restaurants and entertainment and so forth, but they work really well in the right locations. And then power is just more stable but higher growth opportunities with lease-up and less sort of CapEx exposure, tenants that are going in those don't need really high TI sort of finish outs like the lifestyle centers do, but that's sort of an easy sort of way to think about them. Jason Weaver: Yes. And how are you thinking about the relative availability in the market for what you can deploy to today? John Albright: Yes. We're not right now on the grocer side. We're not chasing those just because of the yields are so low. However, we do -- we're looking at lifestyle and power, for sure. And a lot of the opportunities we're looking at are kind of have that grocer opportunity in the future where grocers would come into those centers. We're seeing that in our portfolio now where we may have a large power center, but a grocer is looking at one of the boxes, and we've had that happen before where, unfortunately, we couldn't get one of the tenants out, that would have been a very national grocer that is very beloved in the nation. But unfortunately, we're couldn't get a book store out to accommodate them if you can imagine. So we won't be chasing grocers just because the yield is way too low. We don't see a compelling return opportunity there. We do see it in areas where in the lifestyle and power where the yields are definitely higher, and there's not as much capital chasing them. Jason Weaver: Great. That's helpful. And then maybe it's a little bit early here, but with 20% of your base rent, 2028 lease is coming off, have you started any discussions on what types and sort of opportunity that might present for FFO growth in the [ out year ]? John Albright: Yes. I mean, look, that's the great thing about this company set up right now is we've done so much work on the lease-up and kind of the ramp that -- and a lot of these tenants that -- or these properties that we bought, their leases are below market. And these tenants are doing well. And so most likely, they're going to exercise renewal options. But if not, there's definitely some mark-to-market opportunities. So we don't really have to do much here to grow our earnings, it's just really letting the portfolio play out. And so the setup is really great. We don't have to do anything special to have some really interesting growth here. Operator: Thank you. And this does conclude today's Q&A session and conference call. I want to thank you for participating, and you may now disconnect.
Nathan Burley: Good morning, and welcome to Telstra's results announcement for the half year ending 31st of December 2025. I am Nathan Burley, Head of Investor Relations. I'm joining today from the lands of the Gadigal people. And on behalf of Telstra, I acknowledge and pay my respects to the traditional custodians of country throughout Australia and recognize the continued connection Australia's First Nations people have to land, waters and cultures. We pay our respects to elders, past and present. This morning, we will have presentations from our CEO, Vicki Brady; and our CFO, Michael Ackland. We will then open to questions from analysts, investors, and then the media. I will now hand over to Vicki. Vicki Brady: Thank you, Nathan, and good morning, everyone, and thank you for joining us. I'll make some comments reflecting on Telstra's overall performance and our outlook. Michael will then cover the details of our financials. The first half of FY '26 was a strong period for Telstra. We delivered ongoing growth in earnings, reflecting momentum across our business, strong cost control and disciplined capital management. We also made a positive start to our Connected Future 30 strategy, which will see us double down on connectivity, drive growth and play a critical role in enabling a prosperous digital future for Australia. In first half '26, reported financial performance compared to the prior period included EBITDAaL up 4.9% to $4.2 billion, EBIT up 9.2% to $2 billion, profit for the period or NPAT up 8.1% to $1.2 billion, earnings per share up 11% to $0.099, and return on invested capital up 0.8 percentage points to 8.8%. Our underlying growth more accurately reflects our financial performance compared to the prior period. Underlying financial performance showed underlying EBITDAaL up 5.5% to $4.2 billion, cash EBIT up 14% to $2.5 billion, cash EPS up 20% to $0.14, and underlying return on invested capital up 0.9 percentage points to 8.9%. On the back of cash earnings growth, the Board resolved to pay an interim dividend of $0.105 per share. The interim dividend is 90.5% franked with a franked amount of $0.095 per share and an unfranked amount of $0.01 per share. The interim dividend uplift and the level of franking applied is consistent with our capital management framework and our aim to deliver a sustainable and growing dividend. Our dividend is supported by strong cash earnings this half, and our Connected Future 30 ambition remains to deliver mid-single-digit growth in cash earnings. Today, we are also announcing an increase in our current on-market share buyback from up to $1 billion to up to $1.25 billion. This increase is supported by strong progress in completing $637 million of the buyback in the half, earnings growth and the strength of our balance sheet. The on-market share buyback is expected to support earnings and dividend per share growth, and along with the increased interim dividend reflects the Board and management's confidence in our financial strength and outlook. Now that we've completed our first half, we are tightening our FY '26 underlying EBITDAaL guidance to between $8.2 billion and $8.4 billion. Our guidance on other measures are unchanged. Looking now at our results across the business. We grew underlying EBITDA across our Mobiles, Fixed Consumer and Small Business, InfraCo Fixed and Amplitel businesses. Importantly, our Mobile business has continued to perform well with EBITDA growth of $93 million. Mobile's growth was driven by higher ARPU and more customers continuing to choose our network and the value it provides. Mobile services revenue grew by 5.6%. Our Fixed C&SB EBITDA grew by $37 million, reflecting ARPU growth and disciplined cost management. We introduced our Internet-only plans late in the half, and customers now also have access to our Telstra Smart Modem 4 with next-generation Wi-Fi 7 technology. With these new offerings in place, we are focused on stabilizing customer numbers and driving growth. Our Fixed Enterprise EBITDA declined by $9 million as we continue to reset this business, including through portfolio management and reduced costs. We remain committed to this reset with further changes proposed last week to continue removing complexity. Our international EBITDA declined by $2 million, but grew excluding one-offs. Michael will go through this in detail. Our domestic infrastructure businesses across InfraCo, Fixed, and Amplitel continued to grow, reflecting strong customer demand. Across the business, we achieved 14% cash EBIT growth. This percentage growth rate is higher than the rate we expect at the full year, largely due to lower BAU CapEx in the first half. Our full year cash EBIT guidance is equivalent to around 5% to 10% annual growth. We delivered positive operating leverage of 3.1 percentage points, in line with our Connected Future 30 target. Given the low level of income growth in the period, we achieved operating leverage largely through strong cost discipline and efficiency gains. We reduced underlying operating expenses by $179 million or 2.4%, more than offsetting pressure from rising costs. This required challenging but necessary decisions to reduce some roles and set us up to deliver on our Connected Future 30 ambitions. We're also seeing efficiency gains flow from technology leadership as an important enabler of our strategy. This includes modernizing our software practices, relentless simplification, strong adoption of AI and an API-first architecture. For example, we've consolidated our software partners from 400 down to 2, improved efficiency in our software development by more than 20% and sped up time to market and release cycles by 15% to 20%. And most importantly, we're seeing benefits to customers, which I'll come to shortly. Turning to our strategy. Our ambition is to be the #1 choice for connectivity in Australia. Achieving that in a changing environment means radically innovating in the core of our business. You can see the layers and enablers of this strategy on this slide, which we covered in our last Investor Day. There is a more detailed scorecard in the appendix that shows our progress, so I won't go through that in detail. But I will make some comments on the importance of connectivity and call out some highlights from the half. Connectivity is foundational to supporting national productivity, resilience and security. As reliance on telco networks grows and service expectations rise, continued investment in digital infrastructure is fundamental to better delivering services to consumers and business. Investment needs to be supported and encouraged and the investment required across the sector will be large in the multibillions of dollars. To do this well, we need to have a shared national vision for the digital future we want to create for Australia and a national digital infrastructure plan our sector can align behind with government and regulators. This must include a plan to use spectrum to the greatest possible benefit to consumers and businesses. To do that, we need certainty of spectrum allocation on fair terms at a fair market price. We also need better regulation designed for but agnostic to the technology of today. We need forward-looking guardrails that both protect consumers and encourage innovation to deliver better outcomes for them and the nation. We welcome the Productivity Commission's proposal for a deep dive review of regulation in the telecommunications sector. We want to work with government, regulators and the sector on a shared vision for Australia's digital future, so we can better align policy, regulation and decision-making with the goals we have as a country. On investing in connectivity, we are driving significant momentum in the build of our Aura network and managing this large complex project with discipline. The network will be vast, connecting our capital cities with ultra-fast and reliable fiber and the ability to connect regions too. This week, we reached the halfway mark with 7,000 kilometers of fiber in the ground. Our Sydney to Melbourne coastal via Canberra routes are now live and more routes are expected to be completed in FY '26, including Sydney to Melbourne Central via Canberra and Sydney to Perth. We are on track to achieve a 1 point uplift in our network experience index, which brings together network availability and speed across our mobile and fixed networks to measure the real experience our customers receive. The uplift is a result of our ongoing program of network optimization and early benefits from our additional investment over 4 years in 5G advanced capability. It also reflects improvements in resilience. For example, we have invested to strengthen backup power across our network sites, which we were able to withstand more than 95% of the 165,000 planned and unplanned power interruptions we experienced over FY '25. While there's always more to be done, these investments and others contributed to Telstra receiving the 2025 Best in Test Mobile Network Award from umlaut for the eighth year in a row and with our highest score ever. In June last year, we became one of the first operators in the world to launch satellite messaging. And while it's not a replacement for terrestrial networks, we're seeing it add another layer of resilience when terrestrial networks are disrupted. For example, when fire damage and power disrupted our network during the recent bushfires in Victoria, particularly around Longwood and Harcourt, we saw a threefold increase in people connecting to satellite messaging, even though many people had evacuated this area. On supporting customers, we have migrated more than 99.9% of our 7.7 million consumer customers to our new digital stack. We continue to work with around 4,000 of our customers who are the most complex to migrate, and we are managing that thoughtfully. Our team know these customers as individuals as we work through this with each of them, and we're committed to getting it done. We're seeing significant improvements in customer experience from digitization and AI. 86% of consumer service interactions like billing, order tracking or prepaid recharge are now completed through our digital self-service instead of customers having to call us. In November, we launched an AI-powered assistant, which customers can access on telstra.com to get help with simple things like checking their plan, activating a SIM or how to reset a password. This is our first customer-facing generative AI assistant, and it has meant an almost threefold increase in customers being able to resolve their inquiry using AI. We plan to scale this AI-powered assistant across our My Telstra app over this quarter. It is just one example, but we have many more AI use cases across the business, helping us serve customers better, strengthen network resilience, protect customers from scams and solve issues before they become problems. Overall, our investment in digitization and AI, combined with our ongoing network and capability investment is helping to drive improvements in customer experience. Over the 12 months, we've seen strategic NPS increase by 5 points and episode NPS increase by 2 points. At the same time, we have been laying the foundations of our Connected Future 30 strategy, and there are 3 things that I'll call out here. The first is innovating in core connectivity, capability and how we capture value. In Mobile, our investment in 5G advanced is moving us towards a smarter, more adaptable and programmable network. In Fixed, we launched our Adaptive Network Centre in June last year, a self-service platform that empowers our enterprise customers, partners and Telstra teams to design, order, track, manage and monitor connectivity services, all in one place. These capabilities are both fundamental to enabling our network as a product layer, and we continue to drive momentum. The second is our work under our joint venture with Accenture to transform our business with AI. We have made good progress since launch, including retiring legacy platforms, strengthening responsible AI governance, streamlining data architecture, and opening access to global innovation via our Silicon Valley hub. We recently proposed changes that would see the JV tap into Accenture's existing resources and expertise to deliver on our data and AI road map more quickly. That means some roles would not be required. While decisions like this are never easy, over time, we expect it will deliver benefits to our customers and our business faster. Third is our investment in upskilling our people. We continue to put AI tools into the hands of our people to help them learn and adapt. And over the half, more than 75% of our team with access to those tools use them weekly or more often. We also continue to offer training through our Data & AI Academy. In the first 6 months of FY '26, almost 9,000 of our people completed a course. Looking ahead, we are focused on continuing to deliver value for our customers, communities and shareholders as we build momentum behind our Connected Future 30 strategy. This includes, through our core business cash flows, active portfolio and investment management and disciplined capital management. Our ambition is to be the #1 choice in connectivity in Australia and to continue delivering on our purpose to build a connected future, so that everyone can thrive. I'd like to thank the Telstra team for everything they have delivered in the half and the care they've shown for our customers, particularly responding to the Victorian fires and Queensland floods over the summer. I'll now hand to Michael to take you through the results in detail. Michael Ackland: Thanks, Vicki. And as Vicki said, we've had another strong half with continued growth across all earnings and cash metrics, including our new guidance measures. This is in line with our goal to deliver resilient, predictable and consistent growth under our Connected Future 30 strategy. While total income across the group increased just 0.2% in the half, we've reduced operating expenses by 2.1% with our continued focus on efficiency. EBITDA after lease depreciation or EBITDAaL was up 4.9% on a reported basis and 5.5% on an underlying basis, with the difference due to a $23 million impairment of the London Hosting Center. We've delivered a profit to Telstra shareholders of $1.1 billion, up 9%, and earnings per share of $0.099, up 11%. These results reflect growth in key products, especially Mobile, ongoing strong cost management and reduced shares on issue from buybacks. Cash earnings were higher than reported earnings as depreciation and amortization is higher than business as usual or BAU CapEx. We expect this trend to continue and continued growth in D&A. In addition, cash EPS of $0.14 per share was up 20%, a higher growth rate than reported EPS as BAU CapEx was lower this half. As Vicki said, with stronger cash earnings, the Board increased the interim dividend to $0.105 per share, up 10.5% on a cash basis. This represents 75% of cash EPS. With our tight franking balance and ongoing gap between cash and accounting earnings, partial franking in this period best supports a growing and sustainable dividend. We've also lifted our current buyback from up to $1 billion to up to $1.25 billion. $637 million was bought back in the first half or 1.1% of shares at an average price of $4.90, bringing us to a total of 2.6% of shares retired in the calendar year 2025. Now given this is the first half we are reporting on cash EBIT and cash earnings, let me provide a little more detail. As a reminder, cash EBIT is a view of earnings after key cost buckets, including BAU CapEx, lease and spectrum amortization. Cash earnings is a further view after interest, tax and noncontrolling interest. Cash EBIT growth of 14% to $2.5 billion follows growth in our core operations, coupled with strong cost management and lower BAU CapEx. BAU CapEx of $1.5 billion was down 5%, largely due to timing. We expect a higher spend on digital infrastructure, including in our International business in the second half. Despite a lower average borrowing rate, finance costs increased modestly. Tax was higher in line with higher earnings with an effective tax rate of 28.4%. With that, cash earnings grew 17% to $1.6 billion. Turning to Slide 14 on product profitability. We delivered EBITDA growth across Mobile, Fixed C&SB, InfraCo Fixed, Amplitel and Other. Other EBITDA comprises costs not allocated to product. It improved with favorable foreign exchange movements, adjustments due to bond rate changes and the absence of equity losses following the divestment of our Foxtel stake last year. Health was flat with continued growth in revenue, offset by higher costs supporting new contracts and ongoing transformation. Other EBITDA would generally be around a $70 million loss per half, although this varies based on the nature of the items included. Turning to our key products, starting with Mobile, which continues to demonstrate strong performance. Mobile service revenue grew 5.6% with growth across all product groups, including postpaid, prepaid and wholesale handheld, mobile broadband and IoT. We delivered sustained average revenue per user or ARPU growth across all categories, brands and segments with disciplined commercial execution. Postpaid handheld ARPU grew 4.8%. Prepaid handheld ARPU grew 14.7%, although significantly lower on a unique user basis, and growth is due to the flow-through of October 2024 price changes. And Wholesale ARPU grew 7%. We achieved this ARPU growth while also growing postpaid, prepaid and wholesale customers. Our handheld mobile user base grew by 135,000 in the half. Mobile EBITDA grew 4% to $2.7 billion, with service revenue growth partly offset by higher costs, including higher-than-usual customer remediation and compensation, sales costs largely related to satellite, increased redundancy, and a higher allocation of shared costs as Mobile becomes a bigger part of our business. We expect sequential mobile service revenue growth to be muted given the timing of past price changes and lower IoT revenue following the divestment of MTData. Turning to Fixed Consumer and Small Business, where we continue to grow earnings by focusing on a portfolio of products and technologies and strong cost management. In the half, we grew nbn unit margin through price rises and plan mix, which offset SIO losses, and we continue to grow our 5G fixed wireless product. We continue to invest in our offering in the half. We launched our Internet-only plans and introduced the Telstra Smart Modem 4. However, SIO losses remain a challenge and a focus for our channel and marketing teams. In Fixed Enterprise, we have continued efforts to reset the business and focus on connectivity and strategic growth areas. Starting with Data and Connectivity, or DAC, where income fell 9%. During the half, progress on product refresh and upselling to higher bandwidth was not enough to offset the impact of service rationalization and in-period customer credits. We delivered cost and CapEx reductions. However, DAC EBITDA declined to $25 million as cost reduction was insufficient to offset the revenue decline. Turning to Network Applications and Services or NAS. Revenue declined 4% following deliberate decisions to focus on areas aligned to our strategy and declines in calling products. With strong cost management, EBITDA increased to $62 million in the half. Our focus on portfolio management is ongoing. The sale of Alliance Automation and MTData are completed, and the sale of 75% of Versent Group announced last August is expected to close this half. These businesses contributed $235 million in revenue in the first half of FY '26. Turning now to International on Slide 18. While reported EBITDA fell 0.5%, we achieved modest growth, excluding significant one-offs. Starting with Wholesale & Enterprise, while reported EBITDA of $232 million grew 20%, this included $45 million of one-off benefits, including deferred revenue recognition, other balance sheet releases and an equity accounted associate gain. Excluding these and one-offs in the prior period as well as FX impacts, EBITDA grew around 1%. This growth was delivered through strong cost management following a strategic refocus of the business on DAC. This more than offset DAC margin pressure from higher off-net mix, ongoing declines in legacy voice, a business we expect to complete the sale of this month. Looking forward, Wholesale & Enterprise EBITDA is expected to decrease significantly in the second half sequentially with the one-off items not expected to repeat, declines in NAS and voice, and partially offset by ongoing cost discipline. Over the past few years, we're focused on maximizing utilization in our subsea cable assets. We have been disciplined in our investments in new capacity. However, this has limited opportunities for new sales and growth. We now see promising investment opportunities in the second half of FY '26 within our BAU CapEx guidance. Digicel Pacific reported EBITDA declined 22% to $139 million as the prior year benefited from the release of the remaining earn-out provisions. Excluding this and in constant currency, EBITDA grew 1.7% with ongoing cost reduction offsetting a challenging operating environment. Turning to Infrastructure on Slide 19. InfraCo fixed income was broadly flat at $1.4 billion with growth from nbn, CPI indexation and ground stations. This was offset by lower commercial and recoverable works, reported legacy asset sales and internal revenue based on efficiencies and lower power charges. InfraCo fixed EBITDAaL grew 3.4% to $905 million, including a higher contribution from nbn, copper recovery, commercial works and cost efficiency, partially offset by the reduced internal income. Amplitel continued to benefit from strong demand for towers and cost efficiencies. EBITDAaL grew 6.6% to $162 million despite the MOCN impacts. Regarding strategic investments, including the Aura network, which is our new name for our Intercity Fibre. We continue to expect spend of $1.6 billion above BAU CapEx across the project. Now while we expect the vast majority of this spend to occur by the end of FY '27, we now expect a small amount of spend and some routes to complete in FY '28. We continue to be disciplined in the build of this 30-year asset, including prioritizing routes in line with customer demand and returns. We expect a mid-teens IRR with strong revenue growth, especially from FY '28, in line with demand as routes come online. Strong cost management is a key highlight of this result. Our proactive cost management and the benefits from technology adoption is helping us be more efficient, respond to structural challenges in some products, as well as the impact of inflation, and allow for reinvestment. Lower sales costs were a function of lower Fixed C&SB, International and NAS costs. Fixed costs were $76 million lower. Together with lower BAU CapEx, cash EBIT costs reduced, delivering strong operating leverage of over 3 percentage points. We've maintained our strong capital position with liquidity supported by strong operating cash flows. Net debt remained stable at 1.9x despite our buybacks, as higher debt was offset by EBITDA growth. We've also reduced our average cost of debt to 4.8% and extended our maturity profile. Our balance sheet is strong, and we remain committed to an A band credit rating. This has enabled us to lift our current buyback. We've also improved our return on invested capital. Turning to FY '26 guidance on Slide 22. Today, we are tightening our underlying EBITDAaL guidance to between $8.2 billion and $8.4 billion, with the midpoint unchanged. Our guidance on all other measures is reconfirmed. In terms of EBITDAaL, there are a number of one-offs that have benefited the first half, including in International and Other EBITDA. The second half will also reflect the loss of earnings from businesses we have divested. Offsetting these items in the second half, we expect ongoing productivity, including carry-in from prior years as well as InfraCo asset sales and net product growth. As previously noted, we also expect higher BAU CapEx in the second half. These results demonstrate our value creation under our Connected Future 30 strategy, growth in core business cash flow, 17% growth in cash earnings supported by strong operating leverage, portfolio and investment management, where we continue to execute in line with our strategy to enhance returns, and disciplined capital management, including the lift in dividend and buyback. Finally, I would also like to thank the Telstra team for all of their ongoing efforts in delivering value, especially for our customers, the communities in which we operate, and our shareholders. And I'll now hand to Nathan for Q&A. Thank you. Nathan Burley: Thank you, Michael. We'll now open for questions from analysts and media. On the call today, in addition to Vicki and Michael, we have other members of the Telstra Group Executive, including Brad Whitcomb, Group Executive, Consumer; Steven Worrall, CEO, InfraCo; Oliver Camplin-Warner, Group Executive, Enterprise; Amanda Hutton, Group Executive, Business; and Kim Krogh Andersen, Group Executive, Product & Technology. With that, I'll open to the first question, which comes from Eric Choi from Barrenjoey. Eric Choi: Congrats, everyone, on the result and lifting the dividend. I've got 3 questions, but can I please start my first question specifically on the dividend. And I just wanted to check the broad logic for potential FY '26 and '27 outcomes. So if you look at FY '26, your first half cash payout was 75%, but your policy has been sort of 70% to 90% in the past. And just logicking out the second half, you can work out cash EPS will fall a little bit in the second half versus first half. So I guess we just wanted to check if you're happy to up that cash payout above that 75% to maintain $0.105 into the second half. And then just beyond FY '26, you're clearly focused on cash earnings now. So if we think you guys can grow cash earnings by 5% or more, there's no reason why that EPS can't grow 5% or $0.01 again beyond FY '26. That's the first one. Did you want the rest? Or should I give you a chance to respond? Vicki Brady: Why don't we -- Eric, we might do it a little differently. Given there's quite a bit in that first one, why don't we take it first off? I'll make a couple of comments, and then I know Michael will want to jump in as well. So first off, this is obviously the first half where we've spoken a lot about in terms of dividend that under our capital management framework, where focus is sustainable and growing dividend, our preference is fully franked. But where that's not possible, we would consider unfranked. And so look, as the Board considers the dividend, the capital management framework is obviously the critical thing that they reference. As we spoke to this morning, the first half of this financial year, we've seen particularly strong cash earnings, and that supports the first half dividend. But yes, that sustainable and growing dividend is absolutely a key focus. We don't have any more a cash payout ratio that we're targeting. It's very much -- we focus on the capital management framework and look at it through that lens. But Michael may want to comment on some of the historic numbers, I'm not sure. But look, as we look forward, that's why we keep coming back, Eric. Our ambition under Connected Future 30 is really that mid-single-digit cash earnings. That's really critical, and that's an important reference point. As you know, we work through and the Board makes its final decision on the dividend. But Michael, do you want to jump in with any further? Michael Ackland: Yes. I mean, I think Vicki is absolutely right. We don't have a policy on payout ratio. But if you look over the last few years, I think in FY '25, on the same basis, the cash EPS payout ratio was 85%. It was 90% in FY '24, and it was 83% -- 84% in FY '23. But we're focused on that sustainable dividend and just recommit to our objective to deliver mid-single-digit growth in cash earnings, Eric. Eric Choi: Awesome. I'll try and be quick on 3. But just number two, just in terms of balance sheet headroom for capital management, and I'm going to focus on Moody's here since they're 1 notch higher than S&P. It looks like they've lifted your max gearing headroom to 2.4x now. So can I confirm on their measure, you'd be tracking at 2.1x to 2.2x, and that's before you conducted portfolio optimization. So basically, the question is, do you have plenty of headroom to increase both dividends and buybacks on the credit agency view? Vicki Brady: Excellent. Well, that's quite a detailed one. My overarching comment is, our balance sheet is strong. It's a core part of our capital management framework. You know that. We're absolutely committed to those things that keep us in that A band credit rating. But Michael, do you want to get into any of the specifics there? Michael Ackland: Yes. So we reported 1.9x. I think that's well within our conservatively framed outlook of 1.75x to 2.25x. Moody's have a slightly higher top end to that range. They do use some slightly different methodologies, as you point out. We track both of them. But I think your conclusion is that the balance sheet is strong and that we do have strong capacity within that A band rating based on both Moody's and S&P's, correct. Eric Choi: Can I fit in the last one, sorry. Just a question on whether investors should think of Telstra as an AI loser or winner. And I think you're implying you're an AI winner, because to get to your long-term ROIC of 10%, you basically need to grow EBITDA $1 billion or more from here. And like logically, you can see your mobile service revenues are $8 billion to $9 billion, your fixed cost base is $7 billion. If those 2 kind of grow in line with each other, they kind of offset each other. So you kind of need something else to fill that $1 billion-plus gap. And that's going to have to be through InfraCo and cost efficiencies. And I'm also guessing that's going to have to be driven by AI. So you're essentially saying AI helps you hit your long-term guidance? Vicki Brady: Okay. Well, why don't I start off on that, Eric? There's quite a lot in that one. The first thing I'd say is, obviously, inside Telstra, there's a number of businesses. Obviously, Mobile key driver of value and growth right now. And we're super happy with that business. That's come through years and years of consistent investment and differentiation in what we deliver to customers, and that will obviously remain a focus. If you look at our portfolio, I'll come to InfraCo in a second. But there are other elements of our portfolio we're still working through, Telstra Enterprise. We spoke a little bit about the International component of our business today as well. So there's still work to do in our portfolio in terms of getting those businesses in the right shape and supporting our ambitions. On InfraCo, I mean, there is no doubt the demand cycle we're in at the moment, the sort of investment that is going into AI infrastructure. We couldn't be more pleased that we embarked on Aura, or Intercity Fibre as it was previously known quite a few years ago now, and that build-out is at the halfway mark. All of the demand signals would indicate growing demand there. So the Infrastructure side of our business is obviously important in the long run. We have also set in our ambitions, positive operating leverage. And so yes, we've got to keep getting more efficient. And you see that. I think Michael and I both commented today, we are seeing benefits from, again, years of investment in digitization, in pushing ourselves to be sort of at the front of how we apply AI inside our business. So they are important. The dynamics in the world, it is changing fast. For us to be competitive, for us to keep delivering on rising expectations, rightly, of consumers and businesses, we've got to be able to apply AI. And so I'm really optimistic on what AI can deliver for us, both in terms of the demand signals in InfraCo, but also in how we use that inside our business, yes, to drive efficiency, but also drive better customer outcomes. So they'd be the big things I'd comment on in there. I don't know, Michael, if we want -- I know I might go, because we've got Steven Worrall. Obviously, it's his first set of results with Telstra leading InfraCo. So I thought it might be a good chance, because that winners and losers in AI, particularly from our Infrastructure business. I thought, Steven, if you're happy to make a few comments, it would be great. Steven Worrall: I'll be very happy to do that. Thank you, Vicki. And good morning, everyone. It's great to be here, as Vicki said, my first results announcement with Telstra. And if you'll indulge me for a moment, I thought I might provide a little context that goes to the heart of the question, Eric, that you've posed. But I also can give some direction in terms of where we're headed. I think I'll just start with saying how excited I am to be here at Telstra at this time. It's an incredibly exciting time for our business, but it's also an exciting time in relation to digital infrastructure. We don't have to look too far. Pretty much every other day, there's an announcement of a new investment that's being made in data centers here in Australia. And Australia has emerged as one of the leading destinations for data center investment around the world, as we've all seen. Now of course, that's just one part of the digital infrastructure landscape. And as recently as last month at PTC, which is a conference in Hawaii, where we engaged with hyperscalers, of course, other players in the AI ecosystem, some of our existing clients and many others who are eyeing the opportunities that this build-out of digital infrastructure is providing, we saw a very significant uptick in terms of our pipeline coming out of those discussions. As Vicki mentioned, that's why we think Aura is such an important investment. It will provide the AI inferencing architecture that we think is so essential for our nation as we look to an increasingly digital future. And while I'm excited about all of that and excited to be here, it's also a really important time for us as a nation. And I think Vicki also pointed to this earlier in her comments. Indeed, she made these comments at the press call last year in terms of the moment that we find ourselves confronted by. And that is in relation to how do we think about productivity going forward, how do we think about how we best participate in an increasingly digital world. And we think investments in Aura and the assets that we have give us the permission. And I think the logical role for us to play to help Australia best position itself. Last quick thought. That's a long answer to your question. Of course, our international asset base is incredibly important as well, and Michael touched on this in his remarks. Telstra owns and operates more than 25% of the world's subsea capacity. And when you think about a digital future, you think about connecting Australia to the global digital supply chain, it's that subsea network combined with the domestic and terrestrial assets that we have that we think sets us apart, and we think puts us in an incredibly important position with all of the work ahead of us to ensure that we can capitalize on those commercial opportunities as, of course, we serve the country. Nathan Burley: We'll go to our next question, which is from Entcho Raykovski from Evans Partners. Entcho Raykovski: So my first question is around Mobile costs in the period, and they were a bit higher than the market expected. And Michael, you've provided us with some good color around what's driven that. My question is, to what extent were the higher costs driven by higher satellite costs as opposed to some nonrecurring items like remediation. I'm just trying to get a sense of the extent to which the cost increase is recurring. And I've got a couple of others, but I might hold off after this answer. Vicki Brady: Yes. Thanks, Entcho, for that. I know Michael spoke to sort of 4 major things that were in that cost increase. We don't break it down. We don't get into sort of cutting and dicing it into the pieces. But as you said, the first one mentioned was customer remediation and compensation. We are at the end of a program of work on historical sales practices. So that comes to an end at the end of this financial year. We have in part of business as usual, those costs exist, but they are higher in this half, and we would expect higher for this full year. But we don't break it down into the subcomponents. I don't know, Michael, if there's any other comments you wanted to add. Michael Ackland: No. I mean I think, Entcho, I would -- the satellite costs, we should consider those to be an ongoing change. And I think you rightly pointed out, the others we don't expect to be ongoing in this nature. The other one we referenced there is just the way that shared costs are allocated. And frankly, that's just a little bit that Mobile is increasingly a bigger part of our business, as you can see in our numbers. And so that trend will continue as well. But frankly, it's against our overall costs going down. So I think we should remain reasonably confident about ongoing operating leverage in that business as we've committed to across our entire business as we move forward and look at this, as there has been some more specific impacts this period. Entcho Raykovski: Okay. That's helpful. And my second question is around the potential expected increase in spectrum renewal costs that was announced by ACMA in December. Does that impact your ROIC targets to FY '30 in any way? I mean, I noticed that on Slide 35, you've got a footnote referencing the new payment structure. I guess if that does have an impact on ROIC, do you foresee a need to perhaps divert investment from elsewhere into spectrum purchases? Or how does it impact your decisions around pricing and the need to pass this cost on to consumers? Vicki Brady: Yes. Thanks, Entcho. And obviously, it's an ongoing process at the moment, that process of spectrum renewals. I think on the positive -- I mean on the positive front, starting there, ACMA has decided it is a renewal process. I mean, again, reinforcing the spectrum that will come up for renewal through 2028 to 2032 is about 80% of the spectrum that the mobile networks in the country rely on. So that's a positive. And the process in terms of determining what is fair market price, that is the debate that's underway through that process. ACMA obviously put out some more information just pre-Christmas. We have a different view on what fair market price is. For us, it's about -- at the moment, it would be, we believe, about $1.3 billion more than what we would see fair market price. So look, that will be part of our submission back. Obviously, that process is still ongoing. We'll put our views, our thoughts, our analysis work we've done into that. Obviously, any additional cost that comes into the business, we've got to be incredibly thoughtful about. As extra cost pressure comes, there's constantly a balance of how much we invest into the network and the products and services we're delivering for customers. That might be things like satellite to mobile technology. It's investment in our mobile network we keep making and our broader network. So that will be something we'll have to think about. Obviously, increasing costs, we've then got to think about, what does that look like in terms of what it means for pricing for customers, because ultimately, for us to keep investing and being at the forefront to deliver high-quality connectivity services, we absolutely need to make a return on those investments, so we can keep that investment going. So look, it's part of the process. Our ambition on ROIC remains the same. That ambition under Connected Future 30 to get underlying ROIC to 10%. You did pick up that note. We wondered how quickly that footnote would get picked up. And as you can see, we've just been very transparent using the current ACMA pricing that they've put out as the interim pricing that's reflected in that footnote. Nathan Burley: Our next question is from Bob Chen from JPMorgan. Bob Chen: A few questions for me. Maybe firstly, just on the really strong ARPU result across the Mobile business, especially across the prepaid and wholesale. Like how sustainable do you think this is? And is this just the beginning of moving those customers on to higher prices? Vicki Brady: Bob, did you have more than one question? Can I just check? Bob Chen: Yes, sure. Yes, I've got some others. Do you want me to... Vicki Brady: Yes, why don't we grab them all and then I'll make sure we manage to get to them all. Michael Ackland: Yes. Bob Chen: Yes, sure. Maybe just on the comments earlier around the Aura network. Obviously, we're seeing a lot of demand from new data centers being put into the region, like you guys mentioned. When you think about that sort of mid-teens IRR you're talking to, I mean, given the increased level of demand for data centers and connectivity, could the return profile of Aura be better than what you were initially expecting? Vicki Brady: Okay. And is there a third one? Bob Chen: Yes. And then just on the ACMA spectrum renewal process, I think you spoke to some of the trade-offs you're sort of thinking about in terms of mobile network investment. But how does it impact maybe your capital management settings if you don't see the gap between ACMA's pricing close with your views? Vicki Brady: Great. Thank you. Okay. So quite a few to cover off there. Why don't we -- just on Aura, my comment there would be, we continue to have the same outlook in terms of Aura in terms of that financial profile. So that mid-teens IRR is absolutely what we continue to target. Of course, as you heard Steven talk about earlier, we do see good demand signals. But obviously, we've only just passed the halfway mark of build. So our focus is absolutely completing the build, and as the routes come online, making sure we're converting those demand signals into commitments and switching on revenue on the network. So right now, that financial profile stays as is. And I think we've put a slide in the appendix just as a reminder of what that looks like. Just on the ACMA, look, as I said, that process is ongoing. If it does land with the pricing that's currently proposed, I think this is where you see the benefit of very disciplined capital management, a strong balance sheet. Obviously, as I said, we'll need to consider various trade-offs. But I think given the hard work over many, many years, obviously, the business is in that underlying earnings growth, we're seeing cash earnings growth. And spectrum is ultimately -- it's a critical element to delivering high-quality mobile services. So I think as we stand today, we sit with the capacity, I think, to be able to navigate that period, and we just wanted to be really clear in that footnote and give you a view of how that might look like if the current pricing was to proceed as is in the interim proposal. On ARPU, I think it might be worth getting a few comments on this one. I might get Michael just to make an overall comment, because he can cover off the broader perspective, including wholesale. And then I might ask Brad to comment, because you particularly mentioned prepaid, and we've got good strong performance out of the consumer side of the business. So Michael, why don't I go to you on ARPU more broadly? Michael Ackland: Yes, sure. Sorry, just a quick one on your point around capital management and spectrum. I think it's a really good question. The way that I would think about it is we start with what's our return on invested capital? Are we getting an appropriate return on invested capital, and that's where all those trade-offs that Vicki talked about. And then the second one is capital management, which is our strong balance sheet. So I think -- just reiterating what Vicki said, but I wanted to talk to it. Vicki Brady: Yes. No, thank you. Michael Ackland: Look, I think on Mobiles overall, and I think hearing from Brad is going to be much more insightful than anything I could offer, obviously. But we're really happy with the way that our multi-brand strategy is playing out. We have a broad range of brands and offers and channels to market that are meeting more of the market, and we continue to grow that base. You can see that when you look at the revenue growth, the way that is spread, and also the ARPU growth that we're seeing when you take all of our handheld customers in total. So we're really happy with the way that multi-brand strategy is playing out. Prepaid has been a very specific highlight that you called out. And so maybe with that, we can get Brad to talk a little bit about how that's working and what's happening. Bradley Whitcomb: Yes. Thanks, Michael. Just to broaden that out a little bit, yes, we're really happy with the performance for the first half when we look at the mass market mobile. And as Michael pointed out, we do have a series of brands that we work with, Boost, Belong, main brand, and also our products on prepaid and post, and we work to tile those up, so that we've got offers that are attractive to our customer segments. I'm really pleased that we were able to see growth in terms of subscribers across all of those various aspects of the portfolio. And as you pointed out, also ARPU growth as well. The mechanics of that ARPU growth for prepaid, it was around price rise back in October of 2024. And for postpaid, including Belong, July 2025 price rises there. But when we look to -- in terms of sustainability, I would look first at how happy are our customers. And really pleased that we're sitting -- as Vicki mentioned, we're at an all-time high for our customer NPS at plus 47. That's up significantly PCP. So that's a great trend for us. I'd also look at our overall value proposition and what we're offering our customers. First and foremost, it is built upon having the broadest, deepest, most reliable network in the country and arguably in the world; world-class privacy spend, protection and security for our customers; and then the intangibles around our brand. We see our brand moving from strength to strength. We're now the ninth strongest brand in the nation, which is consistent with one of our Connected Future 30 aspirations to stay in that top 10. We've got brilliant frontline workers that are serving our customers, whether that's through our retail stores or in our contact centers. And you'll feel that when you engage with them that they like the work that they do. In fact, we've got, across the consumer division, which is mostly frontline workers, we've got an employee engagement score of plus 85. And when your employees are engaged, they just provide that much better service to the customer. So hard to predict the future. It is a very, very competitive market, and we have to earn the right to serve our customers every day. But when I think about the sustainability of the value proposition that we have, I like where we're standing right now. Nathan Burley: We'll take our next question, which is from Lucy Huang from UBS. Lucy Huang: I've got 3 questions. I'll just ask them first. So just -- I mean, good results on mobile ARPU. I just wanted to see if you could unpick some trends in churn in postpaid post the price rise that was implemented in July. And particularly on the Enterprise side in Mobile as a result, was that still a drag in the ARPU numbers this half? Or do we think that drag has actually moderated moving forward? And then secondly, just on Intercity Fibre, again, I think you mentioned on the call that we're expecting strong growth coming through in FY '28. What's the conversation with customers on whether or not they want to pre-commit to capacity just to give, I guess, investors a bit more comfort around the demand profile longer term? And then just thirdly, on Fixed C&SB. Early days since unbundling of the modem from the plan, but maybe if you could provide us with some color as to whether that's been driving a better outcome so far in scanning [indiscernible] decline. Vicki Brady: Excellent. Well, thanks, Lucy, for those. I'm actually going to get Brad to come back up and talk a little bit about postpaid churn and also cover off C&SB-Fixed internet-only plans. And then I'll ask Oliver, who's leading Telstra Enterprise. I know you had a question there on the Mobile front. There's been some really great work out of Oliver and the team in Enterprise. So I'll get him to talk a little bit about where that's at and the trends we're seeing. And then, Steven, it might be worth you popping back up and just the discussions. As we've said previously, I think, Lucy, with big builds like this, we find there's lots of good demand signals. Often until you're at RFS of certain routes, it's sometimes not the practice to pre-commit. We obviously had Microsoft where we had a big strategic partnership there. They are an important foundation customer of Intercity Fibre or Aura now. But I might get Steven to give a bit more color to how the dynamics are. So why don't we go to Brad, if you're comfortable to cover off those couple. Bradley Whitcomb: Yes. So if I start with the Mobile churn, as you can imagine, before we make any price changes, we do quite a bit of work around elasticity, conjoint analysis, the customers that we're serving and where they might go should they choose to move off the current plan that they're on. And as a reminder, we have no lock-in contracts, we don't have handset subsidies, and so customers can move very, very quickly if they want. That's all the modeling that we do, and we look at that in terms of a yield, how many customers are going to stay where they were, how many people will down plan? Will we have any customers churning. And I would say that this price change that we made in July, we landed right about where we expected in terms of yield. So we are pleased with that. Of course, that all then comes down to the trading on the floor and how we perform in terms of our peak trading windows, whether that's our flagship handset launches or Black Friday, Christmas and currently our end of summer sale, and I think the team is executing quite well. So we're never fully satisfied with churn. We want to keep customers within the portfolio, but we're right on track with what we had planned for. In terms of Fixed C&SB, one thing I would like to underscore is the team has doubled the profitability of that business over the last 3 years. It's been a massive performance, and we're on track right now to deliver about $0.5 billion in profit when we exclude the legacy copper cost that's in that business. So very pleased about that. As you mentioned, we've rolled out a number of new capabilities within that product suite, including the nbn high-speed tiers. We've got straight-through digital processing to make it really easy for our customers to order digitally. We've got a beautiful new Smart Modem 4, which if you don't have it, you should get it. The Wi-Fi performance in the house is exceptional. And then we've got now our Internet-only. It is early days. We launched Internet-only right on Black Friday. And I will point out as we've been migrating off of Siebel and now on to console. We only got about what, a little less than 4,000 customers left on console. It meant we could move very quickly, and we could meet that critical trading window of Black Friday. Customer response has been good. That said, we remain in a very, very competitive market. We are focused on SIOs, but we're not focused on SIOs at any cost. So that's how I would describe it now. Team very much focused though on the SIO loss. Vicki Brady: Thanks, Brad, for that. That's excellent. And why don't we -- Oli, are you comfortable to speak a little bit to TE and TE Mobile, ARPU trends? Oliver Camplin-Warner: Yes. Thanks, Vicki. Thanks, Lucy, for the question. So yes, let me zoom out and start a little bit on just Enterprise reset and how we're traveling there, and then I'll zoom in on Mobiles. On Enterprise reset, as Vicki reminds me, there's always more work to do, but I'm really pleased with the progress that we've made so far. Without doubt, by the end of reset, we will be a stronger, more customer-focused business, no question. We identified a number of critical initiatives at the start of reset, and those are progressing well. I'm pleased with where they are at. And pleasingly, most importantly for me, customer reaction has been positive as well, where we've seen an increase in NPS. Some of the key points to reset. First off, just that radical simplification of our product portfolio. It was absolutely critical that we're really focused on who we wanted to be moving forward, not trying to be everything to everyone. We've taken a long hard look at our cost base and facing some really tough decisions here, but we've made those calls, and we do have a very different cost base across the business now. Commercial guardrails, we've continued to tighten, which have had a good impact. We have an engaged workforce, like Brad spoke about earlier as well, who are now making a real difference. And then on the portfolio management as well, we've taken a long hard look at the various businesses that we've had. As Michael touched on, we completed the divestments of MTData, Sapio and Alliance in the half. The partnership with Versent -- Versent partnership, that's continuing on track and will close out in the second half. So long story short, there's a lot in there. A couple of weeks ago, we also announced the radical transformation of our service delivery business. We will look to improve the customer experience on the delivery front. So there's a lot there. I'm pleased with where things are at, but there's always more to do. Just on Mobiles. So Mobiles without doubt has been the beneficiary of many of those actions that we have taken through reset, commercial guardrails really celebrating the network that Brad spoke about earlier, all those beautiful attributes. And pleasingly, we saw growth in the half, which I'm really thrilled with. It was great to launch satellite to our customers and especially those organizations who have a remote field workforce, where having that connectivity in the area of need is absolutely critical. So a good response there. You will note in the footnote just around the MTData divestment and how that will impact Mobile in the second half, but pleased with the Mobile performance, but there's always more work to do. Vicki Brady: Yes. Thanks, Oli, for that. And just to add one comment to what Oli said on TE Mobile performance. Lucy, if you go to the very last -- I think it's the very last page in the presentation material in the appendix there, you can see Telstra Enterprise Mobile performance, and you can see growth there. And so real credit to Oli and the team. He spoke about commercial guardrails. The team have been very disciplined, and we have seen, I think Michael mentioned ARPU growth across all products and all segments. So that's been a good outcome of that real focus and discipline. Michael Ackland: Including business? Vicki Brady: Including business, that's right. That's right, every segment across Mobile, which has been great to see. So why don't we come to Steven, a little bit of color, Steven, around those commitments from customers. Are they prepared to pre-commit? Yes. Steven Worrall: Happy to. Thank you, Vicki. And Lucy, thanks for the question. There's sort of 2 thoughts that might be helpful here. As Vicki mentioned, first and foremost, we need to build the network. So we're 7,000 kilometers into a 14,000-kilometer total build, and we have a couple of the routes ready for service and actually in use today, but most are yet to get to that threshold. And so that obviously is the priority as we continue to have all sorts of conversations with players, both domestic and international. The second thought I'd love to share with