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Conversation: Operator: Welcome to Surgical Science Q4 Report 2025 Presentation. [Operator Instructions] Now, I will hand over to the speakers, CEO, Tom Englund; and CFO, Anna Ahlberg. Please go ahead. Tom Englund: Welcome to this earnings call for Surgical Science for the fourth quarter of 2025. My name is Tom Englund, CEO. And with me today, I have our CFO, Anna Ahlberg. We will first present a summary of quarter 4 and our results, and then we will have the Q&A session. We are pleased that like quarter 3, quarter 4 was a clear step in the right direction for Surgical Science. We had sales of SEK 269 million and grew by 15% adjusted for currency effects. And our license revenues almost exclusively from robotics companies were the highest ever reported at SEK 92 million, which was an increase of 21%. The adjusted EBIT amounted to SEK 46 million or 17%. On December 8, last year, we presented our new financial targets of annual sales growth of 10% to 15% with profitability of more than 15%. And it's gratifying to see that we're now delivering fourth quarter results in line with these targets. So if we move over to Educational Products. Performance in Educational Products was mixed with growth of 4%. North and South America showed strong growth of 43% with a good distribution between the different countries. And we are seeing a clear recovery now in this region compared with previous quarters with a higher customer activity and bigger sales pipelines. And we're also cautiously optimistic about the future. Asia, on the other hand, saw sales decline by 21%, driven by a continued challenging market situation in China with generally lower activity and demand. One of our strategic goals is to increase the profitability in all segments outside of robotics. For our high-volume products, we are now beginning to see the impact of this strategic initiative. During quarter 4, our average sales prices increased by around 9% compared with quarter 4 2024 at fixed exchange rates without us experiencing any significant effect on volumes. The impact is most felt in direct sales and indirect channels usually show a delay, but we expect further positive price effects to be seen during this year. Also during the quarter, our new PartnerPath distributor program was introduced on a broad scale, and this program aims to improve cooperation, sales and efficiency between us and our partners, which, among other things, will contribute to increased profitability. Highlighting the Ultrasound segment, the Ultrasound segment experienced a very high level of activity, both within hospitals but also in industrial customers. Although ultrasound sales increased by 48% compared to quarter 4 '24, the segment did not meet our growth expectations as pro forma sales, including the acquisition of Intelligent Ultrasound declined. The main reason for this decline we consider to be structural challenges within our own direct sales force, something that we've already addressed during the past quarter. For ultrasound, and you can see the picture of an ultrasound simulation product to the right, 3 new simulation modules were launched during quarter 4 and in January. One of these is targeted towards the diagnosis of endometriosis, which is a major health problem affecting 1 in 10 women. The module supports one of our focus areas, women's health, an area that is neglected in health care and where we have identified that our unique products and solution can create significant value and contribute to earlier diagnosis. This is one clear example of how Surgical Science fulfills our purpose of unlocking the full potential of every medical professional to improve health care outcomes and save lives. During quarter 1, you can expect the first products, which are based on the joint technology platform from Surgical Science and Intelligent Ultrasound to be launched. We are not yet done with the integration and still have a lot of work to do to realize the full synergies from the acquisition of Intelligent Ultrasound. Now moving over to Industry. The Robotics segment had a strong quarter. License revenue grew by 21% to SEK 92 million, which was an all-time high for the company. We saw strong license revenues from our largest customer, Intuitive as well as several other players in the U.S. and China. These other players are now beginning to install robots in significant numbers, which is in turn driving our license revenues. The collaboration with our largest customer, Intuitive, continued during the quarter. And in January '26, Intuitive announced that its system had been used on more than 20 million patients to date. This, together with the 18% growth in procedures during the quarter is clear evidence of the strong demand and broad adoption of robotic surgery. Both Intuitive and Surgical Science agree on the critical role that simulation plays in training robotic surgeons. Digital offerings are becoming increasingly important for robotics companies and Surgical Science is playing a central role in the development of these offerings. During the quarter, our customer, Johnson & Johnson, applied for a so-called De Novo classification in order to start marketing its Ottava robot for gastrointestinal procedures. Another customer, Medtronic, received FDA approval for the use of its Hugo robot in urological procedures in the U.S. And 2 days ago, Medtronic announced the first commercial surgery with Hugo robotic surgery system at the Cleveland Clinic in the U.S. There are now several hundred robot models that are either actively being sold or about to hit the market. Surgical Science is developing simulation solutions for most of the 20 largest robotics companies, and we feel very confident in the value and uniqueness of our offering in robotic surgery. We have a big and growing pipeline of robotics projects, and we see opportunities for deeper integration into our customers' digital offerings and our ability to create value for many years to come, in line with the recently presented strategy. The introduction of our latest simulator, RobotiX Express has been successful and sales and deliveries have started to pick up speed. 14 simulation exercises have been launched on the simulator so far, and the portfolio will be expanded on an ongoing basis. At the International Meeting on Simulation in Healthcare, IMSH in San Antonio in January, we showcased our products that are making use of AI technologies for the first time ever. In these products, AI is helping to analyze the instrument handling of laparoscopic surgeons and then recommend steps or skills for the surgeons to practice and improve. At the same time, within our core offering of real-time simulation of surgical procedures, we today see major limitations in the power and scalability of AI to handle and calculate models that could generate the complex real-time surgical simulation that our customers require. Therefore, Surgical Science's simulation technologies will continue to be the ultimate solution for high-quality real-time surgical simulation for the foreseeable future and Surgical Science's product experience will be improved significantly with the use of AI. Moving over to Medical Device Simulation. During quarter 4, continued progress was also made in strengthening the company's position within the medical device industry with a focus on endovascular applications. At the end of the year, the pipeline of ongoing development projects was 15% larger than at the same point in 2024. Our development revenue is project-based and may fluctuate between quarters and not fully reflect the underlying level of activity. At the end of '25, the proportion of repeat customers for development projects exceeded 70%, demonstrating that Surgical Science is making progress toward becoming an even more integrated and long-term partner to these customers. During the quarter, several important solutions were delivered to our customers, including the areas of peripheral artery disease and pulmonary thrombectomy. At the same time, sales of simulators to medical device companies for product-specific training fell to SEK 21 million compared with a very strong comparative quarter of SEK 43 million. So over to the strategy and the work going forward. Surgical Science's new strategy was presented at the Capital Markets Day in December last year. The aim is to continue growing the company profitably and establish a market-leading position within our 5 different market segments, all of which currently have low to very low penetration. We are now pursuing active internal efforts to deliver on the strategy and are seeing progress across all initiatives. And we feel very confident that this is the right strategy that will lead to increased shareholder value. Surgical Science is currently a world leader in medical simulation with a very strong brand. Our position is unique with market-leading products, strong and effective direct and indirect sales channels and an extensive medical expertise that our customers rely on for their training and development. Our global reach and support, which ensure reliability and presence are critical factors for our customers. 2025 has been a challenging year in many ways, particularly in relation to the news surrounding our largest customer, Intuitive and the development of our share price. At the same time, Surgical Science has made great strides forward in many respects and is now, in many ways, a significantly stronger company than it was a year ago. Demand for our product is growing steadily, driven by a greater need for training, increased digitalization and a more complex health care. I'm optimistic about the future where our solutions will become a central part of health care training and our ability to generate profitable growth over time. And with that, I would like to hand over to Anna to present the financials in more detail. Anna Ahlberg: Thank you, Tom, and welcome, everyone. We start with sales. For the quarter then we had sales of SEK 269 million, up 7%. SEK 14 million came from Intelligent Ultrasound. And I should just mention, Intelligent Ultrasound is today renamed to Surgical Science UK, but we will still use IU when we talk about this acquired business throughout the presentation. And all IU sales are attributable to the Edu Products business area and the ultrasound product group. In local currencies, sales were up 15%. And we have, after Q1 of last year, since then seen a significant negative effect from currencies on our overall sales. And also on our result, that I will come back to that later. We are just below 80% of revenues in U.S. dollars. We are mitigating this as best we can, except for raising prices that Tom also talked about. We also now quote more countries in euros instead of in U.S. dollars, for example. However, this will not mean a very large change in the ratio between different currencies since a lot of our revenues originate from the U.S. Looking at the business areas, the split was 48% for Edu and 52% for Indu for the quarter, where then Edu was up 4%, but down 8% if we exclude IU. And as Tom mentioned, the Asia region declined 21% compared with the same quarter last year, and that was attributable to China having a weaker quarter, while countries such as Japan and the Philippines showed good sales. Sales in Europe was weaker than last quarter, meaning Q3, but still remained strong and increased by 4%. France and Poland did particularly well in this quarter. And then the comparative figure also includes a major order to Romania. But mentioning Poland, Poland, this market has been really strong for us during these last quarters. It was at an all-time high for last year as a total, and it is also our largest market in Europe. The North and South America region increased by 43% compared with the corresponding quarter last year. And this is attributable to the U.S., which is really nice to see since we have had some tougher quarters there. And this is even when excluding sales from Intelligent Ultrasound that is also -- that part of the business is our largest market. But even if we excluded it, the increase is attributable to the U.S. Indu, up 10%. We had, as mentioned, all-time high license revenues of SEK 92 million. Development revenues were also very strong, while simulator sales within the business area was weaker. I will come back to this when we look at the revenue streams on the next slide. But for the full year, then this means that sales were SEK 992 million. This is an increase of 12% or 19% in local currencies. And in that number, IU is included with SEK 75 million. Their sales for the full year was SEK 80 million. They are in our books and consolidated as of February 18, 2025. And that meant that in SEK, sales were down approximately 30%. This is largely attributable to the U.K. and lower sales to NHS. We've talked about that before, and it's something that we are, of course, not at all satisfied with. The U.K. market was also a market where we saw that sales should be coming from the full product range, also the other Surgical Science products as it then moved to being a direct market. However, and as Tom talked about, we do see a lot of positive signs for our ultrasound product group, where we are now merging our technologies, and we have really exciting products in the pipeline. Edu for the full year 2025 was up 13% and Indu 11%, where license revenues were up 11% for the year. And looking then at the revenue streams, license revenues for the quarter were 34% of our total revenues compared to 30% last year. We saw really good sales, both from Intuitive, and that was then both from dV5 as well as from the older generations, as well as a larger batch revenue order from one of our other robotic companies, customers. So as I think you're all aware of them, we did during the fourth quarter on November 25, received a cancellation from Intuitive on the memorandum of understanding that was signed in January. And this memorandum of understanding implied that all dV5s would be equipped with simulation from us. The cancellation meant that we now, as of January 1 this year, go back to the previous existing agreement between the companies and advanced simulation from us will only be offered to a minority of the customers. For the older generations such as Xi, for example, the agreement has not been changed. It was always an optional feature. And our estimate for this was and still is that it will impact license revenues negatively by SEK 60 million to SEK 90 million for this year. However, as we have also emphasized and Tom talked about it, we still have significant revenues from Intuitive, and we continue to work very closely together on a road map for future simulation. Moving on then to the next revenue stream, simulator sales that was as a whole down 12% compared to Q4 2024. This is due to the industry business area. This is more lumpy than for sales within Edu since it's usually tied to larger projects where development is also involved. And it sometimes also has to be seen together with development revenues. And as an example, the project that we have in Southeast Asian country, that is still in the development revenue phase. This will then during this year and towards the end of this project, move from being pure development revenues to pure simulator sales. So it is usually a mix of the 2 and the simulator sales also usually comes towards the end of the different projects. Development revenues then up a lot also for this quarter and the project that I just mentioned, here, we had revenues of USD 0.7 million, and we estimate the same for this quarter, Q1. So this is, of course, a factor for the increase, but not at all entirely. We had very good development revenues also for other customers. Our gross margin for the quarter was 66% versus 68% in Q4 2024. The fact that license revenue made up a higher share of total sales than in the corresponding period had a positive effect. However, currency effects have a large negative impact on the margin, approximately 2.3 percentage points. And unfortunately, the lower USD exchange rate has less impact on the cost of goods sold than on other cost items because our input goods are primarily purchased in other currencies than in dollars and also production and the associated wage costs, they are also not in U.S. dollars. Then another factor impacting the gross margin negatively that we have seen throughout the year and commented on is that we do have lower gross margin on the IU products. But then also on the positive side, we see that our price increases are starting to have an effect. And that is, as mentioned, something we will continue to pursue. Regarding OpEx, sales costs, they were 17% of sales for the quarter, 20% in the corresponding quarter. And here, we see that the reductions in the sales force following the acquisition of IU have now reached their full effect. And then for the quarter, we also had some lower costs of a more nonrecurring nature due to lower agency fees. This is attributable to sales in certain countries. So it depends on if we sell more or less to these countries. So that means that the cost level was maybe a bit on the low side because of this. But as I said, we have definitely lowered our level for the sales costs. And we have, during the year, also worked a lot with operational efficiency, and we have done reorganizations in line with this. Administration costs, 9% of sales, the same as Q4 last year and R&D costs, 22% of sales. We activated slightly less, SEK 9 million instead of SEK 10 million. And then we had, in this quarter, restructuring costs on this line of approximately SEK 3 million. And this is related to the termination of development personnel in Seattle. During Q4, we restructured our U.S. operations, and this resulted in us closing our Seattle office. We consolidated our operations to our office in Cleveland, and that is then our hub for all commercial activities and services and customer interaction. In Seattle, we had primarily development personnel. And so in connection with this restructuring, these employments were terminated. We still have a few other roles working remotely, and we have the lease for the Seattle office until October 2027. So as I mentioned, the quarter then saw the full impact of the cost reductions we've done after the acquisition of Intelligent Ultrasound. We have done more than we said we would do. We said between GBP 1.5 million and GBP 2 million. On an annual basis, we have done GBP 2.5 million and that then meant approximately SEK 8 million in the fourth quarter. Still then because of the lower sales that we discussed and lower than expected, primarily in the U.S. -- in the U.K., sorry, the operating result for IU was a loss for the quarter of approximately SEK 5 million. Other operating income and operating costs, that is then mainly costs for the company's option programs as well as the revaluation of operating assets and liabilities in foreign currencies. We had a negative impact on this line and on profits in the amount of approximately SEK 7 million during the quarter. And during Q4, we did an internal dividend from Israel. We are taking, as I mentioned also before, certain actions to reduce the effect of the weakening U.S. dollar. So we're both reducing intercompany items, and we also have as little cash as possible in USDs. So that's something we're working actively with. Following this then, our operating profit for the fourth quarter was SEK 40 million, corresponding to a margin of 15%. And for the full year, the FX effects that I mentioned before on the line other, that was a negative SEK 38 million then for the year. And if we exclude these and we also recalculate our revenues and costs with last year's exchange rates and also then exclude acquisition and restructuring costs for the year, and that was in an amount of SEK 30 million, then we reached an EBIT of SEK 177 million for the year or 17%. Organization-wise, we were 313 people at the end of the period, and that is 15 less than going out of Q3. The majority of the change then attributable to the closing of the Seattle office. With the IU acquisition, we added 48 people. And today, we have 11 less here. Adjusted EBIT for the quarter, the result was SEK 46 million. And as mentioned, we had some restructuring costs due to the closure of the Seattle office. Excluding those, we had an adjusted EBIT margin of 18%, same as last year. For the full year, then the adjusted EBIT margin was 12% compared to 19% in 2024. Finance net and taxes. no loan financing meant that net financial items that mainly consist of interest income on bank deposits and then also revaluation of some loan liabilities to subsidiaries, effect of IFRS is also impacting the finance net. Then regarding taxes for the year, the expense here is consists of estimated tax on profit for the year and the change in deferred tax assets. This year's tax expense includes U.S. taxes attributable to the previous year and also taxes that are not linked to taxable income. And combined with the effect of the loss in Intelligent Ultrasound, this means that the effective tax rate increased. And then also for the year, our profit includes the acquisition costs of approximately SEK 23 million. And those are not tax deductible. That is then also impacting the rate. And then cash flow. Cash flow from operating activities was SEK 73 million for the quarter compared to SEK 57 million for Q4 in 2024. Changes in working capital was really small, a small negative of SEK 3 million. Inventories were pretty much unchanged and accounts receivable decreased. Accrued income increased, and this is primarily due to higher license revenues, and they are then paid in the coming quarter, meaning now in Q1, and they have already been paid. So that basically means that the last day of the quarter is when this amount is at its highest. Investing activities, we invested approximately SEK 3 million in the quarter in our ongoing construction of new production facilities in Tel Aviv. We -- they are expected to be commissioned in the second quarter of this year. And then for financing activities, the larger amount underlying for lease liabilities is actually an adjustment in the quarter, so nothing to mention here for the year. And cash flow then was a positive of SEK 32 million for the quarter before FX adjustments. And we ended the year with SEK 616 million in our bank accounts. And with that, I hand back to you, Tom. Tom Englund: Thank you, Anna. So to summarize, we believe that quarter 4 was a solid quarterly result and that Surgical Science is moving in the right direction. We see a continued rapid development of the company in a dynamic market where we can see positive signals both in our external work with our customers and in our internal efforts to create a stronger, more efficient and more profitable company. Our new strategy, which we also now execute on will make us a company with several more revenue streams and a company which addresses a significantly larger market than today. And with that, I would like to open the floor for questions. Operator: [Operator Instructions] The next question comes from Simon Larsson from Danske Bank. Simon Larsson: My first question is related to the strong growth for licenses here in the quarter. Is it possible to quantify the number of robotic customers that bought licenses here in Q4 and how that has developed versus, for example, let's say, a year ago? I'm just trying to understand the underlying strength given the expected negative Intuitive effect we will see from Q1. So any color on the strength or sort of the breadth of the license growth here would be helpful. Tom Englund: Simon, Tom here. So we have said that we have 20 robotics companies as customers right now. And last quarter, it was around 5 of them who bought licenses from us. Simon Larsson: Sorry, it was 20 active customers during Q4 or that's the total scope? Tom Englund: That's the total number of customers that we have, robotics companies that we have, significant robotics companies that we have and about 5 of them had revenue streams this last quarter. Anna Ahlberg: And as you know, Simon, that can vary between the quarters since most customers with the batch sales, it can vary between the quarters. That's what we commented on also throughout last year. Simon Larsson: Yes. Understood. Understood. And then I guess my second and final question for this time at least. I noticed on the balance sheet, accrued income item has increased quite a lot if we look at both year-over-year and quarter-over-quarter. Is there any sort of special customer -- specific customer group that's sort of driving this increase in accrued income? Or yes, any help to understand the dynamic behind that figure would be also helpful. Anna Ahlberg: Yes. That is what I just mentioned before on the cash flow that is due to -- primarily due to increased license revenues and it is being paid in the quarter after and for Q4, it has been paid. So that's the number I referred to as being sort of always at its highest at the last day of the quarter. So there's no like increased risk or that we accrue more in a different way than we've done before or anything like that. So it's really positive in a way. And again, they have been paid and are always paid in the quarter after. Simon Larsson: Okay. So it should come down sequentially already in Q1 then unless it's a very big quarter again for licenses. Anna Ahlberg: It varies a lot with the license revenues. Yes. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: A few questions on my side, and I will limit it to 2, of course. But can you talk about the sales growth momentum in licenses for Intuitive if we were to exclude the dV5, given that this is the last quarter where it will be included as sort of basic skill simulation. Essentially, are you seeing growth outside of the dV5? And for '26, if we were to exclude the effects that you already quantified, would you expect that Intuitive would grow in 2026? Tom Englund: In terms of in terms of attach rates, we see for the other products, not the dV5 that we have sort of the same attach rates that we've had before with the license sales. And so that means that the customers are actively using simulation within those products as well. And then regarding this news that Intuitive will only supply Surgical Science simulation to a subset of the dV5s, that we believe then will have a negative effect of SEK 60 million to SEK 90 million during the entire 2026 compared to 2025. And we have very sort of low visibility on the attach rate for our simulation solutions in the dV5 offerings here for the coming year, both when it comes to the full year and also the quarterly distribution and the quarterly attach rates. Ulrik Trattner: Sure. But I was kind of aiming for here if we were to completely exclude the dV5 and just look at sort of the legacy platforms from Intuitive, the SP, the Xi, et cetera, et cetera. And I know it's a little transparency in terms of attach rate. But would you assume that there would still be any type of growth for those products? Tom Englund: We will not go into more detail regarding the exact growth within the different product lines for our customer. And it also becomes very complex because, of course, Intuitive also has an exchange program where they exchange dV4s or [ dVXs ] to dV5 and so in certain geographies and in certain geographies, they do not. And that entire kind of dynamics is very difficult for us to get into. So we report this kind of overall general revenue impact that we think that it will have for 2026. And once again, we have limited visibility into exactly how this will play out. Ulrik Trattner: Yes, I understand. And second question before getting back into the queue, and that would be on the cash flow side. And you reiterated that there will be some growth and some profit expected, not that sort of your targeted level. Is there anything that suggests that the cash flow for 2026 should not follow, i.e., are there sort of investments needed on your end? Or do you need to beef up working capital? Or are we to expect roughly sort of cash flow growing in the same extent as profits? Anna Ahlberg: There are no structural changes when it comes to cash flow as it has looked before and going forward. No, we have no -- I mean, the investments we do is primarily in staff and in development personnel. I mentioned that we are investing now in a new production facility in Israel, but it's not -- I mean, it's not major amounts. Operator: The next question comes from Christian Lee from Pareto Securities. Christian Lee: Would it be possible to quantify the larger package order received from one of your robotics customers in Q4? And excluding this package, would license revenues still have shown year-on-year growth in Q4? Tom Englund: Christian, we would not actually want to give that detail away when -- about these package orders, they become lumpy. I think that the main point here is that the robotics market is developing rapidly. And there's more and more players that are coming to market or are about -- or are already in the market. And many of these players are also customers to us. And that drives the demand for simulation and training on these robotic platforms in general. And that is kind of an accelerating trend that it's a long-term trend, and it's also kind of a revolution within health care right now. So overall, that will drive the need for simulation from Surgical Science. And then it will be lumpy, both because of the packages, as you say, certain quarters will have revenues when customers buy a large amount of packages or license packages from us. And it will also be driven by how quickly these robotics players will get their market acceptance and our customers. So you should think of this as an inherently attractive market to be in, in the long term with some fluctuations quarter-to-quarter. Christian Lee: Okay. Understood. And my second question then is regarding the cancellation of the memorandum of understanding with Intuitive. Could you please elaborate on why the impact of this is having the magnitude of this -- magnitude if it relates solely to dV5? And could you also please elaborate on the key variables that determine whether the impact lands closer to SEK 60 million or SEK 90 million? Tom Englund: So the dV5 is obviously the flagship product of Intuitive, and they will continue to sell the other products, the dVX and Xi as well alongside the dV5. And the sales focus right now is, of course, on the dV5 very much for the markets where dV5 has been launched. And for the markets where dV5 has not been launched, Intuitive continues to sell dVX and Xi. So the drop here in revenue, the SEK 60 million to SEK 90 million has, of course, to do with the delta of being available in all the different dV5 units that are shipped versus just a subset of it. When it comes to the factors that determine kind of where you land on the SEK 60 million or the SEK 90 million, it is very much related to the attach rate, which has been the same mechanics as with the previous models when we have sold simulation exercises in the X and Xi, we have spoken a lot about the attach rate. And it's then difficult for us to understand exactly how the attach rate will be on the dV5 given that there are so many factors at play here. So in terms of the rate at which dV5 grows in the market and so on, I mean, you can look at the Intuitive reports, it's around 18% procedural growth, and they have -- they also state the numbers of dV5 that they ship and so on. But I think that, that's pretty stable. It also has to do with how quickly their organization can actually install and get these systems active. So the main factor from our perspective is the attach rate. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: And then another focus area, medical simulation outside of robotics. You enjoyed a very strong growth in 2024. We have seen quite a big decline in 2025, and now you talk about 15% increase in projects end of the year versus sort of end of the year last year. So what is to be expected from sort of these numbers and then what to be expected in 2026? And given the fact that there is a big fluctuations between the years in terms of both revenue and projects, one would assume that these are short-cycle projects, and that would assume that it's short-cycle revenue as well. So you should have a little bit higher visibility, right? Tom Englund: Again. So regarding the growth here in the number of projects, the reason why we state this clearly in the report here about 15% is that it's a lead indicator for the simulator sales later on, right? So the development revenues, if we are successful with the development project, it will lead to simulator sales. And that simulator sales can either happen immediately where the customer buys a bulk orders of simulators can be spread out over several quarters or even several years. So the largest medical device order that we ever got, which we announced a few quarters back here, that will be a simulator sale that will go on for 3 to 4 years. So it's a lot dependent on kind of the size of the customer, the importance that our -- that the simulation that we sell into the importance of the product for that customer and how quickly they in turn can both educate and sell -- educate their organization and then sell their product in the market. So I think that the way you should look at it is that the more projects that we have, especially with big customers like Medtronic and Johnson & Johnson and Gore and so on, the higher the potential simulator sales should be over time. And it's, of course, very difficult then when you're a small P&L or a small revenue because then it gets lumpy, right, which is what we see here now. But then it's, of course, important to track the lead indicators, which is the number of returning customers and the growth in the number of development projects that you have. And I think that we can fairly say that now we have a quite healthy mix of the number of projects we have. We have a quite healthy mix towards larger players and larger potential projects and smaller players and quicker turnaround projects, both within development revenue and simulators. Ulrik Trattner: Okay. That's great. Is it possible for you to quantify how many of your sort of medical device customers that are currently utilizing your simulation in sort of a commercial product rather in development? Tom Englund: Yes, it's -- if you look back all years, I mean, it's going to be -- for all products, it's going to be somewhere around 30 or more, I would assume. Ulrik Trattner: And these, in general, should generate recurring revenue, right? Tom Englund: That's the idea. They are not all doing that today, but that's one part of the strategy and also one part of the profitability increase that we want to see in other parts than the license business and robotics. So that's something that we're working towards. You're absolutely right. Ulrik Trattner: Sorry for being a stickler ballpark, out of the 30 or so that are on the market, how many of those are essentially today recurring products? Tom Englund: A minority, a low percentage. Anna Ahlberg: And then just... Ulrik Trattner: Again, why would that be? Tom Englund: Because usually they buy a solution today that consists of both hardware and software, the entire product packaging, right? They want to develop a medical device and they want to make a simulation for that. So they bring a part of the hardware and we build a simulator around and also develop the software, and that's sort of sold in a package. In the future, where we want to go is we want to create the hardware as a platform on which you can sell multiple software modules on. And we can also then have a more continuous value delivery where we can charge on these on a recurring revenue basis. Right now, we have taken the first step where we sell more software onto the same platform, but it's still not on a recurring basis. It's on a perpetual basis. So that's then the next step in the strategy. Ulrik Trattner: So just I understand it correctly, the [indiscernible] that has been launched on to the market, they have essentially fulfilled their demand out there? Tom Englund: Sorry... Ulrik Trattner: In terms of installation -- in terms of devices, given that there are no sort of recurring revenue on these type of products of the [indiscernible] that has been launched, that implies that, I guess, they're used for training purposes, but that would assume that these products or sort of the number of devices placed have sort of fully supplied the market's demand and there is sort of... Tom Englund: Sorry, you can't really look at it like that. If you take Medtronic, which is one of our absolutely biggest customers and where we provide a simulator for one of their key critical products, they are going to have an increasing demand of simulation as the revenue for their product increases, right? So there's going to be more sales and education staff that needs to be trained. It's also going to be more countries that are onboarded onto this product that also need to be educated. And that's -- it's almost like it's a product SKU for a specific company, but the company is so big, so it becomes like a marketing itself, right? So you can think of it as a recurring business also to continue to sell the hardware and the solution for several years to come. It's not like they place one bulk order and then it's over with. That's the 4 years that I spoke about before. So... Ulrik Trattner: And then my second question would be on Intelligent Ultrasound. And just also going back to if I understood one of your comments correctly there, Anna, because I do note that the losses that IU brings is significantly lower here in the fourth quarter, whereas sales volumes are down sequentially as well from Q3. And did you talk about lower agency fees related to IU affect this result... Anna Ahlberg: Sorry if that was unclear. No, it's not related to IU. That was more a general comment that the sales costs can go up and down depending on what countries we sell to or what structure we have and how they are paid, if it's more a rebate or if it's sort of commission and that can affect the sales cost line, and that's what happened in this quarter. So no, it was not... Ulrik Trattner: Yes. Understood. And then the natural follow-up question would be, it looks like at least the losses are declining and it's becoming more manageable. Do you have any more levers to pull? Or is this more a game of hoping for volumes to increase in NHS funding coming back? Tom Englund: In U.K. specifically, I mean? Ulrik Trattner: I mean in IU specifically. Tom Englund: We have many more levers to pull. They are 3 of them, it's sales and sales efficiency and the way we sell and market the product. It's product related, how we develop and package the products. That's why I spoke about in the CEO message that in this quarter and in the coming quarters, we will start releasing the ultrasound simulation products that carry the combined technical base of both Intelligent Ultrasound and Surgical Science, and that can actually also drive profitability. And then, of course, we can work on production improvements and COGS improvements to drive profitability. So there are several different angles you can improve, and we are working on all of them. Ulrik Trattner: Perfect. And just sort of to be fully clear here, obviously, you don't want to guide, and I guess IU will not be disclosed as sort of separate EBIT contribution for 2026. But it would be fair to assume that given everything that you've done in terms of cost savings and the 3 points that you alluded to here that losses for IU would be lower