you is the thought that we are building what I'll describe as AI inferencing architecture for our nation and, of course, connecting that architecture to what is increasingly being built out around our region and around the world. And in that context, what Aura presents to Australia, obviously, critical digital infrastructure for the nation, but it's infrastructure that will support us for a generation. And we're talking about a demand profile that we don't actually see just yet with all of the investments that we're hearing regularly in relation to data centers. Many of those are in the construction process and have yet to come online. And the sort of demand profile that those data centers will drive as one part of the digital supply chain is yet to arrive. And as you might expect, as a result, the commercial conversations with those operators in terms of pre-commits and their precise requirements in terms of connectivity, both domestically and through the region, are conversations that we engage in regularly. We're obviously moving many of them down the pipe very well, and we expect to have more to say on the topic in the future. Thanks very much. Nathan Burley: We'll take our next question from Liam Robertson from Jarden. Liam Robertson: Three questions from me as well. Just firstly, on Mobile, in particular, postpaid subs growth. It looks like Belong was the standout there, adding 21,000 in the half, core base declined modestly. Michael, I think you touched on your multi-brand portfolio already. Clearly, that remains well positioned. But I'm just interested in how you're seeing the market? And should we be thinking of Belong as the key acquisition channel going forward? Or do you actually think you can also grow your core brand? And then just a follow-on from that. I mean, given that dynamic, have you got any concerns around your ability to grow postpaid ARPU moving forward? And then just my next question on the dividend. I might frame it slightly differently, just given you were clear on not having a targeted payout ratio. I don't think it was a coincidence that the $0.095 fully franked and then the $0.01 unfranked on a grossed up basis was similar to the $0.10 fully franked in expectations. I guess moving forward, should we now be thinking about growth of that dividend on a gross basis? And then your split between the franked component and unfranked component will just be dictated by your available franking credits. I guess the inference there is that the unfranked component might actually need to accelerate just given your franking balance and the mismatch between tax paid and then cash earnings? And then my last question, hopefully, just a really quick one on Enterprise. I appreciate all the comments and color, Oli, there around recent divestments, the cost base reset, some of the pockets of growth, looks like Mobile was strong. I guess my question is, when can we consider that portfolio to be fully rebased? Vicki Brady: Well, thanks, Liam. Lots in there, some great questions. I might get Brad back in just a second, because I think how the market is playing out, Belong. My overall comment, as Michael spoke to earlier, our multi-brand approach is critical to how we address the market. There are very different needs in the market in terms of what different segments of customers are looking for. And so it remains a really important piece. And of course, as you'd expect, we're always pushing. We want to make sure we're meeting those needs as best we can. And the Telstra branded proposition is critically important. It is our premium offer to market. I might get Michael to jump in after Brad and just talk a little bit more about dividend. As you call out, this is the first time in a long time it's not a fully franked dividend. So I'm sure there are many questions about how to think about it. Again, I just come to cash earnings is an important piece as we consider, as the Board goes through that process, as they're thinking about the dividend in light of our capital management framework. TE, it's a really great question on reset. Oli and myself and the leadership team, we've been working through that at the moment. I mean, incredible progress. It was May '24 when we announced the reset of our Enterprise business. As you just heard from Oli, some really pleasing progress, but there is still more to be done. And so that's part of our thinking. As we come back for our full year results, we'll be able to share where we're at. But right now, the focus really is on making sure those pieces that are in work still now, and Oli spoke to some of the changes we're driving to try and remove further complexity out of that business to really deliver on those rightly high expectations of our enterprise customers remains absolutely our focus, along with finalizing some of those elements on the portfolio management side. But why don't I -- Brad, are you comfortable to jump in on the market, and then we'll come back to Michael on dividend. Bradley Whitcomb: Yes. So thanks for the call out on Belong. We're super proud of the performance of that business. And it's great to see them growing both in terms of subscribers and also profitability. I think the team there is doing a fantastic job. I will point out, we did have a fairly significant price rise within Belong back in July, the same time that we did the main brand price increases as well. So this isn't necessarily a pricing thing. We do see more growth at the lower end of the market. So from my perspective, it's not surprising that we would see Belong competing very well there and seeing that grow. But our primary focus is around our core main brand and the other brands sit around that to support that main brand. And there's a number of attributes that you can only get with the Telstra main brand. And one that I would point out, we've talked a little bit about today, is the satellite messaging service. And for customers that are aware that we have satellite messaging, we see an NPS which is a full 16 points higher than customers that aren't aware of it. So we're offering real value there, and our aspiration is to continue to grow that business, both in terms of the profitability, but also the number of customers that we can serve. Michael Ackland: Thanks, Brad. And thanks, Liam, for the question on dividends. I think I would -- a little bit like Vicki sort of spoke to, we have an ambition under Connected Future 30 to grow our cash earnings mid-single digit. It is those cash earnings that support the sustainable and growing dividend. And the level of franking within that is going to be determined by the growth in our Australian tax payments, which I apologize is an obvious statement, but it is going to be driven by the growth in our Australian tax payments, and that's going to be fairly closely linked to our growth in accounting earnings and EPS. So as we said, we think that our franking balance is tight, has been tight for some years. The partial franking in this period, we believe was the best way to deliver on our commitment to a sustainable and growing dividend, and we look forward to continuing to achieve our ambition of mid-single-digit cash earnings growth that supports a sustainable and growing dividend in the future. Nathan Burley: We'll go to Roger Samuel from Jefferies. Roger Samuel: I might just stick to 3 questions as well, hopefully, quick ones. Firstly, just on your guidance. If we look at your performance in the first half, the underlying EBITDAaL grew by 5%. And if we assume that you can repeat that 5% performance in the second half, that implies that you can easily get to the top end of the $8.3 billion to $8.4 billion. But is there any issues that we should be aware of in the second half? I mean, I know of your divestments of some businesses, but yes, there could be some cost cut as well that you may do in the second half. Second question is just on Fixed CS&B. Obviously, a very good result on the profit side. But Michael, you mentioned that you'd like to stabilize the nbn subs over time. And yes, if we look at this result, I think your nbn subs still declined by about 25,000. And yes, I'm just wondering what you can do to arrest this decline given that you've introduced Internet-only plans, you have moved your customers to a new technology stack. But if you look at what's been happening in the last 2 weeks, your competitors, especially the challenger brands, they have been doing some consolidation as well. So I'm just wondering what you can do to arrest that decline in nbn subs? And lastly, just a quick one on mobile ARPU. You mentioned about network slicing in the past and how that could add to mobile ARPU, especially in postpaid. How are you going about introducing network slicing to differentiate certain plans and the impact on ARPU, please? Vicki Brady: Thank you. Thanks, Roger, for that. And we're getting the hurry up from Nathan. We're speaking too much. So let us see if we can fire through these 3 quite quickly. I'm going to come back to Michael on guidance. I think he can give a very concise answer on that. On C&SB Fixed, I'd just say, first off, look, the team have done a great job in that business, and Brad spoke to earlier just how much EBITDA profitability in that business has changed in a small number of years. But absolutely, our focus is now on stabilizing customer numbers. The Internet-only proposition only went into market in November. So our focus and Brad's focus with the team is absolutely in our channels, in our marketing, because although we might all know about it, I'm pretty confident that a lot of customers in the market don't know about that proposition yet. So we will focus absolutely continuing to deliver a really high-quality experience for our customers that meets their needs. So that will be the focus there. In terms of Mobile ARPU and slicing, yes, we've got a slicing product in market in our Enterprise business. It is very early days. And Connected Future 30, a big part of that is network as a product. So how we build out, how we make sure we have those network attributes, that we're reinventing the commercial models that go with those attributes. So as we create value for customers, we also share in some of that value creation. So very early days on that, but we remain optimistic. We've got the foundational investments going in, in network, systems capabilities to put us in a position over time to be able to make sure that level of sophistication in our network that can meet the level of sophistication of our customers' needs going forward that we get that to work well together. So that's definitely our focus as we look at the business going forward. Michael, are you happy to cover off guidance, first half, second half? Michael Ackland: No, absolutely. And thanks, Roger. So yes, there is a few things sequentially that are impacting us. So one is we had around $45 million of one-offs in International that we don't expect to repeat. So we will see a significant sequential decline in International, not only that $45 million, but also the divestment of the wholesale voice business in International. So that will be a sequential decline. We mentioned Other EBITDA. In other EBITDA, there was, I think, around $20 million of bond and FX gains that we are not necessarily forecasting to repeat in the second half, which will provide a bit of a headwind. The second one is probably on redundancy. Redundancy is traditionally -- or sorry, not traditionally, has over a number of years, been a tailwind on cost into the second half, because we've done more redundancy in the first half than the second. We announced that we were consulting on some changes last week. If they were to go ahead, we would expect to see redundancy not be that tailwind into the second half. Of course, offsetting that, we have productivity flowing through as we talked to. I think the other one, as we look into the second half, is just based on the historical timings of some of the price rises across particularly in the consumer portfolio, whether that's Fixed or Mobile, we would expect to see some of that revenue growth sequentially to be a bit more muted. And then, of course, as I said, on top of the other divestments that we expect either have completed or we expect to complete in the NAS portfolio. Nathan Burley: Excellent. Our next question is from Nick Basile from CLSA. Nicholas Basile: Just 2 questions. The first one is on AI. I think in your opening remarks, you talked about rationalization of software providers and deployment of AI across the coding team. So I'm just interested to understand or get a little bit more color on how that is benefiting you and how it helps you, I guess, deliver on the 2030 cost ambitions? And also just to what extent at all you've managed some of that vendor concentration risk now from a cost inflation perspective? So that's the first question. So there's a few add-ons. And then the second one is just on incremental returns on Mobile investment. I guess with respect to the commentary around your investment in augmented services using satellite networks. Just wanting to understand what the incremental margins on this capability is relative to selling services leveraging your terrestrial mobile network. Vicki Brady: Yes. No, thank you. Thanks, Nick, for that and a couple of great questions. Well, I'll take the second one first off and then make a couple of comments. But I might get Kim Krogh Andersen, who leads Product & Technology and really has been the driving force between a lot of the pieces you mentioned on the software side. So just on Mobile, obviously, satellite to mobile, I would think about that as we are leveraging the capabilities of a third party. So I think about it like a reseller of a service. So obviously, the incremental margin on that sort of business is very different to where we own and operate the infrastructure ourselves. And obviously, very different CapEx dynamic. We're not the one investing all of the money in launching LEOsat. So we are a reseller of that service. But it is, I think, as Brad spoke to, really important, it is a key element of our proposition, how we bring these services to our customers. And again, as Telstra, we provide a premium experience under our Telstra brand in the market. And so being one of the first few operators globally to be able to bring that to Australian customers, because we could see the service could really serve a purpose here, whether it's when terrestrial networks are disrupted or when people in our very large country are outside mobile coverage. So that's how we sort of broadly think about that. As you said on AI, I made some comments this morning, because I think it is really important to understand there has been investment and work underway for years as we digitize our business, as we're applying AI and particularly in software development. It is so critical in our speed to market and being able to deliver at the level our customers expect. But Kim, I might just get you to make a couple of comments, if you can, on those benefits, how it's been driven and then how you thought about vendor consolidation risk. Kim Andersen: Yes. Thank you so much, and thanks for the question. First of all, we have been modernizing our tech stack for a very long time, and tech leadership is a core part of our Connected Future strategy. Michael mentioned it, and I want to reinforce it. We have actually managed to decrease our cost in tech over the last few years, and that's despite inflation. But as you mentioned as well, there is a lot of partners that really want to hike the price to justify and get return on their AI investment. So we have managed to combat that and ensure that we take the value of this digitization, simplification, AI, et cetera, instead of that become revenue in some of these partners' pockets. So that's important for us because we want that value to go to our customers and to Telstra and to our shareholders. I think Vicki mentioned that we have actually seen a 20% production improvement in our software deployment. And not only that, we are also shipping our software and releases faster 15% to 20%. That comes from a more efficient software flow. So we have seen 12% improvement in EPIC flow. We have seen 29% improvement in our defect rates. So it's great to see when quality, time to market, but also our efficiency come together. It is AI-enabled all of it. Now most of our software engineers, they are using GitHub Copilot to really ensure they produce more code faster. We also use AI for testing. We use AI for quality assurance, for architecture assurance, but also for change management and other things. We use AI for migration. And all these things is a part of us really driving this. But we have consolidated partners, that both applications. So we have done a lot of exits of applications we don't use. We have consolidated our partners. Vicki mentioned, we have consolidated our SIs from more than 400 down to 2. And these 2, Cognizant and Infosys, they're really incentivized to help us to simplify and help us to adopt AI as fast as possible. So all these things is a part of us really creating the right foundation for us to drive this company forward. And it's hard work, and we're not done. We keep pushing hard, but we believe we have a foundation now where our segments, they can compete, where our channels, they have a good experience and our customers have a good experience. These have been very critical for software, but it's even more critical for AI. We believe that if you don't get that foundation right, we will actually see the run cost of AI outperform the benefit of AI. So we are very focused on that foundation to get that in place. We have 380 use cases today. So we are at scale. We are deploying agentic now. So the whole reason for us doing the 2 joint ventures with Quantium and with Accenture was to ensure we have that foundation in place, because we want to ensure, as we have mentioned many times, we are not an AI company, but to be a leading telco, we really need to be a leader in AI and in software. And this is the foundation. And these partners, they keep pushing us forward and really ensure that's in place. So we are pushing hard here, but there is a lot to do. Nathan Burley: Thanks, Kim. We'll go to Brian Han from Morningstar. We will go to the next question, which is from Andrew Gillies from Macquarie. Andrew Gillies: I'll keep it to one just in the interest of time. Not to put too much of a finer point on it, but just on the AI and data strategy, just a little clarification. You mentioned kind of faster delivery on this. Should we be thinking about that as kind of a structural pull forward of the cadence of cost out? I mean, Infosys, it was flagged before. Some of your outsourced partners are flagging really strong efficiency benefits, both internally for themselves, but also for the businesses that they work with. And more broadly, more recently, we've seen software vendors shifting from seat-based models to more of a value share-based model. Can you just clarify that that's all captured in your comments around cost on this call? And can you make a little comment on the cadence? And I presume you're going to reiterate the medium-term EPS CAGR, but that would be great. Vicki Brady: Yes. No, thanks, Andrew, for that. Again, just to reinforce, as we work with our partners, whether it's Accenture under our Data & AI joint venture, whether it's Infosys as a key software partner. And also, obviously, we're planning to also use them more extensively to help us in terms of really simplifying the complexity in our Enterprise service delivery for our customers. Look, I think Kim sort of covered it briefly then. As we enter those arrangements, they are built on very much aligned incentives of delivering real efficiency in terms of our partners have to be able to really be leaning into using AI to drive the efficiency and the experience benefits under those arrangements that we've entered into. So as we look forward, yes, those partnerships are another element of how we make sure we're driving efficiency in our business. Kim spoke to, our goal is, like we did with the Data & AI joint venture with Accenture, we're accelerating a 5-year road map we had into a much shorter time frame, but without driving cost up. And so we are very conscious of making sure that as we move forward, that alignment with our partners where we're both driving to get the efficiencies from the application of AI into our process systems and interactions is absolutely built in. And Michael, in terms of our forward sort of ambitions... Michael Ackland: No, I think it's captured in our forward ambitions. It's covered in that commitment to operating leverage, which I think is really important, growing revenue faster than we grow costs, and that opens up those jaws. The one point I would make, and I think it's really core to our technology strategy and how we're going about it is we are very -- and Kim made the point, there is a risk here that you end up in software licensing, in cloud costs, and in paying the AI providers that you offset your benefits. And that is very much our focus. We've made tremendous progress in the efficiency of our cloud costs. We're getting significant efficiencies around the way that we're focused on how we buy software. And that is embedded in our strategy to ensure that we're using an open architecture, modern software approach, and we're setting up the way that we're executing AI right now, so that we can swap out vendors that we can move between LLMs and that we are really focused on the cost of both cloud and AI. And I think it's been a really important point around those technology costs. So it's a great question, Andrew. Vicki Brady: Yes. Wonderful question. Thank you. Nathan Burley: We'll take 2 more questions from analysts, after which we will move to media. [Operator Instructions] Our second last question comes from Fraser McLeish from Credit Suisse -- I got that wrong, from MST. Fraser Mcleish: Just 2 quick ones from me. Just Vicki, obviously, there's a fair bit of discussion on AI in relation to costs. I'm just wondering, can AI be a competitive advantage for you in the marketplace in terms of being able to invest more and faster than competitors in customer tools and experiences? Or do you expect all players to broadly have the same capabilities? And then second quick one, maybe for Brad, just on fixed broadband. I mean, are you expecting much spin down from these new Internet -- to these new Internet-only plans? And what are you doing to minimize potential for that? Vicki Brady: Thanks, Fraser, for that. Just on AI and where we're at, I think the thing that's front of mind for us is it's moving so fast. And so we are absolutely focused on, we can't be complacent, we've got to be pushing really hard, because we do see, ultimately, for us to be a leading provider of connectivity. We're not an AI company, but we absolutely need to be a leader in how we're applying AI. And that's because, yes, it affects all the obvious parts of our business, how do we make those customer interactions more efficient and better for customers? How do we enable our teams to be able to use AI and work smarter and have greater satisfaction. But it's also right in the heart of our business, the network itself. And if I look at where networks are headed, and we do have Mobile World Congress coming up shortly, so we'll get another injection of where everyone a year on sees things headed. We absolutely believe networks are headed to being much more autonomous. And the complexity of doing that, you absolutely need to have AI deeply embedded and being at the forefront. And so absolutely being at the forefront of delivering world-leading connectivity is absolutely at the core of our differentiation. So moving fast. I think it's not just having it, I think it's moving at the pace and scale needed to make sure we maintain our differentiation. We do provide a premium experience in the market for our customers under the Telstra brand. And so we're very much focused on making sure we're moving fast enough. We are delivering those benefits to customers. We're helping our teams grow their skills and be able to use these tools effectively in the way they work. And ultimately, yes, we see it as an important piece. I mean, long run with any sort of technology, obviously, over time, I would expect it becomes more widely dispersed. But absolutely, we see it as important. The pace we move out here and really enabling our business with it is an important focus for us to deliver for our customers. On fixed broadband, I don't know whether Michael, you want to grab it or we want Brad just to quickly jump up and grab the spin down. Michael Ackland: I'm happy for Brad to... Vicki Brady: Yes, Brad, please. Bradley Whitcomb: Just I can't resist on the AI as well. Vicki mentioned that Telstra virtual agent, which we've deployed. And I think it's the start of a competitive advantage there. We've more than tripled the containment since we've launched that AI agent to customers. So they're able to get their needs met without having to go to a human agent. And another one I'll mention, which is really cool, is using AI, you can change our entire digital experience into over 35 different languages. We've had about 30,000 -- or rather 70,000 customers already do that, and that just makes it much easier for them to engage with us. So that's an example, I think, of where it helps us addressing the customer. In terms of the broadband only, there's a couple of areas that we're focused on there. One is opening up to customers that genuinely -- they have their own modem at home, and they're just looking for the broadband connection and not looking for that full experience. We think also, though, this gives us a softer entry point to have a conversation with the customer when they come in, they see a price point that they're comfortable with, and we talk about the value proposition and what equipment they do have in the home and to then talk about the advantages of things like our smart meter -- or Smart Modem 4.0 rather. So we're not anticipating significant spin down. We think those are 2 different segments of customer, but we will keep an eye on that. Nathan Burley: Excellent. And we will take our last analyst question from Nicole Penny from Rimor. Nicole Penny: Thank you for taking my question and for the detail on the Aura opportunities you're seeing. Just secondly, the CapEx on the Viasat project remains ongoing. Could you provide more color on the expected completion time line and the likely earnings impact during this period as the project moves towards full operation, please? Vicki Brady: Okay. And Nicole, is that the only one? Have you got any others? Nicole Penny: That's it. Vicki Brady: Fantastic. Thanks, Nicole, for that. Look, I'll make a comment and then Michael may want to jump in. Just to be clear, and hopefully, the appendix again helps reinforce it in the material we've issued today. We think about Aura and Viasat inside that $1.6 billion of CapEx spend and those overall returns are linked to that. The profile is a little bit different. Viasat is the smaller component inside that overall program of work where we have been supporting with the build-out of ground stations and other infrastructure. So it's captured inside that broader financial profile that you can see. So it's Intercity Fibre or Aura as it's now called, and Viasat combined. I don't know, Michael, if there's any other color. Michael Ackland: No, I don't think so. I mean the Viasat has been delivered on an ongoing basis, and we've seen the revenue start to appear through both InfraCo but also into our Telstra Enterprise business. And that will continue for the life of that project. They're long-term assets in terms of the ground stations and well on track. Nathan Burley: That concludes our question time from analysts and investors. We'll now show a short video, which I suspect you do not want to miss, because as Brad would say, it is pretty cool. So we'll show that. And after that, we will have time of questions from media. [Presentation] Steve Carey: Thank you, and welcome back. Thank you, Nathan, for that handover. We hope everyone enjoyed the new ad. We will now commence our media Q&A. We are slightly early. So apologies to some media who may be joining at 11. We will obviously drop you into the queue. In this session, we have Vicki Brady, our CEO; and our CFO, Michael Ackland, who will be available to address your questions that you have asked. [Operator Instructions] Our first question today comes from David Swan from Nine Metro Publishing. David Swan: I wanted to ask about spectrum strategy. I've got 3 questions, all related to that. So I'll just fire those away. You've told ACMA, the fair price is $1.4 billion and they've come back at $2.7 billion. Is that number -- I guess what's the number that Telstra would accept without passing costs on to consumers? Is there a sort of landing zone there? Or is it a binary number? I wanted to ask as well, you said the trade-off with spectrum is between network investment and consumer pricing. But is there a third option which might be absorbing the cost through lower returns to shareholders? Is that something that Telstra has or would consider? And third, I wanted to ask about ACMA's renewal process. I mean, you didn't avoid a competitive auction, which could theoretically cost more. Is the $1.3 billion gap that you've complained about still cheaper than the alternative, a competitive auction? Is that something you're keen to -- is a competitive auction, I guess, something you'd be keen to avoid? Vicki Brady: Thanks, David, for that, and some great questions on spectrum. So first thing I'd say is, as you called out, we absolutely agree we've got to pay a fair price for spectrum. It's a core part of delivering high-quality mobile services. And we see spectrum as one of those assets as a country, we absolutely need to be maximizing its benefits to consumers and businesses. We do think as a country, it would be helpful as part of a digital infrastructure plan to have a clear plan for spectrum long run. This process right now is renewal of spectrum. Obviously, there will be spectrum needed for 6G, for future satellite services, for lots of other things as we look forward. So we do think having a really clear plan for how we maximize the use of spectrum to get the maximum benefit for consumers and businesses is super important. Look, obviously, the process is still ongoing on the pricing of the renewal of the spectrum. That's part of the ACMA process right now. We have a different view to ACMA, and that will be part of our submission back in as part of that process. As you call out, there's about a $1.3 billion difference in what we think the fair market value of the spectrum that we will go through renewal on versus what the ACMA currently see as the fair market value for that. Look, in running a telecommunications business like Telstra, you're constantly balancing up various things and various trade-offs. Importantly, Telstra, like all telcos, is a big infrastructure business. We've got to invest a lot of CapEx into our business. And if you look globally, telcos have been challenged on getting reasonable returns, because we need to be profitable to make sure that we can keep investing, and that means investing in our network, in things like the 5G advanced capabilities, or bring in services like satellite to mobile texting, the satellite messaging service we launched last year. And we're seeing customers -- NPS is up, so we've got to keep investing, because expectations also keep rising. We know we've got to keep investing to be able to attract and retain the best talent and invest in their skills. And yes, we also need to deliver returns to shareholders. We've got an underlying return on invested capital at 8.9%. So through a lot of work, we've steadily seen that increase. It is above our cost of capital, but it's probably -- it's not at the level that our investors would ultimately hope for. So we do have an ambition to grow that to 10%. And I don't think that is unreasonable in any way. Remembering our shareholders, we have more than 1 million shareholders. We've got the largest retail shareholder base in the country. And we know through things like superannuation, we estimate about 16 million Australians benefit from the financial outcome. So yes, there is absolutely a balance we need to achieve as we make choices and decisions. Higher spectrum cost just puts again extra costs we need to consider, and we would have to think about the various trade-offs as part of that. But the process is still ongoing at the moment. Steve Carey: Thank you, David, for those questions. Next up, we have Jared Lynch from The Australian. Jared Lynch: Two questions for you. Telstra's first half profit was driven by strong cost control, and it's a strategy that you plan to intensify with the proposed 750 job cuts in the current half. Just wondering, how will you ensure that prioritizing short-term cost savings and efficiencies will not fundamentally undermine the in-house expertise and people-driven innovation necessary to deliver the long-term growth and service quality promised by your Connected Future 30 strategy. And then just on the Connected Future 30 strategy, I'm interested to hear how will your investment in AI and data functions, including the JV with Accenture be deployed to solve one of the nation's most pressing challenges, whether it's climate resilience, health care, accessing regional areas or digital inclusion. And I guess what is the legacy that you want Telstra's new capabilities to create for the country? Vicki Brady: Yes. Thanks, Jared. A couple of good territories there. So let me go firstly to first half. Yes, we've delivered a strong first half performance. And yes, as part of our strategy, given we have very small revenue growth to deliver positive operating leverage, we absolutely need to be driving cost and efficiency. But as we think about our business and we think about the capability we need to be able to deliver long run in this business, absolutely, our internal teams are critical to that. And we keep investing in our teams internally, whether that is in things like their ability to be able to use and apply AI capabilities, because we fundamentally believe, for all of our team, they will be better positioned in the future, the better able they are to apply AI and use it in their jobs. So we're absolutely -- internal capability remains critical. It wasn't that long ago, for example, we bought back our retail stores. And we've heard Brad speak about this morning, just the benefit that has driven in having such a highly engaged team of people out there servicing our customers face-to-face in our stores. We also will partner with key partners. And the couple of things you mentioned from last week, they are 2 examples of where we are partnering. First, in terms of our Enterprise business, we've still got a load of complexity we need to get through in that business. So we did announce and propose some changes where we are partnering with Infosys to really be able to access their capability to help us simplify the complexity in that business in the way we serve and deliver for our Enterprise customers. We also proposed changes in the Telstra, Accenture Data & AI joint venture. Again, that is about accessing Accenture's global capabilities to help us really accelerate our road map on data and AI to be able to deliver benefits to our customers and into our business more quickly. So absolutely, it will be a combination. Our internal teams are critical, and we keep investing in them. But we also -- to remain competitive and at the forefront, we've also got to leverage partnerships. And I can assure you, any decision that impacts a role inside Telstra, they are never taken lightly, and we support and work with our teams very, very closely as we work through anyone who has a role impacted as part of any of those choices and decisions. Just in terms of Connected Future 30 and that ambition as we look forward, I think fundamentally, we see connectivity, it is a foundational piece for the country. You look to the future of inclusion of productivity, of prosperity. Technology is going to play a key role, and having a really solid foundation of leading edge connectivity that is there to deliver to all of those future needs is absolutely fundamental. You spoke about things like health care. I think about education. I see the way we work and connect regional communities, it's absolutely core to who we are as Telstra and the focus and delivery of our Connected Future 30 strategy. So absolutely, that core foundation of leading connectivity, we think, helps enable the country in terms of those future ambitions of inclusion and of prosperity. Steve Carey: Thank you, Vicki. Thank you, Jared. We do have a couple of people on the call that haven't registered for questions. So I'll just quickly reiterate that. [Operator Instructions]. We will move to our next question in the queue, and we will go to Grahame Lynch from CommsDay, please. Grahame Lynch: I wanted to ask about spectrum renewals. I've been following the debate around this quite closely now for a few months. And it seems to be missing the reality that over the next 15 years or so, which is the period we're talking about, 5G and then 6G is going to require a lot of new spectrum in addition to the renewing spectrum. But also Australia's population is probably going to grow by quite a few million over that same period, which means that telcos such as Telstra are going to have to install a lot of new capacity in cities to deal with all that extra population. Is this -- are these 2 realities perhaps a bit missing from the discussion around spectrum? And are they informing Telstra's posture on renewal prices? And perhaps could Telstra be better articulating that these are the issues that we'll be facing in coming years? Vicki Brady: Yes. Thanks, Grahame. And I know -- I've been reading some of your articles that you've been writing and your opinion pieces. You're incredibly well informed and understand our sector and how important spectrum is. So look, I think... Grahame Lynch: Thank you. Vicki Brady: Yes. No, I really appreciate it, because it's a really important question where you've gone. Absolutely, renewal is important. As you well understand, better than anyone, it is 80% of the spectrum that our current mobile networks run on today that will go through this renewal 2028 through 2032. So the certainty of renewal is absolutely a positive. Obviously, we are debating with the ACMA what each of us think the fair market price of that spectrum is, because absolutely, we accept, understand we need to pay a fair market price on fair terms. So that's important. But I think where you're gone is critical. And that's why we have been advocating that as a country, we do need a really clear vision for the digital future that has a very clear digital infrastructure plan that includes spectrum. Because where you've gone, as you look forward over 15 years, it's not just the renewal of spectrum, it is all of those new services, all of those new capabilities like 6G, like some of the satellite capability that is currently sort of forecast to be able to be delivered over that time horizon. I think as a country, we absolutely need to be thinking about how do we maximize the use of our spectrum so we get the best possible outcomes for consumers and businesses. And I think that's an important piece that needs to be brought into the thinking. And again, that's not easy, and we are very happy to be part of that as Telstra and I think as a sector, alongside government and regulators, as we think about how do we absolutely set up the country to maximize the use of spectrum to get the maximum benefits for consumers and businesses. So I think it is an important element right now. A lot of focus on renewal, because that process is obviously well underway, but I think your broader point is incredibly important. Steve Carey: Thank you, Vicki. Thank you, Grahame, for that question. Next up, we have Jenny Wiggins from the AFR on the line. Jenny Wiggins: Vicki, 3 questions from me as well. Just with regards to AI, can you give us any more examples of how exactly you're accelerating Telstra's investment in AI other than what you're doing with Accenture? I mean, for example, is Telstra spending more money on AI investments in the current financial year? Secondly, just more generally, do you have any views on how the federal government can improve productivity and economic growth in Australia? And thirdly, with regard to the ongoing problems with the 4G VoLTE networks, that's an issue for all network operators and device manufacturers, do you think Telstra will ever be able to guarantee that in the future, all mobile phone devices that are sold in Australia will be able to connect to Triple Zero without any problems. I mean, do you think your testing and talks with device manufacturers will ensure that after the current state of problems we've had? Vicki Brady: Thanks, Jenny. Well, lots in those 3 questions. So let me take them one by one. In terms of AI, when I talk about accelerating our Data & AI road map, that's absolutely about accelerating the use cases and the benefits and scaling those across the business. In terms of where we're seeing some of that acceleration, we're absolutely -- through our Data & AI joint venture with Accenture, that's really helped us accelerate some of the fundamental pieces like really streamlining the number of data platforms that we rely on. So we're absolutely seeing acceleration there. We're not talking about accelerating spend. So one of the things we're really clear on is, as we make choices on partnering or going into joint ventures, how do we align our ambitions and incentives, so that it is about being at the leading edge of being able to apply these capabilities into our business, but do it in a way where we do manage our costs, because we're very conscious of that. It's an easy area to spend a lot of money and that to grow fast. So we're very conscious of those and thoughtful in how we set up those partnerships and how we architect the technology inside our business to make sure we have choice, so that we can both get the benefits, accelerate those benefits, but also not see our costs grow beyond where we are comfortable with that being. Just on the productivity agenda for the country, I think it's such an important discussion. One of the things we've been strong on is we do think, as you look forward for our country, whether it's productivity and prosperity of the nation, there's no doubt technology is going to play a big part in that. And we think something that isn't always at the top of the list is that technology, whether it's AI or data centers, it does need to be connected. And so having a really clear digital infrastructure plan for the country, so that as a sector we can align behind that with government, with regulators, so right policy decisions are made, the right investment decisions are made. The regulatory environment is set up to, yes, protect customers, but also encourage innovation. So we think that's a really big piece as we look forward, and we're really optimistic about what technology and the important role that connectivity can play in helping to enable that for the country. On the third one, where you are talking about Triple Zero. And yes, obviously, there's been a lot of focus on Triple Zero. The first thing I'd say, it is a very complex ecosystem to ensure Triple Zero works from the devices themselves through to the networks and the different softwares and protocols that are running over networks through to getting the calls through to emergency services who operate across around the country, state by state, territory by territory. Look, our focus -- this is a complex ecosystem, and I think everyone in that ecosystem is working to try and make sure it works absolutely as well as it can. And I would say, obviously, any call that doesn't get through is too many. But the large majority of that ecosystem does work well. There are some complexities in devices. You're spot on. And obviously, devices come into the country, device manufacturers have to accredit those. We do testing on our network. But it is a dynamic area where devices are changing, software is getting updated, networks are changing. And so we work really hard to make sure we meet our obligations to be monitoring devices. And obviously, as part of some of those obligations, it does mean blocking devices if we find they cannot make Triple Zero calls. And so I think it requires work right across that ecosystem to make sure Australians continue to trust and they should trust our Triple Zero system to be able to get help in an emergency. Steve Carey: Thank you, Vicki, and thank you, Jenny. Our next question comes from Rhayna Bosch from SBS. We might be having some issues there. So we might go to David Taylor from ABC. David Taylor: It's quite extraordinary what Telstra is doing. The ABC has spoken to both current employees of Telstra, but also previous employees of Telstra and those who have been contracted by companies to be also employed by Telstra, and there's a real sense of fear around how your AI investment and AI rollout is affecting jobs. So can you give me an idea of -- so it's a two-pronged question, I suppose. Over the past 12 months, what proportion of jobs that have been lost within Telstra are related to your AI rollout? And how many -- what proportion of jobs are going to be lost at Telstra up to 2030 based on AI? Vicki Brady: Okay. And thanks, David, for that. So first off, I mean, the pace of change in AI is quite extraordinary. And when I'm engaging with our teams internally, yes, one of the questions is what does it mean for my job going forward? And I think the thing we're focused on is absolutely none of us can predict that future. It is changing so fast. I look back over the last couple of years, just how fast it's changed. None of us, I think, predicted that. So the thing we're focused on with our teams, in an environment where it is uncertain how AI will be used, I think the most important thing is skilling our teams. And so we invest heavily in the tools available to our team members. We invest heavily in also the training and skills of our teams through our Data & AI academy, because irrespective of what the future is and how it plays out, we firmly believe that our people who have better capability in being able to use and apply AI will be better positioned for future jobs. So we're very much focused on that. And I do understand it is a question top of mind for our teams. And as I engage across the country and travel internationally, it feels like a very common theme. The world is moving fast. So our focus is on how do we skill, enable our teams, give them access to the tools. And we are seeing our team members who have access to our AI tools, which is the large, large majority, are using those tools on a weekly -- 75% of them are using them at least weekly and often a lot more often as it becomes part of the way they work and operate. So as we look at impacts on our business, and yes, any decision to impact a role is a difficult one. We have had to face into those decisions. They are necessary decisions to put us in a position to be competitive, to be able to deliver at the level we need to for our customers. Those benefits -- today, there's not a role I could say, has directly been taken by AI. But of course, our investment in digitizing our business, our investment in applying AI is generating a more efficient business for us. And that's why, as I said, our focus is absolutely on working with our teams, that investment in the tools, and that investment in their skills. Steve Carey: Thank you, Vicki. Our next caller is Brandon How from Capital Brief. Brandon How: Just wanted to touch on an earlier comment that was made during the analyst call. I think it was flagged that because of Telstra's disciplined capital management, it would be able to navigate the upcoming spectrum renewal fees if they were to go through as they're currently proposed. I was just curious if that means that there's unlikely to be significant disruptions to existing investment plans at least out to 2032. And just wanted to touch on a separate point as well. It was revealed -- Telstra revealed earlier in the year to the Triple Zero service outage inquiry that suffered about more than 5,200 mobile tower outages last year. I was just wondering what commitments are you making to ensure that this is brought down? Vicki Brady: Yes. Thank you. Thanks, Brandon, for those couple of questions. Look, this morning on the call with analysts, the question was around our capacity to be able to -- if those spectrum renewal costs come in as is currently proposed, how would we be able to navigate that? One of the things about Telstra, we're very focused on is ensuring the business is in the right position to be able to continue to sustain investing in the business. And we've worked over many years now to steadily improve our overall returns in the business. They're still not super high. They are above our cost of capital, however. And obviously, if that cost does land higher than what we think the fair market value is and that process is still ongoing, then that will be a consideration we need to consider as we think about various trade-offs, where we're investing our money, how we're positioning and pricing in market. So there are a whole lot of factors we would need to consider. The point this morning is, are we set up to be able to navigate that as a company. And I look at where we're at financially, our ability to keep investing in the CapEx needed to support the business, our balance sheet capacity as a business. So it was a broader comment about being able to navigate through that. Just in terms of Triple Zero, obviously, there's been a huge amount of Triple Zero focus, particularly through the latter part of last year. Telstra takes its obligations incredibly seriously. We do have 2 sets of obligations. We run the emergency answer point for the country. When someone calls Triple Zero under a contract with the federal government, it is a Telstra person that answers that call and passes it then on to the relevant emergency services. And we have our obligations as a telecommunications company, including as a mobile operator. We invest huge amounts of our CapEx into the resilience of our network. These are large complex networks. And they will have issues over time, particularly, I spoke this morning about the investment in power backup systems. The single biggest thing that impacts the resilience of our network is power outages. So we do invest in power backup. However, there are situations where power is out for extended time. It could be that equipment fails. They're not infallible. And so we absolutely invest heavily in resilience of our networks. We also invest in things like new technology, bringing satellite messaging to customers just as another form. If there is an issue on the terrestrial network, there's another layer. We also encourage our customers, who are heavily reliant on being connected, to think about multiple technologies rather than relying on just one. So there are many things we do. These are large complex networks, and they're not infallible, and we invest huge amounts in their resilience. Steve Carey: Thank you, Vicki, for that. Our final caller for the day is Andrew Colley from iTnews. Andrew Colley: Can we have an update on Telstra's lease of OneWeb's LEOsat constellations and the issues you're having with complaints about the performance of small cell base stations themselves. Has [ Telesat ] provided an update on when it might be able to fill coverage gaps in its constellation over Australia to eliminate the voice service dropouts when using those LEOsat for backhaul on those installations? Vicki Brady: Yes. Thank you, Andrew. And so yes, as you well understand, you understand this technology well, we have rolled out using OneWeb's LEO satellite constellation backhaul over their satellites to some of our remote sites. And their rollout of their satellite constellation hasn't gone as planned on their side. So it does mean today there are some issues, particularly impacting voice. However, in terms of data performance, we have seen significant improvements by being able to access that LEO satellite service. We are working through that, working closely with communities and our customers to figure out -- we have rolled it out to a relatively small number of sites to date. That rollout is not going further right now as we work out what is the right balance to find here. It does provide real benefits, much more capacity, much better performance in terms of data over those sites. However, as you call out, there have been some issues around voice dropouts given where that constellation is at. So that's something we continue to work through with OneWeb. And our teams, as I said, closely engage with customers and communities that rely on those small cell services. Andrew Colley: Okay, I have one more question I'll be able to ask. You've sought some delays to the Universal Outdoor Mobile Obligation to push it back a year. Has the federal government given Telstra any indications it's open to doing that or to holding back the legislation for further consultation? Vicki Brady: So just in terms of the Universal Outdoor Mobile Obligation legislation. So first thing I'd say is, we're absolutely at the forefront of rolling out those services in the country. We've already got satellite messaging that we launched in June last year in market. So commercially, we absolutely see the benefits of these services. Under that legislation, it looks at then future services, voice, data. Some of that is dependent on brand-new constellations, brand-new capability that is not commercially available today. So as we've thought about that and we've given input, that's just an important element. Some of this technology is very early, some of it not in market yet. So obviously, that's going to be an important factor, but we're absolutely at the forefront of bringing those services to Australians, because we see them as important services and extra layer of resilience in the event a terrestrial network has an issue and also that ability in a country as large as Australia when people are outside of mobile network coverage, that ability to stay in touch. Steve Carey: Thank you, Andrew, and thank you, Vicki. We do have one final question. Jared Lynch just had a follow-up question. So Jared, just over to you for your follow-up, please. Jared Lynch: Thanks, Steve. Vicki, today, other business leaders warn that without productivity gains that this is as good as it gets after real wages fell for the first time in more than 2 years. I'm just interested about capacity constraints at Telstra and whether you're changing investment as a result of inflation or capacity constraints and are any being delayed? Vicki Brady: Okay. I must admit, Jared, I did see some headlines this morning. I haven't read the transcripts and understood the full context of some of those comments. But in terms of where we're at, we're having to navigate. Obviously, there are inflationary pressures on some of our costs. That's why us being at the forefront of how we really drive efficiency and better outcomes for our customers is at the forefront. We're navigating that. We are very focused on what we call positive operating leverage. So we're in an environment where we're not seeing top line growth at any large level. So we've got to continue being efficient, to be competitive, to be able to deliver at the level we need to for our customers. So right now, we are navigating that. You will have seen, in terms of our overall result, we did reduce overall costs. So we're able to offset that inflationary pressure that, yes, we feel like consumers and businesses across the country feel. We've been able to offset through some of the hard work, the discipline and the gains that we found, particularly through technology investment. Steve Carey: Thank you, Vicki. Thank you, Jared, and thank you to all the media and analysts that have joined our call and Q&As today. Thank you for your time and investment in today's call. We will now wrap up the half year results update. Thank you very much, and have a lovely day.
Nathan Burley: Good morning, and welcome to Telstra's results announcement for the half year ending 31st of December 2025. I am Nathan Burley, Head of Investor Relations. I'm joining today from the lands of the Gadigal people. And on behalf of Telstra, I acknowledge and pay my respects to the traditional custodians of country throughout Australia and recognize the continued connection Australia's First Nations people have to land, waters and cultures. We pay our respects to elders, past and present. This morning, we will have presentations from our CEO, Vicki Brady; and our CFO, Michael Ackland. We will then open to questions from analysts, investors, and then the media. I will now hand over to Vicki. Vicki Brady: Thank you, Nathan, and good morning, everyone, and thank you for joining us. I'll make some comments reflecting on Telstra's overall performance and our outlook. Michael will then cover the details of our financials. The first half of FY '26 was a strong period for Telstra. We delivered ongoing growth in earnings, reflecting momentum across our business, strong cost control and disciplined capital management. We also made a positive start to our Connected Future 30 strategy, which will see us double down on connectivity, drive growth and play a critical role in enabling a prosperous digital future for Australia. In first half '26, reported financial performance compared to the prior period included EBITDAaL up 4.9% to $4.2 billion, EBIT up 9.2% to $2 billion, profit for the period or NPAT up 8.1% to $1.2 billion, earnings per share up 11% to $0.099, and return on invested capital up 0.8 percentage points to 8.8%. Our underlying growth more accurately reflects our financial performance compared to the prior period. Underlying financial performance showed underlying EBITDAaL up 5.5% to $4.2 billion, cash EBIT up 14% to $2.5 billion, cash EPS up 20% to $0.14, and underlying return on invested capital up 0.9 percentage points to 8.9%. On the back of cash earnings growth, the Board resolved to pay an interim dividend of $0.105 per share. The interim dividend is 90.5% franked with a franked amount of $0.095 per share and an unfranked amount of $0.01 per share. The interim dividend uplift and the level of franking applied is consistent with our capital management framework and our aim to deliver a sustainable and growing dividend. Our dividend is supported by strong cash earnings this half, and our Connected Future 30 ambition remains to deliver mid-single-digit growth in cash earnings. Today, we are also announcing an increase in our current on-market share buyback from up to $1 billion to up to $1.25 billion. This increase is supported by strong progress in completing $637 million of the buyback in the half, earnings growth and the strength of our balance sheet. The on-market share buyback is expected to support earnings and dividend per share growth, and along with the increased interim dividend reflects the Board and management's confidence in our financial strength and outlook. Now that we've completed our first half, we are tightening our FY '26 underlying EBITDAaL guidance to between $8.2 billion and $8.4 billion. Our guidance on other measures are unchanged. Looking now at our results across the business. We grew underlying EBITDA across our Mobiles, Fixed Consumer and Small Business, InfraCo Fixed and Amplitel businesses. Importantly, our Mobile business has continued to perform well with EBITDA growth of $93 million. Mobile's growth was driven by higher ARPU and more customers continuing to choose our network and the value it provides. Mobile services revenue grew by 5.6%. Our Fixed C&SB EBITDA grew by $37 million, reflecting ARPU growth and disciplined cost management. We introduced our Internet-only plans late in the half, and customers now also have access to our Telstra Smart Modem 4 with next-generation Wi-Fi 7 technology. With these new offerings in place, we are focused on stabilizing customer numbers and driving growth. Our Fixed Enterprise EBITDA declined by $9 million as we continue to reset this business, including through portfolio management and reduced costs. We remain committed to this reset with further changes proposed last week to continue removing complexity. Our international EBITDA declined by $2 million, but grew excluding one-offs. Michael will go through this in detail. Our domestic infrastructure businesses across InfraCo, Fixed, and Amplitel continued to grow, reflecting strong customer demand. Across the business, we achieved 14% cash EBIT growth. This percentage growth rate is higher than the rate we expect at the full year, largely due to lower BAU CapEx in the first half. Our full year cash EBIT guidance is equivalent to around 5% to 10% annual growth. We delivered positive operating leverage of 3.1 percentage points, in line with our Connected Future 30 target. Given the low level of income growth in the period, we achieved operating leverage largely through strong cost discipline and efficiency gains. We reduced underlying operating expenses by $179 million or 2.4%, more than offsetting pressure from rising costs. This required challenging but necessary decisions to reduce some roles and set us up to deliver on our Connected Future 30 ambitions. We're also seeing efficiency gains flow from technology leadership as an important enabler of our strategy. This includes modernizing our software practices, relentless simplification, strong adoption of AI and an API-first architecture. For example, we've consolidated our software partners from 400 down to 2, improved efficiency in our software development by more than 20% and sped up time to market and release cycles by 15% to 20%. And most importantly, we're seeing benefits to customers, which I'll come to shortly. Turning to our strategy. Our ambition is to be the #1 choice for connectivity in Australia. Achieving that in a changing environment means radically innovating in the core of our business. You can see the layers and enablers of this strategy on this slide, which we covered in our last Investor Day. There is a more detailed scorecard in the appendix that shows our progress, so I won't go through that in detail. But I will make some comments on the importance of connectivity and call out some highlights from the half. Connectivity is foundational to supporting national productivity, resilience and security. As reliance on telco networks grows and service expectations rise, continued investment in digital infrastructure is fundamental to better delivering services to consumers and business. Investment needs to be supported and encouraged and the investment required across the sector will be large in the multibillions of dollars. To do this well, we need to have a shared national vision for the digital future we want to create for Australia and a national digital infrastructure plan our sector can align behind with government and regulators. This must include a plan to use spectrum to the greatest possible benefit to consumers and businesses. To do that, we need certainty of spectrum allocation on fair terms at a fair market price. We also need better regulation designed for but agnostic to the technology of today. We need forward-looking guardrails that both protect consumers and encourage innovation to deliver better outcomes for them and the nation. We welcome the Productivity Commission's proposal for a deep dive review of regulation in the telecommunications sector. We want to work with government, regulators and the sector on a shared vision for Australia's digital future, so we can better align policy, regulation and decision-making with the goals we have as a country. On investing in connectivity, we are driving significant momentum in the build of our Aura network and managing this large complex project with discipline. The network will be vast, connecting our capital cities with ultra-fast and reliable fiber and the ability to connect regions too. This week, we reached the halfway mark with 7,000 kilometers of fiber in the ground. Our Sydney to Melbourne coastal via Canberra routes are now live and more routes are expected to be completed in FY '26, including Sydney to Melbourne Central via Canberra and Sydney to Perth. We are on track to achieve a 1 point uplift in our network experience index, which brings together network availability and speed across our mobile and fixed networks to measure the real experience our customers receive. The uplift is a result of our ongoing program of network optimization and early benefits from our additional investment over 4 years in 5G advanced capability. It also reflects improvements in resilience. For example, we have invested to strengthen backup power across our network sites, which we were able to withstand more than 95% of the 165,000 planned and unplanned power interruptions we experienced over FY '25. While there's always more to be done, these investments and others contributed to Telstra receiving the 2025 Best in Test Mobile Network Award from umlaut for the eighth year in a row and with our highest score ever. In June last year, we became one of the first operators in the world to launch satellite messaging. And while it's not a replacement for terrestrial networks, we're seeing it add another layer of resilience when terrestrial networks are disrupted. For example, when fire damage and power disrupted our network during the recent bushfires in Victoria, particularly around Longwood and Harcourt, we saw a threefold increase in people connecting to satellite messaging, even though many people had evacuated this area. On supporting customers, we have migrated more than 99.9% of our 7.7 million consumer customers to our new digital stack. We continue to work with around 4,000 of our customers who are the most complex to migrate, and we are managing that thoughtfully. Our team know these customers as individuals as we work through this with each of them, and we're committed to getting it done. We're seeing significant improvements in customer experience from digitization and AI. 86% of consumer service interactions like billing, order tracking or prepaid recharge are now completed through our digital self-service instead of customers having to call us. In November, we launched an AI-powered assistant, which customers can access on telstra.com to get help with simple things like checking their plan, activating a SIM or how to reset a password. This is our first customer-facing generative AI assistant, and it has meant an almost threefold increase in customers being able to resolve their inquiry using AI. We plan to scale this AI-powered assistant across our My Telstra app over this quarter. It is just one example, but we have many more AI use cases across the business, helping us serve customers better, strengthen network resilience, protect customers from scams and solve issues before they become problems. Overall, our investment in digitization and AI, combined with our ongoing network and capability investment is helping to drive improvements in customer experience. Over the 12 months, we've seen strategic NPS increase by 5 points and episode NPS increase by 2 points. At the same time, we have been laying the foundations of our Connected Future 30 strategy, and there are 3 things that I'll call out here. The first is innovating in core connectivity, capability and how we capture value. In Mobile, our investment in 5G advanced is moving us towards a smarter, more adaptable and programmable network. In Fixed, we launched our Adaptive Network Centre in June last year, a self-service platform that empowers our enterprise customers, partners and Telstra teams to design, order, track, manage and monitor connectivity services, all in one place. These capabilities are both fundamental to enabling our network as a product layer, and we continue to drive momentum. The second is our work under our joint venture with Accenture to transform our business with AI. We have made good progress since launch, including retiring legacy platforms, strengthening responsible AI governance, streamlining data architecture, and opening access to global innovation via our Silicon Valley hub. We recently proposed changes that would see the JV tap into Accenture's existing resources and expertise to deliver on our data and AI road map more quickly. That means some roles would not be required. While decisions like this are never easy, over time, we expect it will deliver benefits to our customers and our business faster. Third is our investment in upskilling our people. We continue to put AI tools into the hands of our people to help them learn and adapt. And over the half, more than 75% of our team with access to those tools use them weekly or more often. We also continue to offer training through our Data & AI Academy. In the first 6 months of FY '26, almost 9,000 of our people completed a course. Looking ahead, we are focused on continuing to deliver value for our customers, communities and shareholders as we build momentum behind our Connected Future 30 strategy. This includes, through our core business cash flows, active portfolio and investment management and disciplined capital management. Our ambition is to be the #1 choice in connectivity in Australia and to continue delivering on our purpose to build a connected future, so that everyone can thrive. I'd like to thank the Telstra team for everything they have delivered in the half and the care they've shown for our customers, particularly responding to the Victorian fires and Queensland floods over the summer. I'll now hand to Michael to take you through the results in detail. Michael Ackland: Thanks, Vicki. And as Vicki said, we've had another strong half with continued growth across all earnings and cash metrics, including our new guidance measures. This is in line with our goal to deliver resilient, predictable and consistent growth under our Connected Future 30 strategy. While total income across the group increased just 0.2% in the half, we've reduced operating expenses by 2.1% with our continued focus on efficiency. EBITDA after lease depreciation or EBITDAaL was up 4.9% on a reported basis and 5.5% on an underlying basis, with the difference due to a $23 million impairment of the London Hosting Center. We've delivered a profit to Telstra shareholders of $1.1 billion, up 9%, and earnings per share of $0.099, up 11%. These results reflect growth in key products, especially Mobile, ongoing strong cost management and reduced shares on issue from buybacks. Cash earnings were higher than reported earnings as depreciation and amortization is higher than business as usual or BAU CapEx. We expect this trend to continue and continued growth in D&A. In addition, cash EPS of $0.14 per share was up 20%, a higher growth rate than reported EPS as BAU CapEx was lower this half. As Vicki said, with stronger cash earnings, the Board increased the interim dividend to $0.105 per share, up 10.5% on a cash basis. This represents 75% of cash EPS. With our tight franking balance and ongoing gap between cash and accounting earnings, partial franking in this period best supports a growing and sustainable dividend. We've also lifted our current buyback from up to $1 billion to up to $1.25 billion. $637 million was bought back in the first half or 1.1% of shares at an average price of $4.90, bringing us to a total of 2.6% of shares retired in the calendar year 2025. Now given this is the first half we are reporting on cash EBIT and cash earnings, let me provide a little more detail. As a reminder, cash EBIT is a view of earnings after key cost buckets, including BAU CapEx, lease and spectrum amortization. Cash earnings is a further view after interest, tax and noncontrolling interest. Cash EBIT growth of 14% to $2.5 billion follows growth in our core operations, coupled with strong cost management and lower BAU CapEx. BAU CapEx of $1.5 billion was down 5%, largely due to timing. We expect a higher spend on digital infrastructure, including in our International business in the second half. Despite a lower average borrowing rate, finance costs increased modestly. Tax was higher in line with higher earnings with an effective tax rate of 28.4%. With that, cash earnings grew 17% to $1.6 billion. Turning to Slide 14 on product profitability. We delivered EBITDA growth across Mobile, Fixed C&SB, InfraCo Fixed, Amplitel and Other. Other EBITDA comprises costs not allocated to product. It improved with favorable foreign exchange movements, adjustments due to bond rate changes and the absence of equity losses following the divestment of our Foxtel stake last year. Health was flat with continued growth in revenue, offset by higher costs supporting new contracts and ongoing transformation. Other EBITDA would generally be around a $70 million loss per half, although this varies based on the nature of the items included. Turning to our key products, starting with Mobile, which continues to demonstrate strong performance. Mobile service revenue grew 5.6% with growth across all product groups, including postpaid, prepaid and wholesale handheld, mobile broadband and IoT. We delivered sustained average revenue per user or ARPU growth across all categories, brands and segments with disciplined commercial execution. Postpaid handheld ARPU grew 4.8%. Prepaid handheld ARPU grew 14.7%, although significantly lower on a unique user basis, and growth is due to the flow-through of October 2024 price changes. And Wholesale ARPU grew 7%. We achieved this ARPU growth while also growing postpaid, prepaid and wholesale customers. Our handheld mobile user base grew by 135,000 in the half. Mobile EBITDA grew 4% to $2.7 billion, with service revenue growth partly offset by higher costs, including higher-than-usual customer remediation and compensation, sales costs largely related to satellite, increased redundancy, and a higher allocation of shared costs as Mobile becomes a bigger part of our business. We expect sequential mobile service revenue growth to be muted given the timing of past price changes and lower IoT revenue following the divestment of MTData. Turning to Fixed Consumer and Small Business, where we continue to grow earnings by focusing on a portfolio of products and technologies and strong cost management. In the half, we grew nbn unit margin through price rises and plan mix, which offset SIO losses, and we continue to grow our 5G fixed wireless product. We continue to invest in our offering in the half. We launched our Internet-only plans and introduced the Telstra Smart Modem 4. However, SIO losses remain a challenge and a focus for our channel and marketing teams. In Fixed Enterprise, we have continued efforts to reset the business and focus on connectivity and strategic growth areas. Starting with Data and Connectivity, or DAC, where income fell 9%. During the half, progress on product refresh and upselling to higher bandwidth was not enough to offset the impact of service rationalization and in-period customer credits. We delivered cost and CapEx reductions. However, DAC EBITDA declined to $25 million as cost reduction was insufficient to offset the revenue decline. Turning to Network Applications and Services or NAS. Revenue declined 4% following deliberate decisions to focus on areas aligned to our strategy and declines in calling products. With strong cost management, EBITDA increased to $62 million in the half. Our focus on portfolio management is ongoing. The sale of Alliance Automation and MTData are completed, and the sale of 75% of Versent Group announced last August is expected to close this half. These businesses contributed $235 million in revenue in the first half of FY '26. Turning now to International on Slide 18. While reported EBITDA fell 0.5%, we achieved modest growth, excluding significant one-offs. Starting with Wholesale & Enterprise, while reported EBITDA of $232 million grew 20%, this included $45 million of one-off benefits, including deferred revenue recognition, other balance sheet releases and an equity accounted associate gain. Excluding these and one-offs in the prior period as well as FX impacts, EBITDA grew around 1%. This growth was delivered through strong cost management following a strategic refocus of the business on DAC. This more than offset DAC margin pressure from higher off-net mix, ongoing declines in legacy voice, a business we expect to complete the sale of this month. Looking forward, Wholesale & Enterprise EBITDA is expected to decrease significantly in the second half sequentially with the one-off items not expected to repeat, declines in NAS and voice, and partially offset by ongoing cost discipline. Over the past few years, we're focused on maximizing utilization in our subsea cable assets. We have been disciplined in our investments in new capacity. However, this has limited opportunities for new sales and growth. We now see promising investment opportunities in the second half of FY '26 within our BAU CapEx guidance. Digicel Pacific reported EBITDA declined 22% to $139 million as the prior year benefited from the release of the remaining earn-out provisions. Excluding this and in constant currency, EBITDA grew 1.7% with ongoing cost reduction offsetting a challenging operating environment. Turning to Infrastructure on Slide 19. InfraCo fixed income was broadly flat at $1.4 billion with growth from nbn, CPI indexation and ground stations. This was offset by lower commercial and recoverable works, reported legacy asset sales and internal revenue based on efficiencies and lower power charges. InfraCo fixed EBITDAaL grew 3.4% to $905 million, including a higher contribution from nbn, copper recovery, commercial works and cost efficiency, partially offset by the reduced internal income. Amplitel continued to benefit from strong demand for towers and cost efficiencies. EBITDAaL grew 6.6% to $162 million despite the MOCN impacts. Regarding strategic investments, including the Aura network, which is our new name for our Intercity Fibre. We continue to expect spend of $1.6 billion above BAU CapEx across the project. Now while we expect the vast majority of this spend to occur by the end of FY '27, we now expect a small amount of spend and some routes to complete in FY '28. We continue to be disciplined in the build of this 30-year asset, including prioritizing routes in line with customer demand and returns. We expect a mid-teens IRR with strong revenue growth, especially from FY '28, in line with demand as routes come online. Strong cost management is a key highlight of this result. Our proactive cost management and the benefits from technology adoption is helping us be more efficient, respond to structural challenges in some products, as well as the impact of inflation, and allow for reinvestment. Lower sales costs were a function of lower Fixed C&SB, International and NAS costs. Fixed costs were $76 million lower. Together with lower BAU CapEx, cash EBIT costs reduced, delivering strong operating leverage of over 3 percentage points. We've maintained our strong capital position with liquidity supported by strong operating cash flows. Net debt remained stable at 1.9x despite our buybacks, as higher debt was offset by EBITDA growth. We've also reduced our average cost of debt to 4.8% and extended our maturity profile. Our balance sheet is strong, and we remain committed to an A band credit rating. This has enabled us to lift our current buyback. We've also improved our return on invested capital. Turning to FY '26 guidance on Slide 22. Today, we are tightening our underlying EBITDAaL guidance to between $8.2 billion and $8.4 billion, with the midpoint unchanged. Our guidance on all other measures is reconfirmed. In terms of EBITDAaL, there are a number of one-offs that have benefited the first half, including in International and Other EBITDA. The second half will also reflect the loss of earnings from businesses we have divested. Offsetting these items in the second half, we expect ongoing productivity, including carry-in from prior years as well as InfraCo asset sales and net product growth. As previously noted, we also expect higher BAU CapEx in the second half. These results demonstrate our value creation under our Connected Future 30 strategy, growth in core business cash flow, 17% growth in cash earnings supported by strong operating leverage, portfolio and investment management, where we continue to execute in line with our strategy to enhance returns, and disciplined capital management, including the lift in dividend and buyback. Finally, I would also like to thank the Telstra team for all of their ongoing efforts in delivering value, especially for our customers, the communities in which we operate, and our shareholders. And I'll now hand to Nathan for Q&A. Thank you. Nathan Burley: Thank you, Michael. We'll now open for questions from analysts and media. On the call today, in addition to Vicki and Michael, we have other members of the Telstra Group Executive, including Brad Whitcomb, Group Executive, Consumer; Steven Worrall, CEO, InfraCo; Oliver Camplin-Warner, Group Executive, Enterprise; Amanda Hutton, Group Executive, Business; and Kim Krogh Andersen, Group Executive, Product & Technology. With that, I'll open to the first question, which comes from Eric Choi from Barrenjoey. Eric Choi: Congrats, everyone, on the result and lifting the dividend. I've got 3 questions, but can I please start my first question specifically on the dividend. And I just wanted to check the broad logic for potential FY '26 and '27 outcomes. So if you look at FY '26, your first half cash payout was 75%, but your policy has been sort of 70% to 90% in the past. And just logicking out the second half, you can work out cash EPS will fall a little bit in the second half versus first half. So I guess we just wanted to check if you're happy to up that cash payout above that 75% to maintain $0.105 into the second half. And then just beyond FY '26, you're clearly focused on cash earnings now. So if we think you guys can grow cash earnings by 5% or more, there's no reason why that EPS can't grow 5% or $0.01 again beyond FY '26. That's the first one. Did you want the rest? Or should I give you a chance to respond? Vicki Brady: Why don't we -- Eric, we might do it a little differently. Given there's quite a bit in that first one, why don't we take it first off? I'll make a couple of comments, and then I know Michael will want to jump in as well. So first off, this is obviously the first half where we've spoken a lot about in terms of dividend that under our capital management framework, where focus is sustainable and growing dividend, our preference is fully franked. But where that's not possible, we would consider unfranked. And so look, as the Board considers the dividend, the capital management framework is obviously the critical thing that they reference. As we spoke to this morning, the first half of this financial year, we've seen particularly strong cash earnings, and that supports the first half dividend. But yes, that sustainable and growing dividend is absolutely a key focus. We don't have any more a cash payout ratio that we're targeting. It's very much -- we focus on the capital management framework and look at it through that lens. But Michael may want to comment on some of the historic numbers, I'm not sure. But look, as we look forward, that's why we keep coming back, Eric. Our ambition under Connected Future 30 is really that mid-single-digit cash earnings. That's really critical, and that's an important reference point. As you know, we work through and the Board makes its final decision on the dividend. But Michael, do you want to jump in with any further? Michael Ackland: Yes. I mean, I think Vicki is absolutely right. We don't have a policy on payout ratio. But if you look over the last few years, I think in FY '25, on the same basis, the cash EPS payout ratio was 85%. It was 90% in FY '24, and it was 83% -- 84% in FY '23. But we're focused on that sustainable dividend and just recommit to our objective to deliver mid-single-digit growth in cash earnings, Eric. Eric Choi: Awesome. I'll try and be quick on 3. But just number two, just in terms of balance sheet headroom for capital management, and I'm going to focus on Moody's here since they're 1 notch higher than S&P. It looks like they've lifted your max gearing headroom to 2.4x now. So can I confirm on their measure, you'd be tracking at 2.1x to 2.2x, and that's before you conducted portfolio optimization. So basically, the question is, do you have plenty of headroom to increase both dividends and buybacks on the credit agency view? Vicki Brady: Excellent. Well, that's quite a detailed one. My overarching comment is, our balance sheet is strong. It's a core part of our capital management framework. You know that. We're absolutely committed to those things that keep us in that A band credit rating. But Michael, do you want to get into any of the specifics there? Michael Ackland: Yes. So we reported 1.9x. I think that's well within our conservatively framed outlook of 1.75x to 2.25x. Moody's have a slightly higher top end to that range. They do use some slightly different methodologies, as you point out. We track both of them. But I think your conclusion is that the balance sheet is strong and that we do have strong capacity within that A band rating based on both Moody's and S&P's, correct. Eric Choi: Can I fit in the last one, sorry. Just a question on whether investors should think of Telstra as an AI loser or winner. And I think you're implying you're an AI winner, because to get to your long-term ROIC of 10%, you basically need to grow EBITDA $1 billion or more from here. And like logically, you can see your mobile service revenues are $8 billion to $9 billion, your fixed cost base is $7 billion. If those 2 kind of grow in line with each other, they kind of offset each other. So you kind of need something else to fill that $1 billion-plus gap. And that's going to have to be through InfraCo and cost efficiencies. And I'm also guessing that's going to have to be driven by AI. So you're essentially saying AI helps you hit your long-term guidance? Vicki Brady: Okay. Well, why don't I start off on that, Eric? There's quite a lot in that one. The first thing I'd say is, obviously, inside Telstra, there's a number of businesses. Obviously, Mobile key driver of value and growth right now. And we're super happy with that business. That's come through years and years of consistent investment and differentiation in what we deliver to customers, and that will obviously remain a focus. If you look at our portfolio, I'll come to InfraCo in a second. But there are other elements of our portfolio we're still working through, Telstra Enterprise. We spoke a little bit about the International component of our business today as well. So there's still work to do in our portfolio in terms of getting those businesses in the right shape and supporting our ambitions. On InfraCo, I mean, there is no doubt the demand cycle we're in at the moment, the sort of investment that is going into AI infrastructure. We couldn't be more pleased that we embarked on Aura, or Intercity Fibre as it was previously known quite a few years ago now, and that build-out is at the halfway mark. All of the demand signals would indicate growing demand there. So the Infrastructure side of our business is obviously important in the long run. We have also set in our ambitions, positive operating leverage. And so yes, we've got to keep getting more efficient. And you see that. I think Michael and I both commented today, we are seeing benefits from, again, years of investment in digitization, in pushing ourselves to be sort of at the front of how we apply AI inside our business. So they are important. The dynamics in the world, it is changing fast. For us to be competitive, for us to keep delivering on rising expectations, rightly, of consumers and businesses, we've got to be able to apply AI. And so I'm really optimistic on what AI can deliver for us, both in terms of the demand signals in InfraCo, but also in how we use that inside our business, yes, to drive efficiency, but also drive better customer outcomes. So they'd be the big things I'd comment on in there. I don't know, Michael, if we want -- I know I might go, because we've got Steven Worrall. Obviously, it's his first set of results with Telstra leading InfraCo. So I thought it might be a good chance, because that winners and losers in AI, particularly from our Infrastructure business. I thought, Steven, if you're happy to make a few comments, it would be great. Steven Worrall: I'll be very happy to do that. Thank you, Vicki. And good morning, everyone. It's great to be here, as Vicki said, my first results announcement with Telstra. And if you'll indulge me for a moment, I thought I might provide a little context that goes to the heart of the question, Eric, that you've posed. But I also can give some direction in terms of where we're headed. I think I'll just start with saying how excited I am to be here at Telstra at this time. It's an incredibly exciting time for our business, but it's also an exciting time in relation to digital infrastructure. We don't have to look too far. Pretty much every other day, there's an announcement of a new investment that's being made in data centers here in Australia. And Australia has emerged as one of the leading destinations for data center investment around the world, as we've all seen. Now of course, that's just one part of the digital infrastructure landscape. And as recently as last month at PTC, which is a conference in Hawaii, where we engaged with hyperscalers, of course, other players in the AI ecosystem, some of our existing clients and many others who are eyeing the opportunities that this build-out of digital infrastructure is providing, we saw a very significant uptick in terms of our pipeline coming out of those discussions. As Vicki mentioned, that's why we think Aura is such an important investment. It will provide the AI inferencing architecture that we think is so essential for our nation as we look to an increasingly digital future. And while I'm excited about all of that and excited to be here, it's also a really important time for us as a nation. And I think Vicki also pointed to this earlier in her comments. Indeed, she made these comments at the press call last year in terms of the moment that we find ourselves confronted by. And that is in relation to how do we think about productivity going forward, how do we think about how we best participate in an increasingly digital world. And we think investments in Aura and the assets that we have give us the permission. And I think the logical role for us to play to help Australia best position itself. Last quick thought. That's a long answer to your question. Of course, our international asset base is incredibly important as well, and Michael touched on this in his remarks. Telstra owns and operates more than 25% of the world's subsea capacity. And when you think about a digital future, you think about connecting Australia to the global digital supply chain, it's that subsea network combined with the domestic and terrestrial assets that we have that we think sets us apart, and we think puts us in an incredibly important position with all of the work ahead of us to ensure that we can capitalize on those commercial opportunities as, of course, we serve the country. Nathan Burley: We'll go to our next question, which is from Entcho Raykovski from Evans Partners. Entcho Raykovski: So my first question is around Mobile costs in the period, and they were a bit higher than the market expected. And Michael, you've provided us with some good color around what's driven that. My question is, to what extent were the higher costs driven by higher satellite costs as opposed to some nonrecurring items like remediation. I'm just trying to get a sense of the extent to which the cost increase is recurring. And I've got a couple of others, but I might hold off after this answer. Vicki Brady: Yes. Thanks, Entcho, for that. I know Michael spoke to sort of 4 major things that were in that cost increase. We don't break it down. We don't get into sort of cutting and dicing it into the pieces. But as you said, the first one mentioned was customer remediation and compensation. We are at the end of a program of work on historical sales practices. So that comes to an end at the end of this financial year. We have in part of business as usual, those costs exist, but they are higher in this half, and we would expect higher for this full year. But we don't break it down into the subcomponents. I don't know, Michael, if there's any other comments you wanted to add. Michael Ackland: No. I mean I think, Entcho, I would -- the satellite costs, we should consider those to be an ongoing change. And I think you rightly pointed out, the others we don't expect to be ongoing in this nature. The other one we referenced there is just the way that shared costs are allocated. And frankly, that's just a little bit that Mobile is increasingly a bigger part of our business, as you can see in our numbers. And so that trend will continue as well. But frankly, it's against our overall costs going down. So I think we should remain reasonably confident about ongoing operating leverage in that business as we've committed to across our entire business as we move forward and look at this, as there has been some more specific impacts this period. Entcho Raykovski: Okay. That's helpful. And my second question is around the potential expected increase in spectrum renewal costs that was announced by ACMA in December. Does that impact your ROIC targets to FY '30 in any way? I mean, I noticed that on Slide 35, you've got a footnote referencing the new payment structure. I guess if that does have an impact on ROIC, do you foresee a need to perhaps divert investment from elsewhere into spectrum purchases? Or how does it impact your decisions around pricing and the need to pass this cost on to consumers? Vicki Brady: Yes. Thanks, Entcho. And obviously, it's an ongoing process at the moment, that process of spectrum renewals. I think on the positive -- I mean on the positive front, starting there, ACMA has decided it is a renewal process. I mean, again, reinforcing the spectrum that will come up for renewal through 2028 to 2032 is about 80% of the spectrum that the mobile networks in the country rely on. So that's a positive. And the process in terms of determining what is fair market price, that is the debate that's underway through that process. ACMA obviously put out some more information just pre-Christmas. We have a different view on what fair market price is. For us, it's about -- at the moment, it would be, we believe, about $1.3 billion more than what we would see fair market price. So look, that will be part of our submission back. Obviously, that process is still ongoing. We'll put our views, our thoughts, our analysis work we've done into that. Obviously, any additional cost that comes into the business, we've got to be incredibly thoughtful about. As extra cost pressure comes, there's constantly a balance of how much we invest into the network and the products and services we're delivering for customers. That might be things like satellite to mobile technology. It's investment in our mobile network we keep making and our broader network. So that will be something we'll have to think about. Obviously, increasing costs, we've then got to think about, what does that look like in terms of what it means for pricing for customers, because ultimately, for us to keep investing and being at the forefront to deliver high-quality connectivity services, we absolutely need to make a return on those investments, so we can keep that investment going. So look, it's part of the process. Our ambition on ROIC remains the same. That ambition under Connected Future 30 to get underlying ROIC to 10%. You did pick up that note. We wondered how quickly that footnote would get picked up. And as you can see, we've just been very transparent using the current ACMA pricing that they've put out as the interim pricing that's reflected in that footnote. Nathan Burley: Our next question is from Bob Chen from JPMorgan. Bob Chen: A few questions for me. Maybe firstly, just on the really strong ARPU result across the Mobile business, especially across the prepaid and wholesale. Like how sustainable do you think this is? And is this just the beginning of moving those customers on to higher prices? Vicki Brady: Bob, did you have more than one question? Can I just check? Bob Chen: Yes, sure. Yes, I've got some others. Do you want me to... Vicki Brady: Yes, why don't we grab them all and then I'll make sure we manage to get to them all. Michael Ackland: Yes. Bob Chen: Yes, sure. Maybe just on the comments earlier around the Aura network. Obviously, we're seeing a lot of demand from new data centers being put into the region, like you guys mentioned. When you think about that sort of mid-teens IRR you're talking to, I mean, given the increased level of demand for data centers and connectivity, could the return profile of Aura be better than what you were initially expecting? Vicki Brady: Okay. And is there a third one? Bob Chen: Yes. And then just on the ACMA spectrum renewal process, I think you spoke to some of the trade-offs you're sort of thinking about in terms of mobile network investment. But how does it impact maybe your capital management settings if you don't see the gap between ACMA's pricing close with your views? Vicki Brady: Great. Thank you. Okay. So quite a few to cover off there. Why don't we -- just on Aura, my comment there would be, we continue to have the same outlook in terms of Aura in terms of that financial profile. So that mid-teens IRR is absolutely what we continue to target. Of course, as you heard Steven talk about earlier, we do see good demand signals. But obviously, we've only just passed the halfway mark of build. So our focus is absolutely completing the build, and as the routes come online, making sure we're converting those demand signals into commitments and switching on revenue on the network. So right now, that financial profile stays as is. And I think we've put a slide in the appendix just as a reminder of what that looks like. Just on the ACMA, look, as I said, that process is ongoing. If it does land with the pricing that's currently proposed, I think this is where you see the benefit of very disciplined capital management, a strong balance sheet. Obviously, as I said, we'll need to consider various trade-offs. But I think given the hard work over many, many years, obviously, the business is in that underlying earnings growth, we're seeing cash earnings growth. And spectrum is ultimately -- it's a critical element to delivering high-quality mobile services. So I think as we stand today, we sit with the capacity, I think, to be able to navigate that period, and we just wanted to be really clear in that footnote and give you a view of how that might look like if the current pricing was to proceed as is in the interim proposal. On ARPU, I think it might be worth getting a few comments on this one. I might get Michael just to make an overall comment, because he can cover off the broader perspective, including wholesale. And then I might ask Brad to comment, because you particularly mentioned prepaid, and we've got good strong performance out of the consumer side of the business. So Michael, why don't I go to you on ARPU more broadly? Michael Ackland: Yes, sure. Sorry, just a quick one on your point around capital management and spectrum. I think it's a really good question. The way that I would think about it is we start with what's our return on invested capital? Are we getting an appropriate return on invested capital, and that's where all those trade-offs that Vicki talked about. And then the second one is capital management, which is our strong balance sheet. So I think -- just reiterating what Vicki said, but I wanted to talk to it. Vicki Brady: Yes. No, thank you. Michael Ackland: Look, I think on Mobiles overall, and I think hearing from Brad is going to be much more insightful than anything I could offer, obviously. But we're really happy with the way that our multi-brand strategy is playing out. We have a broad range of brands and offers and channels to market that are meeting more of the market, and we continue to grow that base. You can see that when you look at the revenue growth, the way that is spread, and also the ARPU growth that we're seeing when you take all of our handheld customers in total. So we're really happy with the way that multi-brand strategy is playing out. Prepaid has been a very specific highlight that you called out. And so maybe with that, we can get Brad to talk a little bit about how that's working and what's happening. Bradley Whitcomb: Yes. Thanks, Michael. Just to broaden that out a little bit, yes, we're really happy with the performance for the first half when we look at the mass market mobile. And as Michael pointed out, we do have a series of brands that we work with, Boost, Belong, main brand, and also our products on prepaid and post, and we work to tile those up, so that we've got offers that are attractive to our customer segments. I'm really pleased that we were able to see growth in terms of subscribers across all of those various aspects of the portfolio. And as you pointed out, also ARPU growth as well. The mechanics of that ARPU growth for prepaid, it was around price rise back in October of 2024. And for postpaid, including Belong, July 2025 price rises there. But when we look to -- in terms of sustainability, I would look first at how happy are our customers. And really pleased that we're sitting -- as Vicki mentioned, we're at an all-time high for our customer NPS at plus 47. That's up significantly PCP. So that's a great trend for us. I'd also look at our overall value proposition and what we're offering our customers. First and foremost, it is built upon having the broadest, deepest, most reliable network in the country and arguably in the world; world-class privacy spend, protection and security for our customers; and then the intangibles around our brand. We see our brand moving from strength to strength. We're now the ninth strongest brand in the nation, which is consistent with one of our Connected Future 30 aspirations to stay in that top 10. We've got brilliant frontline workers that are serving our customers, whether that's through our retail stores or in our contact centers. And you'll feel that when you engage with them that they like the work that they do. In fact, we've got, across the consumer division, which is mostly frontline workers, we've got an employee engagement score of plus 85. And when your employees are engaged, they just provide that much better service to the customer. So hard to predict the future. It is a very, very competitive market, and we have to earn the right to serve our customers every day. But when I think about the sustainability of the value proposition that we have, I like where we're standing right now. Nathan Burley: We'll take our next question, which is from Lucy Huang from UBS. Lucy Huang: I've got 3 questions. I'll just ask them first. So just -- I mean, good results on mobile ARPU. I just wanted to see if you could unpick some trends in churn in postpaid post the price rise that was implemented in July. And particularly on the Enterprise side in Mobile as a result, was that still a drag in the ARPU numbers this half? Or do we think that drag has actually moderated moving forward? And then secondly, just on Intercity Fibre, again, I think you mentioned on the call that we're expecting strong growth coming through in FY '28. What's the conversation with customers on whether or not they want to pre-commit to capacity just to give, I guess, investors a bit more comfort around the demand profile longer term? And then just thirdly, on Fixed C&SB. Early days since unbundling of the modem from the plan, but maybe if you could provide us with some color as to whether that's been driving a better outcome so far in scanning [indiscernible] decline. Vicki Brady: Excellent. Well, thanks, Lucy, for those. I'm actually going to get Brad to come back up and talk a little bit about postpaid churn and also cover off C&SB-Fixed internet-only plans. And then I'll ask Oliver, who's leading Telstra Enterprise. I know you had a question there on the Mobile front. There's been some really great work out of Oliver and the team in Enterprise. So I'll get him to talk a little bit about where that's at and the trends we're seeing. And then, Steven, it might be worth you popping back up and just the discussions. As we've said previously, I think, Lucy, with big builds like this, we find there's lots of good demand signals. Often until you're at RFS of certain routes, it's sometimes not the practice to pre-commit. We obviously had Microsoft where we had a big strategic partnership there. They are an important foundation customer of Intercity Fibre or Aura now. But I might get Steven to give a bit more color to how the dynamics are. So why don't we go to Brad, if you're comfortable to cover off those couple. Bradley Whitcomb: Yes. So if I start with the Mobile churn, as you can imagine, before we make any price changes, we do quite a bit of work around elasticity, conjoint analysis, the customers that we're serving and where they might go should they choose to move off the current plan that they're on. And as a reminder, we have no lock-in contracts, we don't have handset subsidies, and so customers can move very, very quickly if they want. That's all the modeling that we do, and we look at that in terms of a yield, how many customers are going to stay where they were, how many people will down plan? Will we have any customers churning. And I would say that this price change that we made in July, we landed right about where we expected in terms of yield. So we are pleased with that. Of course, that all then comes down to the trading on the floor and how we perform in terms of our peak trading windows, whether that's our flagship handset launches or Black Friday, Christmas and currently our end of summer sale, and I think the team is executing quite well. So we're never fully satisfied with churn. We want to keep customers within the portfolio, but we're right on track with what we had planned for. In terms of Fixed C&SB, one thing I would like to underscore is the team has doubled the profitability of that business over the last 3 years. It's been a massive performance, and we're on track right now to deliver about $0.5 billion in profit when we exclude the legacy copper cost that's in that business. So very pleased about that. As you mentioned, we've rolled out a number of new capabilities within that product suite, including the nbn high-speed tiers. We've got straight-through digital processing to make it really easy for our customers to order digitally. We've got a beautiful new Smart Modem 4, which if you don't have it, you should get it. The Wi-Fi performance in the house is exceptional. And then we've got now our Internet-only. It is early days. We launched Internet-only right on Black Friday. And I will point out as we've been migrating off of Siebel and now on to console. We only got about what, a little less than 4,000 customers left on console. It meant we could move very quickly, and we could meet that critical trading window of Black Friday. Customer response has been good. That said, we remain in a very, very competitive market. We are focused on SIOs, but we're not focused on SIOs at any cost. So that's how I would describe it now. Team very much focused though on the SIO loss. Vicki Brady: Thanks, Brad, for that. That's excellent. And why don't we -- Oli, are you comfortable to speak a little bit to TE and TE Mobile, ARPU trends? Oliver Camplin-Warner: Yes. Thanks, Vicki. Thanks, Lucy, for the question. So yes, let me zoom out and start a little bit on just Enterprise reset and how we're traveling there, and then I'll zoom in on Mobiles. On Enterprise reset, as Vicki reminds me, there's always more work to do, but I'm really pleased with the progress that we've made so far. Without doubt, by the end of reset, we will be a stronger, more customer-focused business, no question. We identified a number of critical initiatives at the start of reset, and those are progressing well. I'm pleased with where they are at. And pleasingly, most importantly for me, customer reaction has been positive as well, where we've seen an increase in NPS. Some of the key points to reset. First off, just that radical simplification of our product portfolio. It was absolutely critical that we're really focused on who we wanted to be moving forward, not trying to be everything to everyone. We've taken a long hard look at our cost base and facing some really tough decisions here, but we've made those calls, and we do have a very different cost base across the business now. Commercial guardrails, we've continued to tighten, which have had a good impact. We have an engaged workforce, like Brad spoke about earlier as well, who are now making a real difference. And then on the portfolio management as well, we've taken a long hard look at the various businesses that we've had. As Michael touched on, we completed the divestments of MTData, Sapio and Alliance in the half. The partnership with Versent -- Versent partnership, that's continuing on track and will close out in the second half. So long story short, there's a lot in there. A couple of weeks ago, we also announced the radical transformation of our service delivery business. We will look to improve the customer experience on the delivery front. So there's a lot there. I'm pleased with where things are at, but there's always more to do. Just on Mobiles. So Mobiles without doubt has been the beneficiary of many of those actions that we have taken through reset, commercial guardrails really celebrating the network that Brad spoke about earlier, all those beautiful attributes. And pleasingly, we saw growth in the half, which I'm really thrilled with. It was great to launch satellite to our customers and especially those organizations who have a remote field workforce, where having that connectivity in the area of need is absolutely critical. So a good response there. You will note in the footnote just around the MTData divestment and how that will impact Mobile in the second half, but pleased with the Mobile performance, but there's always more work to do. Vicki Brady: Yes. Thanks, Oli, for that. And just to add one comment to what Oli said on TE Mobile performance. Lucy, if you go to the very last -- I think it's the very last page in the presentation material in the appendix there, you can see Telstra Enterprise Mobile performance, and you can see growth there. And so real credit to Oli and the team. He spoke about commercial guardrails. The team have been very disciplined, and we have seen, I think Michael mentioned ARPU growth across all products and all segments. So that's been a good outcome of that real focus and discipline. Michael Ackland: Including business? Vicki Brady: Including business, that's right. That's right, every segment across Mobile, which has been great to see. So why don't we come to Steven, a little bit of color, Steven, around those commitments from customers. Are they prepared to pre-commit? Yes. Steven Worrall: Happy to. Thank you, Vicki. And Lucy, thanks for the question. There's sort of 2 thoughts that might be helpful here. As Vicki mentioned, first and foremost, we need to build the network. So we're 7,000 kilometers into a 14,000-kilometer total build, and we have a couple of the routes ready for service and actually in use today, but most are yet to get to that threshold. And so that obviously is the priority as we continue to have all sorts of conversations with players, both domestic and international. The second thought I'd love to share with you is the thought that we are building what I'll describe as AI inferencing architecture for our nation and, of course, connecting that architecture to what is increasingly being built out around our region and around the world. And in that context, what Aura presents to Australia, obviously, critical digital infrastructure for the nation, but it's infrastructure that will support us for a generation. And we're talking about a demand profile that we don't actually see just yet with all of the investments that we're hearing regularly in relation to data centers. Many of those are in the construction process and have yet to come online. And the sort of demand profile that those data centers will drive as one part of the digital supply chain is yet to arrive. And as you might expect, as a result, the commercial conversations with those operators in terms of pre-commits and their precise requirements in terms of connectivity, both domestically and through the region, are conversations that we engage in regularly. We're obviously moving many of them down the pipe very well, and we expect to have more to say on the topic in the future. Thanks very much. Nathan Burley: We'll take our next question from Liam Robertson from Jarden. Liam Robertson: Three questions from me as well. Just firstly, on Mobile, in particular, postpaid subs growth. It looks like Belong was the standout there, adding 21,000 in the half, core base declined modestly. Michael, I think you touched on your multi-brand portfolio already. Clearly, that remains well positioned. But I'm just interested in how you're seeing the market? And should we be thinking of Belong as the key acquisition channel going forward? Or do you actually think you can also grow your core brand? And then just a follow-on from that. I mean, given that dynamic, have you got any concerns around your ability to grow postpaid ARPU moving forward? And then just my next question on the dividend. I might frame it slightly differently, just given you were clear on not having a targeted payout ratio. I don't think it was a coincidence that the $0.095 fully franked and then the $0.01 unfranked on a grossed up basis was similar to the $0.10 fully franked in expectations. I guess moving forward, should we now be thinking about growth of that dividend on a gross basis? And then your split between the franked component and unfranked component will just be dictated by your available franking credits. I guess the inference there is that the unfranked component might actually need to accelerate just given your franking balance and the mismatch between tax paid and then cash earnings? And then my last question, hopefully, just a really quick one on Enterprise. I appreciate all the comments and color, Oli, there around recent divestments, the cost base reset, some of the pockets of growth, looks like Mobile was strong. I guess my question is, when can we consider that portfolio to be fully rebased? Vicki Brady: Well, thanks, Liam. Lots in there, some great questions. I might get Brad back in just a second, because I think how the market is playing out, Belong. My overall comment, as Michael spoke to earlier, our multi-brand approach is critical to how we address the market. There are very different needs in the market in terms of what different segments of customers are looking for. And so it remains a really important piece. And of course, as you'd expect, we're always pushing. We want to make sure we're meeting those needs as best we can. And the Telstra branded proposition is critically important. It is our premium offer to market. I might get Michael to jump in after Brad and just talk a little bit more about dividend. As you call out, this is the first time in a long time it's not a fully franked dividend. So I'm sure there are many questions about how to think about it. Again, I just come to cash earnings is an important piece as we consider, as the Board goes through that process, as they're thinking about the dividend in light of our capital management framework. TE, it's a really great question on reset. Oli and myself and the leadership team, we've been working through that at the moment. I mean, incredible progress. It was May '24 when we announced the reset of our Enterprise business. As you just heard from Oli, some really pleasing progress, but there is still more to be done. And so that's part of our thinking. As we come back for our full year results, we'll be able to share where we're at. But right now, the focus really is on making sure those pieces that are in work still now, and Oli spoke to some of the