compared to 2025, right? Anna Ahlberg: Yes, because they have gone down sort of sequentially as we have done these restructurings and benefiting from the cost savings there. So yes, since they have the full effect in Q4, that's correct. Tom Englund: Thank you. We have a question from the feed here from [ Austin Groves Family Office ]. Are you currently tracking with other major robotics players such as Medtronic or J&J to have similar penetration install rates as you do with Intuitive? In your discussions with non-Intuitive customers so far, are you competing with other customers for that business? What would you say is the main limiting factor holding that business back? And when, how will it be resolved? So are you currently tracking with other major robotics players such as Medtronic and J&J with penetration install rates? It's depending on the customers' requirements and the customers' wishes about how this customer wants to package the simulation, either as a mandatory piece, digital part of the full robotic experience or as an accessory that we sell on. So it depends a little bit from customer to customer. Some customers will have 100% attach rate of our simulation into their digital ecosystem and some customers will have a lower attach rate. It also depends a little bit on the different product models that these robotic companies have. We are -- we feel that we have a very high market share within robotic simulation for these robotic companies and that there is not that much other competition out there. And actually, frankly, it's not the competition holding us back. The main limiting factor holding us back is our capacity to create compelling simulations for our customers and tying this closely into the digital ecosystems of our customers. And the other limiting factor is how the robotic companies want to train the surgeons on the robotic consoles, meaning the integration of simulation into the training curriculum and training ecosystem of those robotic manufacturers and making sure that, that is smooth and easy from a surgeon's point of view. Those 2 things are holding us back. And then a third structural thing that is holding us back that we have addressed with this RobotiX Express is still that the training usually takes place in the operating room on the console itself. And that's a constraining factor, meaning because that console is also used for clinical procedures. And that we're solving them with our RobotiX Express, which is a generic robotic training that you can use outside of the operating room. So I hope that answers your question, Austin. Anna Ahlberg: And then we have one more written question in the feed. If there are any one-off effects from switching from subscription to license model with the dV5. It is fully and will continue to be a full subscription model? So that is not the difference than the difference is, as Tom discussed before, the attach rate for the dV5. So that is the change, so to speak. And for the older generation, there is no change because that was also before offered as an option. Tom Englund: So we have no further questions in the feed, and we have a few minutes left. Do we have any other questions, Anna? Anna Ahlberg: I don't think so. No. Tom Englund: Okay. But then thank you all for listening to this quarterly report, and I see you again soon. Take care. Bye-bye. Anna Ahlberg: Thank you. Bye-bye. Operator: Welcome to Surgical Science Q4 Report 2025 Presentation. [Operator Instructions] Now, I will hand over to the speakers, CEO, Tom Englund; and CFO, Anna Ahlberg. Please go ahead. Tom Englund: Welcome to this earnings call for Surgical Science for the fourth quarter of 2025. My name is Tom Englund, CEO. And with me today, I have our CFO, Anna Ahlberg. We will first present a summary of quarter 4 and our results, and then we will have the Q&A session. We are pleased that like quarter 3, quarter 4 was a clear step in the right direction for Surgical Science. We had sales of SEK 269 million and grew by 15% adjusted for currency effects. And our license revenues almost exclusively from robotics companies were the highest ever reported at SEK 92 million, which was an increase of 21%. The adjusted EBIT amounted to SEK 46 million or 17%. On December 8, last year, we presented our new financial targets of annual sales growth of 10% to 15% with profitability of more than 15%. And it's gratifying to see that we're now delivering fourth quarter results in line with these targets. So if we move over to Educational Products. Performance in Educational Products was mixed with growth of 4%. North and South America showed strong growth of 43% with a good distribution between the different countries. And we are seeing a clear recovery now in this region compared with previous quarters with a higher customer activity and bigger sales pipelines. And we're also cautiously optimistic about the future. Asia, on the other hand, saw sales decline by 21%, driven by a continued challenging market situation in China with generally lower activity and demand. One of our strategic goals is to increase the profitability in all segments outside of robotics. For our high-volume products, we are now beginning to see the impact of this strategic initiative. During quarter 4, our average sales prices increased by around 9% compared with quarter 4 2024 at fixed exchange rates without us experiencing any significant effect on volumes. The impact is most felt in direct sales and indirect channels usually show a delay, but we expect further positive price effects to be seen during this year. Also during the quarter, our new PartnerPath distributor program was introduced on a broad scale, and this program aims to improve cooperation, sales and efficiency between us and our partners, which, among other things, will contribute to increased profitability. Highlighting the Ultrasound segment, the Ultrasound segment experienced a very high level of activity, both within hospitals but also in industrial customers. Although ultrasound sales increased by 48% compared to quarter 4 '24, the segment did not meet our growth expectations as pro forma sales, including the acquisition of Intelligent Ultrasound declined. The main reason for this decline we consider to be structural challenges within our own direct sales force, something that we've already addressed during the past quarter. For ultrasound, and you can see the picture of an ultrasound simulation product to the right, 3 new simulation modules were launched during quarter 4 and in January. One of these is targeted towards the diagnosis of endometriosis, which is a major health problem affecting 1 in 10 women. The module supports one of our focus areas, women's health, an area that is neglected in health care and where we have identified that our unique products and solution can create significant value and contribute to earlier diagnosis. This is one clear example of how Surgical Science fulfills our purpose of unlocking the full potential of every medical professional to improve health care outcomes and save lives. During quarter 1, you can expect the first products, which are based on the joint technology platform from Surgical Science and Intelligent Ultrasound to be launched. We are not yet done with the integration and still have a lot of work to do to realize the full synergies from the acquisition of Intelligent Ultrasound. Now moving over to Industry. The Robotics segment had a strong quarter. License revenue grew by 21% to SEK 92 million, which was an all-time high for the company. We saw strong license revenues from our largest customer, Intuitive as well as several other players in the U.S. and China. These other players are now beginning to install robots in significant numbers, which is in turn driving our license revenues. The collaboration with our largest customer, Intuitive, continued during the quarter. And in January '26, Intuitive announced that its system had been used on more than 20 million patients to date. This, together with the 18% growth in procedures during the quarter is clear evidence of the strong demand and broad adoption of robotic surgery. Both Intuitive and Surgical Science agree on the critical role that simulation plays in training robotic surgeons. Digital offerings are becoming increasingly important for robotics companies and Surgical Science is playing a central role in the development of these offerings. During the quarter, our customer, Johnson & Johnson, applied for a so-called De Novo classification in order to start marketing its Ottava robot for gastrointestinal procedures. Another customer, Medtronic, received FDA approval for the use of its Hugo robot in urological procedures in the U.S. And 2 days ago, Medtronic announced the first commercial surgery with Hugo robotic surgery system at the Cleveland Clinic in the U.S. There are now several hundred robot models that are either actively being sold or about to hit the market. Surgical Science is developing simulation solutions for most of the 20 largest robotics companies, and we feel very confident in the value and uniqueness of our offering in robotic surgery. We have a big and growing pipeline of robotics projects, and we see opportunities for deeper integration into our customers' digital offerings and our ability to create value for many years to come, in line with the recently presented strategy. The introduction of our latest simulator, RobotiX Express has been successful and sales and deliveries have started to pick up speed. 14 simulation exercises have been launched on the simulator so far, and the portfolio will be expanded on an ongoing basis. At the International Meeting on Simulation in Healthcare, IMSH in San Antonio in January, we showcased our products that are making use of AI technologies for the first time ever. In these products, AI is helping to analyze the instrument handling of laparoscopic surgeons and then recommend steps or skills for the surgeons to practice and improve. At the same time, within our core offering of real-time simulation of surgical procedures, we today see major limitations in the power and scalability of AI to handle and calculate models that could generate the complex real-time surgical simulation that our customers require. Therefore, Surgical Science's simulation technologies will continue to be the ultimate solution for high-quality real-time surgical simulation for the foreseeable future and Surgical Science's product experience will be improved significantly with the use of AI. Moving over to Medical Device Simulation. During quarter 4, continued progress was also made in strengthening the company's position within the medical device industry with a focus on endovascular applications. At the end of the year, the pipeline of ongoing development projects was 15% larger than at the same point in 2024. Our development revenue is project-based and may fluctuate between quarters and not fully reflect the underlying level of activity. At the end of '25, the proportion of repeat customers for development projects exceeded 70%, demonstrating that Surgical Science is making progress toward becoming an even more integrated and long-term partner to these customers. During the quarter, several important solutions were delivered to our customers, including the areas of peripheral artery disease and pulmonary thrombectomy. At the same time, sales of simulators to medical device companies for product-specific training fell to SEK 21 million compared with a very strong comparative quarter of SEK 43 million. So over to the strategy and the work going forward. Surgical Science's new strategy was presented at the Capital Markets Day in December last year. The aim is to continue growing the company profitably and establish a market-leading position within our 5 different market segments, all of which currently have low to very low penetration. We are now pursuing active internal efforts to deliver on the strategy and are seeing progress across all initiatives. And we feel very confident that this is the right strategy that will lead to increased shareholder value. Surgical Science is currently a world leader in medical simulation with a very strong brand. Our position is unique with market-leading products, strong and effective direct and indirect sales channels and an extensive medical expertise that our customers rely on for their training and development. Our global reach and support, which ensure reliability and presence are critical factors for our customers. 2025 has been a challenging year in many ways, particularly in relation to the news surrounding our largest customer, Intuitive and the development of our share price. At the same time, Surgical Science has made great strides forward in many respects and is now, in many ways, a significantly stronger company than it was a year ago. Demand for our product is growing steadily, driven by a greater need for training, increased digitalization and a more complex health care. I'm optimistic about the future where our solutions will become a central part of health care training and our ability to generate profitable growth over time. And with that, I would like to hand over to Anna to present the financials in more detail. Anna Ahlberg: Thank you, Tom, and welcome, everyone. We start with sales. For the quarter then we had sales of SEK 269 million, up 7%. SEK 14 million came from Intelligent Ultrasound. And I should just mention, Intelligent Ultrasound is today renamed to Surgical Science UK, but we will still use IU when we talk about this acquired business throughout the presentation. And all IU sales are attributable to the Edu Products business area and the ultrasound product group. In local currencies, sales were up 15%. And we have, after Q1 of last year, since then seen a significant negative effect from currencies on our overall sales. And also on our result, that I will come back to that later. We are just below 80% of revenues in U.S. dollars. We are mitigating this as best we can, except for raising prices that Tom also talked about. We also now quote more countries in euros instead of in U.S. dollars, for example. However, this will not mean a very large change in the ratio between different currencies since a lot of our revenues originate from the U.S. Looking at the business areas, the split was 48% for Edu and 52% for Indu for the quarter, where then Edu was up 4%, but down 8% if we exclude IU. And as Tom mentioned, the Asia region declined 21% compared with the same quarter last year, and that was attributable to China having a weaker quarter, while countries such as Japan and the Philippines showed good sales. Sales in Europe was weaker than last quarter, meaning Q3, but still remained strong and increased by 4%. France and Poland did particularly well in this quarter. And then the comparative figure also includes a major order to Romania. But mentioning Poland, Poland, this market has been really strong for us during these last quarters. It was at an all-time high for last year as a total, and it is also our largest market in Europe. The North and South America region increased by 43% compared with the corresponding quarter last year. And this is attributable to the U.S., which is really nice to see since we have had some tougher quarters there. And this is even when excluding sales from Intelligent Ultrasound that is also -- that part of the business is our largest market. But even if we excluded it, the increase is attributable to the U.S. Indu, up 10%. We had, as mentioned, all-time high license revenues of SEK 92 million. Development revenues were also very strong, while simulator sales within the business area was weaker. I will come back to this when we look at the revenue streams on the next slide. But for the full year, then this means that sales were SEK 992 million. This is an increase of 12% or 19% in local currencies. And in that number, IU is included with SEK 75 million. Their sales for the full year was SEK 80 million. They are in our books and consolidated as of February 18, 2025. And that meant that in SEK, sales were down approximately 30%. This is largely attributable to the U.K. and lower sales to NHS. We've talked about that before, and it's something that we are, of course, not at all satisfied with. The U.K. market was also a market where we saw that sales should be coming from the full product range, also the other Surgical Science products as it then moved to being a direct market. However, and as Tom talked about, we do see a lot of positive signs for our ultrasound product group, where we are now merging our technologies, and we have really exciting products in the pipeline. Edu for the full year 2025 was up 13% and Indu 11%, where license revenues were up 11% for the year. And looking then at the revenue streams, license revenues for the quarter were 34% of our total revenues compared to 30% last year. We saw really good sales, both from Intuitive, and that was then both from dV5 as well as from the older generations, as well as a larger batch revenue order from one of our other robotic companies, customers. So as I think you're all aware of them, we did during the fourth quarter on November 25, received a cancellation from Intuitive on the memorandum of understanding that was signed in January. And this memorandum of understanding implied that all dV5s would be equipped with simulation from us. The cancellation meant that we now, as of January 1 this year, go back to the previous existing agreement between the companies and advanced simulation from us will only be offered to a minority of the customers. For the older generations such as Xi, for example, the agreement has not been changed. It was always an optional feature. And our estimate for this was and still is that it will impact license revenues negatively by SEK 60 million to SEK 90 million for this year. However, as we have also emphasized and Tom talked about it, we still have significant revenues from Intuitive, and we continue to work very closely together on a road map for future simulation. Moving on then to the next revenue stream, simulator sales that was as a whole down 12% compared to Q4 2024. This is due to the industry business area. This is more lumpy than for sales within Edu since it's usually tied to larger projects where development is also involved. And it sometimes also has to be seen together with development revenues. And as an example, the project that we have in Southeast Asian country, that is still in the development revenue phase. This will then during this year and towards the end of this project, move from being pure development revenues to pure simulator sales. So it is usually a mix of the 2 and the simulator sales also usually comes towards the end of the different projects. Development revenues then up a lot also for this quarter and the project that I just mentioned, here, we had revenues of USD 0.7 million, and we estimate the same for this quarter, Q1. So this is, of course, a factor for the increase, but not at all entirely. We had very good development revenues also for other customers. Our gross margin for the quarter was 66% versus 68% in Q4 2024. The fact that license revenue made up a higher share of total sales than in the corresponding period had a positive effect. However, currency effects have a large negative impact on the margin, approximately 2.3 percentage points. And unfortunately, the lower USD exchange rate has less impact on the cost of goods sold than on other cost items because our input goods are primarily purchased in other currencies than in dollars and also production and the associated wage costs, they are also not in U.S. dollars. Then another factor impacting the gross margin negatively that we have seen throughout the year and commented on is that we do have lower gross margin on the IU products. But then also on the positive side, we see that our price