changes we're driving to try and remove further complexity out of that business to really deliver on those rightly high expectations of our enterprise customers remains absolutely our focus, along with finalizing some of those elements on the portfolio management side. But why don't I -- Brad, are you comfortable to jump in on the market, and then we'll come back to Michael on dividend. Bradley Whitcomb: Yes. So thanks for the call out on Belong. We're super proud of the performance of that business. And it's great to see them growing both in terms of subscribers and also profitability. I think the team there is doing a fantastic job. I will point out, we did have a fairly significant price rise within Belong back in July, the same time that we did the main brand price increases as well. So this isn't necessarily a pricing thing. We do see more growth at the lower end of the market. So from my perspective, it's not surprising that we would see Belong competing very well there and seeing that grow. But our primary focus is around our core main brand and the other brands sit around that to support that main brand. And there's a number of attributes that you can only get with the Telstra main brand. And one that I would point out, we've talked a little bit about today, is the satellite messaging service. And for customers that are aware that we have satellite messaging, we see an NPS which is a full 16 points higher than customers that aren't aware of it. So we're offering real value there, and our aspiration is to continue to grow that business, both in terms of the profitability, but also the number of customers that we can serve. Michael Ackland: Thanks, Brad. And thanks, Liam, for the question on dividends. I think I would -- a little bit like Vicki sort of spoke to, we have an ambition under Connected Future 30 to grow our cash earnings mid-single digit. It is those cash earnings that support the sustainable and growing dividend. And the level of franking within that is going to be determined by the growth in our Australian tax payments, which I apologize is an obvious statement, but it is going to be driven by the growth in our Australian tax payments, and that's going to be fairly closely linked to our growth in accounting earnings and EPS. So as we said, we think that our franking balance is tight, has been tight for some years. The partial franking in this period, we believe was the best way to deliver on our commitment to a sustainable and growing dividend, and we look forward to continuing to achieve our ambition of mid-single-digit cash earnings growth that supports a sustainable and growing dividend in the future. Nathan Burley: We'll go to Roger Samuel from Jefferies. Roger Samuel: I might just stick to 3 questions as well, hopefully, quick ones. Firstly, just on your guidance. If we look at your performance in the first half, the underlying EBITDAaL grew by 5%. And if we assume that you can repeat that 5% performance in the second half, that implies that you can easily get to the top end of the $8.3 billion to $8.4 billion. But is there any issues that we should be aware of in the second half? I mean, I know of your divestments of some businesses, but yes, there could be some cost cut as well that you may do in the second half. Second question is just on Fixed CS&B. Obviously, a very good result on the profit side. But Michael, you mentioned that you'd like to stabilize the nbn subs over time. And yes, if we look at this result, I think your nbn subs still declined by about 25,000. And yes, I'm just wondering what you can do to arrest this decline given that you've introduced Internet-only plans, you have moved your customers to a new technology stack. But if you look at what's been happening in the last 2 weeks, your competitors, especially the challenger brands, they have been doing some consolidation as well. So I'm just wondering what you can do to arrest that decline in nbn subs? And lastly, just a quick one on mobile ARPU. You mentioned about network slicing in the past and how that could add to mobile ARPU, especially in postpaid. How are you going about introducing network slicing to differentiate certain plans and the impact on ARPU, please? Vicki Brady: Thank you. Thanks, Roger, for that. And we're getting the hurry up from Nathan. We're speaking too much. So let us see if we can fire through these 3 quite quickly. I'm going to come back to Michael on guidance. I think he can give a very concise answer on that. On C&SB Fixed, I'd just say, first off, look, the team have done a great job in that business, and Brad spoke to earlier just how much EBITDA profitability in that business has changed in a small number of years. But absolutely, our focus is now on stabilizing customer numbers. The Internet-only proposition only went into market in November. So our focus and Brad's focus with the team is absolutely in our channels, in our marketing, because although we might all know about it, I'm pretty confident that a lot of customers in the market don't know about that proposition yet. So we will focus absolutely continuing to deliver a really high-quality experience for our customers that meets their needs. So that will be the focus there. In terms of Mobile ARPU and slicing, yes, we've got a slicing product in market in our Enterprise business. It is very early days. And Connected Future 30, a big part of that is network as a product. So how we build out, how we make sure we have those network attributes, that we're reinventing the commercial models that go with those attributes. So as we create value for customers, we also share in some of that value creation. So very early days on that, but we remain optimistic. We've got the foundational investments going in, in network, systems capabilities to put us in a position over time to be able to make sure that level of sophistication in our network that can meet the level of sophistication of our customers' needs going forward that we get that to work well together. So that's definitely our focus as we look at the business going forward. Michael, are you happy to cover off guidance, first half, second half? Michael Ackland: No, absolutely. And thanks, Roger. So yes, there is a few things sequentially that are impacting us. So one is we had around $45 million of one-offs in International that we don't expect to repeat. So we will see a significant sequential decline in International, not only that $45 million, but also the divestment of the wholesale voice business in International. So that will be a sequential decline. We mentioned Other EBITDA. In other EBITDA, there was, I think, around $20 million of bond and FX gains that we are not necessarily forecasting to repeat in the second half, which will provide a bit of a headwind. The second one is probably on redundancy. Redundancy is traditionally -- or sorry, not traditionally, has over a number of years, been a tailwind on cost into the second half, because we've done more redundancy in the first half than the second. We announced that we were consulting on some changes last week. If they were to go ahead, we would expect to see redundancy not be that tailwind into the second half. Of course, offsetting that, we have productivity flowing through as we talked to. I think the other one, as we look into the second half, is just based on the historical timings of some of the price rises across particularly in the consumer portfolio, whether that's Fixed or Mobile, we would expect to see some of that revenue growth sequentially to be a bit more muted. And then, of course, as I said, on top of the other divestments that we expect either have completed or we expect to complete in the NAS portfolio. Nathan Burley: Excellent. Our next question is from Nick Basile from CLSA. Nicholas Basile: Just 2 questions. The first one is on AI. I think in your opening remarks, you talked about rationalization of software providers and deployment of AI across the coding team. So I'm just interested to understand or get a little bit more color on how that is benefiting you and how it helps you, I guess, deliver on the 2030 cost ambitions? And also just to what extent at all you've managed some of that vendor concentration risk now from a cost inflation perspective? So that's the first question. So there's a few add-ons. And then the second one is just on incremental returns on Mobile investment. I guess with respect to the commentary around your investment in augmented services using satellite networks. Just wanting to understand what the incremental margins on this capability is relative to selling services leveraging your terrestrial mobile network. Vicki Brady: Yes. No, thank you. Thanks, Nick, for that and a couple of great questions. Well, I'll take the second one first off and then make a couple of comments. But I might get Kim Krogh Andersen, who leads Product & Technology and really has been the driving force between a lot of the pieces you mentioned on the software side. So just on Mobile, obviously, satellite to mobile, I would think about that as we are leveraging the capabilities of a third party. So I think about it like a reseller of a service. So obviously, the incremental margin on that sort of business is very different to where we own and operate the infrastructure ourselves. And obviously, very different CapEx dynamic. We're not the one investing all of the money in launching LEOsat. So we are a reseller of that service. But it is, I think, as Brad spoke to, really important, it is a key element of our proposition, how we bring these services to our customers. And again, as Telstra, we provide a premium experience under our Telstra brand in the market. And so being one of the first few operators globally to be able to bring that to Australian customers, because we could see the service could really serve a purpose here, whether it's when terrestrial networks are disrupted or when people in our very large country are outside mobile coverage. So that's how we sort of broadly think about that. As you said on AI, I made some comments this morning, because I think it is really important to understand there has been investment and work underway for years as we digitize our business, as we're applying AI and particularly in software development. It is so critical in our speed to market and being able to deliver at the level our customers expect. But Kim, I might just get you to make a couple of comments, if you can, on those benefits, how it's been driven and then how you thought about vendor consolidation risk. Kim Andersen: Yes. Thank you so much, and thanks for the question. First of all, we have been modernizing our tech stack for a very long time, and tech leadership is a core part of our Connected Future strategy. Michael mentioned it, and I want to reinforce it. We have actually managed to decrease our cost in tech over the last few years, and that's despite inflation. But as you mentioned as well, there is a lot of partners that really want to hike the price to justify and get return on their AI investment. So we have managed to combat that and ensure that we take the value of this digitization, simplification, AI, et cetera, instead of that become revenue in some of these partners' pockets. So that's important for us because we want that value to go to our customers and to Telstra and to our shareholders. I think Vicki mentioned that we have actually seen a 20% production improvement in our software deployment. And not only that, we are also shipping our software and releases faster 15% to 20%. That comes from a more efficient software flow. So we have seen 12% improvement in EPIC flow. We have seen 29% improvement in our defect rates. So it's great to see when quality, time to market, but also our efficiency come together. It is AI-enabled all of it. Now most of our software engineers, they are using GitHub Copilot to really ensure they produce more code faster. We also use AI for testing. We use AI for quality assurance, for architecture assurance, but also for change management and other things. We use AI for migration. And all these things is a part of us really driving this. But we have consolidated partners, that both applications. So we have done a lot of exits of applications we don't use. We have consolidated our partners. Vicki mentioned, we have consolidated our SIs from more than 400 down to 2. And these 2, Cognizant and Infosys, they're really incentivized to help us to simplify and help us to adopt AI as fast as possible. So all these things is a part of us really creating the right foundation for us to drive this company forward. And it's hard work, and we're not done. We keep pushing hard, but we believe we have a foundation now where our segments, they can compete, where our channels, they have a good experience and our customers have a good experience. These have been very critical for software, but it's even more critical for AI. We believe that if you don't get that foundation right, we will actually see the run cost of AI outperform the benefit of AI. So we are very focused on that foundation to get that in place. We have 380 use cases today. So we are at scale. We are deploying agentic now. So the whole reason for us doing the 2 joint ventures with Quantium and with Accenture was to ensure we have that foundation in place, because we want to ensure, as we have mentioned many times, we are not an AI company, but to be a leading telco, we really need to be a leader in AI and in software. And this is the foundation. And these partners, they keep pushing us forward and really ensure that's in place. So we are pushing hard here, but there is a lot to do. Nathan Burley: Thanks, Kim. We'll go to Brian Han from Morningstar. We will go to the next question, which is from Andrew Gillies from Macquarie. Andrew Gillies: I'll keep it to one just in the interest of time. Not to put too much of a finer point on it, but just on the AI and data strategy, just a little clarification. You mentioned kind of faster delivery on this. Should we be thinking about that as kind of a structural pull forward of the cadence of cost out? I mean, Infosys, it was flagged before. Some of your outsourced partners are flagging really strong efficiency benefits, both internally for themselves, but also for the businesses that they work with. And more broadly, more recently, we've seen software vendors shifting from seat-based models to more of a value share-based model. Can you just clarify that that's all captured in your comments around cost on this call? And can you make a little comment on the cadence? And I presume you're going to reiterate the medium-term EPS CAGR, but that would be great. Vicki Brady: Yes. No, thanks, Andrew, for that. Again, just to reinforce, as we work with our partners, whether it's Accenture under our Data & AI joint venture, whether it's Infosys as a key software partner. And also, obviously, we're planning to also use them more extensively to help us in terms of really simplifying the complexity in our Enterprise service delivery for our customers. Look, I think Kim sort of covered it briefly then. As we enter those arrangements, they are built on very much aligned incentives of delivering real efficiency in terms of our partners have to be able to really be leaning into using AI to drive the efficiency and the experience benefits under those arrangements that we've entered into. So as we look forward, yes, those partnerships are another element of how we make sure we're driving efficiency in our business. Kim spoke to, our goal is, like we did with the Data & AI joint venture with Accenture, we're accelerating a 5-year road map we had into a much shorter time frame, but without driving cost up. And so we are very conscious of making sure that as we move forward, that alignment with our partners where we're both driving to get the efficiencies from the application of AI into our process systems and interactions is absolutely built in. And Michael, in terms of our forward sort of ambitions... Michael Ackland: No, I think it's captured in our forward ambitions. It's covered in that commitment to operating leverage, which I think is really important, growing revenue faster than we grow costs, and that opens up those jaws. The one point I would make, and I think it's really core to our technology strategy and how we're going about it is we are very -- and Kim made the point, there is a risk here that you end up in software licensing, in cloud costs, and in paying the AI providers that you offset your benefits. And that is very much our focus. We've made tremendous progress in the efficiency of our cloud costs. We're getting significant efficiencies around the way that we're focused on how we buy software. And that is embedded in our strategy to ensure that we're using an open architecture, modern software approach, and we're setting up the way that we're executing AI right now, so that we can swap out vendors that we can move between LLMs and that we are really focused on the cost of both cloud and AI. And I think it's been a really important point around those technology costs. So it's a great question, Andrew. Vicki Brady: Yes. Wonderful question. Thank you. Nathan Burley: We'll take 2 more questions from analysts, after which we will move to media. [Operator Instructions] Our second last question comes from Fraser McLeish from Credit Suisse -- I got that wrong, from MST. Fraser Mcleish: Just 2 quick ones from me. Just Vicki, obviously, there's a fair bit of discussion on AI in relation to costs. I'm just wondering, can AI be a competitive advantage for you in the marketplace in terms of being able to invest more and faster than competitors in customer tools and experiences? Or do you expect all players to broadly have the same capabilities? And then second quick one, maybe for Brad, just on fixed broadband. I mean, are you expecting much spin down from these new Internet -- to these new Internet-only plans? And what are you doing to minimize potential for that? Vicki Brady: Thanks, Fraser, for that. Just on AI and where we're at, I think the thing that's front of mind for us is it's moving so fast. And so we are absolutely focused on, we can't be complacent, we've got to be pushing really hard, because we do see, ultimately, for us to be a leading provider of connectivity. We're not an AI company, but we absolutely need to be a leader in how we're applying AI. And that's because, yes, it affects all the obvious parts of our business, how do we make those customer interactions more efficient and better for customers? How do we enable our teams to be able to use AI and work smarter and have greater satisfaction. But it's also right in the heart of our business, the network itself. And if I look at where networks are headed, and we do have Mobile World Congress coming up shortly, so we'll get another injection of where everyone a year on sees things headed. We absolutely believe networks are headed to being much more autonomous. And the complexity of doing that, you absolutely need to have AI deeply embedded and being at the forefront. And so absolutely being at the forefront of delivering world-leading connectivity is absolutely at the core of our differentiation. So moving fast. I think it's not just having it, I think it's moving at the pace and scale needed to make sure we maintain our differentiation. We do provide a premium experience in the market for our customers under the Telstra brand. And so we're very much focused on making sure we're moving fast enough. We are delivering those benefits to customers. We're helping our teams grow their skills and be able to use these tools effectively in the way they work. And ultimately, yes, we see it as an important piece. I mean, long run with any sort of technology, obviously, over time, I would expect it becomes more widely dispersed. But absolutely, we see it as important. The pace we move out here and really enabling our business with it is an important focus for us to deliver for our customers. On fixed broadband, I don't know whether Michael, you want to grab it or we want Brad just to quickly jump up and grab the spin down. Michael Ackland: I'm happy for Brad to... Vicki Brady: Yes, Brad, please. Bradley Whitcomb: Just I can't resist on the AI as well. Vicki mentioned that Telstra virtual agent, which we've deployed. And I think it's the start of a competitive advantage there. We've more than tripled the containment since we've launched that AI agent to customers. So they're able to get their needs met without having to go to a human agent. And another one I'll mention, which is really cool, is using AI, you can change our entire digital experience into over 35 different languages. We've had about 30,000 -- or rather 70,000 customers already do that, and that just makes it much easier for them to engage with us. So that's an example, I think, of where it helps us addressing the customer. In terms of the broadband only, there's a couple of areas that we're focused on there. One is opening up to customers that genuinely -- they have their own modem at home, and they're just looking for the broadband connection and not looking for that full experience. We think also, though, this gives us a softer entry point to have a conversation with the customer when they come in, they see a price point that they're comfortable with, and we talk about the value proposition and what equipment they do have in the home and to then talk about the advantages of things like our smart meter -- or Smart Modem 4.0 rather. So we're not anticipating significant spin down. We think those are 2 different segments of customer, but we will keep an eye on that. Nathan Burley: Excellent. And we will take our last analyst question from Nicole Penny from Rimor. Nicole Penny: Thank you for taking my question and for the detail on the Aura opportunities you're seeing. Just secondly, the CapEx on the Viasat project remains ongoing. Could you provide more color on the expected completion time line and the likely earnings impact during this period as the project moves towards full operation, please? Vicki Brady: Okay. And Nicole, is that the only one? Have you got any others? Nicole Penny: That's it. Vicki Brady: Fantastic. Thanks, Nicole, for that. Look, I'll make a comment and then Michael may want to jump in. Just to be clear, and hopefully, the appendix again helps reinforce it in the material we've issued today. We think about Aura and Viasat inside that $1.6 billion of CapEx spend and those overall returns are linked to that. The profile is a little bit different. Viasat is the smaller component inside that overall program of work where we have been supporting with the build-out of ground stations and other infrastructure. So it's captured inside that broader financial profile that you can see. So it's Intercity Fibre or Aura as it's now called, and Viasat combined. I don't know, Michael, if there's any other color. Michael Ackland: No, I don't think so. I mean the Viasat has been delivered on an ongoing basis, and we've seen the revenue start to appear through both InfraCo but also into our Telstra Enterprise business. And that will continue for the life of that project. They're long-term assets in terms of the ground stations and well on track. Nathan Burley: That concludes our question time from analysts and investors. We'll now show a short video, which I suspect you do not want to miss, because as Brad would say, it is pretty cool. So we'll show that. And after that, we will have time of questions from media. [Presentation] Steve Carey: Thank you, and welcome back. Thank you, Nathan, for that handover. We hope everyone enjoyed the new ad. We will now commence our media Q&A. We are slightly early. So apologies to some media who may be joining at 11. We will obviously drop you into the queue. In this session, we have Vicki Brady, our CEO; and our CFO, Michael Ackland, who will be available to address your questions that you have asked. [Operator Instructions] Our first question today comes from David Swan from Nine Metro Publishing. David Swan: I wanted to ask about spectrum strategy. I've got 3 questions, all related to that. So I'll just fire those away. You've told ACMA, the fair price is $1.4 billion and they've come back at $2.7 billion. Is that number -- I guess what's the number that Telstra would accept without passing costs on to consumers? Is there a sort of landing zone there? Or is it a binary number? I wanted to ask as well, you said the trade-off with spectrum is between network investment and consumer pricing. But is there a third option which might be absorbing the cost through lower returns to shareholders? Is that something that Telstra has or would consider? And third, I wanted to ask about ACMA's renewal process. I mean, you didn't avoid a competitive auction, which could theoretically cost more. Is the $1.3 billion gap that you've complained about still cheaper than the alternative, a competitive auction? Is that something you're keen to -- is a competitive auction, I guess, something you'd be keen to avoid? Vicki Brady: Thanks, David, for that, and some great questions on spectrum. So first thing I'd say is, as you called out, we absolutely agree we've got to pay a fair price for spectrum. It's a core part of delivering high-quality mobile services. And we see spectrum as one of those assets as a country, we absolutely need to be maximizing its benefits to consumers and businesses. We do think as a country, it would be helpful as part of a digital infrastructure plan to have a clear plan for spectrum long run. This process right now is renewal of spectrum. Obviously, there will be spectrum needed for 6G, for future satellite services, for lots of other things as we look forward. So we do think having a really clear plan for how we maximize the use of spectrum to get the maximum benefit for consumers and businesses is super important. Look, obviously, the process is still ongoing on the pricing of the renewal of the spectrum. That's part of the ACMA process right now. We have a different view to ACMA, and that will be part of our submission back in as part of that process. As you call out, there's about a $1.3 billion difference in what we think the fair market value of the spectrum that we will go through renewal on versus what the ACMA currently see as the fair market value for that. Look, in running a telecommunications business like Telstra, you're constantly balancing up various things and various trade-offs. Importantly, Telstra, like all telcos, is a big infrastructure business. We've got to invest a lot of CapEx into our business. And if you look globally, telcos have been challenged on getting reasonable returns, because we need to be profitable to make sure that we can keep investing, and that means investing in our network, in things like the 5G advanced capabilities, or bring in services like satellite to mobile texting, the satellite messaging service we launched last year. And we're seeing customers -- NPS is up, so we've got to keep investing, because expectations also keep rising. We know we've got to keep investing to be able to attract and retain the best talent and invest in their skills. And yes, we also need to deliver returns to shareholders. We've got an underlying return on invested capital at 8.9%. So through a lot of work, we've steadily seen that increase. It is above our cost of capital, but it's probably -- it's not at the level that our investors would ultimately hope for. So we do have an ambition to grow that to 10%. And I don't think that is unreasonable in any way. Remembering our shareholders, we have more than 1 million shareholders. We've got the largest retail shareholder base in the country. And we know through things like superannuation, we estimate about 16 million Australians benefit from the financial outcome. So yes, there is absolutely a balance we need to achieve as we make choices and decisions. Higher spectrum cost just puts again extra costs we need to consider, and we would have to think about the various trade-offs as part of that. But the process is still ongoing at the moment. Steve Carey: Thank you, David, for those questions. Next up, we have Jared Lynch from The Australian. Jared Lynch: Two questions for you. Telstra's first half profit was driven by strong cost control, and it's a strategy that you plan to intensify with the proposed 750 job cuts in the current half. Just wondering, how will you ensure that prioritizing short-term cost savings and efficiencies will not fundamentally undermine the in-house expertise and people-driven innovation necessary to deliver the long-term growth and service quality promised by your Connected Future 30 strategy. And then just on the Connected Future 30 strategy, I'm interested to hear how will your investment in AI and data functions, including the JV with Accenture be deployed to solve one of the nation's most pressing challenges, whether it's climate resilience, health care, accessing regional areas or digital inclusion. And I guess what is the legacy that you want Telstra's new capabilities to create for the country? Vicki Brady: Yes. Thanks, Jared. A couple of good territories there. So let me go firstly to first half. Yes, we've delivered a strong first half performance. And yes, as part of our strategy, given we have very small revenue growth to deliver positive operating leverage, we absolutely need to be driving cost and efficiency. But as we think about our business and we think about the capability we need to be able to deliver long run in this business, absolutely, our internal teams are critical to that. And we keep investing in our teams internally, whether that is in things like their ability to be able to use and apply AI capabilities, because we fundamentally believe, for all of our team, they will be better positioned in the future, the better able they are to apply AI and use it in their jobs. So we're absolutely -- internal capability remains critical. It wasn't that long ago, for example, we bought back our retail stores. And we've heard Brad speak about this morning, just the benefit that has driven in having such a highly engaged team of people out there servicing our customers face-to-face in our stores. We also will partner with key partners. And the couple of things you mentioned from last week, they are 2 examples of where we are partnering. First, in terms of our Enterprise business, we've still got a load of complexity we need to get through in that business. So we did announce and propose some changes where we are partnering with Infosys to really be able to access their capability to help us simplify the complexity in that business in the way we serve and deliver for our Enterprise customers. We also proposed changes in the Telstra, Accenture Data & AI joint venture. Again, that is about accessing Accenture's global capabilities to help us really accelerate our road map on data and AI to be able to deliver benefits to our customers and into our business more quickly. So absolutely, it will be a combination. Our internal teams are critical, and we keep investing in them. But we also -- to remain competitive and at the forefront, we've also got to leverage partnerships. And I can assure you, any decision that impacts a role inside Telstra, they are never taken lightly, and we support and work with our teams very, very closely as we work through anyone who has a role impacted as part of any of those choices and decisions. Just in terms of Connected Future 30 and that ambition as we look forward, I think fundamentally, we see connectivity, it is a foundational piece for the country. You look to the future of inclusion of productivity, of prosperity. Technology is going to play a key role, and having a really solid foundation of leading edge connectivity that is there to deliver to all of those future needs is absolutely fundamental. You spoke about things like health care. I think about education. I see the way we work and connect regional communities, it's absolutely core to who we are as Telstra and the focus and delivery of our Connected Future 30 strategy. So absolutely, that core foundation of leading connectivity, we think, helps enable the country in terms of those future ambitions of inclusion and of prosperity. Steve Carey: Thank you, Vicki. Thank you, Jared. We do have a couple of people on the call that haven't registered for questions. So I'll just quickly reiterate that. [Operator Instructions]. We will move to our next question in the queue, and we will go to Grahame Lynch from CommsDay, please. Grahame Lynch: I wanted to ask about spectrum renewals. I've been following the debate around this quite closely now for a few months. And it seems to be missing the reality that over the next 15 years or so, which is the period we're talking about, 5G and then 6G is going to require a lot of new spectrum in addition to the renewing spectrum. But also Australia's population is probably going to grow by quite a few million over that same period, which means that telcos such as Telstra are going to have to install a lot of new capacity in cities to deal with all that extra population. Is this -- are these 2 realities perhaps a bit missing from the discussion around spectrum? And are they informing Telstra's posture on renewal prices? And perhaps could Telstra be better articulating that these are the issues that we'll be facing in coming years? Vicki Brady: Yes. Thanks, Grahame. And I know -- I've been reading some of your articles that you've been writing and your opinion pieces. You're incredibly well informed and understand our sector and how important spectrum is. So look, I think... Grahame Lynch: Thank you. Vicki Brady: Yes. No, I really appreciate it, because it's a really important question where you've gone. Absolutely, renewal is important. As you well understand, better than anyone, it is 80% of the spectrum that our current mobile networks run on today that will go through this renewal 2028 through 2032. So the certainty of renewal is absolutely a positive. Obviously, we are debating with the ACMA what each of us think the fair market price of that spectrum is, because absolutely, we accept, understand we need to pay a fair market price on fair terms. So that's important. But I think where you're gone is critical. And that's why we have been advocating that as a country, we do need a really clear vision for the digital future that has a very clear digital infrastructure plan that includes spectrum. Because where you've gone, as you look forward over 15 years, it's not just the renewal of spectrum, it is all of those new services, all of those new capabilities like 6G, like some of the satellite capability that is currently sort of forecast to be able to be delivered over that time horizon. I think as a country, we absolutely need to be thinking about how do we maximize the use of our spectrum so we get the best possible outcomes for consumers and businesses. And I think that's an important piece that needs to be brought into the thinking. And again, that's not easy, and we are very happy to be part of that as Telstra and I think as a sector, alongside government and regulators, as we think about how do we absolutely set up the country to maximize the use of spectrum to get the maximum benefits for consumers and businesses. So I think it is an important element right now. A lot of focus on renewal, because that process is obviously well underway, but I think your broader point is incredibly important. Steve Carey: Thank you, Vicki. Thank you, Grahame, for that question. Next up, we have Jenny Wiggins from the AFR on the line. Jenny Wiggins: Vicki, 3 questions from me as well. Just with regards to AI, can you give us any more examples of how exactly you're accelerating Telstra's investment in AI other than what you're doing with Accenture? I mean, for example, is Telstra spending more money on AI investments in the current financial year? Secondly, just more generally, do you have any views on how the federal government can improve productivity and economic growth in Australia? And thirdly, with regard to the ongoing problems with the 4G VoLTE networks, that's an issue for all network operators and device manufacturers, do you think Telstra will ever be able to guarantee that in the future, all mobile phone devices that are sold in Australia will be able to connect to Triple Zero without any problems. I mean, do you think your testing and talks with device manufacturers will ensure that after the current state of problems we've had? Vicki Brady: Thanks, Jenny. Well, lots in those 3 questions. So let me take them one by one. In terms of AI, when I talk about accelerating our Data & AI road map, that's absolutely about accelerating the use cases and the benefits and scaling those across the business. In terms of where we're seeing some of that acceleration, we're absolutely -- through our Data & AI joint venture with Accenture, that's really helped us accelerate some of the fundamental pieces like really streamlining the number of data platforms that we rely on. So we're absolutely seeing acceleration there. We're not talking about accelerating spend. So one of the things we're really clear on is, as we make choices on partnering or going into joint ventures, how do we align our ambitions and incentives, so that it is about being at the leading edge of being able to apply these capabilities into our business, but do it in a way where we do manage our costs, because we're very conscious of that. It's an easy area to spend a lot of money and that to grow fast. So we're very conscious of those and thoughtful in how we set up those partnerships and how we architect the technology inside our business to make sure we have choice, so that we can both get the benefits, accelerate those benefits, but also not see our costs grow beyond where we are comfortable with that being. Just on the productivity agenda for the country, I think it's such an important discussion. One of the things we've been strong on is we do think, as you look forward for our country, whether it's productivity and prosperity of the nation, there's no doubt technology is going to play a big part in that. And we think something that isn't always at the top of the list is that technology, whether it's AI or data centers, it does need to be connected. And so having a really clear digital infrastructure plan for the country, so that as a sector we can align behind that with government, with regulators, so right policy decisions are made, the right investment decisions are made. The regulatory environment is set up to, yes, protect customers, but also encourage innovation. So we think that's a really big piece as we look forward, and we're really optimistic about what technology and the important role that connectivity can play in helping to enable that for the country. On the third one, where you are talking about Triple Zero. And yes, obviously, there's been a lot of focus on Triple Zero. The first thing I'd say, it is a very complex ecosystem to ensure Triple Zero works from the devices themselves through to the networks and the different softwares and protocols that are running over networks through to getting the calls through to emergency services who operate across around the country, state by state, territory by territory. Look, our focus -- this is a complex ecosystem, and I think everyone in that ecosystem is working to try and make sure it works absolutely as well as it can. And I would say, obviously, any call that doesn't get through is too many. But the large majority of that ecosystem does work well. There are some complexities in devices. You're spot on. And obviously, devices come into the country, device manufacturers have to accredit those. We do testing on our network. But it is a dynamic area where devices are changing, software is getting updated, networks are changing. And so we work really hard to make sure we meet our obligations to be monitoring devices. And obviously, as part of some of those obligations, it does mean blocking devices if we find they cannot make Triple Zero calls. And so I think it requires work right across that ecosystem to make sure Australians continue to trust and they should trust our Triple Zero system to be able to get help in an emergency. Steve Carey: Thank you, Vicki, and thank you, Jenny. Our next question comes from Rhayna Bosch from SBS. We might be having some issues there. So we might go to David Taylor from ABC. David Taylor: It's quite extraordinary what Telstra is doing. The ABC has spoken to both current employees of Telstra, but also previous employees of Telstra and those who have been contracted by companies to be also employed by Telstra, and there's a real sense of fear around how your AI investment and AI rollout is affecting jobs. So can you give me an idea of -- so it's a two-pronged question, I suppose. Over the past 12 months, what proportion of jobs that have been lost within Telstra are related to your AI rollout? And how many -- what proportion of jobs are going to be lost at Telstra up to 2030 based on AI? Vicki Brady: Okay. And thanks, David, for that. So first off, I mean, the pace of change in AI is quite extraordinary. And when I'm engaging with our teams internally, yes, one of the questions is what does it mean for my job going forward? And I think the thing we're focused on is absolutely none of us can predict that future. It is changing so fast. I look back over the last couple of years, just how fast it's changed. None of us, I think, predicted that. So the thing we're focused on with our teams, in an environment where it is uncertain how AI will be used, I think the most important thing is skilling our teams. And so we invest heavily in the tools available to our team members. We invest heavily in also the training and skills of our teams through our Data & AI academy, because irrespective of what the future is and how it plays out, we firmly believe that our people who have better capability in being able to use and apply AI will be better positioned for future jobs. So we're very much focused on that. And I do understand it is a question top of mind for our teams. And as I engage across the country and travel internationally, it feels like a very common theme. The world is moving fast. So our focus is on how do we skill, enable our teams, give them access to the tools. And we are seeing our team members who have access to our AI tools, which is the large, large majority, are using those tools on a weekly -- 75% of them are using them at least weekly and often a lot more often as it becomes part of the way they work and operate. So as we look at impacts on our business, and yes, any decision to impact a role is a difficult one. We have had to face into those decisions. They are necessary decisions to put us in a position to be competitive, to be able to deliver at the level we need to for our customers. Those benefits -- today, there's not a role I could say, has directly been taken by AI. But of course, our investment in digitizing our business, our investment in applying AI is generating a more efficient business for us. And that's why, as I said, our focus is absolutely on working with our teams, that investment in the tools, and that investment in their skills. Steve Carey: Thank you, Vicki. Our next caller is Brandon How from Capital Brief. Brandon How: Just wanted to touch on an earlier comment that was made during the analyst call. I think it was flagged that because of Telstra's disciplined capital management, it would be able to navigate the upcoming spectrum renewal fees if they were to go through as they're currently proposed. I was just curious if that means that there's unlikely to be significant disruptions to existing investment plans at least out to 2032. And just wanted to touch on a separate point as well. It was revealed -- Telstra revealed earlier in the year to the Triple Zero service outage inquiry that suffered about more than 5,200 mobile tower outages last year. I was just wondering what commitments are you making to ensure that this is brought down? Vicki Brady: Yes. Thank you. Thanks, Brandon, for those couple of questions. Look, this morning on the call with analysts, the question was around our capacity to be able to -- if those spectrum renewal costs come in as is currently proposed, how would we be able to navigate that? One of the things about Telstra, we're very focused on is ensuring the business is in the right position to be able to continue to sustain investing in the business. And we've worked over many years now to steadily improve our overall returns in the business. They're still not super high. They are above our cost of capital, however. And obviously, if that cost does land higher than what we think the fair market value is and that process is still ongoing, then that will be a consideration we need to consider as we think about various trade-offs, where we're investing our money, how we're positioning and pricing in market. So there are a whole lot of factors we would need to consider. The point this morning is, are we set up to be able to navigate that as a company. And I look at where we're at financially, our ability to keep investing in the CapEx needed to support the business, our balance sheet capacity as a business. So it was a broader comment about being able to navigate through that. Just in terms of Triple Zero, obviously, there's been a huge amount of Triple Zero focus, particularly through the latter part of last year. Telstra takes its obligations incredibly seriously. We do have 2 sets of obligations. We run the emergency answer point for the country. When someone calls Triple Zero under a contract with the federal government, it is a Telstra person that answers that call and passes it then on to the relevant emergency services. And we have our obligations as a telecommunications company, including as a mobile operator. We invest huge amounts of our CapEx into the resilience of our network. These are large complex networks. And they will have issues over time, particularly, I spoke this morning about the investment in power backup systems. The single biggest thing that impacts the resilience of our network is power outages. So we do invest in power backup. However, there are situations where power is out for extended time. It could be that equipment fails. They're not infallible. And so we absolutely invest heavily in resilience of our networks. We also invest in things like new technology, bringing satellite messaging to customers just as another form. If there is an issue on the terrestrial network, there's another layer. We also encourage our customers, who are heavily reliant on being connected, to think about multiple technologies rather than relying on just one. So there are many things we do. These are large complex networks, and they're not infallible, and we invest huge amounts in their resilience. Steve Carey: Thank you, Vicki, for that. Our final caller for the day is Andrew Colley from iTnews. Andrew Colley: Can we have an update on Telstra's lease of OneWeb's LEOsat constellations and the issues you're having with complaints about the performance of small cell base stations themselves. Has [ Telesat ] provided an update on when it might be able to fill coverage gaps in its constellation over Australia to eliminate the voice service dropouts when using those LEOsat for backhaul on those installations? Vicki Brady: Yes. Thank you, Andrew. And so yes, as you well understand, you understand this technology well, we have rolled out using OneWeb's LEO satellite constellation backhaul over their satellites to some of our remote sites. And their rollout of their satellite constellation hasn't gone as planned on their side. So it does mean today there are some issues, particularly impacting voice. However, in terms of data performance, we have seen significant improvements by being able to access that LEO satellite service. We are working through that, working closely with communities and our customers to figure out -- we have rolled it out to a relatively small number of sites to date. That rollout is not going further right now as we work out what is the right balance to find here. It does provide real benefits, much more capacity, much better performance in terms of data over those sites. However, as you call out, there have been some issues around voice dropouts given where that constellation is at. So that's something we continue to work through with OneWeb. And our teams, as I said, closely engage with customers and communities that rely on those small cell services. Andrew Colley: Okay, I have one more question I'll be able to ask. You've sought some delays to the Universal Outdoor Mobile Obligation to push it back a year. Has the federal government given Telstra any indications it's open to doing that or to holding back the legislation for further consultation? Vicki Brady: So just in terms of the Universal Outdoor Mobile Obligation legislation. So first thing I'd say is, we're absolutely at the forefront of rolling out those services in the country. We've already got satellite messaging that we launched in June last year in market. So commercially, we absolutely see the benefits of these services. Under that legislation, it looks at then future services, voice, data. Some of that is dependent on brand-new constellations, brand-new capability that is not commercially available today. So as we've thought about that and we've given input, that's just an important element. Some of this technology is very early, some of it not in market yet. So obviously, that's going to be an important factor, but we're absolutely at the forefront of bringing those services to Australians, because we see them as important services and extra layer of resilience in the event a terrestrial network has an issue and also that ability in a country as large as Australia when people are outside of mobile network coverage, that ability to stay in touch. Steve Carey: Thank you, Andrew, and thank you, Vicki. We do have one final question. Jared Lynch just had a follow-up question. So Jared, just over to you for your follow-up, please. Jared Lynch: Thanks, Steve. Vicki, today, other business leaders warn that without productivity gains that this is as good as it gets after real wages fell for the first time in more than 2 years. I'm just interested about capacity constraints at Telstra and whether you're changing investment as a result of inflation or capacity constraints and are any being delayed? Vicki Brady: Okay. I must admit, Jared, I did see some headlines this morning. I haven't read the transcripts and understood the full context of some of those comments. But in terms of where we're at, we're having to navigate. Obviously, there are inflationary pressures on some of our costs. That's why us being at the forefront of how we really drive efficiency and better outcomes for our customers is at the forefront. We're navigating that. We are very focused on what we call positive operating leverage. So we're in an environment where we're not seeing top line growth at any large level. So we've got to continue being efficient, to be competitive, to be able to deliver at the level we need to for our customers. So right now, we are navigating that. You will have seen, in terms of our overall result, we did reduce overall costs. So we're able to offset that inflationary pressure that, yes, we feel like consumers and businesses across the country feel. We've been able to offset through some of the hard work, the discipline and the gains that we found, particularly through technology investment. Steve Carey: Thank you, Vicki. Thank you, Jared, and thank you to all the media and analysts that have joined our call and Q&As today. Thank you for your time and investment in today's call. We will now wrap up the half year results update. Thank you very much, and have a lovely day.
Operator: And welcome to the Hamilton Insurance Group, Ltd. Earnings Conference Call. As a reminder, this call is being webcast and will also be available for replay, with links on the Hamilton Investor Relations website. I would now like to turn the call over to Darian Niforatos, Vice President, Investor Relations and Finance. Please go ahead. Thanks, Operator. Hi, everyone, and welcome to the Hamilton Insurance Group, Ltd. fourth quarter 2025 earnings conference call. Darian Niforatos: The Hamilton executives leading today's call are Pina Albo, Group Chief Executive Officer, and Craig Howie, Group Chief Financial Officer. We are also joined by other members of the Hamilton management team. Before we begin, note that Hamilton financial disclosures, including our earnings release, contain important information regarding forward-looking statements. Management comments regarding potential future developments are subject to the risks and uncertainties as detailed. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I will hand it over to Pina. Thank you, Darian. Hello, everyone, and thank you for joining us. As we begin today's call, Pina Albo: I want to take a moment to reflect on how far we have come at Hamilton Insurance Group, Ltd. We have been a public company since November 2023 and since then, we have delivered consistently strong results. Results that allowed tangible book value per share to grow 67% since the IPO. That is a remarkable achievement by anyone's measure. With that intro, and before I share more details on our quarterly results, there are three key drivers I would like to point to that underpin the sustainability of our performance. First, the Hamilton team. Namely our strong operational and underwriting culture. Our underwriters are technical and experienced in cycle management, leaning in and leaning out when and where rates, terms, and conditions are attractive, and when and where this is not the case. This approach has allowed us to post another year of record performance in 2025, so kudos to you, Team Hamilton. Second, our success is rooted in relationships, namely those we have built with clients and brokers across our hybrid platform. For reinsurance, our key client strategy, which involves supporting targeted partners across multiple lines, has created broad and resilient trading relationships allowing us to secure the signings we target even in competitive environments. Across our insurance platforms, our specialized product offering and technical expertise serve as strong differentiators, positioning us well with our producers. And last but not least, our strong capital position. Our balance sheet remains robust with low debt leverage, prudent reserves, and strong financial strength ratings, all of which support our business and our performance. Now let me move on to our results. In 2025, Hamilton Insurance Group, Ltd. delivered record net income of $577,000,000, or return on average equity of 22%. We grew gross premiums written 21% to a record $2,900,000,000. We reported a combined ratio of 92.9% and grew tangible book value per share by 25%. Again, these results reflect not only our skilled risk selection, commitment to cycle management, and strong broker and client relationships, but also the overall strength and stability of the organization we have built. After several hard market years, we now find ourselves in a transitioning market, but importantly, one that still provides ample pockets of attractive opportunities for underwriters like ours who are technical, astute, and nimble. A perfect segue to our fourth quarter highlights. We continue to deliver excellent top line growth this quarter with gross premiums written increasing 23%. In so doing, we focused on business where pricing and terms remained compelling and backed away from business which did not meet our return hurdles. The fact that we are nimble and diversified across insurance, reinsurance, and multiple lines of business allows us to do that. Let me break down how this approach showed up across our three underwriting platforms. Starting with Bermuda, our Bermuda segment grew 27% this quarter, driven by casualty reinsurance, which is predominantly written on a quota share basis. This business continues to enjoy healthy underlying rate increases, which in turn flow through to us. Our growth this quarter came from a combination of new business written earlier in the year earning in, largely general liability and professional lines, and expanded participations on renewal business with our targeted key clients. As a reminder, unlike many of our peers, our growth in casualty was recent, started from a small base, and occurred during a period when underlying rates have been improving considerably. Turning to the property book we write in Bermuda, and evidencing the flip side of cycle management, we continued to reduce our participations on large property D&F insurance accounts where competition was strong and consequently pricing did not meet our required thresholds. Moving to International, which houses Hamilton Global Specialty and Hamilton Select, gross premiums written grew 20% in the quarter. Starting with Hamilton Global Specialty, gross premiums written were up 21% driven by specialty and casualty classes in lines where we leaned into attractive opportunities. For example, we grew mergers and acquisitions and marine lines, with a particular boost from the recent launch of our new marine cargo offering. On the other hand, and similar to what we did in Bermuda, we pared back our writings of large property D&F insurance accounts which did not meet our return expectations. And finally, Hamilton Select. Our U.S. E&S platform, which focused solely on casualty classes in 2025, grew 19% in the quarter. Growth was driven by excess casualty, products and contractors, and small business, where we were able to secure attractive pricing, terms, and conditions, but we wrote less professional liability business as we were not satisfied with the pricing environment. Now that is cycle management in action. Let me now turn to the January 1 renewal season. Overall, we entered the renewal period from a position of strength. Our capital is robust, our underwriting discipline unwavering, and our relationships with clients and brokers strong. Consequently, this was a constructive renewal for us, one where we were able to deploy capital while protecting margins. Starting with property cat. The renewal season was defined by abundant capacity and strong competition, particularly on the higher layers. As you will have heard from my peers, pricing for global property catastrophe business declined at 1/1, but discipline prevailed to keep terms, conditions, and attachment points largely consistent with post-reset levels. We focused our capital deployment on well-performing property accounts where risk-adjusted pricing remained attractive. We also leveraged cost-effective retrocession—we benefited from double-digit rate reductions—to maintain adequate margins even as headline rates declined. Turning to casualty. Competition on casualty reinsurance was more measured. Going into 1/1, strong underlying insurance rate increases that flow through to the proportional business we support continue apace, and ceding commissions were generally flat. In fact, given the attractiveness of underlying rates, some cedents chose to retain more of their own business, but we still managed to grow our modest shares on core key clients, a factor that contributed to our growth. As I have said in prior calls, our focus in the casualty area continues to be on those clients who retain a large percentage of their business, provide us good data, and continue to invest in their in-house claims handling. In specialty reinsurance, conditions remained favorable for buyers with increased reinsurer appetite and limited growth opportunities overall, though the picture varied meaningfully by class. Our key client cross-class engagement shone through here, providing some increased signings and new business opportunities, including in our relatively new credit, bond, and political risk offering. Overall for 1/1, the good news for us was that we were able to secure our targeted signings in a competitive market where even our clients looking to retain more of their own business net. As I look further into 2026, we expect the market to remain competitive but that pricing across the lines of business that we target to remain largely risk adequate. Consequently, while we are confident in our ability to continue to find attractive opportunities, I expect our growth going forward to be more measured than it was in the past. In other words, in areas where the market gets too competitive, we will not chase top line at the expense of the bottom line. This disciplined approach will ensure we deliver sustainable results. And with that, I will turn the call over to Craig for some more depth into our financials for the quarter and 2025. Thank you, Pina, and hello, everyone. Craig William Howie: In 2025, Hamilton Insurance Group, Ltd. had a very strong year of financial results, with record net income of $577,000,000, 44% above the $400,000,000 of net income in 2024. We had a return on average equity of 22% compared to 18% in the prior year, and we grew book value per share by 24% over the prior year to a record $28.50. For the fourth quarter of 2025, Hamilton reported net income of $172,000,000, equal to $1.69 per diluted share, producing an annualized return on average equity of 25%. We had operating income of $168,000,000, equal to $1.65 per diluted share, producing an annualized operating return on average equity of 25%. These results include strong underwriting income, solid investment returns, as well as a tax benefit from the reversal of valuation allowances against some of our deferred tax assets and the Bermuda substance-based tax credit. Without these two tax items, the annualized operating return on average equity would still have been a healthy 18%. I will discuss this more in detail shortly. These quarterly results compare favorably to 2024 fourth quarter net income of $34,000,000, or $0.32 per diluted share, an annualized return on average equity of 6%, operating income of $87,000,000, or $0.82 per diluted share, and an annualized operating return on average equity of 15%. Before I move on to our underwriting results, I want to talk through the two tax items: one, the Bermuda substance-based tax credit, and two, the tax benefit in our income tax line. The Bermuda Tax Credit Act became effective on December 11. Under this framework, we qualify for the new substance-based tax credit, which is designed to reward insurers that demonstrate meaningful local economic activity in Bermuda. As a reminder, this credit enhances the competitive advantage for Hamilton Insurance Group, Ltd. since we are exempt from the Bermuda 15% global minimum tax until the year 2030. The credit was driven by both jobs-based and expense-based components and is applied against the Bermuda group’s tax liability. The program includes a transition schedule allowing recognition of 50% of the credit in 2025, 75% in 2026, and the full 100% benefit for fiscal years beginning in 2027. In 2025, we accrued the full credit in the fourth quarter when the Bermuda tax law was passed. Going forward, we will accrue the credit over a 12-month period, reporting it quarterly, based on qualifying payroll and eligible expenses. In our financial statements, the credit flows through as a contra expense to the other underwriting expense and corporate expense line items. For 2025, we recorded a Bermuda substance-based tax credit of $20,700,000. In the Bermuda segment, this was a $17,300,000 offset to the other underwriting expenses, and in corporate expenses, a $3,400,000 offset. For 2026, all things staying about the same, we would expect the Bermuda credit of about $27,000,000 based on a 75% phase-in for the year. We will also no longer have a value appreciation pool expense in 2026, since the VAP program ended in 2025. Turning to the tax benefit on our income tax line, we recorded a net tax benefit of $28,000,000 arising from the net release of valuation allowances against deferred tax assets in the United Kingdom and the United States, jurisdictions which had previously accumulated deferred tax assets due to tax net operating loss carryforwards. This tax benefit came through the income tax line on our income statement. Moving on to underwriting results. For the full year 2025, Hamilton Insurance Group, Ltd. continued to grow its top line at an impressive double-digit rate. Our gross premiums written increased to a record $2,900,000,000, compared to $2,400,000,000 this time last year, an increase of 21%. Each of our platforms, Hamilton Global Specialty, Hamilton Select, and Hamilton Re, expanded where there were attractive opportunities and pulled back from underperforming lines to maintain margins and drive profitability. In terms of underwriting performance, our 2025 year-end combined ratio was 92.9%. Now for some more detail on our quarterly underwriting figures. Hamilton had underwriting income of $76,000,000 for the fourth quarter, compared to underwriting income of $22,000,000 in the fourth quarter last year. The group combined ratio was 87% compared to 95.4% in 2024. In the fourth quarter, our loss ratio improved to 54.6%, down 5.5 points from 60.1% in the prior period. The improvement was driven by meaningfully lower net catastrophe losses, which were 9.0 points better than 2024. This was partially offset by higher attritional losses of 56.5% compared to 51.2% in the prior period. The increase in attritional was driven by more large losses compared to the same period in 2024 and the change in business mix, including increased casualty reinsurance business. For the full year 2025, the attritional loss ratio was 54.4% compared to 53.1% in 2024, for the same reasons. In the fourth quarter of 2025, we had favorable prior-year attritional development of 3.1 points, driven by property and specialty classes. This compares to 1.3 points of favorable development in the fourth quarter last year. The expense ratio decreased 2.9 points to 32.4%, compared to 35.3% in the fourth quarter last year. The decrease was mainly driven by the Bermuda substance-based tax credit and third-party fee income which offsets other underwriting expenses. Before I turn to segment results, I wanted to provide guidance on some items for 2026. Beginning in 2026, we are increasing our catastrophe and headline loss threshold from the current $5,000,000 to $10,000,000. Given the size of Hamilton Insurance Group, Ltd. now, this revised threshold is at a level that is commensurate, focusing on events that are truly headline losses. This means the attritional loss ratio will now include all losses of less than $10,000,000. We would expect the attritional loss ratio to run at about 55% in 2026. On expenses, we expect our other underwriting expense ratio to continue to decrease incrementally in 2026. Our corporate expenses to run between $45,000,000 and $50,000,000 for the year. Next, I will go through the fourth quarter results by segment. Let us start with the International segment, which includes our specialty insurance businesses, Hamilton Global Specialty and Hamilton Select. In the fourth quarter, International had underwriting income of $12,000,000 and a combined ratio of 96%, compared to underwriting income of $9,000,000 and a combined ratio of 96.3% in the fourth quarter last year. The decrease in the combined ratio was primarily related to the loss ratio decreasing 1.7 points, partially offset by the expense ratio. The current-year attritional loss ratio was 5.5 points higher than the prior period due to large loss activity in the quarter, while the prior period had no large loss activity. The prior-year attritional loss ratio was a favorable 2.3 points. This was driven by favorable development in our property and specialty classes. The expense ratio increased 1.4 points to 42% compared to 40.6% in the fourth quarter last year. The increase was primarily driven by the acquisition cost ratio due to less ceding commissions and more profit commissions, and a decrease in third-party management fee income. Other underwriting expenses were down 2.3 points. Moving to some full-year figures, in 2025, International grew to $1,500,000,000, up from $1,300,000,000, an increase of 16%. This was driven by growth across all classes: property, specialty, and casualty. The 2025 year-end combined ratio was 95% compared to 95.6% for 2024. The full-year 2025 current-year attritional loss ratio was 54% compared to 53.5% in 2024 due to a change in business mix. Given the revised threshold for catastrophe and headline large losses, we would expect our International segment to have an attritional loss ratio of around 54.5% in 2026. I will now turn to the Bermuda segment which houses Hamilton Re and Hamilton Re U.S., the entities that predominantly write reinsurance business. In the fourth quarter, Bermuda had underwriting income of $63,000,000 and a combined ratio of 76.4%, compared to underwriting income of $13,000,000 and a combined ratio of 94.3% in the fourth quarter last year. The decrease in the combined ratio was primarily related to lower catastrophe losses and lower expenses in the quarter, partially offset by an increase in the current-year attritional loss ratio. The Bermuda current-year attritional loss ratio increased 5.0 points to 56.7% in the fourth quarter, compared to 51.7% in the fourth quarter last year. This was primarily driven by more large losses in the quarter compared to the same period in 2024, and a change in business mix, including an increase in the casualty reinsurance business. The Bermuda prior-year attritional loss ratio was a favorable 4.1 points. This was primarily driven by favorable development in our property class. The Bermuda expense ratio decreased by 8.3 points to 21.2% compared to 29.5% in 2024, driven by a decrease in the other underwriting expense ratio primarily due to the Bermuda substance-based tax credit of $17,000,000 and increased third-party performance-based fee income, partially offset by the acquisition cost ratio due to a change in business mix. Moving to some full-year figures, in 2025, Bermuda grew to $1,400,000,000, up from $1,100,000,000, an increase of 26%. The increase was primarily driven by new and existing business in casualty and specialty reinsurance classes. The 2025 year-end combined ratio was 90.9% compared to 87% in 2024. The full-year 2025 current-year attritional loss ratio was 54.6% compared to 52.7%. The increase was due to more large losses and business mix shifting toward casualty reinsurance which carries a higher attritional loss ratio. Given the business mix shift and the revised threshold for catastrophe and headline losses, we would expect an attritional loss ratio of about 56% for our Bermuda segment in 2026. Now turning to investment income. Total net investment income for the fourth quarter of 2025 was $98,000,000 compared to investment income of $36,000,000 in 2024. The fixed income portfolio, short-term investments, and cash produced a gain of $42,000,000 in the quarter, compared to a loss of $31,000,000 in 2024. As a reminder, this includes the realized and unrealized gains and losses that Hamilton Insurance Group, Ltd. reports through net income as part of our trading investment portfolio. The fixed income portfolio had a return of 1.2% or $38,000,000 and a new money yield of 4.2% on the fixed income investments purchased this quarter. The duration of the portfolio remains at 3.4 years. The average yield to maturity on this portfolio was 4.1% compared to 4.7% at year-end 2024. The average credit quality of the portfolio remains strong at AA3. The Two Sigma Hamilton Fund produced a $56,000,000 net return for the fourth quarter of 2025, equal to 2.6%. For the full year of 2025, the fund had a net return of 16% or $310,000,000. The Two Sigma Hamilton Fund made up about 37% of our total investments including cash at 12/31/2025, compared to 39% at 12/31/2024. Now turning to capital management. As you may have noted in our fourth quarter earnings release, we announced that Hamilton Insurance Group, Ltd.’s Board of Directors has declared a special dividend of $2 per common share, which will result in an aggregate payment of approximately $206,000,000. The decision to pay a special dividend was based on the company's record earnings in 2025 and our excellent capital position. This dividend represents an effective way of returning excess capital to our shareholders. For the full year 2025, we also repurchased $93,000,000 worth of shares at an average price of $22.13 per share. Even with this special dividend, we are able to continue repurchasing shares under our current share repurchase authorization, which remains in effect with an unutilized limit of $178,000,000. Both the special dividend and the share repurchases reflect our ongoing commitment for active and effective capital management. Next, I have some comments on our strong balance sheet at year-end 2025. Total assets were $9,600,000,000 at December 31, 2025, up 23% from $7,800,000,000 at year-end 2024. Total investments and cash were $5,900,000,000 at December 31, an increase of 24% from $4,800,000,000 at year-end 2024. Shareholders' equity for the group was $2,800,000,000 at year-end 2025, which was a 21% increase from year-end 2024. Our book value per share was $28.50 at December 31, up 24% from year-end 2024. Thank you. And with that, we will open up the call for your questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. We ask that you limit yourself to one question plus one follow-up, and then rejoin the queue for any further questions. Our first question comes from the line of Hristian Getsov with Wells Fargo. Your line is open. Hristian Getsov: Good morning, and congrats on the strong quarter. My first question is on the underlying loss ratio guide for 2026. The 55% for the full year. If you did not change the cat definition threshold, what would that look like versus the 54.4% we saw in 2025? And given the definitional change, is there a new cat load Hamilton Insurance Group, Ltd. will manage to for each of the segments? Thank you. Craig William Howie: Hi, Hristian. First of all, thanks for the question. So first of all, we did guide to the 55%. Part of that increase over the full year 2025, which was 54.4%, the majority of that increase is the change in the threshold that we have. The business mix for 2026 will remain about the same, so we would expect the attritional to have remained about the same, but that is the change in our threshold from the $5,000,000 to the $10,000,000 threshold that is taking that loss pick up to the 55% guidance. As far as catastrophe losses, our catastrophe losses will come down slightly, but they will still be in the range of about 6% to 7% for our catastrophe losses for the year. Hristian Getsov: Got it. All that makes sense. And then could you just give a little bit more color on deciding to deploy a special dividend? I would think given where your shares are at currently, I mean, the gap that has closed versus book value, but still close to or a little bit below. I guess, why not buy back more of your shares? So this is just a more effective way to get rid of that excess capital since it could be an ROE drag? Or how should we think about that? And should we expect maybe a more modest level of buyback in 2026 just given the deployment of the special? Craig William Howie: Good question. What I would say to you is we have the flexibility to do both of these things. And after a record year of earnings, we decided to return a portion of our capital. A special dividend is an active and an effective way of returning that capital quickly to our shareholders. But we will also be able to continue buying back shares. As you know, we bought back $93,000,000 worth of shares in 2025, and we still have the ability to buy back under our authorization. We still have $178,000,000 to be able to do that. We have a really strong track record of being good stewards of capital. And when we see and have strong business opportunities to deploy that capital there, we are going to do that. As you know, for example, we have been able to do that by growing our premiums at double-digit levels every year since 2017. But otherwise, we are going to return some of this excess capital to our shareholders and that is what we are doing here with the special dividend as well as the share buybacks. We have the ability to do both. Hristian Getsov: Got it. Thank you. And if I could sneak in one more on the E&S platform. The growth is moderating a little bit, but in part, that is likely due to a higher base you are growing off. But are you seeing any signs of increased competition on the casualty side from MGAs, fronting companies, or other admitted carriers? We have heard a lot of competition on the property side, but I am not sure if you are seeing that on the casualty side as well. Thank you. Pina Albo: I will take that, Hristian. Thanks for the question. Firstly, I think it is important to note the growth that we saw on Hamilton Select this quarter has been completely in line and year to date is completely in line with what our expectations were. We continue to see robust pricing, particularly in the areas where we grew more this year. That was, once I mentioned, the excess casualty, products and contractors, and small business. In terms of increased competition, where we are seeing that is on the professional lines side, and that is where we wrote less of this business this quarter. Overall, I think I take a step back and look at Select, again, completely in line with plans. It is an incredibly important growth engine for us, given the strength of the team that we have assembled there and the relationships they have. You will notice some recent hires recently that we announced that we will be launching in the property space, and that will concentrate on the smaller to mid-sized property business where we are not seeing the robust competition that we have seen in large accounts space where we have shed business. I hope that answers your question. Hristian Getsov: Yep. Thank you. Operator: Your next question comes from the line of Thomas Patrick McJoynt-Griffith with KBW. Your line is open. Please go ahead. Thomas Patrick McJoynt-Griffith: Hey. Good morning, guys. Thanks for taking the questions. What is the optimal premium leverage that you would like to manage to? And is that changing as the portfolio mix leans heavier toward casualty growth after a period when property growth was stronger? Craig William Howie: Hi, Tommy. It is Craig. You know, our premium leverage has not really changed very much. We have been retaining about 80% of the business on a net basis. But over time, you know, your point is valid. As we go into a transitioning type market, one of the things that we do not want to do is just blindly edge up on the premium leverage for that purpose. You may recall in 2024, we essentially retained more of our business because we had primary proceeds from the IPO that we wanted to put to work. And in 2025, we actually were able to buy a little bit more reinsurance coverage for the overall book because the quality of business that we had been putting on the books gave us the ability to get lower rates for those reinsurance purchases. So we have been able to do that over time; we have been able to retain, and that retention rate has stayed right around 80%. Thomas Patrick McJoynt-Griffith: Okay. Got it. And then maybe a question on the data center opportunity. You know, a lot of carriers have been asked about it, and it is going to be a great need for capital over the coming years. I guess the question is, do you guys have sort of the expertise to play in that niche? Are there little pockets of opportunities there, or is it a great, large opportunity? What are you guys doing on the data center side? Pina Albo: I will take that one. We are certainly seeing some more of that business and we see it as an opportunity, and we are taking up some of these opportunities. For example, writing some physical damage-only covers where it only covers contents and does not cover business interruption. I think that although this is an opportunity and we will lean in with our expertise that we have in-house, we are also a little bit cautious here on, you know, accumulation, particularly on the large data centers. So we are monitoring that very closely when we look at our writings. And, also, the whole business interruption area. Again, the physical damage cover that we are now offering on the insurance side does not include business interruption. So we are looking at this as an opportunity, but also looking at it very cautiously, with those factors in mind. Justin Lee: Thank you. Operator: Our next question comes from the line of Daniel Cohen with BMO Capital Markets. Your line is now open. Please go ahead. Daniel Cohen: Hey, good morning. Thanks for taking my first one, maybe just on reserves. If you could just add a little more color on the years and the classes that the property and specialty favorability came from this quarter. And then maybe just anything on how casualty reserves moved this quarter and if there has been any change in loss trend there? Thanks. Craig William Howie: Yes. Hi, Daniel. So first of all, overall, our reserves were favorable for the quarter. None of that came from casualty. So overall, casualty was flat for the quarter with no movement. So this was another year of favorable reserve development for Hamilton Insurance Group, Ltd., something that we have been able to achieve each and every year since the inception of the company. But to your point, yes, the favorable development this quarter came from property and specialty, mostly from the property side. What we typically do on the property side is take a look at those reserves that have been in place or have matured over a period of time for over two years, and we take a look at that. And some of those we were able to release in the fourth quarter and throughout the year as well. We actually have a reserve review done by an outside actuary twice a year on our book of business. And we consequently take a look at their guidance that they see when they are looking at the industry levels as well as other clients—so other peers of ours—and it gives us an indication of where we stand against what an outside actuary would look at, and we would remain above the midpoint of their estimate consistently year after year. Daniel Cohen: Right. Thanks. And then, Pina, on the casualty reinsurance side, you just mentioned preferring clients with good data, in-house claims handling. I was just wondering, could you add more color on maybe what differentiates those clients versus maybe some others in the marketplace? And whether or not Hamilton Insurance Group, Ltd. is embedding their own conservative margin on top of where their cedents are picking? Thanks. Pina Albo: Yes. I will take that question. So just maybe a little bit of a background. Again, we started from a very low base when it came to casualty business. And in the context of our AM Best first positive outlook and then our upgrade, we had targeted in advance the clients that we wished to support on the casualty side. And these are clients that we knew well already from property and specialty placements that we enjoy with them. And those clients there provide us robust data so we can see what they are doing in terms of limits management, pricing versus what they are seeing in trends. We look at it with respect to what we are seeing and what we anticipate trending to be. So that already is one tick. Then we look at how robustly they handle their claims in-house and how quickly they resolve these claims. So all in all, those are the kinds of clients we target when we look at our reinsurance support, and because we are able to support them broadly across classes, that makes these relationships very resilient. Daniel Cohen: Thanks. And then, also, I think if I could sneak one more just on the corporate expense line. Craig, I think you said there is going to be no more value appreciation pool expenses there. So outside of that tailwind from the Bermuda tax credit, should we expect this line to continue to tick down? Or how should we think about that? Craig William Howie: Yeah, Dan. Certainly, that is exactly what you would expect. Certainly, the value appreciation pool expired, and the second tranche of that pool vested in November 2025. So the VAP is no longer there. And the guidance that I have given in the prepared remarks is that you can expect corporate expenses to be in the range of $45 to $50 million. Operator: Your next question comes from the line of Matthew Heimerman with Citi. Your line is now open. Please go ahead. Your next question comes from the line of Justin Lee with Barclays. Your line is now open. Please go ahead. Justin Lee: Hi, everyone. Thanks for taking the question. The first one I had was just on the Two Sigma Hamilton Fund. I believe in previous quarters, you guys gave sort of the year-to-date, month-to-date returns. And maybe I might have missed it, but I was just wondering if you guys can provide what returns were as of January. Craig William Howie: Yeah. Hi, Justin. This is Craig. You know, with respect to us having earlier reporting than we have had in the past, it is not as meaningful now for us to provide that type of guidance anymore. So going forward, we are going to report these results on a quarterly basis with no lag, just like we do with the rest of our portfolio. What I will tell you is that Two Sigma has historically outperformed in a volatile market. And as you know, we have been very fortunate to have the partnership that we have with Two Sigma. We have had a 13% average annualized return every year since the inception of the fund in 2014, and the fund has never had a calendar year loss. So again, going forward, we will report this on a quarterly basis with the same as the rest of our call. Justin Lee: Got it. Thank you. And second one, more high level. Appreciate your comments around scaling back on the large property side and focusing on areas that are, you know, still getting relatively better pricing versus loss cost. And on the other hand, I am sort of seeing data points that suggest that maybe on the primary side, the pressures on property may be permeating onto the general liability and other lines of casualty side on the pricing front. I was wondering if you can kind of help me square those two dynamics, and how you guys are sort of thinking about growth? Understand it is going to be more measured, as you said, but just a little bit more color there would be helpful. Thank you. Pina Albo: Sure. I will take that, and thank you for the question. Firstly, on the property side, you are right. Where we are seeing the most pricing pressure is on those large insurance accounts, those large scheduled accounts, and that is where you have seen us pare back our writings consistent with our disciplined approach to underwriting. On the middle market and the smaller property accounts, we are not seeing that level of pricing pressure, so we are still seeing some attractive opportunities there, and that is where we are seeing some growth. And that is where our new underwriting offering in Hamilton Select will lean into. So that is on property. On the casualty side, we are still seeing some health increases on the insurance side of the equation. And that is actually supported by the fact that a lot of our cedents, and I mentioned that in my prepared remarks, seeing these robust pricing increases are keeping more of their business net. They are also confident that that pricing is keeping pace with the trend that we are seeing out there. So we do not see any signs of that casualty pricing abating. And as long as it is in that area where it is keeping pace with trend, or we feel it is, we will continue to look at that business. Operator: Our next question comes from the line of David Sedor with Citizens. Your line is now open. Please go ahead. David Sedor: Hi. Thank you, and good morning. On the special dividend, what will be the source of funds there? Is that cash already on hand or from the Two Sigma fund or fixed income portfolio or maybe a mix of those? Craig William Howie: Hi, David. This is Craig. Yes. It is from available cash on hand as well as the fixed income portfolio. David Sedor: Thank you. And then are you able to provide any color on the elevated large losses in both segments from the quarter? Craig William Howie: Sure. I can do that. So essentially, what happened this quarter in 2025 is we had more large losses in this quarter than we did in 2024. The largest loss that we had this quarter was a satellite loss. It impacted both segments for us in our specialty classes of business. And this is exactly the reason why we changed the threshold in our catastrophe and large headline loss, to the capture of these truly headline losses. We wanted to make sure that we gave guidance on what that impact would be going forward. That is why we gave the guidance going forward for the attritional loss ratio. But essentially, of these types of losses that come through, it was impacting our attritional loss ratio up and down just based on some of these large losses, and we wanted to make sure that we are taking that into account. David Sedor: Thank you. Operator: If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Our next question comes from the line of Matthew Heimerman with Citi. Your line is now open. Please go ahead. Matthew Heimerman: Hi. Good morning, everybody. Apologies for earlier. I guess first question would be, with respect to the Bermuda tax credit and the significant savings, or offsets to expenses you are getting there, I am curious if there are any thoughts around potentially reinvesting some of that incremental savings on a go-forward basis either for new priorities or accelerating existing investments that might already be on your roadmap? Craig William Howie: Yeah. Thanks, Matt. You know, the credit is really designed to reward insurers that demonstrate meaningful local economic activity in Bermuda. This credit really keeps Bermuda as an attractive place to do business. And there are two components that we are able to take advantage of under this credit, which are jobs-based and expense-based components. We are going to continue to invest in our projects, our operations, and our technology to operate at scale in Bermuda. And for a company the size of Hamilton Insurance Group, Ltd., we have a large footprint, a significant presence in Bermuda with over 100 people in our office there, and we also hold all of our board meetings in Bermuda. So while we are not specifically designating these funds to a particular purpose, they will serve to reduce our overall operating expenses. And, again, this shows up as a contra expense in our other underwriting expenses in the Bermuda segment as well as in our corporate expenses. Pina Albo: And, Matt, maybe I will just add on to that. I think if you look at our history, we have a very strong track record of investing in our underwriting capabilities and in adding new lines of business, whether it is on the reinsurance side over the years, most recently in our credit and bond offering, but also prior to that by adding per risk and proportional, and also on the insurance side by adding attractive lines of business, be that in our Hamilton Global Specialty platform or also in Hamilton Select. So I think you will see that continue in our future. Matthew Heimerman: Thanks for that. I guess the other question would be, just can you remind us the guiding principles that you have with respect to technology and underwriting to help us better frame as you invest in new technologies and implement AI, more use cases just how to frame that? Pina Albo: Sure. I will take that. And, Craig, if you want to add anything, be my guest. But I think you start with the fact that we have, and we are very proud of the fact that we have, very robust underwriting tools and underwriting frameworks that are regularly calibrated for what we are seeing in the market. And we calibrate them because we meet very regularly as a team, both on the platform side, but at the executive level and then across the group, to share insights, monitor pricing expectations, and all of that gets retooled into our underwriting tools. If I segue from there to how we are embracing AI, I say that we are embracing AI. I think I have mentioned on a prior couple of prior calls that we are already deploying AI in several use cases across our platform, both on the underwriting and the claims side. The use cases are predominantly for efficiency purposes, and what that means is it allows us to extract data, populate our underwriting workbenches, summarize some very complex reports, and what that does is it allows us to get to more business more quickly. In Hamilton Select, you will have heard, in addition to this populating of workbenches, we are looking to roll out in the course of 2026 a smart queuing feature which will allow us to triage the risk better. That means not only just getting more hits at bat, but getting more swings at balls we know we are going to hit. So that is how we look at AI. I think the other thing you should know in this context is our guiding principle here is to ensure at the same time as we are embracing AI that we have a robust control framework in place to avoid any unintended consequences of this new technology. Matthew Heimerman: Thanks for that. One of the things—just one quick follow-up. One of the things I am struggling with is one of the benefits clearly is efficiency, and you mentioned that. And, obviously, that can take the form of doing more with the same or doing the same with less, and many permutations. So I am curious when you think about the efficiency savings, like, how concentrated they are to Bermuda relative to the rest of your platform? And I am kind of asking that in the context of just talking about the tax credits, which are supposed to spur investment there. And this obviously allows you to do. Just curious if those are in contrast with the others specifically, but more broadly, as we think about how you staff and how you invest, how that might look differently around your platform. Pina Albo: Yeah. We have not yet come up with a number in terms of savings we are going to achieve in dollar terms from this technology, but we are seeing benefits of the technology across all three platforms. In Bermuda, we have been deploying AI technology for a couple of years now, and we are also using it increasingly, again, across our Hamilton Select and Hamilton Global Specialty platforms for our insurance business. Over time, we will continue to see the benefit of this technology, but it is across all three of our platforms. Matthew Heimerman: Thank you for that. Operator: Thank you. That will conclude our question-and-answer session for today. I will now turn the call back over to Pina Albo. Pina Albo: Thank you. I want to just take a minute to thank everybody here for joining our call today and engaging with us as you have. We are once again incredibly proud of the results we achieved this year, and we look forward to speaking to you in the very near future. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning. Welcome to F&G Annuities & Life, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. During today's presentation, all callers will be placed in listen-only mode. Following management's prepared remarks, the conference will be opened for questions, with instructions to follow at that time. I would now like to turn the call over to Lisa Foxworthy-Parker, Senior Vice President, Investor and External Relations. Please go ahead. Thanks, Operator, and welcome, everyone. I am joined today by Christopher Blunt, Chief Executive Officer, and Conor Ernan Murphy, President and Chief Financial Officer. Lisa Foxworthy-Parker: Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures which management believes are relevant in assessing the financial performance of the business. Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for webcast replay. I will now turn the call over to Christopher Blunt. Christopher Blunt: Good morning, and thanks for joining today's call. We delivered a strong finish to an outstanding year. Christopher Blunt: Through disciplined growth and the proven ability and flexibility of our business model, as we transition to be more fee-based, higher margin, and less capital intensive. And we remain focused on creating long-term shareholder value. We are executing on our strategy and made further progress toward our 2023 Investor Day targets, as we achieved record AUM before flow reinsurance fueled by one of our best years of sales. Excellent performance in our high-quality diversified investment portfolio, strong performance across our business balanced with diligent expense management, and a healthy financial and capital position. I would especially like to thank our employees. Their hard work and dedication are truly the foundation of everything we achieve for our business, and for our customers. Now looking at our results more closely, we achieved record AUM before flow reinsurance of $73,100,000,000, up 12% over year-end 2024, as well as record retained AUM of $57,600,000,000, up 7% over year-end 2024. This record AUM was driven by $14,600,000,000 of gross sales, our second highest year on record. 2025 demonstrated our commitment to manage growth for the long term, as we prioritize pricing discipline and capital allocation to the highest return opportunities. Christopher Blunt: For the full year, we delivered $9,000,000,000 of core sales including indexed annuities, indexed universal life, and pension risk transfer, and $5,600,000,000 of opportunistic sales, including MYGA and funding agreements. Conor will provide more details on sales later in the call. Next, turning to the investment portfolio. Our high-quality diversified portfolio is performing very well. The retained portfolio is high quality with 97% of fixed maturities being investment grade at year end. Since 2020, we have selectively repositioned over $2,000,000,000 of assets to optimize, derisk, and position the portfolio to perform in varying market conditions while also improving credit quality. Credit-related impairments have remained stable at eight basis points in 2025, well below our pricing assumption. This brings our five-year average since 2021 to basis points, which is exceptionally low. Our fixed income yield was 4.65% in the fourth quarter, up six basis points over the 2024. As a reminder, our fixed income yield excludes alternative investment income as well as variable investment income, which we define as prepayment fees. Looking at our alternative investment portfolio, our annualized return was approximately 7% in the fourth quarter, as compared to our 10% long-term expected return. At year end, approximately 40% or $4,000,000,000 of our $11,000,000,000 alternative investment portfolio was comprised of equity interests, including limited partnerships, with the remaining 60% being investment-grade fixed income debt with more predictable levels of investment income. Starting in the 2026, we are updating our long-term expected return for alternative investments to reflect only the 40% or $4,000,000,000 of equity interests. We will reclassify the remaining 60% or nearly $7,000,000,000 into our fixed income yield and AUM as shown in the investment income and yield table on Page 8 in our financial supplement. We believe this will more appropriately delineate between the fixed income portfolio and alternative investments while also improving comparability to others in the industry. Industry. This disclosure refinement will not have any impact to adjusted net earnings on an as-reported basis. We are often asked about the effect of short-term interest rates on our business following the recent Fed rate cuts. Given the nature of our spread-based business, longer-term rates and the shape of the yield curve are more significant to us than short-term interest rates. We do not have significant exposure to changes in short-term interest rates, as we have hedged the majority of our floating rate portfolio to lock in higher rates over the past couple of years. Our floating rate exposure is now only $2,800,000,000 or approximately 5% of our total portfolio net of hedging. Another consideration is variable investment income. We reported $7,000,000 of pretax prepayment fees in the fourth quarter. This brought the full year to $56,000,000 in line with full year 2024. As a reminder, prepayments fluctuate quarter to quarter and present a headwind in 2026, if bond prepayments vary from 2025 levels depending on market conditions. As far as our asset managers go, we really think we have the best of both worlds in terms of our competitive positioning and flexibility. We are now in the ninth year of our strong and seasoned relationship with a world-class manager in Blackstone. And we have the flexibility to work with other asset managers whether for flow reinsurance or specialty asset classes that complement Blackstone's capabilities. Blackstone employs a robust and thorough underwriting approach by developing its own forecast based on conservative macroeconomic views and historical sector performance. Christopher Blunt: Next, turning to private asset origination, which is a key component of our investment strategy, and represents 20% or $11,000,000,000 of our retained portfolio. Here, we utilize Blackstone's best-in-class origination, underwriting, and structuring teams to source high-quality pools of physical and financial assets. These include corporate and commercial lending, consumer loans, real estate, and other real asset exposures. When it comes to private asset origination, most of these directly originated asset classes have been in existence for decades within the bank channel and have long performance histories over multiple market cycles, providing observable data for thorough underwriting. Private asset originations allow us to mitigate our credit risk in a couple of ways. They provide diversification to investments that we can access through public markets, and the bilateral nature of these private origination transactions allow us to perform comprehensive analysis on an asset-by-asset basis and incorporate stronger covenant protections relative to the public markets. From a ratings perspective, our private asset origination portfolio has a strong credit profile. Approximately 92% of the private origination debt portfolio is investment grade, and included within the 97% investment grade for our total fixed income portfolio. We primarily use the top five nationally recognized statistical rating organizations. Approximately 90% of the private origination debt portfolio and 94% of our total fixed income portfolio are rated by a combination of the top five agencies, including Moody's, S&P, Fitch, Kroll, and DBRS. Egan-Jones ratings are de minimis at less than 1% of our total retained portfolio. And private letter ratings account for approximately 17% of our total retained portfolio, and undergo the same analytical rigor as public ratings. The combination of Blackstone's structuring talent, our ability to complement Blackstone's ability with other asset managers, the track record of these assets, and our thorough due diligence has helped generate attractive risk-adjusted returns for F&G Annuities & Life, Inc. that have performed very well to date and through stress environments like the COVID pandemic. We have refreshed our annual portfolio stress test which is conservative and assumes no management action. Once again, the stress test has confirmed that our portfolio is well positioned to withstand a sharp downturn in the economy. In summary, we feel comfortable and confident in the credit soundness of our investment portfolio. Please see our Winter 2025 investor presentation for further details on our stress test. Next, I would like to provide an update on our strong progress toward our 2023 Investor Day medium-term financial targets now that we are at the midpoint of our five-year horizon. Christopher Blunt: We have grown AUM before flow reinsurance, from the $51,000,000,000 baseline to $73,000,000,000 at year-end 2025, a 44% increase at the midpoint mark as compared to our target of 50% in five years. We have expanded ROA excluding significant items from the 110 basis point baseline and made significant progress toward the lower end of the 133 to 155 basis point targeted range. And we have increased ROE excluding AOCI and significant items from the 10% baseline and are closing in on the lower end of the 13% to 14% targeted range. The preferred stock investment from FNF in 2024, combined with our own internal capital generation, enable us to grow significantly faster than originally projected when we set our Investor Day targets. On December 31, FNF completed the distribution of approximately 12% of the outstanding shares of F&G Annuities & Life, Inc.'s common stock to FNF shareholders. Following the distribution, FNF retains control and a majority ownership with approximately 70% of the outstanding shares in F&G Annuities & Life, Inc. This has increased F&G Annuities & Life, Inc.'s public float from approximately 18% to approximately 30% after the distribution, strengthening F&G Annuities & Life, Inc.'s positioning within the equity markets and facilitating greater institutional ownership. This distribution reflects FNF's confidence in F&G Annuities & Life, Inc.'s long-term prospects and is intended to unlock shareholder value by enhancing market liquidity and broadening investor access to F&G Annuities & Life, Inc.'s shares. On a stand-alone basis, we reported GAAP common equity, excluding AOCI, of $6,000,000,000 at year end, and we have grown book value per share excluding AOCI to $44.43, up 62% since the 2020 acquisition. In summary, F&G Annuities & Life, Inc. finished the year strong. I am excited about the future, and our ability to continue to deliver long-term shareholder value. Christopher Blunt: Looking ahead, F&G Annuities & Life, Inc. has differentiated capabilities and is uniquely positioned in the industry. We have made significant progress executing on our strategy, leveraging the strength of our distribution partners to continue to grow our spread-based business alongside our growing sources of fee-based, higher margin, and less capital intensive earnings through our flow reinsurance, middle market life insurance, and owned distribution strategies, all of which is showing up in our results as expected. I will now turn the call over to Conor to provide further details on F&G Annuities & Life, Inc.'s fourth quarter and full year highlights. Conor Ernan Murphy: Thank you, Chris. This morning, I will provide some additional details of our sales, fourth quarter and full year earnings and performance drivers, and our strong capital position. Starting with sales, as Chris mentioned at the beginning of the call, we generated $14,600,000,000 of gross sales for the full year, including $3,400,000,000 in the fourth quarter. We had $9,000,000,000 of gross sales of our core products, including indexed annuity, indexed universal life, and pension risk transfer. For the full year, this was our second year of more than $9,000,000,000 in core sales. This includes $2,800,000,000 of core sales in the quarter, in line with the 2024 and up 27% over the sequential third quarter. To provide a few highlights of our core sales, indexed annuities were $6,700,000,000 for the full year which was in line with full year 2024 and included $1,900,000,000 of indexed annuities in the quarter, up 12% over the 2024. This is a strong result in a competitive environment and coming off a record 2024 for fixed index annuities sales for both F&G Annuities & Life, Inc. and the industry. FIA is our largest contributor to indexed annuity sales and progressively increased during 2025, with modest but increasing Rilla sales throughout the year. IUL sales were a $190,000,000 for the full year, including over $50,000,000 in the quarter, and reflect a 14% increase over full year 2024. Our life insurance solutions are meeting the needs of the underserved, multi middle market which is driving continued steady growth. ERT sales were $2,100,000,000 for the full year, including over $800,000,000 in the quarter. This result marks our third consecutive year attaining $2,000,000,000 or more in PRT sales and landed squarely in our $1,500,000,000 to $2,500,000,000 targeted annual range. We continue to see a robust PRT pipeline for midsized deals up to 500,000,000 where F&G Annuities & Life, Inc. competes well. Gross sales of our opportunistic products including funding agreements and multiyear guaranteed annuities were $5,600,000,000 for the full year, including over $600,000,000 in the fourth quarter. Opportunistic sales volumes fluctuate quarter to quarter depending on economics and market opportunity. To provide a few highlights, funding agreements were $1,800,000,000 for the full year, up nearly 80% over the $1,000,000,000 in full year 2024. This included nearly $300,000,000 of funding agreements in the quarter, as compared to no funding agreements in the 2024. As we enter 2026, we took advantage of an attractive market window and successfully executed a $750,000,000 FABN issuance in early January as we continue to expand our high-quality investor base. MYGA sales were $3,800,000,000 for the full year, including over $350,000,000 in the quarter, as compared to $5,100,000,000 in 2024 including nearly $650,000,000 in the 2024. We have intentionally moderated MYGA volumes from the prior year level given market condition, competitive dynamics, and flow reinsurance optimization as we continue pricing discipline and allocating capital to the highest return opportunities throughout the year. F&G Annuities & Life, Inc.'s net sales retained were $10,000,000,000 for the full year 2025, as compared to $10,600,000,000 in full year 2024. This included $2,300,000,000 of net sales in the quarter, down slightly from the 2024. Stepping back, 2025 showcased the diversity of our new business engines, attractive liabilities allowing us to flex across our products and channels to source the most in a given environment. We are also uniquely positioned with our third-party MYGA flow reinsurance partners to dynamically adjust volumes up and down as the market economics change. This is not supplemented by a reinsurance sidecar and we expect our mix of sales to shift more toward FIA over time. As one of the industry's largest sellers of annuities and life insurance, our model is sustainable and allows us to optimize and position the business for long-term success. This aligns our interest well with the continued strong secular demand by consumers and financial advisers for retirement savings solutions, including our core indexed annuity and indexed life products. Conor Ernan Murphy: Turning to earnings. On a reported basis, adjusted net earnings were $123,000,000 or $0.91 per share in the fourth quarter. Alternative investment income was $65,000,000 or $0.047 per share below management's long-term expected return for the quarter. For the full year, on a reported basis, adjusted net earnings were $482,000,000 or $3.64 per share. Alternative investment income was $278,000,000 or $2.03 per share below management's long-term expected return for the year. Full year adjusted net earnings included three favorable significant items totaling $30,000,000 or $0.22 per share which are detailed in our financial supplement. Overall, as compared to the prior year, adjusted net earnings reflect asset growth, growing fees from accretive flow reinsurance, steady owned distribution margin, and operating expense discipline driving scale benefit. As Chris mentioned, our results have generated sustainable returns. Our fee income from accretive flow reinsurance has grown to $56,000,000 for the full year 2025, up 37% over $41,000,000 in 2024. Our fee income from owned distribution margin contributed $47,000,000 for the full year 2025, up 2% over $46,000,000 in 2024. Our fee-based strategies, including flow reinsurance fee and owned distribution margin, together with steadily growing IUL product fees, have contributed approximately 15% of F&G Annuities & Life, Inc.'s adjusted net earnings, excluding significant items, for the full year 2025. As we continue to execute on our strategy, we expect our share of fee-based earnings to grow to approximately 25% of our total earnings by year-end 2028. From a flow reinsurance perspective, we continue to expect to reinsure the vast majority of MYGA sales depending on economics, and as discussed on last quarter's call, with the reinsurance sidecar, we expect to evolve towards 50/50 retained versus flow for FIA sales. Importantly, we will continue to grow retained AUM, as we balance retaining business versus optimizing flow reinsurance and preserving capital flexibility. Our owned distribution portfolio is performing well and creating value. We have invested nearly $700,000,000 in our four owned distribution investments, and generated $80,000,000 of EBITDA for the full year 2025. Our holdings are diversified by product and market and reflect growing businesses with strong leadership. Two of our holdings are life IMOs that produced about 30% of F&G Annuities & Life, Inc.'s IUL sales in full year 2025. The other two holdings are annuity IMOs that produced approximately 10% of F&G Annuities & Life, Inc.'s total annuity sales the full year. In the future, we have opportunities to expand the value of owned distribution through our existing holdings. As F&G Annuities & Life, Inc. grows, we are benefiting from increased scale, as our ratio of operating expense to AUM before flow reinsurance decreased to 50 basis points at year-end 2025, down from 60 basis points at the 2024, meeting our target through a combination of growth in AUM and expense actions we have taken. As AUM grows and we continue to manage expenses, we expect the operating expense ratio to improve to approximately 45 basis points by year-end 2027 for a cumulative 15 basis points or 25% improvement over the three-year period. F&G Annuities & Life, Inc. is uniquely positioned in the industry with a profitable and growing $57,000,000,000 in-force block that does not contain any problematic legacy business. Our asset and liability cash flows are well matched. Our retail fixed annuities are 92% surrender protected, and non-surrenderable liabilities include funding agreements, pension risk transfer, and immediate annuities. Over the past couple of years, both F&G Annuities & Life, Inc. and the industry have seen elevated terminations on annuities, which provide a boost to earnings from higher surrender charge fees when they occur. Beyond that initial benefit, terminations can temporarily pressure near-term spreads. As we move into 2026, this is a potential source of quarterly variability, and we feel that we benefit either way over the long term. If termination flow from the current pace, we forego the incremental surrender charge fee income, but benefit from retention of the underlying retained asset and profitable in-force liability. If terminations hold at the current level, we continue to benefit from higher surrender charge fee income and free up capital to deploy to new business with renewed surrender charges and longer surrender periods resulting in stickier in-force liabilities that generate significant margins over time. Conor Ernan Murphy: Next, I want to spend a few moments highlighting a capital transaction. We are on track to close a transaction during the first quarter with an investment firm, Ancient Financial Holdings LP, to sell F&G Life Re Limited, our Bermuda-based legal entity with affiliate-only reinsurance, effective March 1. In preparation for the sale, our Iowa operating company recaptured approximately $900,000,000 or one-third of F&G Life Re's affiliated statutory liabilities at year end. Approximately $600,000,000 of this was ceded to an existing third-party reinsurance partner at year end. We expect to receive net proceeds of approximately $300,000,000 from the sale of the legal entity and the remaining runoff in-force block, including a return of capital in the form of a $200,000,000 dividend of assets at year-end 2025 from our Bermuda entity to our Iowa operating company. Blackstone will retain asset management for the in-force assets and Ancient will manage assets under a new flow reinsurance treaty for MYGA new business. After the transaction closes in the quarter, we expect AUM to decrease by $1,900,000,000. The foregone annual adjusted net earnings are expected to be approximately $10,000,000 per quarter before deployment of proceeds on future flow reinsurance fee income. The transaction provides a number of benefits to F&G Annuities & Life, Inc., including the transfer of capital through the dividend at year end and the opportunity through F&G Annuities & Life, Inc.'s disciplined execution of risk transfer options to dispose of a valuable asset that we no longer need to support our reinsurance strategy. The transaction also provides counterparty diversification for MYGA flow reinsurance in the future as we are always looking to expand with high-quality flow partners. As a reminder, F&G Annuities & Life, Inc. remains a U.S.