increases are starting to have an effect. And that is, as mentioned, something we will continue to pursue. Regarding OpEx, sales costs, they were 17% of sales for the quarter, 20% in the corresponding quarter. And here, we see that the reductions in the sales force following the acquisition of IU have now reached their full effect. And then for the quarter, we also had some lower costs of a more nonrecurring nature due to lower agency fees. This is attributable to sales in certain countries. So it depends on if we sell more or less to these countries. So that means that the cost level was maybe a bit on the low side because of this. But as I said, we have definitely lowered our level for the sales costs. And we have, during the year, also worked a lot with operational efficiency, and we have done reorganizations in line with this. Administration costs, 9% of sales, the same as Q4 last year and R&D costs, 22% of sales. We activated slightly less, SEK 9 million instead of SEK 10 million. And then we had, in this quarter, restructuring costs on this line of approximately SEK 3 million. And this is related to the termination of development personnel in Seattle. During Q4, we restructured our U.S. operations, and this resulted in us closing our Seattle office. We consolidated our operations to our office in Cleveland, and that is then our hub for all commercial activities and services and customer interaction. In Seattle, we had primarily development personnel. And so in connection with this restructuring, these employments were terminated. We still have a few other roles working remotely, and we have the lease for the Seattle office until October 2027. So as I mentioned, the quarter then saw the full impact of the cost reductions we've done after the acquisition of Intelligent Ultrasound. We have done more than we said we would do. We said between GBP 1.5 million and GBP 2 million. On an annual basis, we have done GBP 2.5 million and that then meant approximately SEK 8 million in the fourth quarter. Still then because of the lower sales that we discussed and lower than expected, primarily in the U.S. -- in the U.K., sorry, the operating result for IU was a loss for the quarter of approximately SEK 5 million. Other operating income and operating costs, that is then mainly costs for the company's option programs as well as the revaluation of operating assets and liabilities in foreign currencies. We had a negative impact on this line and on profits in the amount of approximately SEK 7 million during the quarter. And during Q4, we did an internal dividend from Israel. We are taking, as I mentioned also before, certain actions to reduce the effect of the weakening U.S. dollar. So we're both reducing intercompany items, and we also have as little cash as possible in USDs. So that's something we're working actively with. Following this then, our operating profit for the fourth quarter was SEK 40 million, corresponding to a margin of 15%. And for the full year, the FX effects that I mentioned before on the line other, that was a negative SEK 38 million then for the year. And if we exclude these and we also recalculate our revenues and costs with last year's exchange rates and also then exclude acquisition and restructuring costs for the year, and that was in an amount of SEK 30 million, then we reached an EBIT of SEK 177 million for the year or 17%. Organization-wise, we were 313 people at the end of the period, and that is 15 less than going out of Q3. The majority of the change then attributable to the closing of the Seattle office. With the IU acquisition, we added 48 people. And today, we have 11 less here. Adjusted EBIT for the quarter, the result was SEK 46 million. And as mentioned, we had some restructuring costs due to the closure of the Seattle office. Excluding those, we had an adjusted EBIT margin of 18%, same as last year. For the full year, then the adjusted EBIT margin was 12% compared to 19% in 2024. Finance net and taxes. no loan financing meant that net financial items that mainly consist of interest income on bank deposits and then also revaluation of some loan liabilities to subsidiaries, effect of IFRS is also impacting the finance net. Then regarding taxes for the year, the expense here is consists of estimated tax on profit for the year and the change in deferred tax assets. This year's tax expense includes U.S. taxes attributable to the previous year and also taxes that are not linked to taxable income. And combined with the effect of the loss in Intelligent Ultrasound, this means that the effective tax rate increased. And then also for the year, our profit includes the acquisition costs of approximately SEK 23 million. And those are not tax deductible. That is then also impacting the rate. And then cash flow. Cash flow from operating activities was SEK 73 million for the quarter compared to SEK 57 million for Q4 in 2024. Changes in working capital was really small, a small negative of SEK 3 million. Inventories were pretty much unchanged and accounts receivable decreased. Accrued income increased, and this is primarily due to higher license revenues, and they are then paid in the coming quarter, meaning now in Q1, and they have already been paid. So that basically means that the last day of the quarter is when this amount is at its highest. Investing activities, we invested approximately SEK 3 million in the quarter in our ongoing construction of new production facilities in Tel Aviv. We -- they are expected to be commissioned in the second quarter of this year. And then for financing activities, the larger amount underlying for lease liabilities is actually an adjustment in the quarter, so nothing to mention here for the year. And cash flow then was a positive of SEK 32 million for the quarter before FX adjustments. And we ended the year with SEK 616 million in our bank accounts. And with that, I hand back to you, Tom. Tom Englund: Thank you, Anna. So to summarize, we believe that quarter 4 was a solid quarterly result and that Surgical Science is moving in the right direction. We see a continued rapid development of the company in a dynamic market where we can see positive signals both in our external work with our customers and in our internal efforts to create a stronger, more efficient and more profitable company. Our new strategy, which we also now execute on will make us a company with several more revenue streams and a company which addresses a significantly larger market than today. And with that, I would like to open the floor for questions. Operator: [Operator Instructions] The next question comes from Simon Larsson from Danske Bank. Simon Larsson: My first question is related to the strong growth for licenses here in the quarter. Is it possible to quantify the number of robotic customers that bought licenses here in Q4 and how that has developed versus, for example, let's say, a year ago? I'm just trying to understand the underlying strength given the expected negative Intuitive effect we will see from Q1. So any color on the strength or sort of the breadth of the license growth here would be helpful. Tom Englund: Simon, Tom here. So we have said that we have 20 robotics companies as customers right now. And last quarter, it was around 5 of them who bought licenses from us. Simon Larsson: Sorry, it was 20 active customers during Q4 or that's the total scope? Tom Englund: That's the total number of customers that we have, robotics companies that we have, significant robotics companies that we have and about 5 of them had revenue streams this last quarter. Anna Ahlberg: And as you know, Simon, that can vary between the quarters since most customers with the batch sales, it can vary between the quarters. That's what we commented on also throughout last year. Simon Larsson: Yes. Understood. Understood. And then I guess my second and final question for this time at least. I noticed on the balance sheet, accrued income item has increased quite a lot if we look at both year-over-year and quarter-over-quarter. Is there any sort of special customer -- specific customer group that's sort of driving this increase in accrued income? Or yes, any help to understand the dynamic behind that figure would be also helpful. Anna Ahlberg: Yes. That is what I just mentioned before on the cash flow that is due to -- primarily due to increased license revenues and it is being paid in the quarter after and for Q4, it has been paid. So that's the number I referred to as being sort of always at its highest at the last day of the quarter. So there's no like increased risk or that we accrue more in a different way than we've done before or anything like that. So it's really positive in a way. And again, they have been paid and are always paid in the quarter after. Simon Larsson: Okay. So it should come down sequentially already in Q1 then unless it's a very big quarter again for licenses. Anna Ahlberg: It varies a lot with the license revenues. Yes. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: A few questions on my side, and I will limit it to 2, of course. But can you talk about the sales growth momentum in licenses for Intuitive if we were to exclude the dV5, given that this is the last quarter where it will be included as sort of basic skill simulation. Essentially, are you seeing growth outside of the dV5? And for '26, if we were to exclude the effects that you already quantified, would you expect that Intuitive would grow in 2026? Tom Englund: In terms of in terms of attach rates, we see for the other products, not the dV5 that we have sort of the same attach rates that we've had before with the license sales. And so that means that the customers are actively using simulation within those products as well. And then regarding this news that Intuitive will only supply Surgical Science simulation to a subset of the dV5s, that we believe then will have a negative effect of SEK 60 million to SEK 90 million during the entire 2026 compared to 2025. And we have very sort of low visibility on the attach rate for our simulation solutions in the dV5 offerings here for the coming year, both when it comes to the full year and also the quarterly distribution and the quarterly attach rates. Ulrik Trattner: Sure. But I was kind of aiming for here if we were to completely exclude the dV5 and just look at sort of the legacy platforms from Intuitive, the SP, the Xi, et cetera, et cetera. And I know it's a little transparency in terms of attach rate. But would you assume that there would still be any type of growth for those products? Tom Englund: We will not go into more detail regarding the exact growth within the different product lines for our customer. And it also becomes very complex because, of course, Intuitive also has an exchange program where they exchange dV4s or [ dVXs ] to dV5 and so in certain geographies and in certain geographies, they do not. And that entire kind of dynamics is very difficult for us to get into. So we report this kind of overall general revenue impact that we think that it will have for 2026. And once again, we have limited visibility into exactly how this will play out. Ulrik Trattner: Yes, I understand. And second question before getting back into the queue, and that would be on the cash flow side. And you reiterated that there will be some growth and some profit expected, not that sort of your targeted level. Is there anything that suggests that the cash flow for 2026 should not follow, i.e., are there sort of investments needed on your end? Or do you need to beef up working capital? Or are we to expect roughly sort of cash flow growing in the same extent as profits? Anna Ahlberg: There are no structural changes when it comes to cash flow as it has looked before and going forward. No, we have no -- I mean, the investments we do is primarily in staff and in development personnel. I mentioned that we are investing now in a new production facility in Israel, but it's not -- I mean, it's not major amounts. Operator: The next question comes from Christian Lee from Pareto Securities. Christian Lee: Would it be possible to quantify the larger package order received from one of your robotics customers in Q4? And excluding this package, would license revenues still have shown year-on-year growth in Q4? Tom Englund: Christian, we would not actually want to give that detail away when -- about these package orders, they become lumpy. I think that the main point here is that the robotics market is developing rapidly. And there's more and more players that are coming to market or are about -- or are already in the market. And many of these players are also customers to us. And that drives the demand for simulation and training on these robotic platforms in general. And that is kind of an accelerating trend that it's a long-term trend, and it's also kind of a revolution within health care right now. So overall, that will drive the need for simulation from Surgical Science. And then it will be lumpy, both because of the packages, as you say, certain quarters will have revenues when customers buy a large amount of packages or license packages from us. And it will also be driven by how quickly these robotics players will get their market acceptance and our customers. So you should think of this as an inherently attractive market to be in, in the long term with some fluctuations quarter-to-quarter. Christian Lee: Okay. Understood. And my second question then is regarding the cancellation of the memorandum of understanding with Intuitive. Could you please elaborate on why the impact of this is having the magnitude of this -- magnitude if it relates solely to dV5? And could you also please elaborate on the key variables that determine whether the impact lands closer to SEK 60 million or SEK 90 million? Tom Englund: So the dV5 is obviously the flagship product of Intuitive, and they will continue to sell the other products, the dVX and Xi as well alongside the dV5. And the sales focus right now is, of course, on the dV5 very much for the markets where dV5 has been launched. And for the markets where dV5 has not been launched, Intuitive continues to sell dVX and Xi. So the drop here in revenue, the SEK 60 million to SEK 90 million has, of course, to do with the delta of being available in all the different dV5 units that are shipped versus just a subset of it. When it comes to the factors that determine kind of where you land on the SEK 60 million or the SEK 90 million, it is very much related to the attach rate, which has been the same mechanics as with the previous models when we have sold simulation exercises in the X and Xi, we have spoken a lot about the attach rate. And it's then difficult for us to understand exactly how the attach rate will be on the dV5 given that there are so many factors at play here. So in terms of the rate at which dV5 grows in the market and so on, I mean, you can look at the Intuitive reports, it's around 18% procedural growth, and they have -- they also state the numbers of dV5 that they ship and so on. But I think that, that's pretty stable. It also has to do with how quickly their organization can actually install and get these systems active. So the main factor from our perspective is the attach rate. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: And then another focus area, medical simulation outside of robotics. You enjoyed a very strong growth in 2024. We have seen quite a big decline in 2025, and now you talk about 15% increase in projects end of the year versus sort of end of the year last year. So what is to be expected from sort of these numbers and then what to be expected in 2026? And given the fact that there is a big fluctuations between the years in terms of both revenue and projects, one would assume that these are short-cycle projects, and that would assume that it's short-cycle revenue as well. So you should have a little bit higher visibility, right? Tom Englund: Again. So regarding the growth here in the number of projects, the reason why we state this clearly in the report here about 15% is that it's a lead indicator for the simulator sales later on, right? So the development revenues, if we are successful with the development project, it will lead to simulator sales. And that simulator sales can either happen immediately where the customer buys a bulk orders of simulators can be spread out over several quarters or even several years. So the largest medical device order that we ever got, which we announced a few quarters back here, that will be a simulator sale that will go on for 3 to 4 years. So it's a lot dependent on kind of the size of the customer, the importance that our -- that the simulation that we sell into the importance of the product for that customer and how quickly they in turn can both educate and sell -- educate their organization and then sell their product in the market. So I think that the way you should look at it is that the more projects that we have, especially with big customers like Medtronic and Johnson & Johnson and Gore and so on, the higher the potential simulator sales should be over time. And it's, of course, very difficult then when you're a small P&L or a small revenue because then it gets lumpy, right, which is what we see here now. But then it's, of course, important to track the lead indicators, which is the number of returning customers and the growth in the number of development projects that you have. And I think that we can fairly say that now we have a quite healthy mix of the number of projects we have. We have a quite healthy mix towards larger players and larger potential projects and smaller players and quicker turnaround projects, both within development revenue and simulators. Ulrik Trattner: Okay. That's great. Is it possible for you to quantify how many of your sort of medical device customers that are currently utilizing your simulation in sort of a commercial product rather in development? Tom Englund: Yes, it's -- if you look back all years, I mean, it's going to be -- for all products, it's going to be somewhere around 30 or more, I would assume. Ulrik Trattner: And these, in general, should generate recurring revenue, right? Tom Englund: That's the idea. They are not all doing that today, but that's one part of the strategy and also one part of the profitability increase that we want to see in other parts than the license business and robotics. So that's something that we're working towards. You're absolutely right. Ulrik Trattner: Sorry for being a stickler ballpark, out of the 30 or so that are on the market, how many of those are essentially today recurring products? Tom Englund: A minority, a low percentage. Anna Ahlberg: And then just... Ulrik Trattner: Again, why would that be? Tom Englund: Because usually they buy a solution today that consists of both hardware and software, the entire product packaging, right? They want to develop a medical device and they want to make a simulation for that. So they bring a part of the hardware and we build a simulator around and also develop the software, and that's sort of sold in a package. In the future, where we want to go is we want to create the hardware as a platform on which you can sell multiple software modules on. And we can also then have a more continuous value delivery where we can charge on these on a recurring revenue basis. Right now, we have taken the first step where we sell more software onto the same platform, but it's still not on a recurring basis. It's on a perpetual basis. So that's then the next step in the strategy. Ulrik Trattner: So just I understand it correctly, the [indiscernible] that has been launched on to the market, they have essentially fulfilled their demand out there? Tom Englund: Sorry... Ulrik Trattner: In terms of installation -- in terms of devices, given that there are no sort of recurring revenue on these type of products of the [indiscernible] that