-domiciled company. We are a full U.S. taxpayer and all new business is originated in our U.S. subsidiaries. Turning now to our strong capital position, we remain committed to our long-term target of approximately 25% debt to capitalization excluding AOCI, and we expect that our balance sheet will naturally delever over time. We continue to target holding company cash and invested assets at two times interest coverage. Our annualized interest expense is approximately $165,000,000 or roughly a 7% blended yield on the $2,300,000,000 of total debt outstanding. We ended the year with an estimated company action level risk-based capital, or RBC, ratio of approximately 430% for our primary operating subsidiary, above our 400% target and boosted by the year-end recapture from the Bermuda legal entity. Importantly, F&G Annuities & Life, Inc. maintained strong capitalization and financial flexibility across all of our statutory balance sheets including our offshore entities, which we conservatively manage to the most stringent capital requirements of our regulators and four rating agencies. From a capital allocation perspective, during 2025, our capitalization supported sustained asset growth, and we returned $137,000,000 of capital to shareholders through common and preferred dividends. Notably, we increased our quarterly common stock dividend by 14% in the fourth quarter as supported by our strong cash generation. To wrap up, as I reflect on the past year, we have extended our proven track record and positioned F&G Annuities & Life, Inc. for long-term growth. To recap some highlights, we have executed on our strategy as we made continued progress toward our 2023 Investor Day target and improved our operating expense ratio by 10 basis points. Maintained a disciplined focus on our core products including indexed annuities, indexed universal life, and pension risk transfer, allocating capital to the highest return opportunities, significantly expanded in the earnings contribution of our fee-based flow reinsurance, middle market life insurance, and owned distribution strategies alongside continued growth and our spread-based businesses. Enhanced our strong capital position to fund our organic growth not supplemented by the launch of our sidecar that provides long term on demand capital created flexibility to monetize the intrinsic value in our own distribution strategy in the future, and we expanded our public float from 18% to 30%, enhancing market liquidity and broadening investor access to F&G Annuities & Life, Inc. shares. As I look ahead to 2026, we remain focused on growing our core business and delivering long-term shareholder value by continuing to increase our assets under management primarily through our core products, generating additional incremental scale benefit, expanding ROE excluding significant items, and moving further toward a more fee-based, higher margin, and less capital intensive business model leveraging our position as one of the industry's largest sellers of annuities and life insurance. This concludes our prepared remarks. We will now open for questions. Operator: And a confirmation tone will indicate your line is in the question queue. It may be necessary to pick up your handset before pressing the star keys. One moment please for our first question. First question comes from the line of John Barnidge with Piper Sandler. Please proceed with your question. John Barnidge: Good morning. Appreciate the opportunity and hope you are all well. My first question, can you talk about software exposure in the investment portfolio? If you are underexposed to that area, where is some overexposure where you believe there is a strength? Christopher Blunt: Yeah. Hey, John. It is Chris. Happy to start with that. Yeah. So software exposure for us is quite manageable. It is less than 5% of the total portfolio. If you break that down further, obviously, that is a huge category. We think it is less than 1% that has some potential for disruption or disintermediation risk. Obviously, underwriting for AI risk is not a new topic for Blackstone. They have been on this theme for probably a decade now, and really have been focused on companies with durable use cases, high switching costs, structural moats, etcetera. So we feel really good about that exposure. Same thing on commercial real estate, where we have, I guess, tenants that you would loosely call software. Tend to be the hyperscalers, and these are long-term leases with cash flows and, you know, low LTVs, etcetera. So we think we are in really good shape there. I do think there is tremendous upside in the private equity portfolio because, again, this is not a new theme. So, you know, disruption cuts both ways. But I would say manageable on the credit side, with some pockets of upside in the private equity portfolio. Thank you for that. My next question, can you maybe talk about your near-term outlook for variable investment income given it kind of underperformed in the quarter? Conor Ernan Murphy: Yeah. So John, at this point, I would say it is the same. We have a blended rich on the current basis of approximately 10%. And as we mentioned in Chris' prepared remarks, we were in that sort of seven, seven unchanged, seven, seven and a half type range the quarter, seven blended for the year. So it remains the same. We feel very confident in what is in our portfolio. We, I do not expect we did talk about we are going to do a geographic shift, if you will, in Q1, but I do not anticipate that there would be a commensurate change in the outlook and that should be all that should all that should net out to the same overall blended return. So no real change, and I think there is probably an air of optimism relative to where we are, but we are to be a little careful on that. I think others had maybe similar perspectives with their fourth quarter returns and as they look into the 2026. Christopher Blunt: Yes. I think Conor hit it. The only thing I would add, John, is that, yeah, from a planning perspective, we plan for, I would say, continued mediocre returns because I think that is the prudent thing for us to do. But there are some encouraging signs. We are starting to see more IPOs, more transaction activity. So, hopefully, that continues, but, you know, our job is to not build a business plan around that. Conor Ernan Murphy: Yep. It probably would also make sure we, I think as you know, obviously, Blackstone are our partner for this. They have a good history of being a little on the conservative side too and having an increased value upon realization. So as this continues, we still feel very, we still very, still feel very good about our portfolio. Thanks for the answers. If I could ask one more. As I look at your supplement, you have a list of a number of your reinsurance partners. And I see Somerset Re in there who has a relationship with the entity that is acquiring Brighthouse. Can you talk about your diversified panel, your outlook for continued participation there by the existing partners, and general demand in the market. Thank you. Christopher Blunt: Yeah. Sure, John. Thank you. Well, let me, of all, say yes. I acknowledge, obviously, the relationship between Somerset and Aquarian. No indication of any kind from Somerset or Aquarian that anything would change with that relationship. So let me be clear on that. But, yeah, we have a suite of partners here in addition, obviously, to the sidecar with Blackstone. We have got another one that we just told you about today with Ancient, so pleased about that. There are others. We have a lot of people who show up at our doorstep and who want to be our reinsurance partners. And, honestly, individual appetites at these companies ebb and flow, so you have to be prepared with a nice suite of partners. So no concerns at all. In fact, we probably have more partners than we handle at the moment or could have more partners than we could handle. So feeling very good about that, and, obviously, happy to have another significant partner join us here on March 1. Thank you. Operator: The next question is from the line of Alex Scott with Barclays. Please proceed with your question. Alex Scott: Hi. For the first one, I was hoping you could talk a little bit more about, you know, the transaction you mentioned. And, you know, I think it sounded like you had already gotten 200 into the stat and from that and maybe another 100 coming. So I just wanted to check to make sure I have that right. And also just get your thoughts on sort of uses of that capital. Christopher Blunt: Alex, this is Chris. I am just going to start with a little history of, you know, we set this up, I want to say, six, seven years ago. And at the time, we thought we might have a path to be a flow reinsurer ourselves. And so there were some advantages to having a Bermuda operation. Our strategy is our organic business took off. Our PRT business took off. We just did not see that in our future. So it had effectively become just a runoff block of assets. Yet we knew it was a pretty valuable entity. It had a, you know, multiyear track record, audited financials, a team, etcetera. So, yeah, being approached by, you know, the folks at Ancient who we thought were very credible potential partners. This looked like it is just a good opportunity to jettison an operation that really was not part of our go-forward strategic plans and pick up another partner. But I will let Conor talk about some of the details behind it. Conor Ernan Murphy: Yeah. Yeah. Just the pieces building towards your question. So we mentioned, we recaptured a third of it, reinsured or reinsured 600 of that 900. We have got $1,900,000,000 of AUM moving across. So proceeds of $300 of which 200 essentially has already been included in that RBC number at the end of the year. So part of why the RBC number is in the 430 range. Last year, we were both sort of 410. So we do not obviously expect to continue to run the company at a 430 range, so that is some capital flexibility. Remaining, therefore, just mathematically proceed to $300, $200 already. So there is another 100 to come. I would describe that towards general uses: sales, growing the business. Very focused on growing AUM, but I would also take the chance to reiterate we are going to stay very disciplined. So as we, we will write great business when the opportunity arises. If the margins are not there, we will be a little patient, and if that means we have more cash and more capital along the way, then I think that is probably a good thing as well. That is helpful. Thanks. I wanted to also circle back on the crediting rate, or, sorry, the surrender fees and how they are contributing to the crediting rate and just think through that a little. We have seen this at some other, you know, spread-based companies where there has been a temporary drag of sorts that surprised people. You know, where are the surrender fees, where do you expect them to go to? I just want to make sure I am understanding and incorporated into my estimates enough ROE pressure because I, you know, we are forecasting your ROE is going up because you have this plan to send it off. I just want to understand if that is going to take a little more time because of this dynamic or, you know, can you help us understand that? Conor Ernan Murphy: Yeah. Yeah. Sure. So there is quite a number of pieces to that. But if I maybe put it into an ROA context or the surrender fee income, we mentioned a little bit of this coming into the call. Obviously, it has been contributing to ROA. But specifically to your question, we would expect that the volume of surrenders, and therefore the related surrender fee income, to be lower in 2026 than 2025. Now from an ROA perspective, there are other components as well. We have highlighted the fact that we expected the investment ratio will continue to improve. So I think all in all, would imagine in the very term, that is maybe we might be kind of around where we are. We may be in some element of a plateau. But I think you are thinking about it the right way. Right? If surrenders come down, we have more assets, and, honestly, I think we would rather have the assets than, and if that meant a less muted expansion of ROA but higher AUM, we would be good with that. But I think, yeah. I mean, I would argue I think that both the, I would say the prepayment number probably a little higher in 2025 than we might see in 2026, but it is pretty modest. I would not be surprised if we saw surrenders, surrender-related fees, down, you know, 20% roughly from where they are would be kind of where my head is thinking. But, obviously, a lot of that depends on external factors and rates and suitability rules at other companies and everything like that. So it is hard to tell. But that frames the way we are thinking about it. Christopher Blunt: Yeah. Alex, the only thing I would add to that, what Conor said, is just to link a couple things. It is hard to isolate just one metric. So there is no doubt ROA has been pumped up a little bit through excess surrender fees. But the same phenomenon that has caused that has also caused muted realizations in the PE portfolio. And means that we have had to operate with significantly less capital, you know, getting 7% versus 10 on $10,000,000,000 of AUM. That goes directly to capital. So seeing surrender fee income drop off a cliff would probably be driven by a pretty sharp move down in interest rates, which I think would have some offsetting positives for us. So, obviously, it is all linked. Said another way, ROA would undoubtedly be lower if not for all the excess surrender fees, but my guess is AUM would be significantly higher than it is at this point too. Alex Scott: Got it. That is helpful. I have a couple more, but I will requeue. Thanks. Operator: Our next question is from the line of Mark Douglas Hughes with Truist Securities. Please proceed with your question. Mark Douglas Hughes: Conor, the 15 basis points of improvement over three years, will you refresh us on the pieces that are going to, how that is going to break out? What are those specific big contribute to that? Conor Ernan Murphy: Well, really, it is expense. So it is obviously, ratio is AUM to expenses. But, essentially, what I would say now is that we will keep our overall expenses about, we aim to keep our expenses entirely flat year over year, 2025 into 2026. If you were going to peel into that a little bit between kind of the fixed and variable, I would say that while we continue to grow, we will pull our fixed costs down a few percent in order to fund the variable, you know, the offsetting few percent on the other side. So I want to make sure I am answering your question, but that is really the overarching way is that we will continue to grow, but we will not grow expenses. We mentioned, you know, getting another, you know, so it is going to be another 10%, another five basis points, you know, we will do everything we can to do that as quickly as we can. Very good. And then, what is the latest thoughts on terms of the trajectory on Rilla sales? I think you are describing a steady improvement still off of a small base. How do you see that over the next couple of years? Conor Ernan Murphy: Yeah. We feel very good that we combine our Rilla far, we still combine our Rilla with our FIA, but, you know, that is, we talk about a lot of core products, but that might be the most core, if you will, the combination of FIA and Rila. So we are very pleased with Rila, it is off a small base. Right? We have not been in the space that long, and you know from everybody else, it takes a little while to get going. But we are really, really happy with where, echo, really happy with where the Rila is going, and I would maybe just also, like, FIA and IUL are going. PRT, obviously, a bit seasonal. That is the other core one. You tend to do a lot more in the back half of the year than the front half. And then we will remain opportunistic on FABN and MYGA. Operator: Appreciate that. Thank you. Thanks, Mark. The next question is coming from the line of Wilma Bernice with Raymond James. Please proceed with your questions. Wilma Bernice: You saw a little bit lower FABNs quarter over quarter in 4Q. That was pretty similar to other issuers. Maybe just talk a little bit about any causes of the slowdown in the quarter. And what is causing the bounce back in demand so far in Q1 2026? Thanks. Conor Ernan Murphy: Honestly, I think for us too, that is perfect. That is, to repeat myself a little bit, it is opportunistic for us. So we were very happy with what we wrote in terms of just deploying capital and finding that really just the balance in total between volume and return. And in the third quarter, we had the opportunity to write an FABN where we had, I would say, an increased interest from the big, big asset managers, which helped pull in our credit spread. We were many, many times oversubscribed. And I think it has been a good market in fairness for others as well. We came into the new year with a view of, well, let us see if that is still good or perhaps even better. And, honestly, it just was. It was a really good time. We keep it right at the beginning of the year, January. So it was a really good time to come into the market. It felt like a nice amount to put to work. We could have written more than the $750,000,000, but you are trying to do the balancing act of getting the price where you want as well. So you want to pull in your spreads, you want to be oversubscribed, and you want even more of the big asset managers. At this stage, we have essentially them all. So really very pleased with that. And now we sit back. I think you are probably aware, at this stage now, we have to wait until after all the statutory filing stuff is done. So we will not even have an opportunity until late in the second quarter. We will not, it is not something we will do every quarter. We will come in just as we see the prevailing trade winds being very effective. So I would have a reasonable expectation we will do more during the year, but as to exactly which quarter it will fall into, we will be very much market dependent. Wilma Bernice: Thank you. And then maybe you could talk a little bit about MYGA sales. Seems like there has been a bit of a pivot towards the index products. Is that something you expect to continue to see given the interest rate environment changing a little bit? Maybe just give us a little color there. Conor Ernan Murphy: Yeah. And look, I will be careful here because each entity, each company has maybe a slightly different view here, and I will speak specifically about ours. We are seeing better relative returns elsewhere. Meaning across the other core products. So, look, we are still in the MYGA business. We will continue to write MYGA, but be a little more selective about it. So we are entirely prepared to write less here, and deploy that capital in other places. There are times, even last year, there was quite a, I think, a significant fluctuation between Q1 and Q2. We had a quiet first quarter, a big second quarter, and I think the rest of the year were kind of in between those bookends. But, yes, to be even more specific, we continue to view the opportunities as being better in other products even as we head into early 2026 here as well. Christopher Blunt: The only, Wilma, it is Chris. The only thing I would add to what Conor said is I would not call it a pivot. I think for seven years now, our number one priority has always been grow FIAs. Right? Then we added Rila, PRT. And if the returns are there, MYGA, we reinsure the vast majority of our MYGA out. So if the returns and the demand from the reinsurers are there, we will certainly write it. If there are more attractive places to put capital, we will do that. So it just happened to be that I think FABN in particular was more attractive from a return perspective than writing extra MYGA at the margin. Hopefully, that helps. That is very good. I mean, we have been seeing, I mean, over the last few years, a top 10 writer in all of these, in FIA, in IUL, in PRT, and in MYGA. So, you know, we will move up and down that scoreboard a little bit or that leaderboard a little bit as the opportunities shift. Thank you. Operator: As a reminder, to ask a question, you may press star 1 from your telephone keypad. The next question is a follow-up from the line of Alex Scott with Barclays. Please proceed with your question. Hey, thanks for taking the follow-up. Alex Scott: So I want to ask you a bit about just sort of high-level view on valuation. You know, I heard you on derisking some of the fixed income. I thought that was interesting. I think, you know, one of the things that maybe holds people back from giving you credit for the fee-based business you have is just the sheer magnitude of the net investment income that comes from your alternative investments and the other parts of the nonfixed income portfolio. So do you, is there anything you can do there to sort of ease some of the tension there with shareholders? The way investors are viewing it? I mean, is that something that you guys contemplate? Christopher Blunt: Yeah. This is Chris. I will start and just say, you know, from a valuation standpoint, we are trading at $0.62 of book value. So you tell me. Like, historically, that is associated with companies with massively toxic liabilities, not a pristine fixed book of surrender charge protected FIAs and non-surrenderable liabilities. So, yeah, it is extreme, the valuation. We have tried to give a lot more disclosure this quarter around credit and specifically what is in the private credit portfolio. So, hopefully, that helps, including refreshed stress test numbers. So, yeah, the stock is trading as though there are billions and billions of credit losses coming. It is pretty inexplicable to me, to be quite honest. I would say we have two other assets that are quite undervalued. One is our middle market, cultural market life insurance business, which is a quite valuable asset. And then the other is owned distribution, which we spent quite a bit of time on, which I think we have multiple avenues to monetize that business over time. So, yeah, I think it is extreme. I will defer to Conor on alternatives. It is one of the reasons we have split out the equity component because we were sort of capturing and defining alternatives as anything that showed up on a certain schedule. It is not the right way to think about it. You know? The majority of that portfolio is investment grade and, in most cases, in the vast majority of cases, investment grade fixed income. But Conor, I will defer to you if there is more you want to add to that DII discussion. Conor Ernan Murphy: Yeah. I will say a couple of things. I mean, broadly speaking across portfolio, I mean, it has been pretty pristine. I have heard others be very proud of their low double-digit impairment-related numbers over the last few years, and, you know, we are half of that. So, you know, I get why people have concerns, but in terms of what is in our portfolio and how well it has been performing, it has been very noteworthy for us. There is definitely an attempt. I mean, I feel that there is a lowest common denominator, you know, where we viewed props as a single business that is heavily spread rather than kind of component parts like life or owned distribution, etcetera, as Chris alluded to. That was why this was a, there was a significant attempt to help rectify that with this new disclosure around fee versus spread because we wanted to demonstrate that we have actively made a very significant shift here in, we have talked about an expansion from, I think in the disclosures, talked about going from less than 5% to 15. I would actually argue it is probably closer to, like, zero to 15 because if you did a full attribution of expenses and debt to that, essentially the life business, like, three years ago, it would have been very small. So now that 15% of our earnings are coming from the fee business, and you can see that we have an expectation that that will grow to 25 just organically without anything else over the next three years or the three years of the planned cycle. So that is definitely a step in that direction. We are going to continue to talk about it. We will increase our exposures and perhaps even related educations around those businesses, the owned distribution business, the life business, as we go here. Hopefully, that will help. Obviously, we need, you know, the old portfolio, I think the disclosure changes we will make next quarter will help as well. But at the end of the day, obviously, we, Chris said, we have an expectation, near-term expectation that we are not quite at that, not going to get to that 10% quite yet. But, obviously, that will help a lot. And I guess, Chris, the absolutely pristine set of liabilities. I mean, there is nothing. It is a young, clean book of business. So there is really nothing to be concerned of there. Very well surrender protected, performing very much in line with our expectations. So we will see. Alex Scott: Maybe a follow-up to that is, you know, when I think about the last couple years, even the nonfixed income just being closer to 7%, to hit this funding requirements for your growth, you know, I think in both the last two years, there were, you know, things that happened. Right? Like, there is an equity raise one of the years, and then this year, there is the selling of legal entity, which is, you know, it is good to get that tool this year for sure. But, you know, the private equity returns have to be, you know, 10% plus for you guys to be self-funding. Is that an incorrect takeaway from that? Like, how would you describe it? Conor Ernan Murphy: Alright. I am going to start with thank you. I am actually really glad you asked the question. I will wait, no. So, right. I mean, with the, you tell me, but I have a sense that the equity raise perhaps raised concerns that we either needed to continue to rely on FNF or the equity markets to have the capital to write the business, and that is not the case. And we have done everything we can to allay those in the quarters since then, and I will reiterate today that we are not, we are capital independent. We have the capital we need to continue to grow AUM, continue to write business, etcetera. So, I mean, at this stage, the book is essentially throwing off all of the capital that we would need to write all the business that, you know, that we would want to write. So that is not the case. And I would also suggest too that, yeah. I mean, we would like, on average over the long term, we expect these returns. If they are delayed in coming, we have been measured in our expectation through the, you know, and even in our plan cycle as well. So in a scenario, like, if the scenario is that it remains at more of a seven-ish range, we are absolutely fine. We might write at the lower end of our sales target volumes. But, again, I think our sales volumes are going to be tied more to market opportunity and the best uses of capital. So I do not feel that capital is a constraint sitting here with my CFO hat on. I think the constraint a little bit is just what will the earnings opportunity be in the marketplace, and therefore, we will decide how much we want to write and where we want to put the. But, absolutely, from a capital point of view, we are capital self-sufficient, capital independent. We are all good. Alex Scott: Appreciate it. Bye. Alright. Thanks for all the responses. Operator: Thanks, Alex. Thank you. And this will conclude our question and answer session. I will now turn the conference back over to CEO, Christopher Blunt, for closing remarks. Christopher Blunt: Great. Thanks again, everyone, for joining the call this morning. We delivered a strong finish to an outstanding year and continue to execute on our strategy toward a more fee-based, higher margin, and less capital intensive business model. Looking ahead to 2026, we remain focused on continuing to grow our core business and delivering long-term shareholder value. We appreciate your interest in F&G Annuities & Life, Inc. and look forward to updating you on our first quarter earnings call. Operator: Thank you for attending today's presentation. The conference call has concluded. You may now disconnect.
Operator: Greetings, and welcome to the Gaming and Leisure Properties, Inc. Fourth Quarter 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please signal an operator. As a reminder, this conference is being recorded. It is now my pleasure to introduce Joseph Jaffoni, Investor Relations. Please go ahead. Thank you, Paul, and good morning, everyone, and thank you for joining Gaming and Leisure Properties, Inc. Fourth Quarter 2025 Earnings Call and Webcast. Joseph Jaffoni: Press release distributed yesterday afternoon is available in the Investor Relations section on our website www.glpropinc.com. In addition to the fourth quarter press release, GLPI also posted a supplemental earnings presentation which highlights the events of the quarter, recent developments, and future considerations that can also be accessed at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Forward-looking statements may include those related to revenue, operating income, and financial guidance, as well as non-GAAP financial measures such as FFO and AFFO. As a reminder, forward-looking statements represent management's current estimates, and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to factors and forward-looking statements contained in the company's filings with the SEC, including its 10-Q, and in the earnings release, as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, are joined by Brandon John Moore, President, Chief Operating Officer; Desiree A. Burke, Chief Financial Officer and Treasurer; Steven L. Ladany, Senior Vice President and Chief Development Officer; and Carlo Santarelli, Senior Vice President, Corporate Strategy and Investor Relations. With that, it is my pleasure to turn the call over to Brandon John Moore. Brandon, please go ahead. Brandon John Moore: Thanks, Joe. Good morning, everyone. We appreciate you being on the call today. And before we dive into the quarter, I will address the obvious absence of Peter on our call this morning. For those of you that have been dialing into these calls at GLPI and prior to that, Penn, for the last three decades, Peter’s voice is the one you would expect to hear. Unfortunately, he is unable to join us this morning due to some lingering back issues. He is having a procedure this morning ahead of some upcoming travel to get him back on his feet. So we will miss him this morning, but he asked us to share some prepared remarks, which I will do, then turn over to Desiree, and then we will move to your questions. So moving on to Peter’s remarks, enter 2026 in an enviable position with what I would consider to be the most visible line of sight towards healthy multiyear AFFO growth that I can recall. Our pipeline entering 2026 is deep, with $2,600,000,000 of future capital commitments poised for deployment over the next 24 months. Our balance sheet is well positioned to support our growth without the need for incremental capital and our tenants, as evidenced by our robust rent coverage metrics, remain healthy. We recently completed the acquisition of Bally’s Lincoln, an asset we have long coveted, for $700,000,000 at an accretive 8% cap rate while also closing on the real estate related to Cordish Live! Virginia project, to which we have committed an incremental $440,000,000 towards the development. In addition, funding remains ongoing in Bally’s Chicago with roughly $740,000,000 left to spend towards the development as of 12/31. The project remains on schedule for the first half 2027 opening with the hotel tower surpassing the 20th floor. On the tribal front, we eagerly anticipate the grand opening of the Ione Band Acorn Ridge next week. Development activity at Caesars Republic Sonoma remains ongoing. Overall, we believe the strength of our tenants, the strength of our leases, the depth of our pipeline, and the condition of our balance sheet position us well to continue to execute and grow the business in 2026 and beyond. With that, I will turn it over to Desiree, and then we will move to questions. Desiree A. Burke: Thanks, Brandon. Good morning. The 2025, our total income from real estate exceeded the 2024 by over $17,000,000. This growth was driven by cash rent increases of over $23,000,000 resulting from acquisitions and escalations. For Bally’s, the acquisition of Bally’s Kansas City and Shreveport real estate increased their cash rent $6,600,000. The Chicago lease increased cash income by $2,600,000, and the Belle development increased cash rent by $1,900,000. For Penn, the Joliet funding and M Resort funding increased cash income by $4,400,000. The Sunland Park and strategic acquisition increased cash income by $3,200,000, and then the recognition of escalators and percentage rent adjustment on all of our leases added approximately $4,300,000 of cash income. The combination of non-cash revenue gross-ups, investment in lease and straight-line rent adjustments partially offset these increases resulting in a collective year-over-year decrease of $6,200,000. Our operating expenses decreased by $37,800,000, mainly due to a non-cash adjustment in the provision for credit loss. Included in today’s release is our guidance for 2026 AFFO between $1.207 billion and $1.222 billion, or between $4.06 and $4.11 per diluted share and OP units. The guidance does not include the impact of future transactions. However, it does include our anticipated development fundings of approximately $575,000,000 to $650,000,000 related to current development projects such as Chicago, Ione, Marquette, Dry Creek, and Virginia. These will be funded relatively evenly by quarter throughout 2026. And in addition, the acquisition of Penn’s Aurora facility, $225,000,000, is expected late in 2026. And the completion of the $700,000,000 Lincoln acquisition, which is now complete, was also anticipated in our guidance. Lastly, the anticipated settlement of $363,000,000 of our forward equity is expected on 06/01/2026 in our guidance. From a balance sheet perspective, our leverage ratio is 4.6x, well below our targeted and historic levels. Given our current balance sheet position, the several-year runway to fund our development projects and our annual free cash flow over that time frame, we have optionality to fund our future accretive commitments. As a reminder, our significant installment projects pay us cash rent upon funding, and our rent coverage ratios on our master leases are now ranging from 1.69x covered to 2.6x covered as of the prior quarter end. With that, operator, please open up the line for questions. Operator: Thank you. We will now be conducting a question and answer session. One moment please while we poll for questions. Thank you. Our first question is from Ronald Kamdem with Morgan Stanley. Ronald Kamdem: Great. Just two quick ones. If we could just start on Bally’s Chicago, that development project and so forth, you could just give an update on sort of the milestones, how that is sort of going. I saw you funded some of that in April with some left to go. Thanks. Carlo Santarelli: Sure. There was a report actually, I think, I do not know which publication put out this morning about the crane movement over the weekend, but the project is going well. We would estimate that it is over 20% complete at this point. There is over 300 employees, our average daily crew on the site. Hotel structure, as was mentioned in the opening remarks, we are currently on level 21 of what will be 34 floors total. The curtain wall glass has started on the 6th floor. It is currently on the 8th floor on the hotel. And on the casino podium, we are nearing completion of the phase two structural steel and the decking. So the project is moving along nicely, and I think that you have probably noticed they put out a request to extend the length on the temporary facility. We expect that the project should conclude and open sometime in 2027. And so I think from that perspective, do not know if anyone else has anything to add to that. Carlo Santarelli: The only thing I would add to that, Ron, is the development timeline that we have contemplated here internally at GLPI is consistent with the message that Steve just delivered. First half 2027 opening. Our development financing has kind of stretched out that long. So despite the request that many of you saw a couple weeks ago, there has been no change from our perspective. Great. And then, you know, my second question was just on the pipeline. Obviously, Lincoln is through, and you got that done. Any sort of any comments on, you know, I remember there was sort of a lender consent that needed to go through and so forth, how that sort of progressed along. And then any broader comments on the pipeline in general between tribal and non-tribal would be helpful. Thanks. Carlo Santarelli: I will talk a little bit about the first part. I think with the Ares refinancing that they announced, the lender consent was solved. So that was the impediment on Lincoln. They solved that with the refinancing that opened up Lincoln for us to acquire. So that one is pretty easy. Brandon John Moore: I will address a bit of the pipeline. I think, you know, obviously, there is a lot of stuff we cannot talk about here internally at the company. On the tribal side, you know, we continue to have gained traction with various tribes with different potential uses for our capital structure. We obviously announced Dry Creek recently. I would not say anything is imminent there, but there are a lot of really productive conversations going on with tribes that would involve our new financing structure. So we will see. Anybody, I do not know if you guys have anything to add on the pipeline. Desiree A. Burke: Yeah. No. I think the supplemental has a great slide on page eight with the pipeline. Right? So we have the $2,000,000,000, which $700,000,000 has now been completed. So we are down to $1,900,000,000. And all of the projects are listed there. And as I said, the guidance does include between $575,000,000 and $650,000,000 of the development funding. So those projects that I mentioned that are development. And then in addition, we have the Aurora project for $225,000,000 left to occur. Ronald Kamdem: Great. That is it for me. Thanks so much. Operator: Our next question is from William John Kilichowski with Wells Fargo. William John Kilichowski: Hi, good morning. Thanks for taking my question. The first one for me is just both on Vegas and New York. I do not know if you can give us updates on either of those projects, whether there is an idea of what commitments will look like. I know that we have a number on Vegas. But there is room for expansion in New York if we can start to talk about sizing of opportunity there. Brandon John Moore: Yeah. I will take the first part of it with Vegas. I will turn it over to Steve to talk a little bit about New York. In Las Vegas, what I can tell you is Peter and I were out there together last month to visit with the A’s team and to walk the site and their experience center. The stadium is progressing at a pretty rapid rate. I think they are actually a little bit ahead of schedule on the stadium now. And all I can say is I think they are building a spectacular product. I think the site will see a first-class stadium product that is not just a baseball stadium, but also an entertainment venue, which I think is really important for this site. You know, they bring fans very close to the field with this new stadium, and it opens itself up quite nice, you know, 25,000 to 30,000-seat entertainment venue. So I think both we and folks in Vegas are very excited about the potential that that attraction brings to the site. With respect to the integrated resort, you know, we are really looking to Bally’s to finalize their plans. They have released a lot of renderings, some preliminary permit applications for the site. They have indicated that they intend to phase the site, which is not any surprise to us. And at the present time, we are sitting on our remaining commitment of $125,000,000. We will consider investing more in the property as the details of the property become more available. I think the key for us is to ensure that whatever investment we have in the property that the revenues that will be generated there can support our rent. You know, we have been hyper-focused on coverage since the day we spun out. We will continue to do that, and Vegas is no exception. So I think it is a great opportunity. It is a great amenity that the A’s are bringing to that site. And we will see how Bally’s looks to take advantage of that. Carlo Santarelli: I can speak to New York. I mean, with respect to New York, we continue to view Bally’s development as an attractive opportunity in New York, and we would certainly like to be a participant. That said, we recognize that there is likely no shortage of providers for that project and there is continued interest that we continue to hear about. So we remain in discussion with them. We are monitoring the process. I am not sure that they will need our capital. So I guess to put it frank, I think to dispel any notions that may exist, we view it very unlikely that we would end up providing the majority of the capital for a $4,000,000,000 project there. We are going to continue to evaluate the process and the project, and we will look to try to be as strategic as possible with respect to any involvement. William John Kilichowski: Mhmm. Got it. That is helpful. And then for my second question, maybe could you provide a timeline on the Virginia Live! project? Do not mind losing timeline. Desiree A. Burke: Well, they opened the temporary in January. And they are beginning the preparation and groundwork on the permanent site. I do not think we have a timeline from Cordish, a definitive timeline from Cordish for opening at this point in time. You may recall from our previous discussion, their capital goes in first. So our funding on that will be after the equity portion of the Cordish Group’s capital is in. So we do not expect to be funding that until the latter half of 2026 into 2027. I do not really have any other updates on that. John, I think for your purposes, the lion’s share of our spend related to the remaining $440,000,000 will occur in 2027. There is likely to be some spend, modest relative to the $575,000,000 to $650,000,000 that we guided in development. Some modest element of that will likely relate to Virginia later in the year. William John Kilichowski: Got it. Thank you. Operator: Our next question is from Mitch Germain with Citizens Bank. Operator: Mitch, are you there? Mitch, is your line—sorry about that. Yeah. Sorry about that. Mitch Germain: When did the economics of the Lincoln transaction change? I mean, obviously, I know the cap rate was the same, but, you know, I think I had seen $735,000,000 as a purchase price. Brandon John Moore: Yeah. Yeah. I think, Mitch, when we came time to exercise that option, we had done some new underwriting on the project. There was a little bit of competitive pressure from the tribe and some other things. And in working with Bally, and focusing on the rent coverage, we decided to lower the rent a little bit, which lowered the purchase price. So I would look at it as finding the right level of rent to put into the master lease to come out with a pro forma coverage we were comfortable with, and the rent just yielded that purchase price. So we did not change the cap rate. We just changed the rent. Got you. And then with the Live! project, is it just a traditional lease or will you guys also have a percentage rent option on any of the food and beverage options. Traditional lease. Great. Thank you. Brandon John Moore: Thanks, Mitch. Operator: Our next question is from Barry Jonas with Truist Securities. Barry Jonas: Hey, guys. Good morning. First off, hope Peter gets better soon. Discussions around iGaming and skill-based games in Virginia are back again this legislative session. How would you guys handicap these things actually getting passed, and how could that impact the Cordish project and your underwriting? Thank you. Carlo Santarelli: Hey. Thanks, Barry. So look, the skill-based stuff is a little bit harder to answer. I think with respect to the iGaming, obviously, there have been a lot of headlines recently. Some of the, I think, thinking maybe a little bit ahead. Some of the stuff that is getting passed is more of a passage for the purposes of being able to continue discussion. There is still some reconciliation between the two bills that need to occur. I think with respect to the Cordish project, what is important to remember, and you could kind of evidence this from looking at the leases in Pennsylvania and Maryland, the underwriting of these leases has always been strong. They are written to be strong. They have done nothing but produce great resorts that cover our rent very thoroughly. I do not see there being any reason to believe this project will be any different than the others out there. Obviously, you know, iGaming will be interesting in how it ultimately gets done, if it gets done, a couple years down the road. So it could benefit some of the land-based operators in this instance. Barry Jonas: Great. Thanks for that, Carlo. Just as a follow-up on Acorn Ridge, has all the funding been completed as of today? Does any bleed over into future quarters? I know it is opening in four days. And then is the expectation still that the tribe decides in five years whether to convert this to a sale-leaseback, or could something happen sooner? Desiree A. Burke: So all of the funding has not been completed. We had expected it to be completed over the next few months. There is always a lag between doing the construction and us actually making sure the construction is complete and is thorough before we will fund. So there is a lag. And on the second part of your question, yeah. It is certainly possible that they could convert that to a long-term at the end of the five years, but we do not have any indication at the present time that they have made a decision to do that in five years, let alone to do that sooner. But if they came to us and wanted to convert the loan sooner, I think we would be amenable to that. Barry Jonas: Perfect. Thanks a lot, guys. Operator: Our next question is from Smedes Rose with Citi. Smedes Rose: Hi. Thank you. I just wanted to ask you just a little bit about sort of the pipeline and willingness to continue to commit capital. Mentioned $2,000,000,000 over the next 24 months, so very robust pipeline now. But given sort of, I think, somewhat challenged cost of equity capital, and you have already talked about having to move leverage up a little bit, I realize well within your, you know, comfort ranges. But how are you thinking about adding new projects at this point? And then I guess in general, what is sort of the tenor of conversations like with folks who might be interested in, you know, coming to you for capital? Desiree A. Burke: So I will start on the leverage piece and then turn it over to Steve to talk to you about our expectations for projects, new projects. So we are at 4.6x levered. And if you layer in what we just did with Lincoln, that would get us to just below 4.9x. We do have the $363,000,000 forward equity outstanding towards the projects. We also have quite a bit of free cash flow in 2026 towards the projects. We certainly do not have to hit the debt or equity markets at any near term for these projects, and we do believe we have them all funded, you know, theoretically on our balance sheet. We know where the money is coming from for the projects. Carlo Santarelli: With respect to the pipeline, look, I think we continue to be active. We are not turning away accretive transactions underwritten based on our current equity cost of capital associated with our, and then our cost of capital with the debt respect. We are ongoing discussions. Because of where we sit from a leverage profile, it gives us some flexibility. The development transactions that we might discuss with any parties, there is obviously a timing component, so I think that we have given ourselves an added amount of time to raise the capital and decide what form it is going to come in. I think with respect to regular-way sale-leasebacks, we would obviously look to fund those at the time in which they were completed. And I think those, you know, we would welcome those discussions and have welcomed those discussions. And so I think we continue to be as thoughtful as possible, but I do not see any interest here to turn away business just because there is a bunch of business already underwritten and signed up. Smedes Rose: Thank you. I appreciate it. Quite have quite a bit of availability on our ATM program as well. If in the future we want to raise equity, it is still there, so we have plenty of optionality for future commitments. Operator: Our next question is from Brad Heffern with RBC Capital Markets. Bradley Barrett Heffern: Yes. Hey, everybody. Thanks. Best wishes to Peter. GLPI obviously has one of the highest growth profiles in the net lease, great visibility over the next few years. Bally’s seems to have gotten better. At the same time, the stock continues to trade at a discount. Why do you think that is? And is there anything that you guys can do about it? Carlo Santarelli: Hey, Brad. It is Carlo. Everything you said is accurate. Obviously, you know, you guys could do the math and see what the growth trajectory looks like. The balance sheet is in really good position to fund it. And the stock does trade where it trades. You know, I think in our conversations, certainly, there is a lot of things people can point to. Obviously, the stock performance amongst our tenants is one. There are certainly some issues within the industry as it relates to lease coverages and things of that nature that I think have unnerved some folks. We feel very good about where our leases stand from a coverage perspective, but there are certainly some bigger picture items out there. The equity trading of our tenants certainly being one that does come up quite frequently. And I think those things have harnessed our valuation to a certain extent. Bradley Barrett Heffern: And then on the funding for Twin River, I know you have a revolver balance that is there for tax reasons related to prior Bally’s acquisitions. Is there something similar for Twin River and how much of the revolver might that represent? Desiree A. Burke: Yes. So we did use the revolver for that as we told you we would have to to get the Bally’s tax benefits, and we did borrow on the revolver for that transaction. Bradley Barrett Heffern: Okay. Is it all of it, or is it a subset of the total? Desiree A. Burke: It is the majority of it, $670,000,000 of it, and there were some units also associated with that transaction. Operator: Our next question is from Chad C. Beynon with Macquarie. Chad C. Beynon: Hi, good morning. Thanks for taking my question. You guys have made a lot of progress and really, you know, broken the mold just in terms of activity with tribes. You know, the recent debate or, you know, new input is around prediction markets, in markets where, you know, tribes might have a little bit more exclusivity on the land-based side. So given the CFTC’s view or maybe even support of this new potential competitor, how are you seeing that? And in your current or maybe future pipeline with tribes in these markets, do you think that will affect your activity? Thank you. Brandon John Moore: I guess the long and short of it is I do not think that will have an impact on our activity with the tribes. I can tell you that the tribes in California, for example, are very focused on being able to offer sports betting exclusively, and the prediction markets threaten that. So they are very active on the legislative front, but I do not see that impact any of the things we are working on in tribal country. At least not today. If predictive markets become a genuine threat to the EBITDA at these, it is obviously an underwriting concern, and things we will take a look at. But as we sit here today, it is currently not something that I think will impact our tribal investments at the present time. Based on the conversations we have had with tribes and the underwriting we have done with respect to the properties that we currently entered into agreements with, and others we have even diligenced, no one is making the predominance of cash flow from sports betting. So I think from that aspect, there are many different areas that they are producing adequate cash to support any type of long-term financing structure. But it has not been a predominance from a sports betting angle. You know, it could certainly be an upside to some of these properties and add revenue, which would be good. To the extent that it is a downside on the predictive market or iGaming side, we are underwriting these deals with such a wide level of coverage that I think that the incremental downside threat to those currently is not something that would impact the durability of our cash flow coming off these, but certainly cognizant of it, and we keep an eye on it. And if things change, then our underwriting will change. Operator: Great. Thank you for that. And then just in terms of interest in the Las Vegas locals market, the S-4 was out on one of the deals that was announced, I think, between now and the last time you guys reported. So we have a little bit more insight into that. You know, that market continues to do really well just in terms of, you know, from California moving there and just the overall wealth effect and retirement effect. Is that still a market that you are interested in? And do you think there could be, you know, additional opportunities maybe even at a—unfortunately, a slightly higher cap rate than what you are used to doing or—I am sorry. Lower cap rate. Thank you. Carlo Santarelli: Yeah. I think the short answer is yes. Of course, we are in the Las Vegas locals market. We are very pleased with the performance at the M Resort, which we own. And we get inbound calls around that asset with interest. So I think we continue to have interest. Obviously, Boyd and Red Rock have large presence there. But there are many smaller operators that own, you know, individual or a handful of assets. And we have looked at those in the past, and we will continue to look. So we definitely have an interest. It is a good market. You are right about the demographic shift and some of the movement from California. And we will continue to try to be active there where it fits. Operator: Our next question is from Anthony Paolone with JPMorgan. Anthony Paolone: Great. Thank you. With regards to the pipeline beyond what is teed up right now, can you talk about how much of it is perhaps development transactions versus straight up acquisitions? How much might be, you know, more just straight up gaming versus something more adjacent. Just a little bit more color as to what that pipeline looks like and maybe what the impediments have been to get anything else done there? Carlo Santarelli: Sure. I will give it a shot, and then anybody can add what other thoughts they may have. So I think that the reality is there is probably—I would say, of the pipeline and things we are looking at, it probably would fall in the development part, but it is not because they are greenfield. I would tell you, I think that large gaming operators today are spending plenty of time looking at their own assets and their own portfolios that they currently hold and figuring out where can they make strategic capital investments to better their performance and increase their cash flow. So many of the things that I would put in that 50% bucket are existing assets that people are reinvesting in, whether it is things like Boyd did at Treasure Chest or Penn’s done at, you know, their Columbus property, M Resort, and a few of their Illinois properties. So we have seen a number of instances of people redeveloping properties, adding to properties, expanding properties, and I think that will continue. And I think with respect to some of the smaller or private gaming operators, some of those are new jurisdictions, new opportunity things where, of course, those would fall in the development pipeline. But I think stepping away from that, there are plenty of discussions that we are having around what I would consider to be more traditional sale-leaseback. The reality is, though, most of those are portfolio type of projects, and therefore, M&A is not a quick discussion. Right? So these things take months to talk about, work through details, and effectuate. So I think the pipeline, honestly, if I am being frank, is probably 50/50. And then the 50 in the development, it is not all greenfield. I would say large portion of it, two-thirds of that even, is probably existing properties looking to reinvest in their own assets. With respect to non-gaming, I would not consider anything to be in our pipeline on that front. I think there are plenty of discussions we have and plenty of things we look at. But I would not consider anything to be so close to being effectuated soon that we would consider it to be actually actionable in the pipeline. Anthony Paolone: Okay. Thanks for all that. And then just my follow-up relates to the spending guidance for 2026. And as I look across pipeline and what you have teed up, I mean, are the—I mean, I guess Chicago is the obvious one, but where do you think the big swing factors are that can get you, you know, either at the low or high end or above the range there? Because it seems like there is enough teed up where, you know, money could get spent maybe perhaps above the range, but I would love to hear from you all what you think. Desiree A. Burke: I mean, you know, the range was developed by, you know, looking at our development and it is all of them. But the largest one clearly is Chicago with the most spend in 2026. But, you know, there could be movement in timing of when it is funded or what gets completed and when it is completed. That is outside of GLPI’s control. So