has been launched, that implies that, I guess, they're used for training purposes, but that would assume that these products or sort of the number of devices placed have sort of fully supplied the market's demand and there is sort of... Tom Englund: Sorry, you can't really look at it like that. If you take Medtronic, which is one of our absolutely biggest customers and where we provide a simulator for one of their key critical products, they are going to have an increasing demand of simulation as the revenue for their product increases, right? So there's going to be more sales and education staff that needs to be trained. It's also going to be more countries that are onboarded onto this product that also need to be educated. And that's -- it's almost like it's a product SKU for a specific company, but the company is so big, so it becomes like a marketing itself, right? So you can think of it as a recurring business also to continue to sell the hardware and the solution for several years to come. It's not like they place one bulk order and then it's over with. That's the 4 years that I spoke about before. So... Ulrik Trattner: And then my second question would be on Intelligent Ultrasound. And just also going back to if I understood one of your comments correctly there, Anna, because I do note that the losses that IU brings is significantly lower here in the fourth quarter, whereas sales volumes are down sequentially as well from Q3. And did you talk about lower agency fees related to IU affect this result... Anna Ahlberg: Sorry if that was unclear. No, it's not related to IU. That was more a general comment that the sales costs can go up and down depending on what countries we sell to or what structure we have and how they are paid, if it's more a rebate or if it's sort of commission and that can affect the sales cost line, and that's what happened in this quarter. So no, it was not... Ulrik Trattner: Yes. Understood. And then the natural follow-up question would be, it looks like at least the losses are declining and it's becoming more manageable. Do you have any more levers to pull? Or is this more a game of hoping for volumes to increase in NHS funding coming back? Tom Englund: In U.K. specifically, I mean? Ulrik Trattner: I mean in IU specifically. Tom Englund: We have many more levers to pull. They are 3 of them, it's sales and sales efficiency and the way we sell and market the product. It's product related, how we develop and package the products. That's why I spoke about in the CEO message that in this quarter and in the coming quarters, we will start releasing the ultrasound simulation products that carry the combined technical base of both Intelligent Ultrasound and Surgical Science, and that can actually also drive profitability. And then, of course, we can work on production improvements and COGS improvements to drive profitability. So there are several different angles you can improve, and we are working on all of them. Ulrik Trattner: Perfect. And just sort of to be fully clear here, obviously, you don't want to guide, and I guess IU will not be disclosed as sort of separate EBIT contribution for 2026. But it would be fair to assume that given everything that you've done in terms of cost savings and the 3 points that you alluded to here that losses for IU would be lower compared to 2025, right? Anna Ahlberg: Yes, because they have gone down sort of sequentially as we have done these restructurings and benefiting from the cost savings there. So yes, since they have the full effect in Q4, that's correct. Tom Englund: Thank you. We have a question from the feed here from [ Austin Groves Family Office ]. Are you currently tracking with other major robotics players such as Medtronic or J&J to have similar penetration install rates as you do with Intuitive? In your discussions with non-Intuitive customers so far, are you competing with other customers for that business? What would you say is the main limiting factor holding that business back? And when, how will it be resolved? So are you currently tracking with other major robotics players such as Medtronic and J&J with penetration install rates? It's depending on the customers' requirements and the customers' wishes about how this customer wants to package the simulation, either as a mandatory piece, digital part of the full robotic experience or as an accessory that we sell on. So it depends a little bit from customer to customer. Some customers will have 100% attach rate of our simulation into their digital ecosystem and some customers will have a lower attach rate. It also depends a little bit on the different product models that these robotic companies have. We are -- we feel that we have a very high market share within robotic simulation for these robotic companies and that there is not that much other competition out there. And actually, frankly, it's not the competition holding us back. The main limiting factor holding us back is our capacity to create compelling simulations for our customers and tying this closely into the digital ecosystems of our customers. And the other limiting factor is how the robotic companies want to train the surgeons on the robotic consoles, meaning the integration of simulation into the training curriculum and training ecosystem of those robotic manufacturers and making sure that, that is smooth and easy from a surgeon's point of view. Those 2 things are holding us back. And then a third structural thing that is holding us back that we have addressed with this RobotiX Express is still that the training usually takes place in the operating room on the console itself. And that's a constraining factor, meaning because that console is also used for clinical procedures. And that we're solving them with our RobotiX Express, which is a generic robotic training that you can use outside of the operating room. So I hope that answers your question, Austin. Anna Ahlberg: And then we have one more written question in the feed. If there are any one-off effects from switching from subscription to license model with the dV5. It is fully and will continue to be a full subscription model? So that is not the difference than the difference is, as Tom discussed before, the attach rate for the dV5. So that is the change, so to speak. And for the older generation, there is no change because that was also before offered as an option. Tom Englund: So we have no further questions in the feed, and we have a few minutes left. Do we have any other questions, Anna? Anna Ahlberg: I don't think so. No. Tom Englund: Okay. But then thank you all for listening to this quarterly report, and I see you again soon. Take care. Bye-bye. Anna Ahlberg: Thank you. Bye-bye.
Stephane Pallez: So good morning, everyone. Welcome to our annual results presentation for 2025 and outlook for FDJ United Group. So before handing to Pascal to detail the financial results, as we always do it together, I will start by commenting on the key events of 2025, first year of Kindred's integration into our results. And I will then, of course, come back to present our outlook, and we'll conclude with Q&A. So just to say where we are today and what we are. So we are FDJ United, a group with a unique profile with solid assets and a strong business model, and this illustrates this statement. So in 2025, the group generated a gross gaming revenue of EUR 8.7 million, a revenue of EUR 3.7 million and current EBITDA of EUR 902 million, representing a margin of 24.5%. FDJ United has developed over the year, a unique profile based on solid assets and a robust business model. And this is what I want to illustrate briefly through those numbers. We detain assets in all gaming activities and distribution channels. We are present in most European markets and of course, very strong in France, where we generate more than 3/4 of our revenue. We combine point-of-sale activities with digital activities, and we believe in this combination. Our online activity now represents 1/3 of our revenue, and this was part of our strategic goals. And we generate solid financial results, enabling us to finance our investment and to offer a good return to our shareholders as is our promise. So as you know, this was achieved through a deep transformation over the last years. I won't come back to the different steps that we went through. It was, of course it started with the IPO of FDJ United in 2019. And we have now become a true champion of online lottery, betting and gaming in Europe. This result was, of course, primarily achieved through successful organic growth, but it has been complemented with selective mergers and acquisitions since 2022. And in numbers, what this means is that this from 2019 to 2025, our financial profile has, of course, significantly evolved and positively evolved. Our overall performance has changed. The numbers have changed. Revenue has been multiplied by 1.8. Current EBITDA has been multiplied by over 2, 2.1. We gained almost 400 basis points in terms of EBITDA margin coming today at, again, 24.5%. Free cash flow was multiplied by 2.6 and the dividend payment was multiplied by 4.6. So all this, I think, illustrates what we are today, a solid group with, of course, good perspective, and we'll come back to that. So to come back to 2025, I want to start by underlining some key highlights that we have achieved during this year in terms of business transformation and of course, looking out to our 2 main business units. So for the Lottery and Sports betting in France, I think 2 main transformations that were -- one was already started. It's the sales force internalization, which has been completed into 2025. And you know that this is something that has been a high contributor to our margin improvement into the last year and even more to our capacity to drive our business in France over the whole territory with our retail network. We've also started a new phase of development of our retail network, again, which we -- in which we believe strongly with the opening of more than 500 point of sales until -- under banners, particularly with large full retailers like Carrefour/E.Leclerc, in line with the objective that we communicated during our Investor Day last June to increase our client base in France, which we think is still an opportunity today. So good start for this, and thank you to everyone for giving us this good start. But of course, it's not finished. We'll come back to that. For online betting and gaming, I can say that the integration of Kindred has been completed. Kindred is completely today part of our group. It's been now -- it's now part of OBG online business and -- online betting and gaming BU. We have definitely now, again, a complete online business in France and in Europe of our gaming activities that are open to competition. This BU, of course, is undergoing a strong transformation over the next -- which will go on over the next years. It is, of course, a technology transformation, and we'll come back to that. It's also a transformation that implies to completely separate our competitive activities from our exclusive rights activities as we committed to the antitrust authorities. We have achieved that in France. We have achieved that in France with the separation of our player accounts between online lottery and online sports betting followed by the merger of Parions Sport en Ligne, and ZEturf accounts at the end of June, and this was an important step, which prepares what will happen this year and particularly in March with -- on our brands in this activity. In the United Kingdom, we deployed 32Red and Unibet brands on our proprietary platforms. This road map is, of course, not achieved today. We will come back later on our vision of this transformation for this year and next years. With the decisive contribution of AI, this BU continued also to transform and implement its operational performance at the highest level. Two things worth mentioning. First, the ramp-up of automated marketing campaigns with more than 70% of direct marketing campaigns automated in most of our markets and the optimization of our customer service operation, enabling us to manage an increase of nearly 20% in interaction with reducing costs at the same time by more than 10% in 2025. So very significant transformation, which is again not finished, but which has started nicely. So when I look more globally at 2025, of course, it is fair to recognize that in '25, our performance, our results were significantly impacted by major adverse factors. This is not a surprise. We described those over the year. Some came at the latest part of the year. And of course, we incorporate all those in our results and in our vision for 2026. First and foremost, in those factors, tax increase in France, in Netherlands and Romania. And over the total financial year, their impact on revenue and EBITDA amounted to more than EUR 50 million. So very, very significant impact. At the same time, in the Netherlands, in particular, regulatory decisions that I can only describe as ill considered were implemented in a short time frame with a very negative impact on the legal market, on all the operators, of course, including us. The market for operators in Netherlands has been shrinking by around 25%, at least in favor of offshore online betting and gaming operators, resulting in a loss of tax revenue for the country and in the last, of course, of control on players who visit sites without any protection and guarantees. And this is clearly not good news for the sector, but it shows how regulation can definitely, if it's, I would say, ill implemented, go in the wrong direction. However, we had to adapt to these developments, and we acted and very quickly put in place a broad-based performance plan to improve our operational efficiency all over the group. This plan is off to a very good start as the 2025 target that we communicated at the beginning of the year has now significantly exceeded, reaching approximately EUR 50 million compared to EUR 20 million that we announced at the beginning. We, therefore, raised in our forecast for the future, our target. First, our target for this -- for the impact of this plan from EUR 120 million to EUR 150 million of recurrent cost efficiencies that will improve -- will continue to improve our margin over time till the end of 2028. Therefore, in this particularly challenging regulatory and fiscal environment, FDJ United has managed to preserve its fundamentals and to meet our financial commitments as we formulated them at Q3 results particularly. We reached an EBITDA margin of over 24% -- 24.5% exactly. We generated a record operating cash flow generation of nearly EUR 300 million. And therefore, we are in a position to propose in the continuity of our guidance on dividend, which is a payout ratio of 20% -- of 80% of our adjusted net income. We are in a position to propose to the next general assembly in April a raise of our dividend to EUR 2.10 per share. So this, of course, shows our solidness, our strong performance, the solidity of our model and the trust that we have in the future. So to look a little more at our performance in our 2 main BUs that, of course, are the cash generator of the group. I want to look a little more at LSF than OBG. So for LSF, I've just mentioned the 2 key achievements in terms of business transformation. And again, those achievements are very structural in the way we have managed and will continue to manage this business. In financial terms, the BU gross gaming revenue and revenue increased by 3% to EUR 6.9 billion and to 1% in terms of revenue to EUR 2.5 billion. This, of course, is including the impact of the tax increase in France that has been implemented from July 1 and which amounted to more than EUR 28 million. So when you look at our underlying growth for the lottery, you see that GGR grew by 3%, identical for both draw games and instant games and revenue grew by 2% to, again, a little more than EUR 2 billion. In terms of games, we had, again, good trends in our main games. Instant game businesses benefited from the success of promotions and relaunch in our portfolio, such as the launch of Royaume d'Or of 600,000 carats and the strong performance of the exclusive online offering, including the record launch of some games as Bubblecaster game in Q4. So good results in Instant game business. And the draw games business was also positive, driven by long Euromillions cycles with more than 50 draws offering jackpots of over EUR 75 million, including 6 with EUR 250 million. So strong activity and strong business in our draw games and particularly for Euromillions but we also had good momentum on Crescendo and the new Keno formula that we launched last November. For online lottery revenue, we grew by 8% and this online business in the lottery represent now more than 15% of our lottery activity, an increase of nearly 100 basis points compared to 2024. I think it's worth noting that this strong performance is attributable to growth in the number of players that now exceed 6 million at the end of December 2025, thanks to record recruitment. Of course, we need to continue to work both on recruitment and increase the value of those players. But again, a very solid trend in this online lottery business which, as you know, has also high impact on our margin improvement over the years. For sports betting revenue in the point of sales, it had a slight decline of 2%, which is attributed to lower stakes, which reflect mainly unfavorable comparison with the Euro 2024 soccer, which has been, as you know, a high success. So these achievements in the -- in our lottery and sports activity under exclusive rights in France has lead us to actually a very strong performance into EBITDA margin. We had a very good implementation of our performance in our lottery in France. And therefore, we were able to generate a current EBITDA of EUR 913 million, up 3%, representing a margin of 36%, an improvement of 60 basis points compared to 2024. So very -- again, very solid fundamentals and very good results for LSF and again, a very strong asset in the group financial assets as of today. OBG is under transformation. We know it. It's not a surprise. It's a transformation that is going to be a journey and we have known it even, of course, if we are impatient to go further and to accelerate. As I said in the beginning, we have completed the Kindred integration. So that's done. We also, during this year, continued to launch major marketing and commercial initiatives, including the launch of 32Red e-casino brand in Romania in July, for instance. And in casino, we launched a new exclusive cross-market chatbot, which was very successful in 7 countries in the second half of the year. So again, good level of marketing initiatives. Also very significant increase in the number of active players up to more than 10% which is, of course, a pillar of our marketing and responsible gaming strategy in OBG. However, it is fair to recognize that level activity was disappointing with GGR declined by 8%, reflecting a particularly unfavorable base of comparison with 2024, of course, marked by the Euro Soccer and of course, the impact of tightening of regulation, particularly in the Netherlands that has started in October 2024, but that has been, I think, over -- again, over restrictive all over this year. So considering the cumulative effect of numerous tax increase on gaming in France, Netherlands, Sweden and Romania, amounting to more than EUR 23 million, revenue was down 12% to EUR 908 million. If, however, you look at what we did without United Kingdom and Netherlands, which were the markets where this negative trend was the most significant, GGR rose by 6% and revenue by 1%, thanks particularly to the performance of OBG in the French market, where we definitely outperformed the market and continue to gain market share. So again, very definitely mixed performance, but