that is the reason for the spread between $575,000,000 and $650,000,000. And to be honest with you, that is not a very large spread. I agree with you. It could be higher. Could be lower. Right? It depends on how the construction is progressing at all of those projects, and there are five development projects currently going on. So it could, you know, we really did our best estimate of what we think will happen in 2026. And then, Anthony, just to add to that, two of the projects, including Live! Virginia and the Caesars Republic project, our capital does not turn on until other capital is spent. So you are looking at kind of the time in which that capital is deployed prior to us going in. So there is some ambiguity as to when we will eventually get started there. Operator: Our next question is from Jay Kornreich with Cantor Fitzgerald. I just wanted to ask on the just the overall gaming transaction marketplace. As interest rates have come down a bit to start the year, is that opening up new conversations where HoldCo owners are coming to the table and starting to more seriously think about selling the real estate? Or is it maybe too soon to have a read on that? Carlo Santarelli: I do not think too soon is the right answer, but I do not think a lot of these conversations pivot on the Treasury rate. Right? So it is not like someone wakes up one morning and decides 10 basis points changed their lives; now they are interested in the sale-leaseback. So most of these conversations are long-lived. I think that comps that happen in the marketplace dictate more how people feel. So when people see a deal get cut at 7.5% cap rate, all of a sudden, they decide that, oh, maybe I am more like a 7.5% cap rate. And then if they see things like the Lincoln transaction we did at 8%, hopefully, they are paying more attention to that and decide that the marketplace is more at 8%. But I say it in jest. But I think the reality is that those conversations do not just—it is not spur of the moment. It is not totally driven by debt. I think that if the credit markets were to gap higher, not really lower, but higher, I think that is when people maybe start to look at alternative financing sources as a sale-leaseback possibly being that solution. But just because rates get a little better, I do not know that it really changes a lot of the dynamic of the marketplace. Operator: Okay. Appreciate that. That is all for me. Our next question is from Greg Michael McGinniss with Scotiabank. Greg Michael McGinniss: Antonio, could you—we are just looking at the kind of the rent resets, the percent rent resets on a couple of the leases on the amended Penn call and Boyd master. You giving any sort of guidance on that front? Desiree A. Burke: No. We are not. I mean, we are including the Pinnacle escalation in our guidance. I can tell you that. But the amount of the percentage rent adjustment, since it is going to happen in the middle of the year, fairly insignificant for the year. So we have not provided detailed guidance on that. Okay. Thanks. And follow-up. With this intensifying relationship with Bally’s. If we do kind of some back of mapping math, it does seem like that they are on the casino business at least given the debt structure even with the new term loan in place, which has all massively kind of improved the company. Casinos are still generating negative cash flow. I mean, do you guys view that differently, or do you think that it is kind of once Chicago delivers and Vegas opportunity in New York, they just kind of have to get through these next couple years and then everything is clean again. Carlo Santarelli: Yeah. I mean, look. Not going to bless the math, but what I would say is, I mean, Bally’s is in, right now, a development period where they are in the process of three, you know, large-scale casino developments. And it has been a long time, but when you look at, you know, a lot of the companies in the gaming space today, I mean, a lot of them went through these areas where there was a lot of development, not a lot of in place to support it. And I think Bally’s continued down this path. It is clearly Chicago, New York, and Las Vegas, and it is a lot of, you know, incremental EBITDA associated with that stuff and a lot of spend to get there. But, you know, I do not think your math is necessarily wrong, but it is temporary. Operator: Our next question is from Daniel Edward Guglielmo with Capital One Securities. Daniel Edward Guglielmo: Hi, everyone. Thank you for taking my questions. On your call a few quarters ago, I asked if investors are too focused on what could go wrong kind of versus what could go right. And it feels like the 2026 guide is a testament to what is going right. So are you all starting to feel more supported on the equity side of things, or is there still kind of a ways to go? Brandon John Moore: I think there is still probably a ways to go on the equity side. I will say, you know, we have been steadfast in our messaging on this. We have not been confused about what 2026 and 2027 would deliver. I think there are a number of different factors that Carlo highlighted near the beginning of the call that could be weighing on the stock, but the question is, you know, are we happy with a $46–$47 stock price? The answer is clearly no. We did our equity forward around the $48 price. We will give you a better indication of where we think equity might be actionable. But, no, I think we have some room to run in the stock, and I agree that what we are showing you for 2026 and into 2027 is what we anticipated, and we believe it should be reflected in the price. Carlo Santarelli: Daniel, I will add to that. You know, Brandon mentioned the $48 level. We used the ATM. A lot has gone right since then. Numbers have moved in the right direction. You look at the stock. We are trading at kind of a two-turn discount. Our dividend yield is close to 7%. Our balance sheet is levered at a much more conservative rate than most of our peers. And our AFFO growth over the next two years is at a premium to most of our peers. So, you know, you put all that together, and I would not say that, you know, the stock where it is today is something that makes us incredibly happy. Desiree A. Burke: The cap rate has definitely crept up. And that is, you know, not where we want to be. Daniel Edward Guglielmo: Great. Yeah. I appreciate all that color. And then kind of a follow-up on the price. We generally think that property portfolio should trade at a premium to kind of single properties, but it does not seem like you guys are getting that benefit. Am I wrong in thinking that the portfolio premium just does not seem to be there right now? Carlo Santarelli: Would not say that is wrong. You know, I think whether that is the reason or not, I do not know. But I would agree with your premise that obviously the portfolio provides a level of safety that the single asset does not necessarily provide, and hence, you know, a premium should be associated with that. But I think that could be one of several things that maybe our valuation right now is not fully incorporating. Desiree A. Burke: I definitely think the cross-collateralization in our leases is a very important value point. And I certainly hope it is not not getting a premium. Right? Because it does give quite a bit of credibility to our leases. Operator: Our next question is from John DeCree with CBRE. John DeCree: Hey, everyone. Thanks for taking my question. I think you guys kind of highlighted in our note just how valuable your stock is right now. So I appreciate all that, Carlo. Maybe one question back on New York, maybe a nuance one, but you guys exclusive to Bally’s, Steve? I think you said, you know, we should not expect you to be kind of the majority of the financing structure for Bally’s. But if there were opportunities to partner or invest in the other projects, is that something you could or would look at? Carlo Santarelli: Yeah. We are not exclusive to Bally’s. We would look, and I think I have said this on the prior quarterly calls when they had not yet won the license. I mean, we were open for business and happy to discuss other projects. I think the one thing that is worth noting, though, with respect to us being involved or having discussions, like, we do value ownership of real estate. And therefore, you know, we have yet to do a loan that did not have a linkage to either a future right to acquire real estate or some type of real estate ownership accompanying with it from the start. So I would think that any discussions we have with any of the other parties involved would be under the same type of guise, that we have to have a path to owning real estate or a piece of ownership of real estate to start with. So that would be the premise. But, yeah, no. We are not exclusive, and we are happy to have conversations. Give me a call. John DeCree: Thanks, Steve. We have one more on Canada. So there is some discussion of possibly expanding in Niagara to the Vegas of the North, I think was the comment made. Have you guys spent much time studying Canada as a market that GLPI would look to invest in or own real estate in if the right opportunity were to come up and kind of what are your considerations there? Brandon John Moore: Yeah. Yeah. We spent a lot of time looking at various projects in Canada. I think if you are familiar with Canada, you recognize that it is different province to province. So the economic drivers in each one are a little different. But if we can find the right project in Canada, we would certainly be interested in that. And part of the problem is there is, you know, some tax leakage in getting the dollar from Canada back to the U.S. So that weighs on the underwriting, but we have looked at a lot of different projects there and just have not found the one that was accretive enough for us to take the dive. John DeCree: That is fine. That is helpful. I appreciate you guys fielding all the questions, and give Peter our best for a quick recovery. Hope he is back on his feet soon. Brandon John Moore: Yeah. We will certainly do that. Thank you. Operator: Our next question is from Rich Hightower with Barclays. Rich Hightower: Yes. Most of my questions have been answered, but I will go back to, I guess, a little bit of the background on how the Lincoln purchase price was revised based on sort of shifting coverages. And for me, it brings up a larger question is, you know, if 2x coverage was kind of the gold standard previously, I think, you know, given all of the different factors affecting land-based gaming as we see them before us and, you know, in the context of 30-plus-year leases. I mean, is a higher going-in coverage maybe the superior way to underwrite these projects going forward? How do you feel about that? Brandon John Moore: Well, I will start and then others can weigh in. I mean, I think a 2x coverage is still a nice standard to look at to start. I think each market and property is different. So you have to look at what the factors weighing on the different markets and the property in order to—and the health, you know, the credit level of the parent company, whether we have master leases or other properties that we can look to. There are a lot of different factors that go into the coverage, but I think as a starting point, looking at 2x is still probably the right place to start. But Steve or Carlo might have a view on that as well. Carlo Santarelli: I mean, to state the obvious, we would love every lease to be struck at 3x coverage, but there is obviously a market dynamic and there is a negotiation that will take place. But I agree with everything Brandon said. I just think the reality is, of course, if all of our leases were covered the way the Cordish leases were covered and we were entering into each new lease at 3x, I think we would be totally comfortable with that and would be very happy with that. Brandon John Moore: I think each of these transactions, you know, we are entering into partnerships for the most part, and there is a necessity for the tenant and the landlord to succeed in these. And so the tenant also has an incentive to balance getting the most dollars versus protection and coverage and flexibility in the lease moving forward. So these are all active discussions and negotiations. And would a seller take a coverage level lower than we would pay? Absolutely. Would a seller want a coverage level higher? And would that maybe knock us out of the box? Could be. But I think it is a dynamic conversation you have with sellers between sellers and buyers right now in the market. And, Rich, just to level set on that specific transaction, you know, as we pointed out, the four-wall coverage was north of 1.9x, and that was put into a lease that was robustly covered, and obviously could have taken on more rent, and that master lease now is north of 2.2x. So I think that one there is not necessarily entirely indicative of kind of a single-asset stand-alone given where it was going. Yeah. Yeah. I think you have heard from us in the past. We very much value four-wall coverage. And so when we look at these leases, we are not depending on corporate credit to support the leases. So we are looking at four-wall coverage. Corporate credit is nice to have. Parent guarantees are nice to have. They are valuable. But we are underwriting these to stand on their own. And so I think what you saw with Lincoln and our discussions with Bally’s was taking a little bit less rent upfront creates a little bit stronger coverage in that lease, and we were happy with that. Rich Hightower: Alright. Great. Thanks for the color, guys. Operator: Our next question is from Todd Michael Thomas with KeyBanc Capital Markets. Todd Michael Thomas: Hi, thanks. Good morning. Just sticking with Lincoln, I guess, Brandon, was the competitive pressure that you cited was that specifically at Lincoln, or was it around some of the other assets in that Bally’s master lease? And then do you see those competitive pressures in the near term? Or do you think that some of those headwinds persist for a period of time? Brandon John Moore: So my comment was unique to Lincoln. The Mashpee tribe at First Light has expanded their facility, but I think it has stabilized. So I do not think it is getting better. I do not think it is getting worse. I think we are comfortable where that is. A lot of their funding is coming from Genting. And Genting obviously has a very large project in New York now that they need to fund. And so we are less concerned about future expansion of that project. That being said, planning for the future and underwriting a little bit more rent coverage there seemed to be the prudent path, and that is what we did. Todd Michael Thomas: Okay. Helpful. And then, Desiree, the use of the revolver to fund the majority of the $700,000,000—so that capacity or, I guess, amendment was completed back in December 2024, I think specifically for Lincoln. And post closing, can you just remind us now how that works? The bridge component to that credit facility, whether you are considering any interest rate hedges, and also, you know, when that can be sort of permanently financed? I guess, are the mechanisms around that now? And that funding, with the revolver? Desiree A. Burke: Yep. So we definitely did plan for this in 2024. It was not just for the Lincoln transaction. We could actually use that bridge revolver for any transaction that we had that had a guarantee. We knew Lincoln was on the horizon at the time, so that was the primary one. We have also used it for the other transaction that we did earlier in the year last year for Bally’s. So we do not—like, no. We have $2,000,000,000, so that takes a billion off. That leaves us with over a billion dollars of a line of credit still. So we will, you know, consider what to do in the markets when the time is right. Todd Michael Thomas: Okay. But that is all floating today on the revolver. Are there any plans to hedge some of that and then how long does that, you know, need to be outstanding on the revolver specifically? Brandon John Moore: I think, Todd, we are actively looking at managing our balance sheet, and we understand the Lincoln transaction just came in. So I think you can assume we are cognizant of the fact that that debt is sitting there and it is variable-rate debt, and we are taking a look at that. And I think, unfortunately, that is all we can say at the present time. Todd Michael Thomas: Okay. Alright. Thank you. Operator: Our next question is from David Brian Katz with Jefferies. David Brian Katz: Morning. Thanks for taking my question. I know that this has been discussed from a few different angles, but with respect to Bally’s, who is, you know, as Carlo pointed out, you know, in a very high development mode with a little bit, you know, with EBITDA coming later on. You know, particularly with Las Vegas and then New York behind it, you know, do you think about sort of putting, you know, any limitations or boundaries around exposure to a singular tenant during that kind of a ramp up? Or, you know, is that something you are comfortable just compensating for, you know, with cap rates and terms and coverage? Or, you know, is there an amount with any singular tenant that you would sort of put some boundaries around? Desiree A. Burke: I mean, as you know, Penn—we have a very large exposure to Penn. You know, Bally’s exposure has been growing. So it is not that we have a limit on the exposure to a tenant. We really look at the assets that we are funding and the four-wall coverage at that property and making sure that it is a good investment option for GLPI. I would not say that we are going to put a limit on some tenants’ you know, how much of our balance sheet they are. Carlo Santarelli: And the reality is, though, we did put a limit on them from the start in Las Vegas. Right? So we set a $175,000,000 total exposure. Desiree A. Burke: And— Carlo Santarelli: that is the limit on the project. Desiree A. Burke: Correct. Carlo Santarelli: Correct. Yes. So that is what I am saying. If the question is about New York and Las Vegas, we are going to look at each project and make a determination based on our underwriting of the project, the situation, what other capital is coming into the project. So I would say there is no hard and fast rule as Desiree was pointing out. But I think that you can rest assured we are also not diving headfirst into every opportunity just because of the name on the building. David Brian Katz: Understood. And so you have not said this, but, you know, it is fair of us to infer that, you know, come New York, you know, there may be some limitations around that too. Carlo Santarelli: Depending, again, depending on what the circumstances are and how it evolves. Brandon John Moore: I think New York is somewhat unique in this sense. We would have to look at the total project, which we have seen. We do not fully understand, and think about how much exposure we would want. And the tenant may lean in; it may influence how much we would be willing to take in a project like New York. But I think overall at GLPI, we have to sit and look about how much exposure we want in any project. And that is effectively what we did in Chicago. We took a look at the Chicago underwriting and the project, and we wanted to cap our exposure at roughly $1,110,000,000. And that is what we did. And I think we would take a similar approach to New York. And Bally’s, as our tenant, may or may not weigh into how much exposure we would be willing to take based on where they are when that project funding is needed, if it is needed. I know that is kind of a non-answer, but the reality is I think this depends on the project and the tenant and a lot of the factors going into it. Carlo Santarelli: David, and I think in New York, as you are probably aware, there is going to be no shortage of funding for them. And if there is an opportunity for us to play a role, as Steve said earlier, great. We welcome it. But I do believe that project in particular has quite a few suitors. David Brian Katz: Yep. Appreciate all the commentary. Thanks. Operator: We have time for one further question. Our last question is from Robin Margaret Farley with UBS. Robin Margaret Farley: Great. Thanks for squeezing me in here. Just going back to the New York project, you mentioned that there is a lot of interest in financing it. But you have also previously, I think on the last earnings call, you talked about how you would want to see something—I forget your exact word, but it was, you know, significantly more than 2x rent coverage, kind of suggesting that maybe it was not as attractive to GLPI to fund it. So I guess if you could—I do not know if you could shed any light on that and given what you are describing as interest in funding that project, would you say the likelihood is that GLPI is not participating in that, given that you are—and maybe your feelings have changed since last quarter—but just on your thought about, you know, the risk factor there. Thanks. Brandon John Moore: Yeah. I will have to go back and look at the comment on significantly more than 2x covered. I suspect that it had to do with our indication that we would like to own the land. And if we were to only own the land in that project, we would be significantly more than 2x covered. Would we do something down to 2x covered? I only say no because I think to get to 2x covered, you are going to have to invest in a majority of the build in the project. And I think what you have heard from us is we are unlikely to be a majority of all of the hard cost in the project. Therefore, our interest in a piece of that project is probably such that the coverage will end up being much higher than 2:1 on our piece. So we may have not been clear on that, but I think the point is our appetite for a piece of New York is probably small enough where the coverage will be quite high if we do it. That being said, we do have a significant appetite to participate in the projects in New York. We think they will be good projects, and I think there is a lot of detail that need to be flushed out for us to really make any kind of true investment decision. And as Carlo and others have alluded to, I think the ability to raise capital unique to the New York project will result in a very competitive field of suitors for capital. And we will not do anything dilutive. So what I think you will not see us do is compete down to a cap rate that is not accretive to GLPI. That will not be of interest to us. Robin Margaret Farley: Great. Thank you. Operator: At this time, I would like to turn the floor back over to Brandon John Moore for any closing remarks. Brandon John Moore: Thank you. Yes, hopefully you have heard today, you know, we are very bullish for 2026–2027. I think we worked hard to create a pipeline that many of you have asked for over the course of our evolution here at the company, and we are actively looking to add to and extend that pipeline as we move forward. So we are excited about the days ahead. And we appreciate all of you dialing in. Thank you. Operator: This concludes today’s conference. You may disconnect the lines at this time. Thank you for your participation.
Operator: Ladies and gentlemen, thank you for joining us and welcome to the TDS Enderae Fourth Quarter 2025 Operating Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you have dialed into today's call, please press 9 to raise your hand and 6 to unmute. I will now hand the conference over to John Toomey, Treasurer and Vice President of Corporate Relations. John? Please go ahead. John Toomey: Good morning, and thank you for joining us. The presentation we prepared to accompany our comments this morning can be found on the investor relations sections of the TDS NRA websites. With me today in offering prepared comments are on behalf of TDS, Walter Carlson, President and CEO, Vicki L. Villacrez, Executive Vice President and Chief Financial Officer. On behalf of TDS Telecom, Ken Dixon, President and CEO of TDS Telecom, and Chris, Vice President of Financial Analysis and Strategic Planning of TDS. And on behalf of Array Digital Infrastructure, Inc., Anthony Carlson, President and CEO of Array. This call is being simultaneously webcast on the TDS and Array investor relations websites. Please see the websites for slides referred to on this call including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K including the press releases, earlier this morning. As shown on slide two, the information set forth in the presentation and discussed during this call contain statements about expected future events and financial results that are forward looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings. I will now turn the call over to Walter Carlson. Walter? Thanks, John, and good morning, everyone. We are pleased to report to you today Walter Carlson: our fourth quarter performance, review the progress made on our priorities for 2025, and share our goals for the future. As set forth on slide three, 2025 was a transformative year. We completed the largest transaction in our company's history and significantly strengthened our balance sheet. By divesting our wireless operations, we believe we have now positioned Array Digital Infrastructure, Inc. for success as a growing tower company and we now have the financial capacity to support TDS Telecom as it continues to expand and grow its fiber operations. Our speakers this morning will highlight many of these accomplishments in more detail shortly. But let me summarize by saying that the TDS team of associates accomplished much in 2025 during a year of significant change. As we look forward to 2026, we have five fundamental objectives for the enterprise as outlined on slide four. We plan to continue our efforts to strengthen the TDS corporate and capital structure. Vicki will share more details on those topics in a moment. We will continue to grow TDS Telecom's fiber business and work to delight our customers. Ken and Chris will share with you updated fiber address goals and other success targets. We intend to support Array Digital Infrastructure, Inc.’s success as a tower company and continue our efforts to successfully monetize Array Digital Infrastructure, Inc.’s remaining spectrum holdings. Anthony will highlight Array Digital Infrastructure, Inc.’s expectations for the year. We also intend to strengthen TDS' culture while delivering strong operational and financial results across all of our businesses. I want to personally thank every associate across the enterprise for their contributions in 2025, and look forward to all that we will accomplish together in 2026. And I will now turn the call over to Vicki. Vicki L. Villacrez: Thank you, Walter, and good morning, everyone. As I shared last quarter, across the enterprise, we continue to focus on moving the announced spectrum transactions forward as well as executing on our capital allocation plans. Slide five highlights our progress in these areas. In January 2026, Array Digital Infrastructure, Inc. closed on the announced spectrum sale to AT&T for $1,018,000,000. Pro rata share of the special dividend or $726,000,000. Additionally, in January, TDS repaid the last of our outstanding term loan debt of $150,000,000. With this further debt reduction and cash from the proceeds of the closed transactions, we are pleased with the flexibility this affords us to execute on our capital allocation priorities. As a reminder, our TDS capital allocation plan has three key elements. First, continued investment in fiber. With the proceeds from the special dividend related to the AT&T spectrum, we are increasing our fiber goals. As you will hear from Ken in a moment, while we are still in the early stages, we have identified 300,000 additional fiber edge-out service address opportunities across approximately 50 new communities where we believe we can be first to market and achieve returns in the mid-teens. And we are increasing our marketable fiber service address goals. Second, as it relates to M&A, we continue to evaluate fiber opportunities in a financially disciplined, accretive, business case-driven fashion. Third is shareholder returns. In the quarter, we invested $67,000,000 to repurchase 1.8 million TDS common shares, bringing our total 2025 repurchase volume to 2,800,000. As announced in November, the TDS board authorized a $500,000,000 increase to the then existing share repurchase program. As of the 2025, we had $524,000,000 remaining on this open authorization. The company intends to continue to be disciplined in the timing of its repurchase activity, balancing the needs of the business and market conditions as we move forward. Looking back at 2025, we made great progress in transforming our businesses. We continued to unlock significant value and generated significant returns for our shareholders, particularly in the form of transaction-related special dividends at Array Digital Infrastructure, Inc. I am incredibly pleased with how we have positioned the businesses for the future and aligned our capital allocation strategy with our growth opportunities and return to shareholders. Thank you. And now I'll turn the call over to Ken Dixon to discuss TDS' fiber business. Thank you, Vicki, and good morning, everyone. Ken Dixon: I'd like to provide an update on our fiber strategy progress. We still have work to do to improve execution, modernize our systems, and continue to scale our build and install operations. The foundation we have built positions us well for the future. Before I talk about where we are headed, I want to share our 2025 full year and fourth quarter performance. As set forth on slide seven, in the fourth quarter, we added 58,000 new marketable fiber addresses, up sequentially over Q3 and up 39% year over year. For the full year 2025, we delivered 140,000 new marketable fiber addresses and expanded our broadband footprint. Execution improved throughout the year. We delivered 40,000 marketable addresses in the 2025 and 100,000 in the second half, showing momentum as our construction engine accelerated. The fourth quarter was our strongest build quarter since 2023, and it was supported by record high construction crew counts. We did not reach our 150,000 address goal. However, we continue to make progress. We know what it will take to reach the level of output that we are targeting and we are focused on carrying this progress into 2026. Looking at sales, in each quarter, we delivered sequential growth in residential fiber net adds. We ended the fourth quarter with 15,000 fiber net adds, up 11% from the 2024, bringing us to approximately 45,000 residential fiber net adds for the year. Driving sales and increasing penetration across our fiber markets remains a top priority as we work to achieve our long-term objectives. We also made progress in our business transformation program in 2025. Through process improvements, organizational alignment, and targeted investments in best-in-class tools, we are strengthening the efficiency and agility of our operations, all with the focus on providing a superior customer experience. These improvements will be foundational to delivering consistent, scalable performance as we continue expanding our network. We are continuing to optimize our portfolio to strengthen our strategic focus. The divestitures in 2025, which included the mid-year sale of Colorado, and in December, the sale of our Oklahoma ILECs, have concentrated our footprint in markets with an economic path to fiber. Turning to slide eight, the progress we made in 2025 and the availability of additional capital to invest gives us confidence to expand our long-term fiber goals. We have identified 300,000 fiber address opportunities in new edge-out markets that are increasing our long-term goal from 1.8 to 2,100,000 fiber addresses. With that updated target in place, let's move on to the priorities that will guide us in 2026. Slide nine sets forth our TDS Telecom priorities for 2026. First, we are focused on delivering our fiber build plan. In 2026, our goal is to deliver between 200,000 and 250,000 new marketable fiber addresses as we ramp up construction in the A-CAM markets, continue expansion in growth markets, and enter targeted edge-out communities. This work is critical. When we execute the build plan, we can see sales opportunities in these key markets. Second, we are focused on driving sales and expanding our fiber customer growth. We delivered approximately 45,000 residential fiber net adds in 2025. In 2026, we expect to increase that number by driving higher sales in both new and established fiber markets. Third, we are committed to creating a best-in-class customer experience. That means improving every interaction from installation to service to long-term retention and ensuring the systems and processes behind these touch points support a seamless, high-quality experience. Fourth, we will continue executing on business transformation. The work underway will streamline processes and modernize systems in 2026, positioning us to operate as a faster, more efficient, fiber-first organization. As part of this work, we remain on track to deliver $100,000,000 in savings by year end 2028. These priorities align the organization for future success. I'll now hand it over to Chris to walk through our 2025 results and our financial outlook for 2026. Chris? Chris: Turning to slide 10. The chart on the left shows the last five quarters of fiber service address delivery, which strengthened throughout the year. Our address cadence quarter over quarter reflects seasonality, but it also highlights the actions we took to increase crew counts in the second half of the year. In addition, A-CAM activity contributed to this acceleration, as those builds started to ramp in the fourth quarter. As Ken mentioned, Q4 represents our highest production quarter since 2023, demonstrating the momentum we are seeing in our fiber build engine. On the right, you can see the continued expansion of our fiber footprint. Over the last three years, we have nearly doubled the number of fiber addresses across our markets. Turning to the next slide, the chart on the left shows the last five quarters of residential fiber net adds. In the fourth quarter, we delivered over 15,000 residential fiber net adds, representing year-over-year as well as sequential improvement. This growth reflects the investments we have made in fiber address delivery during the year. The chart on the right highlights the growth in our residential fiber connections, which have also nearly doubled over the last three years. This growth is driven by ongoing footprint expansion, as well as copper-to-fiber conversions. We expect fiber connections to grow as we continue to expand our fiber footprint. Turning to slide 12, average residential revenue per connection was up 2% year over year. As we have seen across the industry, fewer broadband customers are choosing to bundle with video, which puts downward pressure on this metric. In 2025, we indicated that we expected more modest revenue per connection growth, and our results this quarter remain consistent with that outlook. The chart on the right shows our year-over-year revenue comparison. As a reminder, the markets we divested accounted for $3,000,000 of the revenue decline in the quarter, versus prior year. Additional detail on the recent divestitures is available in the trending schedule on our investor relations website. Slide 13 focuses on the full year and quarterly results. Total operating revenues decreased 1% for the quarter and 2% for the full year. Excluding the impact of divestitures, revenues were flat year over year for both periods. This reflects continued secular declines in our cable and copper markets offset by growth in fiber connections, and modest improvement in revenue per connection. Cash expenses decreased 4% in the quarter, but were up 1% for the full year, reflecting the impact of our transformation efforts in the second half of the year. As a result of lower expenses, adjusted EBITDA improved 6% in the fourth quarter. For the full year, adjusted EBITDA declined 6% primarily due to the impact of divestitures as well as the first quarter's noncash adjustment to stock-based compensation. After a big fourth quarter, full year capital expenditures were $406,000,000 as we prioritized investments in our internal construction crews and equipment to support future builds. On slide 14, we provide our guidance for 2026. We are forecasting total telecom revenues of $1,015,000,000 to $1,055,000,000. This reflects top line growth from our fiber investments, offset by industry-wide declines in video, voice, and wholesale revenues. These ranges also reflect a full year impact from the 2025 divestitures, which contributed $19,000,000 in annual revenues. Adjusted EBITDA is projected to be between $310,000,000 and $350,000,000 in 2026. The 2025 divestitures and legacy revenue stream declines put pressure on this metric, but continued advancement of our fiber program and the benefits from our transformation initiatives will help mitigate these pressures. In 2026, our goal is to deliver 200,000 to 250,000 fiber service addresses, up from what we delivered in 2025, and we expect capital expenditures to be in the range of $550,000,000 to $600,000,000, up from $406,000,000 in 2025. The increased CapEx is driven by A-CAM builds, continued growth in our expansion markets, as well as spending on new edge-out opportunities. Before turning over the call, I want to thank the entire TDS team. Because of your hard work and dedication, we ended the year on a strong footing. We are energized for 2026 and the opportunities ahead. I'll now turn the call over to Anthony. Thanks, Chris, and good morning. As I reflect on what the Array team accomplished in 2025, I am extremely grateful for the team's hard work and perseverance during a year of enormous change and new beginnings. I am honored to have the responsibility to lead Array and look forward to growing the business over the coming years. As set forth on slide 16, Array's business portfolio has three significant yet distinct drivers of value. First, we own a portfolio of more than 4,400 towers across the United States. Originally constructed to support UScellular's wireless network, these sites are primarily located in suburban and rural areas. Notably, about one third of our towers have no competing site within a two-mile radius, making them especially valuable as carriers expand 5G and other advanced technologies to meet increasing mobile data demand. Second, we continue to hold wireless spectrum, principally C-band. This is a valuable asset with an existing ecosystem for deploying 5G that we are opportunistically seeking to monetize. Finally, we have minority interests in a number of primarily wireless partnerships, referred to in our financials as noncontrolling investment interests. These are passive investments that have historically generated substantial income and cash distributions. As I think about our strategic imperatives for 2026 as shown on slide 17, and how we extract value from our business, you will see the same key elements discussed last quarter: a laser focus on fully optimizing our tower operations and monetizing our spectrum. Spectrum. First, a brief update on our spectrum monetization process. As shown on slide 18, we have reached agreements to monetize roughly 70% of our spectrum holdings. As a reminder, in conjunction with the sale of our wireless operations on August 1, we conveyed 30% of our spectrum to T-Mobile. In addition, as previously announced, we signed agreements to sell spectrum to Verizon and AT&T in separate transactions, in exchange for roughly $1,000,000,000 each. In August and October 2025, we signed additional agreements with T-Mobile to sell spectrum for total gross proceeds of $178,000,000. This primarily includes the sale of 700 megahertz A Block, and the exercise of approximately 80% of T-Mobile's call option on the 100 megahertz spectrum. In December 2025, we received regulatory approval for the spectrum sale to AT&T and that transaction closed on 01/13/2026, with the Array board declaring a $10.25 per share dividend that was paid on February 2. Remaining pending spectrum transactions are subject to regulatory approval and closing conditions. Our retained spectrum principally consists of C-band. As I previously noted, we continue to believe this is highly attractive spectrum for 5G with an existing ecosystem that carriers can immediately put to use. While there are build-out requirements for the spectrum, the first one does not apply until 2029, leaving us plenty of time to monetize the spectrum. Turning to slide 21. As noted with our Q3 results, the T-Mobile MLA significantly increases our revenue, and we continue to focus on a strong partnership with T-Mobile to ensure the integration process is well executed. The team has made material progress in Q4, processing over 2,000 applications and completing structural analyses on over 95% of the applications. This is the first key step in the integration process, and we have executed seamlessly and are now shifting focus to subsequent phases of integration. Growing colocation revenue outside of the T-Mobile MLA continues to be a key priority, and both revenue growth and new colocation application volume remains strong. In Q4, cash site rental revenue increased 64% year over year from all customers and increased 8% when excluding the T-Mobile MLA committed sites. When layering in the T-Mobile interim site revenue, the increase was 96% year over year. We also continue to see a strong pipeline, with full year 2025 new colocation applications, excluding the T-Mobile MLA, exceeding prior year by 47%. Like others in the industry, we disclosed in Q3 that we received a letter dated September 2025 from DISH Wireless whereby DISH asserts its master lease agreement with Array has been impacted by unforeseeable actions of the FCC and therefore DISH believes it is relieved of its obligations under the MLA, and despite this, DISH plans to continue to operate certain sites for a period of time. Array continues to believe that DISH's assertions are without merit and DISH's obligations under the MLA remain intact. Since early December, DISH has generally failed to make contractually required payments. Array will take such actions it deems necessary to protect its rights under the MLA. For full year 2025, Array recognized approximately $7,000,000 of site rental revenue from the DISH MLA, and DISH has obligations at similar levels from 2026 through 2031, with a declining revenue commitment in 2032 through 2035. Slide 22 summarizes Array's financial results. Q4 was the first full quarter of T-Mobile MLA revenue, both the revenue from the MLA minimum committed sites as well as the full population of interim sites. The aforementioned T-Mobile integration volume in Q4 drove elevated service revenues as well as higher cost of operations expense due to the high volume of structural analyses conducted in Q4. Additionally, in Q4, there was a prospective change in classification of property tax and insurance from SG&A to cost of operations. SG&A expenses in the 2025 include cost to support the wind down of the legacy wireless operations. We began to see reductions in these costs. We continue to expect these expenses to persist into 2026 but declining over future periods. Turning to slide 24. As a reminder, T-Mobile has until January 2028 to finalize its select of 2,015 committed sites under the new MLA. Once these selections have been made, in addition to any incremental sites above the MLA commitment, Array expects to have between 800 to 1,800 tenant or naked towers. As laid out in our strategic imperatives, we are hyper focused on ground lease optimization and, more specifically, reducing the cash burden of our negative cash flow towers. Those efforts are coupled with our sales team continuing to aggressively market our full portfolio of towers, which will aid in reducing the naked tower portfolio. We are also assessing the future leasability of these towers and will prudently evaluate all outcomes and options over a multiyear period as we determine a path forward for the naked tower portfolio. Slide 25 summarizes the results of our partnership, our noncontrolling investment interests. This investment income and distributions are primarily from four wireless entities, operated and managed by AT&T and Verizon. As discussed last quarter, investment income and distributions for full year 2025 were impacted by several onetime factors, including the impact of the Iowa partnership selling their wireless operations to T-Mobile, and distributions received from Verizon related to their transaction with Vertical Bridge. Shifting our focus to 2026, on slide 26, we provided guidance for Array Digital Infrastructure, Inc. for the following metrics: total operating revenue, adjusted EBITDA and OIBDA, and capital expenditures. Notably, our guidance ranges are wider than the industry norm, but there are a few key factors driving dynamic for 2026. First, there is uncertainty with the T-Mobile MLA and timing of interim site terminations, as well as the potential for incremental committed sites above the MLA minimum. And second, on the expense side, we have discussed the currently elevated SG&A expenses and the wind down of these expenses that we expect throughout 2026 and beyond. For total operating revenue, we are forecasting a range from $200,000,000 to $215,000,000. This reflects a range of outcomes related to the T-Mobile MLA as uncertainty and includes anticipated new colocation and amendment revenue driven from applications we received in 2025 and expect to receive in early 2026. Our guidance range does not include DISH revenues given the uncertainty related to their recent actions. For adjusted EBITDA, we are forecasting a range from $100,000,000 to $215,000,000. Given the passive nature of our noncontrolling investment interests, our guidance range assumes equity income similar to 2025, excluding the onetime events outlined on slide 25. Adjusted OIBDA guidance of $50,000,000 to $65,000,000 simply removes the equity method investments. Finally, for capital expenditures, we are forecasting $25,000,000 to $35,000,000. This range is largely driven by a degree of uncertainty around ground lease purchase volume. Our CapEx spending in 2026 will continue to include onetime tower light monitoring migration costs of about $6,000,000, as we complete our efforts to migrate tower light monitoring to our long-term solution. In closing, I want to again thank the entire Array and TDS teams who have dedicated countless hours and energy to the stand up of our tower company. Array's future is bright, and 2025 was a transformative year. I am excited about the opportunity to lead this team through a year of integration, growth, and a focus on operational efficiency. Thank you, Anthony. I will now turn the call back to Walter. As you can see, TDS is in the midst of a vital period of transformative change. The successful close of the T-Mobile and AT&T transactions have unlocked tremendous value, enabling us to expand and deepen our fiber program Walter Carlson: stand up a strong and growing tower business, and strengthen our capital structure. Let me again thank all of the outstanding associates across the TDS enterprise for the fine work you do every day to serve our customers and advance our business. Operator, please now open the line for questions. Operator: We will now begin the question and answer session. Ric Prentiss: If you have dialed into today's call, please press 9 to raise your hand and 6 to unmute. Your first question comes from the line of Ric Prentiss with Raymond James. Your line is open. Please go ahead. Morning, Ric. Ric, a reminder to kindly unmute yourself. Once more, a reminder to kindly unmute yourself by pressing— Ric Prentiss: Got it. Okay. Can you hear me? Yes. Good morning. Good morning. Okay. Hey. Thanks for that. Sorry for the technical problems. Appreciate it. Anthony, good to talk to you. Thanks for the update on the DISH. We were wondering if it was in or out of guidance. So as I understand it, then DISH is completely out of your 2026 guidance from revenue to OIBDA to free cash flow then? Correct. And so any settlement from that would be upside from here. Correct. Okay. Alright. And when you think about what you are seeing in the tower leasing application area, how are you feeling about the application pipeline? It does feel like a lot of the carriers are focusing on rural America, T-Mobile, Verizon, and even AT&T. But what can you give us as far as some insight into what growth rates might look like from new lease activity? Vicki L. Villacrez: Yeah. So thank you, Ric, for the question. We are feeling quite optimistic about our sort of growth prospects for 2026, of course. The T-Mobile MLA for on a full year basis represents significant growth. But we also expect to see, excluding DISH and excluding the T-Mobile MLA, significant same-store growth. Right? So, for example, there are elements such as when UScellular was the market, you provided roaming to a lot of other carriers. And so with us leaving the market, some carriers have elected to use to replace the roaming that they had with us with building up some of their own sites. So that is one element that is driving things forward. In addition, other elements, other actions that we have taken, such as insourcing our sales team, and the agreement that we signed with Verizon, we have already seen positive results for in terms of driving our sales growth, and we expect that to continue into 2026. Ric Prentiss: Okay. And how is it coming along as far as other tower companies that have been focused as tower companies for longer than you guys? They are able to break out the cash revenue contribution, say, from escalators, versus new lease activity, versus churn, call it legacy churn versus kind of carrier consolidation churn or odd events like T-Mobile, Sprint, and Mobile UScellular and DISH. How is it coming as far as getting reporting out there on new leasing activity, escalators, and churn? Vicki L. Villacrez: We will—we are continually in the process of evaluating which of these metrics we will put in our public reporting. Right now, we are focused on standing up an effective power company's operations, and we reserve the right to make those changes in future reporting if and as you see fit. Yeah. Ric, this is Vicki. I will just jump in here. I was really pleased. We had a really strong fourth quarter. As you know, it is our first full quarter of reporting for Array Digital Infrastructure, Inc., and we will continue to focus on this as we go forward and keep our priorities in front of us. Ric Prentiss: Great. Okay. And on the TDS Telecom side, thanks for, as we called it, we want the number. So we now know the number of service addresses for the long-term target for that, Vicki and Ken. So the 2,100,000, a couple of related questions, of course, to that is, what is the definition of long term? Because it does feel like there is a race to be first to fiber, as you mentioned. The markets you have identified. You think you have got a good chance to be first to fiber there, but help us understand why is 2.1 now the right number. What do the competitive dynamics look like in that? And what is the pacing? I know you mentioned 200,000 to 250,000 service addresses this year as the target. Is that something that could accelerate? But give us a sense of what that long term means. What is the pacing to get there? Chris: Hey, Ric. This is Chris. I am going to take the first part of this question, and then I am going to hand it off to Ken to add more color. So, yeah, we are very excited to be raising our long-term fiber address target from 1,800,000 to 2,100,000. These goals reflect two multiyear fiber programs that we have in place. We have our A-CAM program, as well as our ongoing fiber expansion that we are building out to those 100 communities where we initially planted flags. Now we are taking advantage of additional edge-out opportunities to further expand those strategic clusters. So these goals reflect when those builds are substantially complete. As we shared last year, we said that roughly a five-year time horizon from our initial goal was a reasonable time frame, and that timeframe has not changed with these increased goals. So still that 2029, 2030 time frame, but we are doing everything we can to accelerate these goals because, as you said, we see a window of opportunity to be first to fiber in these new expansion markets, and we want to make sure to seize that opportunity. Ken Dixon: Yeah. So I will add to that. I absolutely love the markets that have been selected prior to my joining. And we still see very favorable competitive landscapes. And as Chris mentioned, we have a great opportunity to be first to fiber and continue to plant those flags in the marketplace. We also see these edge-outs, candidly, where we are already building and have a presence. And it allows us to expand into a bigger strategic cluster. So we are very bullish on the markets that we have chosen. And we have confidence in that incremental 300,000 to bring us to the 2,100,000. Ric Prentiss: Great. And a couple extra color questions around that. Can you break out for us how much is going to be A-CAM versus expansion because I would assume the capital spending is greater in the A-CAM markets than the expansion markets. So maybe a rough breakout on how much is A-CAM versus expansion of the 2,100,000 target. And then you mentioned, Ken, I think in your prepared remarks talking about focusing on sales, and that, you know, you still have a top priority and your long-term objective is. So maybe update us on what that long-term objective is for fiber penetration. Vicki L. Villacrez: Ric, this is Vicki. I will just jump in and say, our guidance is a total capital number. But specifically as you are thinking about the size of the A-CAM program relative to our full fiber target. Chris, you want to comment on that? Chris: Yeah. So raising our goals from 1.8 to 2,100,000, that is entirely for these additional 300,000 edge-out communities adjacent to existing expansion communities. This does not include any incremental A-CAM addresses. When we raised our guidance last year, that included 300,000 A-CAM addresses. And so we are not moving off of that. Ken Dixon: I will give you a quick update to your sales question. Obviously, address delivery creates sales opportunities. So our plan for 2026 is to continue our momentum. We are seeing very good presales volumes 60 days in advance of launch. The other update I will give you is we are spending a lot of time on sales channel development. In addition, we have brought on some new door-to-door vendors based on all of the markets that we have launched and the markets that we are expecting to bring into these new edge opportunities. So that allows us to increase our sales capabilities. We have also put significant improvement into our .com channel, and we have a great roadmap of go-to-market execution outlined for the remainder of 2026. We also are very focused in penetration rates. You will see us focus more on multi-dwelling unit in 2026 in addition to single-family homes. And we have also brought in some new leadership to help run sales in our call center environment and sales throughout our various distribution channels, two folks that are very tenured in the industry and have a great background in fiber sales. Thank you. Operator: Thanks, everybody. Thank you. Thank you. Your next question comes from the line of Sebastiano Petti with JPMorgan. Your line is open. Please go ahead. Hi. Thank you for taking the question. I guess maybe cleaning up there on the fiber questions. Any help in terms of thinking about the shaping of in-year service delivery? I think, Ken, you kind of talked about, I mean the fourth quarter delivery was, I think, the strongest, you said, since 2023. How should we think about that 200,000 to 250,000, you know, ratably over the balance of 2026? Obviously, weather implications in 1Q, April. Just trying to help think about that. And then I guess in the press release, I feel like the comments regarding the C-band or just spectrum monetization seemed a little bit new or, you know, a little bit more, you know, pointed. So I was just wondering if you can help update us on how you are thinking about that, the level of conversations you might be having in the market. Obviously, the reauction of the AWS-3 mid-year this year. You have visibility into upper C-band next year. So any color there would be helpful. And then lastly, I will just throw it out there. As it pertains to the buyback, any interest or what is your view on potentially buying back AD shares in the market as opposed to the TDS shares given the implied look-through discount on your own shares? How is the board perhaps maybe evaluating that? How do you think about that? Ken Dixon: I will start off with the fiber goals for 2026. As I mentioned earlier, we have—I love the markets that we are currently operating in. One of the first things that the team focused on was how do we absolutely get as many crews into the markets constructing our service addresses as possible. As you saw in my opening remarks, in the fourth quarter, we had record crew counts, and we were able to keep those crews throughout those, what I would say, winter months. And that gives us confidence going into 2026. One of the other big things that we did in 2025 is we made some very strategic investments in our internal construction capacity. We added additional equipment and plan to have additional crew capacity throughout 2026. I believe one of the biggest advantages that TDS has in the marketplace is the fact that we have internal construction crews and we also have contractors throughout the marketplace. As I mentioned, with those construction crew count levels in the fourth quarter, it gave us what I would say a very healthy funnel of service addresses coming into 2026, which we had not had coming into 2025. So I am very bullish on what we can accomplish in 2026. And I will hand it off for the tower question. Vicki L. Villacrez: Yeah. So in terms of the spectrum, right, as you know, the primary spectrum niche from a value perspective would be maintained as a C-band spectrum. We believe that spectrum is very attractive. Mid-band spectrum is an established infrastructure ecosystem. All major carriers can use it, and it is deployable immediately. And in addition to the major big three carriers, of course, there may even be other potential acquirers such as cable, regional carriers, speculators, what have you. You know, certainly, the availability of other spectrum could affect demand. But that could be positive for us as well, because of where companies, where potential acquirers of the upper C-band spectrum, wind up in the band range. So we think that that is potential upside for us as well. And then, you know, want to reiterate simply that the C-band is very attractive spectrum, and we are optimistic that it has significant value. I am going to hand over the capital structure questions to Vicki. Yeah. Thank you for the question. You know, Sebastiano, you know, each company's board determines their own capital allocation based on a number of multiple factors. As you know, TDS has announced that share repurchases are a part of its capital allocation plan and use of proceeds that have come from the transactions in the special dividends. The Array Digital Infrastructure, Inc. organization is very focused right now on standing up the new tower business. They are excited with the fourth quarter results and our outlook for next year, and very focused on growing that business going forward. So I cannot comment. That is a decision that each individual board makes. Sebastiano Carmine Petti: Yeah. But would TDS consider buying AD shares rather than its own TDS shares? To not only accrete yourselves higher, but also buy back your stock at a discount to the market. Walter Carlson: So Sebastiano, this is Walter. I think that Vicki's given the guidance that we can offer in response to your question. The issue of share buybacks is one that each board thinks about. And we do not have any further comments at this time. Sebastiano Carmine Petti: Okay, and then one last question, is the implied EBITDA guide at TDS, does that imply ex divestitures? Does that imply growth, or how should we think about that? Thank you. Chris: Yes, Sebastian. No. I can take this. This is Chris. So for our adjusted EBITDA guidance for 2026, we are seeing an impact from the divestitures as well as those legacy revenue stream declines. But past that noise, there is growth there and, really, that is coming from not only our investments in our fiber markets, but our continued business transformation efforts, and we are really liking the potential we are seeing from that program. Vicki L. Villacrez: Thank you. Operator: Your next question comes from the line of Michael Rollins with Citi. Your line is open. Please go ahead. Michael Rollins: Thanks, and good morning. Thanks for the additional disclosures in the deck today. If I could turn to slide 21. So in that slide where it walks through the tower revenues, you described 8% growth, excluding the committed and interim sites. And just curious, if we take that now to 2026, what growth rate is embedded within the revenue guidance for '26. And then I have a question on TDS Telecom afterwards. Vicki L. Villacrez: Sure. So assuming I am interpreting correctly your request, which is sort of same-store growth. Right? So I want to—like, if you take out the DISH revenue, right, the fact that that is going to zero, you know, we are expecting a growth of around 6% or so on a same-store basis. With DISH included, that would be closer to, you know, if you—with DISH included, it would be closer to zero. So flattish if you assume DISH was still around, but 6% excluding DISH. Michael Rollins: And when you think about—and thank you for that. And when you think about same store, is that the combination of existing leases and then new colocation or amendment leases signed on those locations. Vicki L. Villacrez: Yeah. Correct. Excluding all the T-Mobile activity. Michael Rollins: Great. And including any churn, normal course churn? Vicki L. Villacrez: Correct. Michael Rollins: Great. Very helpful. And moving over to the TDS Telecom side of the equation, you mentioned some of the issues with, you know, video take rates influencing overall account, you know, ARPU or ARPA. And just kind of curious, you know, how you are thinking about video on a go-forward basis. You know, are you able to discern in your current footprints the types of customer lifetime value, churn, and margin and economics of customers that are just, like, standalone broadband versus those that bundle video. And at some point, is there going to come a fork in the road where you decide, you know what? If you just kind of let video be handled by others, you know, in terms of streaming and so forth, that you could deliver a more efficient, effective broadband E and L for investors? Thanks. Ken Dixon: Thank you. So I will tell you when I came to TDS Telecom, I was very, very happy with the video business and what I would say very strong margins out of that video business. So I do not see us looking to outsource video. I think it is a critical part of our overall value proposition to attract a bundled customer that still wants broadband. And we still do hear loud and clear from some segments of customers that if we did not offer a video bundle, they would not have chosen TDS for their broadband service. So I still think it is very important. So I would say the other big opportunity for us in long-term value and churn reduction by having a bundled customer. We see that and we think it is still very important to our business. As you know, in 2025, we launched the mobile product to have a quad-play offering to our customers, and you will see us again, as we have with video bundles, also look to bundle the mobile product much stronger throughout 2026. But we have a very healthy video business. We are happy with the margins. And I think the team has done a very good job in terms of the content packaging, and I like where we are positioned in the market for 2026. Thank you. Michael Rollins: Thanks very much. Operator: Your next question comes from the line of David Barden with New Street Research. Your line is open. Please go ahead. David Barden: Hey, guys. Thanks so much for taking the question. So you guys have been pretty clear about your strategy to monetize the C-band. I am interested in your posture on monetizing specifically the naked towers that you foresee that may emerge over the course of this decision making that T-Mobile makes between now and 2028. But also the unconsolidated investment interests that you have largely with Verizon, how actively you are considering the monetization of those, or if you consider them kind of the anchor tenants of a going concern business and that we should really think about this as a terminal value, run-rate cash flow business or as a sale value business? Or which ones we should consider which? Thank you. Vicki L. Villacrez: Alright. So starting on with the second question first, on the noncontrolling interests, we like the cash flow from these investments. We are not in any hurry to sell them. There is only one natural buyer for those investments. If those companies are interested in buying them at a price that is attractive to us, of course, we will entertain that, but we are in no hurry to sell them if we like the cash flows from them. In terms of the naked towers, you know, our perspective on those is that there is significant latent value in the majority of those naked towers. Right? Some, obviously, we will need to, at some point, decommission or otherwise exit from, although decommissioning is quite expensive, and it is an interesting math exercise to go and take a look at that versus the cost of retaining them. But we view it as an option, and it is our objective at Array to reduce the holding cost of that option, you know, as quickly as possible in order to get the potential value from those towers, because we do think that there is substantial lease-up opportunity on those naked towers over the long term. David Barden: So the kind of industry standard has been to underwrite a 0.1 incremental tenant per tower per year. Is that something that you would underwrite, or are you not confident in underwriting that, or are you more optimistic than that? Vicki L. Villacrez: We are not going to take a position on that at this time, given just how new a situation we are in with this portfolio of towers no longer having the UScellular tenancy on that. David Barden: Got it. Thank you, guys. Really appreciate it. Operator: Your next question comes from the line of Sergey Dluzhevskiy with Gamco Investors Inc. Your line is open. Please go ahead. Sergey Dluzhevskiy: Morning, guys. Thank you for taking the time. Good morning. Good morning. Good morning. My first question is on the TDS Telecom side. Obviously, you are increasing the run rate of the build. Although in the fourth quarter, it was pretty close to the lower end of your guidance. As you look into 2026, and maybe if you look at your past build history, what are some of the lessons learned, maybe what are some of the best practices that you are planning to utilize in 2026 and going forward to make sure that the build is more efficient and more successful. Obviously, you did not meet your target in 2025 by about 10,000. But in 2026, obviously, you feel much better about the opportunity. Ken Dixon: So thank you for the question. What I will tell you is our focus is around execution of how many crews we have out in the marketplace. That is vital to our success to deliver our targets for 2026. What we have seen at TDS in the past is that you have typically good service address delivery in the fourth quarter, but you lose most of your external construction crews through what I would say the winter months post-holiday, and then it is very difficult in the past to get those crews back in time for spring. So we have monitored that very, very closely and kept our crew counts stable in the fourth quarter. And we now are monitoring those crew counts and have those same levels here in the first quarter. So that gives us much better confidence than we have had in years past about getting off to a strong start with our service address delivery at the beginning of the year. Sergey Dluzhevskiy: Yeah. Great. My second question is on the Array Digital side. And, Anthony, nice to meet you virtually. I guess my question is, obviously, you have made progress on improving tenancy ratio since the T-Mobile transaction and running this company as a more focused tower business. As you look into 2026 and maybe even 2027, what are some of the initiatives that are working well for you in terms of improving this density ratio ex T-Mobile? And also what are some of the new things that you are potentially contemplating and maybe would focus more on in 2026 and 2027 to accelerate the tenancy rate increase. Vicki L. Villacrez: So, Sergey, thanks for the question, and nice to meet you virtually as well. So there are a number of initiatives that are in place that we expect will help our performance in terms of increasing our tenancy ratio. So first, as we have mentioned before, we insourced our sales team and we believe that that is already paying significant dividends in terms of getting our tenancy ratios up. The new deal that we signed with Verizon that we announced last year also is having an impact, as well as, I mentioned, the fact that some carriers are doing roaming replacement builds for their old UScellular network carriers. Finally, we did not have much of a focus at all on non-tower within our sales team. We do have roles that are doing that now, and we believe we are seeing early results from approaching more vertical potential tenants. So all of those are elements that we believe are going to help us increase our tenancy ratio going forward in 2026 and beyond. Sergey Dluzhevskiy: And maybe my last question is also on the Array side. So you have talked already about your focus on monetizing C-band spectrum. Obviously, we have seen several transactions last year involving EchoStar and their spectrum. We have several spectrum auctions coming up. So maybe if you can just provide more color on how you are thinking about the monetization opportunities for C-band, maybe the timeline, and to what degree some of those developments or other third-party transactions or with auctions are putting or creating more urgency to find an appropriate transaction sooner rather than later. Vicki L. Villacrez: So a couple comments on that. First, I think those transactions with EchoStar show that there is very robust demand for spectrum. You know? And I think that bodes well for the spectrum that we indeed do have. Second is that, you know, we believe our spectrum is very valuable. We believe that, if we have to, the carrying costs of maintaining that spectrum are manageable relative to the potential value that we could get for it. So we are not going to be a forced seller of the spectrum, and nor do we feel that we need to be. You know, with all that said, we continue to look for opportunities to monetize it. And we are going to continue to be active in pursuing those. Operator: There are no further questions at this time. I will now turn the call back to John for closing remarks. John Toomey: Thank you, and thanks again to everyone for joining the call this morning. As always, please do not hesitate to reach out with further questions or follow-up. And I hope everyone has a wonderful weekend. Walter Carlson: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Alarm.com Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Zartman, Vice President, Investor Relations. Please go ahead. Matthew Zartman: Thank you. Good afternoon, everyone, and welcome to Alarm.com's fourth quarter and full year 2025 earnings conference call. Please note, this call is being recorded. Joining us today are Steve Trundle, our CEO; and Kevin Bradley, our CFO. During today's call, we will be making forward-looking statements, which are predictions, projections, estimates and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. We refer you to the risk factors discussed in our annual report on Form 10-K and our Form 8-K both of which will be filed shortly with the SEC, along with the associated press release. The call is subject to these risk factors, and we encourage you to review them. Alarm.com assumes no obligation to update forward-looking statements or other information that speak as of their respective dates. In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of GAAP to non-GAAP measures can be found in today's press release on our Investor Relations website. I'll now turn the call over to Steve Trundle. Steve? Stephen Trundle: Thank you, Matt. Good afternoon, and welcome to everyone. We are pleased to report fourth quarter and full year results that exceeded our expectations. Our SaaS and license revenue in the fourth quarter was $180 million, up 8.8% over the last year. Our adjusted EBITDA in the quarter was $55 million. I want to thank our service provider partners and our employees for their contributions to our performance in 2025. During the year, we reached a significant growth milestone generating more than $1 billion in annual total revenue. Achieving this scale reflects the strength of our technology and the business model that we have engineered. Our business is grounded in the long-term partnerships we have with our service providers. Those partnerships are based on our commitment to both innovation and strategic alignment, where our growth is predicated on our partner success with our technology. Our service providers integrate our technology platform across their business to deliver the best possible residential and commercial security solutions to their end customers. During the year, we continue to execute on our long-term growth strategy. We are leveraging our R&D program and delivery channels to expand into additional markets. As a result of these efforts, we have created a more diversified and durable business. Today, we provide mission-critical IoT-based solutions anchored by physical products that protect homes, businesses, enterprises, multifamily properties and critical grid infrastructure worldwide. I want to spend a moment reminding our investors of how our business model and value creation engine are unique compared to most other SaaS companies. The equity markets have recently become fearful that all SaaS businesses will be pressured by AI, impacting seat-based pricing models and performing tasks that could relegate incumbents. Alarm.com's SaaS software is priced around a different set of value drivers. Our service providers already use our back-end software essentially for free if they install our customer sites with IoT devices in our ecosystem that enable our software. We have no material seat-based pricing models. Instead, our SaaS revenue is driven by each connected device that is installed by our service provider partners. And once these connected devices are installed at a customer site, they typically remain in service for nearly a decade. Our service providers benefit from efficiencies that are gained by having a single management platform for servicing all of their connected devices. The value drivers in our business are the number of connected devices that we enroll on our platform and at some level, particularly in the case of video, the data that these IoT devices generate. We produce insights from these rich proprietary data streams to benefit the subscriber and the service provider. Additionally, in many cases, we create value by offering and managing cellular and tightly supervised Internet connectivity to the devices and locations we serve. We will continue to leverage AI for both internal productivity gains, and to augment our capabilities with products like the AI-based deterrents and monitoring capabilities we already have in market. However, we do not see AI driving a change to our fundamental business model structure. Next, I want to walk through the major components of our business and discuss the strategic drivers that support their continued growth. I'll start with our core residential business which serves the smart home security market in the U.S. and Canada. We have a strong market share for professionally installed smart home security solutions in these markets. Our leading position is built on the scale of our platform, the breadth and quality of our solutions and our trusted service provider relationships. We have consistently invested more in this market than our competitors. Revenue growth in our core residential business continues to be driven primarily by ARPU expansion. Our service providers are particularly effective with our residential video solutions, including video analytics, and increasingly remote video monitoring that is augmented by the central station. Our residential customer tends to be the person who wants real and serious security with everything done right by a professional, delivered and regularly serviced in a manner that protects the subscribers' privacy. We recently introduced a new premium video doorbell, which allows customers to enable 24/7 continuous onboard recording via SD card. It's also designed to enable our full suite of advanced analytics and drive adoption of our higher-tier video subscriptions. We launched our first battery-powered camera the 731. It's flexible, completely wireless installation enables video coverage in locations that are difficult to wire. The 731 can be installed with automatic solar-based battery charging. It also supports premium video capabilities, including AI deterrents, perimeter guard and remote video monitoring. On the software side, we recently released new AI capabilities that improve automation and personalization for subscribers. These enhancements make it easier to identify and respond to important events. Over time, we believe it will help support increased retention and adoption of premium video subscriptions. We have also continued to diversify the business. I'll start by focusing on our expansion into adjacent markets through our commercial security and energy businesses. These 2 businesses alone contributed 25% of our SaaS revenue for the full year of 2025 and grew about 25% year-over-year. Our commercial business serves small- and medium-sized businesses and enterprise customers with integrated intrusion, video and access control solutions. Growth remains solid in 2025 despite some economic uncertainty that slowed some larger scale deployments. We believe that the underlying demand environment in the commercial market remains solid. With the range of functional advantages our platform offers the market, we believe that we can drive increased adoption of the Alarm.com and OpenEye commercial platforms amongst both our existing and new service providers. We have continued to enhance the platform to fully integrate video, access control and intrusion protection to enable our service providers to standardize on Alarm.com for the full range of commercial subscribers that they serve. A recent platform enhancement is the introduction of a new lineup of commercially targeted Alarm.com video cameras called the Prism Series. The new product line is designed to give our service providers a more robust offering for SMB and mid-market installations. The series offers high-resolution imaging, clear color video at night and 2-way audio. It also supports our premium video analytics services, including AI-driven proactive deterrence and integrated central station remote video monitoring. It has also been encouraging to see that many of our commercial end subscribers continue to add to their systems with more components of our platform well after the initial installation. Today, more than 2 million active video cameras and devices are deployed across our commercial property base. This base has grown consistently driven by increasing attach rates as more of our service providers incorporate our video solutions into their standard offerings. Shifting to our Energy business. EnergyHub remains a strong contributor to our growth. The EnergyHub platform provides mission-critical distributed IoT management solutions that help utilities address long-term structural pressures on grid reliability and infrastructure. Forecasts point to the strongest sustained growth in U.S. electricity demand in more than 2 decades. Electrification and the growing footprint of data centers are among the primary drivers of demand-side pressure. At the same time, electricity generation is also becoming increasingly diversified and thus more variable. EnergyHub orchestrates large networks of connected devices, including thermostats, electric vehicles, batteries and water heaters, to provide on-demand virtual power plants, also called VPPs. Utilities call on VPPs to reduce peak demand and to increasingly manage load more dynamically across the grid. EnergyHub can stand up a VPP far faster and more cost effectively than building new generation infrastructure. EnergyHub is the clear market leader in this space. In 2025, the number of connected devices under management increased by more than 50%. During the year, utilities increased the number of times they called on EnergyHub VPPs by 25%, reflecting the growing importance of its programs to grid stability. To accelerate EnergyHub scale, we acquired Resideo Grid Services, or RGS, late in 2025. Similar to EnergyHub, RGS provides demand response aggregation and program management solutions for utilities, but it has been primarily focused on supporting smart thermostats. With the acquisition, EnergyHub can introduce its multi-device platform to RGS clients, enabling them to manage a broad ecosystem of distributed energy resources and deploy VPPs with greater capacity and capability. Looking ahead, EnergyHub will remain focused on growing its base of utility clients, expanding the diversity of devices enrolled in programs and increasingly applying AI to provide load shaping solutions that address a growing range of grid challenges. Lastly, we continue to develop international markets as a natural extension of our platform strategy. We are deploying our core residential video and increasingly commercial technology into these new markets to leverage our core R&D investments and drive scale. As we've expanded our core video offering, our solutions, including remote video monitoring, are being increasingly introduced and adopted by our international partners. In 2025, we saw a continued uptick in the video attachment rates to 33%. In summary, I'm pleased with our 2025 results, and the continued growth we see across the business as we roll into 2026. I want to thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. I'll now turn things over to Kevin Bradley, our CFO, to review our financials. Kevin? Kevin Bradley: Thanks, Steve. I'll begin by reviewing highlights from our fourth quarter and full year 2025 financial results, then cover key elements of our capital allocation framework and conclude with our guidance for the first quarter and full year 2026. I'm pleased to report another quarter of execution against our financial plan. Our quarterly and annual performance reflects continued broad-based contributions across the business's diverse components. As Steve just mentioned, one of the areas that outperformed was EnergyHub. EnergyHub's results were driven by higher-than-expected program participation as well as a modest contribution in the latter part of the quarter from the RGS acquisition. Growing the number of programs and increasing the number of enrolled devices in each program are among the multiple long-duration levers supporting EnergyHub's growth. There are network effects in the business that accrue with scale. The more programs and DERs that EnergyHub manages on behalf of utility clients, the more valuable they become to ecosystem device partners. And the more ecosystem device partners EnergyHub works with, the more capacity the virtual power plants can provide utility clients. The acquisition of RGS expands our number of managed programs and enrolled devices and deepens our relationships with ecosystem device partners, accelerating these effects. For full year 2025, SaaS and license revenue for the overall consolidated business grew 9.2% year-over-year to $689.4 million. Total revenue grew 8% year-over-year in the fourth quarter, and as Steve discussed, exceeded $1 billion for the full year. Total gross profit in the quarter was $172.6 million, an increase of 8.8% year-over-year, including 13.4% year-over-year growth in hardware gross profit to $19.1 million. Higher-than-expected hardware revenue and gross profit were driven by OpenEye's sales of enterprise-grade video cameras and devices as well as a favorable product mix of Alarm.com residential cameras. As Steve described, the physical installation of hardware plays a critical role in value creation across the business, regardless of whether it's one of our products or those of an ecosystem partner. But when it is one of our products, as is the case with substantially all video cameras that connect to our cloud that sale contributes to our highly efficient subscriber acquisition model. In the fourth quarter, gross profit from hardware sales offset approximately 55% of GAAP sales and marketing expense and more than 60% for the full year. That leverage allows us to direct more capital toward organic R&D and innovation, enabling our service providers to deploy a wider array of solutions across our mutual customer base. During the fourth quarter, total operating expenses, including depreciation and amortization, were $137.7 million. Excluding depreciation and amortization as well as stock-based compensation and other items we address from G&A for non-GAAP purposes, total operating expenses were $121.7 million, a 9.5% increase year-over-year. R&D expense in the quarter, inclusive of stock-based compensation, was $66.2 million, up 6.8% year-over-year. For the full year, R&D expense increased 5.6%. GAAP net income in the fourth quarter was $34.7 million or $0.66 per diluted share. Non-GAAP adjusted net income grew 19.2% year-over-year to $38.9 million and non-GAAP EPS increased 24.1% to $0.72 per diluted share. Adjusted EBITDA for the quarter grew 18.3% year-over-year to $54.9 million. For the full year, adjusted EBITDA increased to $206 million, representing 16.9% year-over-year growth. I do want to point out that our adjusted EBITDA number was a tad inflated by a $4.7 million mark-to-market gain on a security in our treasury portfolio. While substantially all of our balance sheet cash is held in money market funds, our policy allows for a small allocation to other marketable securities. The business generated $35.1 million of non-GAAP free cash flow in the quarter and $137 million for the full year. As we previously indicated, free cash flow declined year-over-year as the exceptionally favorable working capital dynamics we saw in 2024 normalized. Turning to the balance sheet. We recently retired the $500 million of convertible notes that matured in January 2026. These bonds carried 3.4 million shares of potential dilution that we began removing from our diluted share counts midway through Q3 2025. They will not be in our diluted share counts for the entirety of 2026. Our operations fully fund their own capital requirements, which allows for a higher degree of opportunism and flexibility as it relates to capital allocation, further supported by the 3-year time line remaining on our $500 million of outstanding convertible notes due May 2029. In 2025, the business generated returns on invested capital from its ongoing operations well in excess of that capital's cost, reflecting the durability of our competitive positioning and the discipline with which we allocate capital. We have historically and will continue to primarily allocate capital to organic R&D with an emphasis on long-term value creation. Our commitment to domestic product development has contributed to some meaningful tax efficiencies in the form of ongoing R&D tax credits. Our cash tax liability for 2025 was $12.1 million, which reflects the benefit of those R&D tax credits as well as changes to Section 174 of the tax code that restored the full deduction of domestic R&D expenses in the year incurred, which will provide us with a multiyear tailwind to net returns on invested capital. We also leverage our strong balance sheet to supplement organic investment, whether in the form of M&A such as the $113 million we spent in 2025, acquiring businesses that support our commercial and energy initiatives, returning cash to shareholders via opportunistic buybacks, we're investing strategically into the ecosystem in the form of nonoperating assets. Looking ahead, we will continue to deploy capital to reinforce our competitive position and leverage our scale. We will prioritize high-return organic investments and selective acquisitions that support growth opportunities, while maintaining the financial flexibility to act opportunistically elsewhere. I'll switch gears now to providing our 2026 financial outlook. For the first quarter of 2026, we expect SaaS and license revenue of between $175.8 million and $176 million. As a reminder, the sequential decline in SaaS revenue from Q4 reflects EnergyHub's normal seasonal dynamics. EnergyHub revenue is typically annual in nature and weighted towards the second half of the year. The fourth quarter represents the largest contribution. This pattern is reflected in our guidance. For the full year 2026, we expect SaaS and license revenue between $743 million and $745 million. This is a bit higher than previously expected and reflects contributions from RGS as well as continued healthy expectations for organic growth. We now expect total revenue between $1.058 billion and $1.065 billion, implying hardware and other revenue of $315 million to $320 million, which includes the assumption that we pass through the current tariff cost dollar for dollar and that tariffs don't become incrementally larger from here. We are also implementing non-GAAP adjusted EBITDA guidance above our first look of between $213 million and $215 million, implying margins of 20.2% at the midpoint. This outlook reflects the inclusion of RGS, which we don't anticipate will contribute to adjusted EBITDA this year. Over time, we expect to realize more synergies from the acquisition, and we continue to expect to exit 2027 with a 21% adjusted EBITDA run rate margin, as I discussed in more detail on our last call. Non-GAAP adjusted net income for 2026 is expected to be between $150.5 million and $151 million or $2.78 to $2.79 per diluted share. This is based on approximately 57.2 million weighted average diluted shares outstanding, down from 60 million weighted shares outstanding during Q4 2024. We expect our non-GAAP tax rate to remain approximately 21% under current tax rules, and we project full year 2026 stock-based compensation expense of approximately $40 million to $43 million. In closing, we're pleased with the broad-based momentum in the business that we saw throughout the year. We believe we're well positioned to deliver continued revenue growth and profitability while investing to expand our long-term opportunities. With that, operator, please open the call for Q&A. Operator: [Operator Instructions] Our first question comes from Adam Tindle with Raymond James. Adam Tindle: Congrats on 2025. Kevin, I wanted to maybe just start with the raise of SaaS guidance. It's a little bit more meaningful than in the past. I know you guys tend to kind of outperform over time and inch that up. But this is a little bit of a bigger bump than we've seen in the past. I understand there might be some RGS contribution. And if you could maybe just break that out a little bit. And then also the organic assumption sounded like you were still expecting healthy organic growth. What are you seeing in the business to underpin that? I think that's obviously not consistent with what the stock has been doing, what kind of the general view on software that Steve outlined. So what's underpinning the organic assumption improvement as well? Kevin Bradley: Sure. Adam. Yes, as you noted, we -- since our first look, the SaaS guide at the midpoint went up by about $21 million. There's 2 components of that. Obviously, that we included RGS in late Q4 of last year. So most of the revenue from that is going to show up from a year-over-year perspective, obviously, in 2026. And then we outperformed excluding that during Q4. So I think the best way to think about it is we had some implied year-over-year SaaS growth rate embedded in our first look. I'd say things are maybe slightly better than that. If you excluded RGS, maybe about 10 basis points or so, 10, 20 basis points or so better than that growth rate that we projected. And the rest of the absolute dollar stack on there is really from RGS. Adam Tindle: Got it. Okay. Maybe just a follow-up on RGS and EnergyHub in general, since I think it's becoming even more topical for Steve. You described some of the network effects that essentially that are kind of going on in that business. Wonder if you might just take a step back for investors that might be a little newer to this and talk about the competitive environment and EnergyHub's position with RGS, and have you taken a look at like sizing that total market? How big could that be over time? Sort of your vision for that business, especially now with the RGS acquisition? Stephen Trundle: Adam, good question. Yes, in terms of the network effects, I mean, essentially, we want to be the most appealing partner to various folks who may make a device that can play in the ecosystem. So hypothetically, if you're a thermostat maker and you decide to partner with a company that can enable VPPs, you want your thermostat to be used for that purpose in as many places as possible. And with the acquisition that we announced, we get to a wider array of utilities. And that, of course, makes the value of each device higher. Longer term, the thing we're really -- in terms of size of market, there are around 100 -- I believe, 130 million meters in North America. Currently, we're transacting business with electric utilities that cover around 50 million of those meters. But we're still in the very early days of enrollment against those meters. So we're getting about a 5% level of enrollment today on those 50 million meters that we're passing with the EnergyHub offering. And of course, we grow in a couple of different ways -- 3 different ways actually. First is to drive up that level of enrollment with our utility partners. Second is to continue to add utilities. We believe we're the share leader at the moment, but we'll continue to add utilities. And then third would be to add more devices and to add categories that are energy consumption categories. So -- that's what we're attempting to do. That's sort of the -- those are the growth drivers in the business. In terms of the competitive framework, there are some smaller competitors in this space, but it's pretty hard to sort of cover off all the different areas that a utility partner would want their VPP provider to cover off. So if I jumped into the business today and I'm an upstart, I might attack just, for example, EV charging stations or I might have tried to attack just, for example, swimming pool pumps or hot water heaters or whatever. The problem is it's almost too late to do that today. So we think that the utility wants to basically have one partner that can stabilize supply across a wide array of devices, and we think we're pretty well positioned to do that. Operator: Our next question comes from Samad Samana with Jefferies. Unknown Analyst: This is Jordan on for Samad. Congrats on the strong quarter. Steve, you touched on kind of the primary concern we're hearing from investors around AI and software, which is the risk that software poses. Obviously, your business model seems to be in a position of strength relative to many others. I wanted to just double-click on how you're pivoting R&D internally to capture the opportunity here with AI and the strong SaaS guide you guys gave, how does that embed either a material demand or monetization that might come from the newer AI features that you're layering into the product? Stephen Trundle: Yes. Good question. Yes, Jordan, I think really 2 fronts there. So first, internally, we think about what are the capabilities that we can render that make the solution more accessible or that create more intelligence from each stream of data. So we've done some things already. We've been in market with what we call AI-based deterrence now for well over a year. We've been in the analytics business, leveraging AI for half a decade anyway. The capabilities are getting stronger every day. We're increasingly looking and working on efforts to make the consumers interface to all of our capabilities, much more streamlined leveraging LLM. So you've seen capability, I think we've mentioned called attribute search, which allows someone to interact with a rich amount of video data in a very efficient sort of text-based way. So I think you'll see us continue to drive functionality out, and then there's -- in terms of monetization, there's the other side of it, which is can we become more productive or can we do more things. And we're certainly -- it's there, I'd say it's a little bit more early days. There's a lot of evidence of amazing things that one will be able to do. And then there's sort of a question of how many of those things can one actually do today. So we continue to kind of walk down that path and we expect through time though, to drive up productivity on some. Unknown Analyst: Got it. That makes a lot of sense. That's great to hear. Maybe a quick call for you, Kevin. You mentioned the implied hardware guidance accounts for tariff cost pass-throughs, obviously, a positive for margins for the business. But I'm curious how you're thinking about how those pass-throughs impact demand broadly? Any feedback from your customers? And then, are you seeing any increase in manufacturing costs related to hardware and how are you thinking about managing those if those are coming up? Kevin Bradley: Yes. Jordan, thanks. We dealt with a similar [indiscernible] type of cost inflation back during COVID on the hardware line. And when -- last April, when tariffs started being released, we went back and examine what happened during that period of time related to demand, and we couldn't really discern any meaningful change in demand. So our thesis going into this when we first passed through tariffs, it was last June at the base 10% level was that we were going into it optimistic that there would be no demand impact. And I think that bore out through most of the year. We obviously outperformed our initial look last year, our guide. Now that includes about $7 million or $8 million of tariff pass-through revenue. But even excluding that, we would have exceeded it. So no material decrease or discernible decrease in demand yet. Those pass-throughs went up on January 1 to reflect the full tariff. So they went up by about 2x, and we're going into this, assuming that there will be no degradation in demand from that either. Related to other manufacturing costs, we've been watching the DRAM market, obviously, that impacts us to some degree. We haven't really seen any cost increases come through related to that yet. One thing that we're likely to do is probably extend the number of days of inventory that we have on hand by about 30 or 40 or so, early this year to try and derisk the supply chain a little bit from that. So we'll have a little bit more of an investment in working capital to start the year that will unfold over the next couple of months. But yes, no cost increases yet related to the memory -- potential memory shortages. Fortunately, our agreements tend to carry the right to pass through third-party costs. So we feel a little bit insulated from that and we'll just sort of deal with that as it comes. Unknown Analyst: That makes sense. Congrats. Operator: Our next question comes from Saket Kalia with Barclays. Saket Kalia: Great to see the results. Stephen Trundle: Thanks. Saket Kalia: Steve, maybe for you. That was a helpful walk-through earlier on kind of the combined EnergyHub business. And I get the vision in terms of having more devices only makes each other device more valuable to a utility. That makes a lot of sense. Maybe more of a medium-term question. How do you kind of think about synergies there? Whether that's from a revenue or expense perspective, just as we think about that combined EnergyHub business becoming maybe a bigger, more strategic part of Alarm's overall business. Does that make sense? Stephen Trundle: Yes, it makes sense, Saket. Yes, in terms of synergies. So the way we think about it are -- in the early days, we're -- as of right now, we're managing 2 different platforms that enable the capabilities that RGS and EnergyHub have traditionally rendered. So synergies as of today are not very substantial. We, of course, have some customer synergies already in place. But our outlook is that over the next 12 to 24 months, working with our customer partners there. We will begin to fuse the capabilities -- any unique capabilities that exist in RGS will roll into the EnergyHub platform. And over time, we would begin to see synergies that come from a fusion of those 2 platforms and to sort of one greater whole, the benefit to the customer, of course, being that the greater whole will be supported by an overall larger R&D engine, a wider array of devices and become more valuable. So in terms of the way we've modeled it, it's sort of no synergy this year, very little and then on the -- in terms of EBITDA, but over -- as we sort of look into the 12- to 24-month period, we began to see more material synergies emerge there that will help us, by the way, kind of get EnergyHub. I mean you're seeing us begin to gain some confidence that EnergyHub by itself is a platform company and to gain more confidence there we need to gradually see the cash production capacity become more real. And I think that this will help us -- the synergies here will help us get there. Saket Kalia: That makes a lot of sense. Kevin, maybe for my follow-up for you, just on a slightly different topic or a broader topic. I was wondering how you kind of think about the emerging areas growing in 2026. I think Steve Trundle said, the commercial plus energy, I think that's about 25% of SaaS, it grew about 25% in '25, of course, international would be additive on top of that. If we think about those 3 businesses sort of in aggregate, how do you think they kind of grow in '26 as we think about the different components next year? Kevin Bradley: Sure. Thanks, Saket. I would expect that they grow between 25% and 30%. Now that obviously includes a little bit of inorganic growth, but that's how we're thinking about it going forward. And by implication that if they grew at that rate, they'll wind up becoming more like 1/3 of total SaaS revenue, if not maybe slightly more. Operator: Our next question comes from Stephen Sheldon with William Blair. Stephen Sheldon: First, it seems like you're getting a lot of traction with commercial video solutions. I guess, so if you look at that, has there been anything surprising about how your video capabilities are getting utilized across end markets, property types, use cases, et cetera? And specifically, are there any notable pockets of strength to call out on the broader commercial video side? And then I think you also talked about expansion motion there as one of the factors supporting growth. So yes, I guess, I'd just love some more color on the growth you're seeing in commercial video. Stephen Trundle: Sure. This is Steve speaking. And yes, we -- the areas that are always best for what we're doing in video tend to be the areas with high crime and high assets. So certainly, strengths are places where those 2 phenomena exists in the same location. So some -- place like L.A., for example, is a great market for our commercial video solution. The strengths are coming right now. I think -- I wouldn't call them surprising because we saw it coming. But the acquisition we did and the commitment we made to Central Station augmented remote video monitoring is a source of strength in the commercial video market. It really enhances the ability to deter a crime before it occurs as opposed to just doing forensic analysis of what has occurred after it has occurred. So just a sort of a sea change in the way that we think about the role of a camera and what its value is to society and the shift to deterrent. So that's -- that's been the biggest driver. I would say we saw that coming. We've got the right product lineup. There's been a lesser driver, which is just on the commercial side beginning to get some uptick on the international markets. International always lags what we're doing in North America a bit. And in the last 6 months, I would say we've made more progress deploying some of the commercial assets, especially in Latin America, but gradually elsewhere. Stephen Sheldon: Got it. That's helpful. And then as a follow-up, I guess, high level on spending plans. Can you talk more about areas where you're stepping up reinvestment across the business in 2026. I know R&D is always a major focus. So I guess, any color on kind of where you're maybe stepping up the investments in R&D in any other parts of the business where or maybe reinvesting more than you have historically? Stephen Trundle: Yes. I would say, in general, our view right now is that R&D as a percentage of revenue is about where we want it. So we're not planning to surge R&D spend. We're instead really focused on driving more productivity out of R&D. And in the past, we've talked about kind of where we want to end '27, I guess, in terms of overall operating margins in the business, and we're still committed to that. In the near term, yes, absorbing a couple of different platforms or a new platform on the EnergyHub side will require some effort and some surge capacity. And then I would say we're at a point in time now where -- and I would imagine other companies in a similar position where you have a set of R&D commitments that you've made 12 to 24 months ago that are in process, and then you're simultaneously doing a lot of work to get all of the goodness of what's going on with AI at the same time. So if there were a place where there's some surge, it would be attempting to basically spend both of those wheels at the same time. And I'd say that's underway here now. Operator: Our next question comes from Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: I wanted to follow up on EnergyHub and Steve, something you brought up at the beginning of the call, could you just maybe take a step back and mechanically help investors think about how your EnergyHub business would benefit from the AI-driven data center demand? And then how should investors just more broadly as we track that business through the year? Is there anything in the market that we should be tracking to -- other than quarterly results to try and understand the trajectory of that business? Stephen Trundle: Adam, yes. So the data center phenomena is a demand driver for EnergyHub. It's a combination of sort of the requirement for more electricity. That's at the moment driven very much by growth in data centers as well as this phenomenon where the sources of supply on the grid themselves have become a bit more variable. So a smaller percentage of power is coming from, say, a constant rate nuclear facility, a higher percentage of power is coming from more variable sources like solar, wind and others. So those 2 things together, the data center, plus the increasingly variable sources of supply create more of a need for the utilities to find new sources of power. And I would say they're, therefore, more open to what we do with EnergyHub and the creation of virtual power plants to produce energy at certain points in time when the need is most acute. It's a great driver for us, I guess, I would say. In terms of the second part of the question, tracking how things are doing. I guess I have to point to sort of our updates as the best way to track what we're doing with EnergyHub and how the business is -- what its trajectory is. I can't think of another way to sort of easily second -- find a second source of information there. Adam Hotchkiss: Okay. Great. Really helpful. And then Kevin, for you, just on the -- just to sort of double click on the margin question. I know we've historically talked about R&D, a big portion of that investment being opportunistic and sort of looking ahead on growth ROI and opportunities. How should we think about the sort of flat margin trajectory next year? And how you thought about the trade-off between maybe getting some scale on the revenue growth that you're seeing and improving margins a little bit more quickly versus leading in on the investment side. I guess just trying to understand how we're progressing towards a medium-term margin number? Kevin Bradley: Sure. Thanks, Adam. I think one thing I would point out is that the -- our adjusted EBITDA margins in 2025, for example, contain $4.5 million of unrealized gains on a security in our treasury portfolio. So I think if you were not capturing that and you were focused on sort of more pure operating results, you'd wind up at something just south of a 20% adjusted EBITDA margin, 19.9%. And so on that basis, there's a little bit of progression embedded in our initial guide here from 2025 to what we've signaled is what we anticipate exiting 2027 at. Stephen Trundle: And the second component there, I just would highlight is we did complete an acquisition in the fourth quarter. We're not picking up EBITDA margin there. We're taking up sort of 0% EBITDA margin. So yet we sort of still work to absorb that and show a bit of a trajectory here on the bottom line. Operator: Our next question comes from Jack Vander Aarde with Maxim Group. Jack Vander Aarde: Okay. Great. Congrats on the strong finish to the year and a strong outlook as well. A couple of questions. Maybe, Steve, two-part question on the competitive environment within Alarms or North America residential business. Just first, in general, any notable trends or changes in the competitive environment that you'd like to speak to? And then two, how has Alarm's core business performed relative to that original like 200 basis point headwind that you guys were initially I think forecasting for ADT? Anything you could speak to there and how the business performed up against that? Stephen Trundle: Sure. Jack. Yes. I don't think on the -- in the core business, we've seen any dramatic change in kind of the competitive landscape. There are always competitors. But we did a lot of the work over the last 15 years to cement a set of relationships with our service providers. I think the service providers are running meaningful chunks of their business on platform. And I would never say that we're insulated from a competitive threat. But we're in a strong position, especially if we continue to make our offering better and deliver on what we say we're going to deliver upon. So feeling relatively good about the competitive environment at the moment. In terms of the how much or what I can say about the 200 bps headwind. It didn't manifest as fully as expected. We sort of point folks to ADT's own comments about their transition and I think their comment was they had transitioned roughly, I believe, in the third quarter, I think they said 25% of the business or so. So that probably gives you a little bit of a directional input there on how that has gone. It hasn't been as dramatic in '25 as what maybe was initially expected, but is still something that we have modeled in to 2026. Jack Vander Aarde: Got it. Okay. That's very helpful. And then maybe just another one for Kevin, maybe on the core business as well. The outperformance in growth sounds like it's been heavily ARPU expansion driven. Certainly, strong video attach rates, can you maybe just touch on anything you're seeing in the installed base for the North American business? Has that performed? Is it up? Or is it kind of in line with your expectations? And then does that play a role at all in your raised SaaS guidance for 2026 for the installed base lever? Kevin Bradley: Yes. Jack, thanks. Yes. So as Steve mentioned, a lot of the growth in that segment or the majority of the growth sort of comes through ARPU dynamics. And it's kind of a 70-30, 75-25 kind of thing tilted between sort of pricing and ARPU. Most of that is related to just organic product-led feature adoption as opposed to just sort of pure -- pure pipe pricing increases. There's always a very little bit of that. But for the most part, that's basically just product adoption, led by video for the most part. And one data point that has consistently been true for the past number of years is that 20% to 25% of the cameras that we sell actually go into the installed base. And so there's a pretty constant movement sort of through the installed base, and that's been there for about 5 years where they start taking video, where they increased the number of video cameras they have, they're buying video cameras that support more capabilities, which leads to basically a package upgrade. That's a pretty consistent hallmark of the model. Jack Vander Aarde: Excellent. That's a great data point. I appreciate the time, guys. Solid results. Operator: Our next question comes from Ella Smith with JPMorgan. Unknown Analyst: This is Bella on for Ella. So first, I wanted to ask, can you frame EnergyHub's growth using a few incremental operating KPIs such as total DER assets under management, gigawatts under control, opt-in or retention rates or the mix shift? Stephen Trundle: Yes. I think the main way we portray their growth is probably on the percentage of the market that they are in a position to service. So a moment ago, I mentioned that there are roughly 130 million meters in North America and EnergyHub is now in a position to service those residences on about 50 million of those meters. That's obviously -- that's a number that we watch closely is how many homes passed can we take advantage of with the EnergyHub offering. And the other one then is, of course, what -- you're passing that number of homes, what percentage of those are you actually enrolling in a program. There, I mentioned that we were enrolling roughly today around 5% of the homes we pass. Obviously, we'd like to drive that number up some. I think it's not inconceivable that we'll see that number move up to 10%. So as we think about the growth drivers, it's -- what percentage of homes in North America are we in a position to service with the relationships we have with the utilities. And then of those that we're in position for, what percentage are we actually enrolling in our program. Those are the 2 primary things. The third is really how many different categories of devices that consume power, are we simultaneously servicing. You've got the thermostat, you have the EV charger, you have the battery. In some cases, have pull pumps. In some cases, you have water heaters. The wider the number of devices, the better. Unknown Analyst: Got it. That's very helpful. And just as a follow-up, [indiscernible] penetration among large utilities is often cited at about 30% to 40% moving higher over time. So where do you see the next leg of adoption to move that penetration rate higher, and how are sales cycles and integration backlogs trending? Stephen Trundle: Yes, I would say that penetration today is probably -- sort of becomes a question of what are we actually measuring penetration on? So what's the denominator. But if we went back to that number of meters metric at 130 million. And then we said we're today at 50 million, we're getting to a number that's right in sort of the range that you said. So I would probably use that one, 30% to 40%. I think that the drivers are multifold. First, just the increased need that many utilities have for additional supply that's driven by electrification of vehicles, and it's driven by data centers. So that should be a driver we continue to see. In terms of the sales cycle, it is a very long sales cycle. I mean, oftentimes, it starts with a pilot, you sometimes have a regulatory body that needs to be involved or needs to approve a program. So the sales cycles can take years in some cases. But I think that the current shortage of supply is allowing us to shorten those sales cycles some and has given us some optimism about latter part of this year and next year. Operator: And I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
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