I think it's important to underline the strength that we want to continue to develop for the future. So the BU current EBITDA amounted to EUR 181 million, which represents a margin of 20%, of course, down as a consequence of activity decrease in some major markets. At a general level, as you know, we are completely convinced that at FDJ United, financial and nonfinancial performance go together, have to go together if we want to drive a sustainable business. So as everywhere -- as every year, we measure and publish our positive economic and social impact in France at this point. And for the 10th year, we have done this assessment with an external auditor, which illustrates our impact in France. Social and economic contribution of more than EUR 7 billion has been assessed. Of course, a good part of it is through the fiscal revenues that we pay in France, more than EUR 5 billion, including EUR 4.8 billion in public levies on games. We have also contributed to create or preserve more than 57,000 jobs, including more than 20,000 in bar, tobacco, newsstand network. This particularly benefits local businesses in France with a record remuneration of more than EUR 1 billion that has been paid to our 29,000 retailers last year. So high contribution to the French economy and the French territories. To look more broadly at our extra financial highlights, you know that we have further to the establishment of FDJ United, we have also adopted a new purpose to cover our new international scope, which is to embody the future of entertaining and responsible gaming in a model that creates positive impact for society. In that framework, I think 2 main objectives. One, of course, is responsible gaming. Responsible gaming, as you know, is part of our business model. It's not only a conviction, it's a necessity. And therefore, we continue to invest in that, particularly in terms of communication to our players because we know it's a never-ending objective to increase our efficiency with our players. So it is part of our brands to talk about responsible gaming. This is what we've done through Safe Play. It's a campaign with a new identity that will be adopted over time by all the group brands to highlight our, again, definite commitment into this responsible gaming activity. We have also invested in new tools, state-of-the-art tools to control the risk of this activity, particularly in France with a new tool, FDJ Protect, which is -- has been deployed to better control risky gaming practices, of course, specifically to online lottery activities. And we are deploying another tool, which is called Crucial Compliance that has been implemented in United Kingdom and the Netherlands and will be gradually deployed in other European markets for OBG. So again, strong investment to continue this and to accompany the development of our business. We also invest -- we also invest in carbon reduction footprint. For the fourth year, we have been awarded an A+ and A carbon rating by Vérité40 Index. And we have taken positive voluntary commitments into social and environmental contribution to dedicate over the year, 5% of our published net income. And this year, it took the form of a EUR 5 million investment in a fund launched by Ardian to finance projects to restore forests, wetlands and mangrove to sequester a large amount of carbon. So again, also medium-term objective that we fulfill during this year. So I will now hand over to Pascal for a presentation of financial results and come back later to talk to you about 2026. Pascal Chaffard: Thank you, Stephane, and hello, everybody. This first slide presents our key figures for 2025, some of which Stephane has already touched upon. The 2025 figures are compared with the 2024 reported, meaning published, consolidating Kindred from its acquisition 11th of October 2024 and also 2024 restated up to EBITDA. Restated meaning as if Kindred had been acquired on January 1, 2024, and based on the scope of business retained by FDJ United. The comparison to the reported figures shows the group change of scale and record level of GGR, revenue, EBITDA or free cash flow generation. We will come back on more detail on every KPI presented on this slide. First, the GGR, gross gaming revenue, which is stakes minus player winnings. In other words, the amount spent by the players. This KPI is growing in 2025, even in restated figures. But due to the gaming tax increase based also on the GGR in France, in Netherlands and in Romania, public levies went up by 3% and the net gaming revenue went down by also 3%. The impact of the tax increase that reduces mechanically our revenue and our recurring EBITDA by the same amount. We have grown our activity, but for the benefit of the different states, if I may say. As a result, the average tax on the GGR is now close to 60%. You show the figures of 59.9% on the slide in 2025 versus 58.5% in 2024. The net gaming revenue represented on this slide is a major part of our total revenue. And to get the total revenue, you must add the revenue from other activities, which are the B2B part of international lottery and payment and services. Let's now look at the bridge between revenue and recurring EBITDA for the group. Total costs have decreased by 2%. It's close to EUR 50 million in 2025 compared to an activity, the GGR that was up 1%. This is a result of the performance plan put in place in 2025, and I will come back later on this point. Cost of sales amounted to EUR 1.5 billion, down 1%, including, in particular, more than EUR 1 billion of retailers' remuneration, growing at a pace of 1.4% and the pace is the same at the one of the stakes in point of sales in France and in Ireland. It means that the other cost of sales went down by nearly 5%, reflecting notably the benefits of the sales force reorganization in France. Marketing costs include advertising and also the product design. They amounted to EUR 306 million in 2025 and were down 11% compared to 2024, which was impacted by the Euro football and the Paris 2024 Olympics, but the decrease is also the result of the performance plan. IT services reached EUR 173 million, plus 4%. They cover the costs associated with the outsourcing contractors of the development and IT operations. The increase is the net impact of the performance plan on one side that has decreased the costs and the investments on our proprietary platform, mainly in LSF and OBG on the other side. The personnel expenses were stable at EUR 583 million, although they include EUR 12 million related to the employee share ownership plan that has been put in place in the middle of the year. And to finish with this slide, administrative and general expenses, which are -- which mainly include consulting fees, operating cost of central functions and building costs, et cetera, were down EUR 8 million, minus 5% to EUR 166 million. So as it has been already said, the recurring EBITDA thus stood at EUR 902 million with down 6% compared to 2024 restated in the context of what I've already said, Stephane, of around EUR 50 million gaming tax increase. Let's take a look now at the same bridge from revenue to recurring EBITDA, but on the 2 main BUs. If we start by the French lottery and retail sports betting, the LSF BU revenue amounted to EUR 2.5 billion, up 1%, as Stephane already told you, based on the GGR growing at a higher pace, more than 3% -- the total cost remained barely stable despite a plus 3% GGR that was impacted -- that has impacted the variable cost. And I will come back to that a little bit later, but the variable costs are 70% of the cost base, demonstrating the performance efforts that has been performed to maintain a stable those costs in total. Cost of sales amounted to EUR 1.2 billion, stable despite the increase of retailers' remuneration. This increase is offset by the performance plan, notably, as I said it before, the effect of the sales force internalization. The marketing costs were stable at EUR 114 million despite the impact of the new tax on advertising and promotional expenses from July 1, 2025, for more than EUR 6 million. Other costs, namely IT costs, personnel costs and administrative and general costs increased very slightly by 2% to in total, EUR 322 million. In addition to this excellent execution of the performance plan, the BU has also benefited from a favorable mix effect on margins with the accretive effect of a higher digital penetration. Stephane told you earlier that digital penetration has now reached 15% compared to 14% last year. These factors enabled LSF BU to record current EBITDA of EUR 913 million, up 3%, representing a margin of 36%, an improvement of 60 basis points compared to 2024, which is a very good performance. And the strict cost control measures implemented in 2025 will, of course, continue in 2026 and further on. For online betting and gaming BU, the revenue amounted to EUR 908 million. Cost of sales were down 2% to EUR 261 million. The marketing expenses were down minus 11% to EUR 174 million, were optimized and further adapted to certain regulatory constraints, but also implementing some performance plan measures. The increase in other costs, plus 5% is mainly attributable to the plus 17% that you can see on the IT cost, reflecting the platform migrations and developments that we are performing. OBG has a fixed versus variable cost split of around 2/3 for the fixed and 1/3 for the variable, which creates a significant negative leverage when business slows down. This explains the sharp decline in the current EBITDA margin this year, which stands at 20%, compared to 28.5% in 2024. So our main focus is, therefore, the return to growth in order to activate the leverage effect that will automatically lead to a fast improvement in recurring EBITDA. We will, of course, continue to optimize the cost base in parallel as part of the performance plan also. In 2025 compared to the 2024 reported, revenue increased by 20%, but compared to the restated, it fell by 3% as it has already been explained. As we have just seen, the decline in revenue is directly linked to taxation. I will not come back to this point more. And Stephane has already commented in details on the 2 main BUs, LSF and OBG. So I will tell you a few words about the international lottery and Payment & Services. The international lottery recorded a drop in revenue of EUR 21 million due to the sale of Sporting Group at the end of 2024 and the termination of B2B contracts. Those activities have ceased because they were not profitable. You will see thus a positive impact on the EBITDA. And to finish with international lottery, the Irish lottery, PLI is growing. The activities of Payment & Services are down slightly minus EUR 3 million. It's 4% due to the cessation of high volume but low profitability activities. Let's have the same look at the EBITDA bridge by BU. As I already said on the revenue, Stephane has already commented the margins of LSF and OBG. So I'm going to focus already on this slide on International Lottery and Payment & Services as well as the holding costs. Regarding international lotteries, the recurring EBITDA amounted to EUR 38 million, up EUR 13 million compared to the previous year, thanks to the positive impact of the sale of Sporting Group. I've touched upon when I spoke about the revenue and the increase of profitability of PLI, and this is a very positive point, resulting notably from the group synergies that we have put in place. The margin of this BU in total is now 22.5% compared to 13.1% in 2024. On Payment & Services, recurring EBITDA was down EUR 5 million -- was minus EUR 5 million compared to minus EUR 1 million in 2024. In parallel with the optimization of its business portfolio to focus on profitable services, the BU continues to invest in developing Nirio brand and services. This explains the minus EUR 5 million. Central costs recorded in what we call holding amounted to EUR 226 million, down EUR 13 million compared to 2024. The rationalization of costs as part of the performance plan more than offset the EUR 13 million total costs related to the employee share ownership plan that has occurred in the first half of the year. Okay. This one, I think it's not necessary to comment it in details. So I will just move to this slide very quickly. To give you a few words complementary to what I've already told on OBG on fixed and variable cost split. As you can see on the slide, at the group level, this split is close to 50-50, allowing strong operational leverage. This leverage is even higher in OBG with a level of fixed cost that I already said close to 2/3. This means that when the BU is growing, the profitability is increasing rapidly. But when we face headwinds like in 2025 with a revenue decline faster than the GGR, the EBITDA margin is going down rapidly. We can mitigate this effect, reducing the fixed cost base, but it cannot be enough. Our focus has to be back to growth to benefit again from the powerful operational leverage. In the LSF BU, the split is different at the weight of the retail remuneration is heavy. Nevertheless, on the online lottery, the split is comparable to the one on OBG, allowing a strong operational leverage that is one of the 2025 good performance of LSF explanation. So our focus is obviously growth and optimization of the fixed cost base. Let's talk now about the performance plan. In 2025, we had announced a EUR 20 million positive impact of our performance plan. This was at the beginning of the year when we have faced the increase of the tax in France. And we have done far better because we are announcing here a EUR 50 million recurring cost reductions. And as Stephane told you, we are 1 year ahead in the implementation of the multiyear performance plan. This acceleration allows us to increase the total amount of this performance plan to more than EUR 150 million by the end of 2028 compared to the EUR 120 million that we announced initially in June. More than half attributed to OBG and nearly 40% to LSF. This plan, to be clear, is not just a cost-cutting plan. It's far from being a cost-cutting plan. It is more a transformation of our operating model, of our processes, of our tools to do more with less. And let's take maybe some example to make it very concrete. We have just finalized the internalization of the LSF sales force with substantial savings that I already commented. We continue to streamline the processes, for example, new commercial criteria to the point of sales with also the reduction of the number of agencies. We are transforming OBG's customer operations using automation and AI, which makes it possible to enter more client contacts, better quality and less costs. Also on OBG, but it will be done in a second time in LSF, marketing automation to optimize the creation and TTM of the campaigns, thanks to AI and also the globalization of the advertising purchases at the group level with scale economies. Transformation of IT, including infrastructure cloudification, DevOps, test automation, et cetera, et cetera, and many others. So we are -- with an ongoing transformation that is concerning the whole company. Let's now look at the bridge from EBITDA to the adjusted net result, which is the base of our dividend calculation. The net depreciation and amortization amounted to EUR 336 million, of which EUR 200 million of PPA amortization. The nonrecurring items of EUR 199 million mainly correspond to impairments of intangible assets recognized in PPA, EUR 166 million and restructuring costs, EUR 28 million. The financial result for the 2025 financial year amounted to minus EUR 63 million compared to plus EUR 5 million in the previous year. This change is mainly due to the interest of the debt and the lower level of cash following the acquisition of Kindred. This is completely in line with our expectations. The tax expense amounted to EUR 130 million, including EUR 27 million in additional taxes on large companies, i.e., an effective tax rate of 42.9% compared to EUR 138 million in 2024 and an effective tax rate of 25.8%. And as you know, the exceptional contribution on profit of large companies introduced in France in 2025 will be prolonged in 2026. The net income amounted to EUR 176 million compared to EUR 399 million in 2024 reported. The adjustments of EUR 311 million correspond to the amount net of tax of the depreciation of PPA, EUR 170 million and the net asset impairment already mentioned of EUR 140 million. Those are noncash events. This is why we adjusted to calculate the adjusted net income of EUR 487 million, close to the figures of last year, which was EUR 490 million. Free cash flow reached a record level of EUR 782 million compared to EUR 675 million last year. It's an increase of 16%. In surplus, the conversion rate of recurring EBITDA into cash was 87%, which is very satisfactory and a level well above the medium-term guidance of 80%. The group continued to invest in 2025 and even intensified with CapEx of EUR 172 million versus EUR 150 million in 2024, with the majority of its investment remaining devoted to information system developments. As a reminder, for the purpose of comparability between financial years, certain components of free cash flow linked to cutoff and nonrecurring effects are restated. These restatements mainly cover nonrecurring CapEx in group's business cycle, including in 2025, the additional equalization payment that we paid for an amount of EUR 97 million as well also as calendar effects impacting the variation in working capital, nothing different from what we did the previous years. Let's conclude this section with a few words about our financial situation. Taking into account other debts, total financial liabilities amounted to EUR 2.3 billion at the end of 2025. It's down EUR 200 million compared to the end of 2024, reflecting the debt repayments made this year. With available cash of nearly EUR 550 million, the net financial debt amounted to EUR 1.7 billion at the end of 2025, a reduction of nearly EUR 100 million compared to the end of 2024. This reduction is not exactly up to EUR 150 million that we have forecasted initially. This is explained by the slight lower recurring EBITDA compared to the situation beginning of the year and also by elements difficult to predict precisely, such as the winnings to be paid to players, which are at a lower level than expected at the end of 2025. They mainly depend on the jackpots 1 or not 1 and the fact that the players have claimed their prices end of December or beginning of January, you see that it's mostly a cutoff effect and not a structural one. The financial debt ratio, net financial debt on recurring EBITDA is at a level of 1.9x, stable compared to last year. And to really conclude and give back the floor to Stephane to talk about the outlook, a slide to maybe help you model 2026, taking all the key elements. We will have a split between fixed and variable cost in average that will be in the region of what we have seen in 2025. Second, the cumulative effects of the performance plan will amount to EUR 100 million. It means EUR 50 million in surplus compared to the EUR 50 million that we already did in 2026. Our business will be impacted by 900 additional calendar effects of new gaming taxes, including 2/3 on OBG and 1/3 in LSF. I would like to point out that the calendar effect is the additional effect of taxes. For example, in France, we only consider the additional taxes in H1 since H2 has been allocated from 2025. The cumulative impact of the new gaming taxes in 2026, if we compare it to the initial situation in 2024 on the NGR amounts to EUR 140 million and more than EUR 150 million impact on the EBITDA, considering also the new advertising tax, which is accounted for in the costs. The exceptional corporate tax on companies that generated yes, external corporate tax of the companies that generated more than EUR 1 billion in revenue in France having being renewed. I've already said that. We will once again get a sort of tax burden around EUR 27 million additional. The amortization of the PPA will be at the same order of magnitude as in 2025, i.e., a gross amount of EUR 200 million for a net amount of EUR 170 million net of deferred tax. CapEx will be in the region of EUR 160 million. It means that it will be on the lower end of the 4%, 5% revenue range that we have in our guidance. And finally, a reduction in the net financial debt is expected of around EUR 100 million. And now I can hand over really to Stephane, who will present our outlook. Stephane Pallez: Thank you, Pascal. So I think it's important to understand, as Pascal has done the weight of taxes on our business, but it's also very important to look at the activity and the drivers of the activity because this is what says, where we go from now and how we can project ourselves. So to start with LSF, lottery and sports betting in the point of sales, I think we have some interesting drivers of activities. First, of course, is the acceleration on the basis of the success that we had this year in the banner point-of-sale rollout. As I said in my first part, we are able to open 500 new point of sales. We will aim this year to open 700. And again, this means new clients, new type of clients also because it's a very different type of network. So that's a great factor. We will, of course, continue to work on the efficiencies that we can get from the integrated sales force model now, now that we have completed this internalization. So this is also a lever for efficiency and good marketing drive of our network in 2026. We will also, as usual, in 2026, we will animate our commercial activity through numerous events and innovations, of course, coupled with initiatives to continue to develop cross-selling at point of sales. So in the lottery, we will benefit for a lot of -- from a year with a lot of events. We will use the celebration of the 50th anniversaries of Loto. We will have 3 Friday -- 13th Friday, which is, as you know, an occasion also to animate our games. We will offer on this occasion Super Loto and we'll continue to offer extra benefits on the game that we launched in 2025, EuroDreams -- well, since the last year, including '25, which are EuroDreams and Crescendo to continue to develop them in our draw games portfolio. For the instant game portfolio, we aim to launch at least one new game or one relaunch of a current game every month, such as the relaunch, of course, of iconic games like Cash, Numéro Fétiche. And we'll also continue to invest in the online lottery to recruit new players while ensuring responsible gaming with, again, our new tools. We also continue -- we will continue to develop our exclusive games portfolio. We also plan to have each month new games in our exclusive web portfolio to further develop our offer in the online lottery, including multiplayer game, Lagoon Clash that will be launched in June and which will be a real innovation. So again, lots of innovation in our gaming portfolio to sustain our growth this year and for the future. And of course, for the sports betting, it will be a year of World Cup. And therefore, we plan to use this event as we know how to use it to have good growth in the sports betting activity in our point of sale. So let's turn now to OBG. OBG will see in 2026, the acceleration of its transformation that we started in 2025 and further implementation of the operational performance plan that Pascal has described at financial level. It will be executed through a new management and organization under the leadership of Pascal, who has been very involved in the integration and successfully integration of Kindred and who will take a key strategic operational responsibility with the management of OBG, which shows the importance for the group of this transformation in our strategic road map. He will also continue to lead major transformation project at the group level. And I really want to thank him for his results and his commitment to this transformation that we want to make real in 2026 and further. We'll -- of course, since Pascal will move to this operational responsibility, we are in the process of hiring a new CFO in the very next weeks or months. And of course, you'll be informed of this move as soon as it is completed. So we have in nobility an intense operational agenda. Of course, in France, a very significant move, which is the shift of Parions Sport en Ligne under the Unibet brand. It's important in commercial terms. It's also important in terms of our capacity to, I would say, get more efficiency from our commercial spendings under one powerful brand, which will be Unibet starting in March. So it's a strong move that we have been planning to do, and that will be done again this March, but it's also important for the future of this business, successful business, again, in France. We will also expand further our automated marketing campaign, and we'll expand also further the optimization of our customer service, supported by artificial intelligence in all OBG business. And we will prepare as we have already started for the opening of the Finnish market, which is now scheduled for mid-2027 after the framework for regulation has been adopted. So we will -- we intend to benefit from continuous commercial and marketing initiatives such as the internalization of the 32Red brand follow the success that we had with the launch in Romania. We will -- we plan to launch it in other markets during the year. And we also will finalize our multi-license strategy in Sweden that we started this year. And of course, OBG will -- intend to use the World Cup also to drive major commercial and marketing initiatives to get back to growth and recruitment, of course, through recruitment of players during this 2026 year. So very active agenda. Looking forward, I also want to say a word about our other activities. Pascal has commented them in terms of results for this year. But I also want to comment them in terms of how they will contribute to our growth and performance in the years to come. So we have the intention, as we said during our Capital Market Day to look for further growth in our international lottery business beyond PLI, which is today a success in terms of integration and synergies within the group. We have set a strong team to prepare to seize opportunities, which might be tenders or acquisition as they arise around us. And again, to look to those opportunities in short term and medium term. So we are now ready, I think, to be in that capacity to do so. We also continue, and this is more, of course, for France to invest to create differentiating assets in payment and service to serve our group strategy in France and particularly to serve our clients in the network and our retailers. So we offer now to our clients local bill payment systems in almost half of our network and a payment card. And we have built also a solution which is dedicated to local businesses of course, our retailers, but not only with Nirio business. So second trend. And more broadly speaking, at the group level, we have been building in 2025, our team and road map for data and AI acceleration. We are convinced that all our activities are and will be profoundly transformed and strengthened by data and AI use. And we have started to roll this road map with 2 priorities. One is, of course, to use it to improve gaming experience, more personalization with our customers, more efficiency in responsible gaming, which is, again, completely integrated into our new tools and objective and which will be a key driver to achieve this efficiency. And we want also to use data and AI to achieve operational excellence into our customer service operations. And we have started to also get new partners to help us to do so, such as the partnership that we signed with a company to develop AI within FDJ United. So all this, of course, is not only short term, but I think it's worth noting that in this context, we invest for growth and efficiency for the future. So to look at the 2026 outlook, I want to give you a global view of how we see 2026 year, which, of course, as Pascal has already explained, does have to absorb calendar tax increase of a significant level. So our target is definitely to increase our gross gaming revenue, again, despite this level of tax. I think Pascal has been quite specific in terms of level and calendar. But again, you have to remember that for France, lottery and network sports betting, the calendar of the tax introduced in July 2025 is expected to be close to EUR 30 million. And it is close to EUR 60 million for OBG as a whole, given the taxes in different countries, including, of course, France, Romania, United Kingdom and the Netherlands. So by business unit, GGR growth is expected to be higher for OBG than for the French lottery and network sports betting BU. However, given the level of tax increase that we got on OBG, revenue growth for the 2 BUs should be fairly comparable. And also, I want to underline that given the timing of tax increase and the high basis comparison in the first half of 2025, the expected growth in GGR and revenue will be more pronounced in the second half of the year, where we will benefit from, again, having absorbed part of the taxes that have been announced earlier. So this will translate considering the ramp-up of our performance plan that Pascal has been described into a stable EBITDA margin, both at group level and for the 2 business units. We aim for stability, again, to compensate the adverse headwinds, but also to continue to invest to generate growth in our market. And for the future, this is why we have set ourselves this aim of stability of the EBITDA margin. This stability will put us in, of course, the right condition to continue to fulfill our promise in terms of dividend distribution, which is to increase year-on-year our dividend based on a payout ratio of more than 75% of adjusted net income, and we are completely confident in our capacity to fulfill this promise over the years to come. So looking beyond at the medium-term guidance, you remember that we presented our medium-term outlook in our Capital Market Day. However, at this time, we didn't -- we could not include the bad news that we received on the new taxes for U.K. and Romania, which are not decided and not known at this time. So in that context, we now expect to gradually accelerate our revenue growth over the period to reach the 5%, which is our medium-term ambition in 2028. Our other medium-term projection remain unchanged with a current EBITDA margin of over 26% in 2028, a conversion rate of current EBITDA to cash of over 80% as we showed this year, a CapEx level stable between 4% and 5% of revenue. And therefore, again, on this basis, capacity to fulfill our promise of annual dividend increase. I want also to mention that to achieve this, you have understood that we have major milestones that we have been working already this year and will continue to work over the next years, which is, of course, a performance plan on which we were able to continue to increase our perspective for recurrent efficiencies and of course, the building of our technology assets, particularly through proprietary sports betting platform that we will -- we aim to roll by the end of 2027. So to conclude before letting ask questions, of course, I want to reiterate our confidence, our trust and our commitment to fulfill our medium-term ambition on the basis of what we have already achieved today. Thank you very much. We are ready for your questions. Hugo Paternoster: Hugo Paternoster from Kepler Cheuvreux. I will have 3 questions. The first one is on the tax impact and the EUR 90 million you mentioned for 2026. I understand this is not an annualized amount since U.K. will start to be implemented in midyear. Just wanted to have if you can have a breakdown by jurisdiction, potentially to isolate the U.K. one, what could remain to be expected for 2027? The second question is on your tech stack implementation. Just wonder what remains to be done by jurisdiction, by brand, especially ahead of the World Cup? And also in terms of IT cost services, what should we expect for this year? And the last one is on the M&A. I know you have a kind of a road map there. Your leverage is already below your target. So technically, you could already do some bolt-on. Just wanted to have an update on the bolt-on and potentially also an update on the U.S. I know that you have some view there for the lottery. Stephane Pallez: So maybe, Pascal, you can start with the tax. And maybe tech stack or as you want. Pascal Chaffard: Okay. I do both. On the tax impact, yes, to help you, the impact related to U.K. is around EUR 30 million in 2026. It will raise over EUR 40 million in 2027 as it will begin in the 1st of April. So there is an annual effect in 2027. And the tax will be raised in 2026 on the gaming, casino online part, and it will be raised in 2027 on the sports betting side. Happily in the U.K., our split between -- happily or not between the sports betting and online gaming -- online casino is 80%, 85% casino and 15-plus percent on sports betting. And in 2026, you will have also the annualization of the impact of the Romanian tax for an amount of something like EUR 8 million. And the rest is related to the annualization, the calendar effect of the impact of French tax that has been, I think, quite heavily commented in detail. Does it answer your question on the tax part? Tech stack. So I think it's interesting to -- yes, to draw all the picture. We have already a PAM that is internalized and live in all our jurisdictions. The remaining efforts to do and the PAM is player account management. It's very important because it is where you implement the KYC of the clients, you implement the CRM, you implement all the compliance and responsible measures to monitor the spend of the player. So it's a key asset that is already live everywhere. The only element that has to remain to be done is to move France on the Kindred PAM on the PAM that is running in the rest of the jurisdictions. This is the only remaining thing that we have. It's not urgent to do it. We will do it in the coming years. No problem. Second point, I will end by sports betting. Second point, on poker, we already have our full internalized tech stack with the poker of Relax. And when we will move in France all the activity under the Unibet brand by the end of March, we will also move the provider that we have on poker to Relax. So we will have in France full Relax, so internalized poker stack as on all the other jurisdictions. Then on casino. Casino is more than 50% of the global revenue of the OBG BU, and we have internalized the tech stack in the casino side. I do one precision that is very important. On the casino, what is important is to be able to connect thousands of games. Part of those games are totally internal, developed by Relax and part of those games are both from international actors like everyone is done -- is doing. It means that we have never envisaged to internalize thousands of games directly developed internally. It will be completely a nonsense. So what is important in casino is the ability to connect to an enormous portfolio of games, and this is what we have already done and the capacity to have specific games that are 100% ours to differentiate more from competitors. Last part is sports betting. Sports betting, we have currently a little bit less than 60% of our revenue that is totally internalized in France. In France, we are totally internalized with a platform that is internal and at a good level. And in the rest of the jurisdiction, we have implemented KSP in Romania, in the U.K., both brands, 32Red and Unibet and also in Estonia. The rest of the remaining countries to be moved to the internalized platform is mainly Netherlands, Denmark, Sweden, Belgium and Australia, but it's very, very small. Okay. So this answers your question. Stephane Pallez: Okay. So M&A, as you rightly underlined, we are deleveraging at, I would say, a reasonable pace, and we are below 2. And so we will continue to deleverage at a reasonable pace, which gives us, obviously, financial capacity to do M&A. So I think the question for M&A is more an operational question on the -- particularly on the OBG side connected to what Pascal has just described, which is are there opportunities and capacity to do small M&A in the context of the tech migration that we want to pursue and complete in the best condition. So it is not our priority. Again, it's not a significant priority for OBG. I think we will continue to look at in a pragmatic way to what could be done if it's, again, consistent with our tech migration because we definitely want to continue to complete in the medium term our scope, but we would prefer, again, this year to concentrate -- to continue to concentrate on the tech stack migration even if it's already well advanced. And of course, there is no intention of doing anything during World Cup that's for sure. So M&A, I think, is more a question, as I said, M&A or tenders or investment is more a question related to lottery, international lottery business. We are already active in looking at opportunities also in, I would say, in a realistic way. And at this point, with small initiatives in terms of investment, which is probably what you referred to in the U.S. In the U.S., we believe we have opportunity to be present in the online lottery development, which is as we know, not as mature as the French or European market. So we have been competing in partnering with other actors in tenders or renewal of license that do include this online lottery development in which we consider to have good track record and experience. Apart from that, if I may, the U.S. market we're not at all in the sports betting U.S. market. And in a way, we are happy not to be because we see that this market is already quite, I would say, questioned about potential disruption from other type of activities. So we're not concerned by that. This is a positive. Okay. Other questions? So if no, if it's clear. Thank you very much. Pascal Chaffard: Thank you. Stephane Pallez: So we'll stop at this point. And of course, we'll be happy and ready to answer further questions if you have some. Thank you very much. Bye-bye.
Matthew Hooper: Good morning, everyone, and welcome to today's Q4 2025 results conference call. [Operator Instructions] My name is Matthew Hooper, and I will be your host today. Joining me here on the call are our CEO, Jorgen Madsen Lindemann; and our CFO, Johan Johansson. Welcome, gentlemen. As usual, our presentation will be followed by a Q&A session, and you can find our results materials, including a presentation deck and detailed fact sheet on the Investor Relations section of our website. We will not follow the slides, but the presentation deck and fact sheet do provide useful information for you. Please be advised that today's conference is being recorded. [Operator Instructions]. I will now hand the call over to Jorgen to walk you through the Q4 results. So over to you, Jorgen. Jorgen Lindemann: Thank you, Matthew, and good morning, everyone. So Q4 was another important quarter for us as we made further progress in our strategic transformation. We have met or exceeded the targets that we set out for the pro forma combined results of Viaplay and the Allente Group for the full year. We completed the acquisition of the remaining 50% of Allente Group in mid-November. This is a company that we know well as an owner, partner and operator. Back in July last year, we announced that we would buy the remaining 50% of Allente for SEK 1.1 billion. Allente then paid out SEK 500 million of dividends to Telenor and SEK 500 million to us. So we ended up paying SEK 600 million to Telenor in Q4 to complete the 100% consolidation. We are now in the process of integrating the business, and we expect full run rate cash synergies of SEK 300 million to SEK 400 million from 2027, which will further support our transformational journey, our profitability and cash flows. We have reconfirmed our intention to deliver double-digit EBITDA margins in '28 compared to the 5.3% that was delivered for '25 on a pro forma basis. This still requires a lot of work in collaboration with partners to agree mutual beneficial B2B distribution terms and prolonged content agreements on commercial market terms. We have already negotiated and extended a number of our agreements with content partners and with B2B distribution partners that include Viaplay and our TV channels in their customer offerings. As mentioned, we continue to work with our partners to rethink these relationships so that they work well for both parties moving forward. On the content side, which represent 80% of our OpEx, we have received great and important support from our key partners in order to drive our transformation and to build our future continued partnerships. We have prolonged agreements where we have been able to agree mutually beneficial commercial terms. And in some instances, we have exited or replaced the legacy agreements where this has not been possible. The work we have done with our content partners to enhance our product offering resulted in 2% organic growth for our streaming business. Our D2C subscriber base has continued to grow quarter-on-quarter, driven by our premium sports offerings, while our B2B base has remained largely stable quarter-on-quarter as we continue to prioritize value over volume. ARPU levels were up for both our D2C and B2B basis, again, reflecting the growing share of our premium sports offering. Our Q4 programming slate was more attractive and relevant than ever with English Premier League Football, Formula 1 Motor Racing, Darts and Winter Sport continue to drive viewer engagement. Our content cooperation in Norway with TV2 has resulted in growth for our price package. Thanks to the support from our partners and with the existing contract -- and within the existing contract terms, we have also now just become the first broadcaster in the world to show all 552 games from the English Football League Championship each year, and we are further extending our coverage of Formula 1 races weekends and Winter Sports in 2026. On the non-sports side, local storytelling has combined with international formats and new releases to support not only Viaplay, but also our free TV channels, which have grown their audience shares in each market in '25 versus 2024. The latest series of local versions of proven relative formats such as Paradise Hotel, Expedition Robinson have again led the way together with Crime Thursday and [ Efterlyst ] and Svenska fall in Sweden; [indiscernible] in Norway and popular acquired TV franchise shows across our markets. The work we have done to transform our advertising business also paid off in Q4. Our digital advertising sales were up 38% as we continue to push both our HVOD and AVOD products. Linear advertising markets remain under pressure, and we are working hard to maintain our market shares. Total advertising sales were stable year-on-year in Q4. We increased our listening share in our Norwegian radio business and we were broadly flat in our Swedish radio business. We have just been awarded a prolongation of our national radio license in Sweden from 2026 for 8 years, which is the same license as we have today. The sales of our linear channels to telcos and other distributors were up slightly, and this reflects the investments that we continue to make in these products as well as the renegotiation of legacy agreements that I mentioned earlier. We have either prolonged these agreements on improved commercial terms or we have exited and replaced them where that is not possible. The 37% decline in our sublicensing and other sales is the major reason that our total sales were down 2% on an organic basis in Q4. We have referred before to the exceptional high sublicensing sales that we had last year when we made a number of one-off scripted content sales and sublicensing deals in Q4. This year's sales are at more normalized level, and we have been consistent quarter-on-quarter this year. Looking forward into 2026, we have today guided for a stable group sales when excluding currency effects with accelerated growth in streaming sales expected to offset the continued decline in Allente's DTH sales. Our profits in Q4 were impacted by the consolidations of Allente's profit for half of the quarter and by adverse currency effects. On an underlying basis, when excluding these effects, our profit would have been slightly down year-on-year and reflect the closing down of the noncore businesses last summer. We reduced the OpEx for our core operations by 2% before currency effects, which was in line with the 2% organic sales decline for our core operations. We have today guided for between SEK 1 billion to SEK 1.4 billion of EBITDA in 2026. The range reflects a number of moving parts, including some synergies from Allente Group integration, which we expect to be full run rate from 2027. We will provide more information about this once integration is finalized. To conclude then, we have delivered the guidance for 2025, and we are now a group with almost SEK 22 billion of annual sales and over SEK 1 billion of EBITDA. Our products are stronger than ever with more relevant content than ever, and we are consistently working to enhance, exit or replace the legacy agreements and partnerships while maintaining as lean an SG&A cost base as possible. We are totally focused on relevance and resilience with commercial partnership and competitive products so that we can secure our position and future. There's still much to do -- for us to do to deliver the double-digit EBITDA margins in '28 that we're aiming for, and we are clear about what needs to happen for that objective to be achieved. That is it for my comments, and I will now hand over to Johan for his comments on our financial performance and position before we take your questions. Johan Johansson: Thank you, Jorgen, and good morning, everyone. Our guidance metrics for 2025 were based on the full year pro forma performance of the group as if Allente Group had been consolidated 100% from 1st of January 2025. Jorgen has been through the achievements of our core sales and our core EBITDA metrics, and we have closed down the remaining noncore operations last summer. A few words on the Q4 numbers specifically. Our reported sales of [ SEK 4.978 billion ] included SEK 578 million of Allente Group sales, net of internal eliminations following the acquisition of the remaining 50% of Allente Group in mid-November. And our reported EBIT before associated company income and IAC of SEK 158 million included SEK 31 million from Allente Group. The Viaplay sales to Allente as a key distribution partner have been eliminated in the sales line, as you can see from the segmental results from our core operations, and there is no elimination on the EBIT line. The noncore operations had no sale and no EBIT in the quarter compared to SEK 198 million of sales and negative SEK 36 million of EBIT in Q4 2024. Currencies continue to affect us as a stronger Swedish krona had a negative impact on the around SEK 133 million on the translation of our core sales in other currencies into our SEK reported currency. Reported core operation costs, however, benefited from a net positive FX tailwind. The total FX impact on the core EBIT was negative by approximately SEK 40 million, which was in line with our previous expectations for the full year FX headwind on the core EBIT of SEK 100 million to SEK 150 million, where we came in at approximately SEK 125 million for the full year. When looking at the organic cost development, when excluding Allente and FX, we achieved savings in almost all categories, apart from some key legacy contracts where we have built in inflation and a substantial reduction in scripted content sales also resulted in a reduction in associated costs. The SEK 642 million of items affecting comparability in the Q4 primarily comprised noncash write-down of legacy nonsport content as well as transaction costs related to the Allente acquisition. Net financial items totaled minus SEK 281 million and included SEK 121 million of accelerated interest payment and written off prepaid borrowing costs related to the renegotiation of our banking agreements and the cancellation of the guaranteed facility. A further minus SEK 6 million related to net lease liabilities. Other financial items totaled minus SEK 57 million and included a minus SEK 20 million of costs related to the renegotiation as well as facility fees and FX impact on revaluation. Moving on to cash flow. We also met a third of the full year pro forma guidance metrics, which relates to the group rather than to the core operations. We reported SEK 804 million of pro forma adjusted operating free cash flow when compared to the guidance range of SEK 500 million to SEK 750. This metric excludes acquisition costs, interest, dividends and extraordinary one-off working capital effects. The SEK 804 million included a positive adjusted free cash flow of SEK 1.169 billion for the core operations and the SEK 365 million drag from the noncore operations due to the content contracts that are yet to expire. The SEK 365 million cash drag was lower than the SEK 500 million that we previously expected and is a function of timing where we have managed to defer some of the payments into 2028. Our Q4 reported cash flow from operations primarily reflected the SEK 1.533 billion negative change in working capital, which included a previously flagged an extraordinary SEK 2.5 billion negative working capital effect as well as a positive change in the timing of payments when compared to 2024. Excluding this SEK 2.5 billion one-off effect, the Q4 changes in working capital would have been positive. We also received SEK 300 million of cash dividends from Allente Group prior to the acquisition on top of the SEK 200 million that we received in Q3, which are included in the cash flow from operations. Cash flow from investing activities primarily reflected the Allente acquisition, while the cash flow from financing activities primarily reflected the refinancing as well as the drawings on the RCF. When looking forward into 2026, it's worth noting that we expect the core operations working capital swings to be less volatile between quarters due to a range of new commercial agreements with partners. The anticipated noncore operations cash drag for 2026 has not changed from the SEK 500 million figure that we provided before. CapEx will be at or about the same level for the combined group, which was approximately SEK 150 million in 2025 on a pro forma basis. Cash tax payments will benefit from the carryforward tax losses that we have and our annual cash interest costs are now running at approximately SEK 450 million. This is only a slight increase in our total cash financing costs when compared to the cost before Allente deal. The SEK 300 million to SEK 400 million of full annual run rate cash synergies that Jorgen mentioned in relation to the integration of Allente will be at full run rate from 2027. We are now in the process of integrating the business and expect the cash cost of that integration to be between SEK 270 million and SEK 330 million, which will be reported as an IAC during 2026, with the majority coming in Q1 and Q2. In connection with the Allente Group transaction, we refinanced the balance sheet in order to improve our debt structure and to reflect the fact that we are now a group with over SEK 1 billion annual EBITDA. This effectively involve securing a new SEK 1.726 billion term loan to replace the debt that Allente brought to the table, canceling the SEK 7.1 billion guarantee facility, establishing the new SEK 2.5 billion working capital facility and reducing the size of the RCF from SEK 3.392 billion to SEK 2.817 billion. The [ SEK 1.58 ] billion of bonds and notes is unchanged. We already amortized SEK 100 million on the SEK 1.726 billion loan in Q4. So our total long-term indebtedness, excluding the RCF, is now at SEK 6 billion. We will make further repayments of SEK 420 million on this loan in both 2026 and 2027 and all the rest of our debt facilities mature in 2028. Our financial net debt when excluding leases amounted to SEK 5.246 billion at the end of the quarter and comprised SEK 6.422 billion of debt and SEK 1.132 billion of cash. SEK 500 million on the RCF was drawn at the end of the quarter. The effective doubling of the EBITDA margin between now and 2028 required a lot of work and collaboration with our partners to prolong legacy agreements and partnerships on commercial market terms or find alternatives. The strengthening of this profitability profile and the ending of the cash drag from the noncore operations in 2028 will enable us to gradually delever the balance sheet. Execution and efficiency remain our key focus area. We have clear objectives, so must continue to deliver on sales growth and cost reduction initiatives, must constantly improve our working capital efficiency and must allocate capital with discipline and clear return on investment requirements. We have made a lot of progress, and there is still much to do. That concludes my remarks. So now back to you, Matthew. Matthew Hooper: [Operator Instructions] So if we take the first question from the message board. This question comes from Emil at MediaWatch. And it's one for you, Johan, I think, which is, can you please explain why the group's net debt has risen from SEK 1.1 billion in 2024 to SEK 5.2 billion in 2025? Johan Johansson: So I think as we have said, a part of the Allente transaction, we have refinanced the balance sheet, which included this reshape of the capital structure with these components that we have talked about. And it is a combination of all those items that I mentioned just in my note there. Matthew Hooper: Yes. So remember, Emil, that we had the refinancing, which we announced in conjunction with Allente. There are a number of factors there, including the new working capital facility, the old guarantee facility went away. So there's a lot of reshaping that's gone on there, but it's all been laid out. So it should be fairly straightforward to understand, hopefully. There's another question from Emil, probably one for you, Jorgen, which is how much do you expect content cost to increase in 2026 due to the multiyear legacy agreements? Jorgen Lindemann: Yes, we have not been specific on the amount. But clearly, we have some new contracts kicking in, and we do see inflation in those contracts, but we are not specific around the amount. Matthew Hooper: Yes. And I think as Johan mentioned, I mean, we've had cost savings in this period in Q4 related to almost all categories and including SG&A as well, not just the content costs. So hopefully, that shows you a direction of travel and what we're doing on the majority of the cost items. Another one from Emil again, Jorgen, for you. Do you expect a continued net loss of Viaplay subscribers in the core markets in 2026? Jorgen Lindemann: Yes. So far, as you can see, the Viaplay subscribers, we have now grown quarter-on-quarter. And that is something clearly we would like to continue to do. So we have strong traction right now on the products. And as you have seen as well, our sports -- particularly our sports high ARPU sports portfolio has grown quite significantly. So the aim is, of course, to continue to get more customers on board. So that is the focus. Matthew Hooper: Okay. And just the final question from Emil now is how important will price increases be for meeting the guidance for 2026? Jorgen Lindemann: Yes, but it is a combination of more customers, as we said, and also clearly also price increases where we find that we can increase prices. So we are still competitive or adjust prices, so we are competitive. So that is clearly a part of the way to get to the guidance. Matthew Hooper: Okay. [Operator Instructions] So we'll continue with the message board for now. And a question from Alex at SB1 Markets. You reiterate the ambition of a double-digit core EBITDA margin by 2028. What are the 2 to 3 biggest quantified levers to get you there? And you suggested some for us, pricing ARPU, content cost optimization, OpEx, tech efficiencies, Allente synergies. And then the second half of the question is what annual milestones should we track in '26 to '27 to show the direction of travel? Jorgen Lindemann: Yes. But I think it is clearly that we want to grow our D2C and also grow our B2B streaming business. I think that is quite important. And also that growth, of course, should flow straight down to the bottom line. Clearly, the improvement, as we talked about as well in different content agreement or distribution agreement, Johan mentioned as well or Matthew right now as well, the savings, the more being fit for purpose and then also the synergies from Allente Group integration as well. So those is, of course, what should bring us in the end to the double-digit margin in -- as we have set out as an ambition in '28. Matthew Hooper: Okay. And then a follow-up from Alex. Q4 had extraordinary -- actually one for you, Johan. Q4 had extraordinary working capital effects. What should we assume for normalized working capital seasonality for the combined group in '26? And are there really any structural changes here post Allente plus any anticipated full year working capital headwind or tailwind? Johan Johansson: Yes. So as I mentioned, I think we -- in 2025, we had this extraordinary working capital effect of SEK 2.5 billion. And then we have also had a positive effect from improved commercial agreements and that effects 2025. So when we go into 2026, we will have less volatility between the quarters on the working capital. And it will be more stable if you look during the year. We will have a few hundred million buildup during the year. But there's many moving parts in this, and we need to come back to it and give more updates on that during the course of the year. Matthew Hooper: Yes. So overall, less lumpy. Johan Johansson: Overall, less lumpy during the year. Matthew Hooper: Yes. Then we have a question from Kristoffer from Kepler Cheuvreux. On Viaplay streaming, you have previously indicated low to mid-single-digit annual growth in '26 and beyond. Can you explain how you see the balance between subscriber intake and price adjustments? One for you, Jorgen? Jorgen Lindemann: We have not been specific on that. But as I said earlier as well, it is a combination of mix of the products clearly, and we are increasing prices or making sure that we are competitive on pricing where we need, at the same time, making sure that we also are getting customers in by being competitive. So we have not been specific on the 2 specific levers there, which what each of them will drive. But it is a combination as we see today, where higher ARPU products and increased subs that is driving the growth as we see right now. Matthew Hooper: Okay. And a follow-up from Kristoffer, which I think is one for you, Johan. You previously said we should expect gradual free cash flow growth from the '25 level. Is that still the case? Or will it look different in 2026? Johan Johansson: I mean the gradual increase is still our long-term ambition. But please remember that it depends on the EBITDA outcome as well. But the pro forma 2025 of SEK 804 million had this positive underlying effect. And then we will also, as I mentioned, have -- I mean, 2025 included a benefit of the lower noncore cash drag, which in '26 expected to be around SEK 500 million at this point. But remember as well that we have the integration cost and restructuring costs within this year. Matthew Hooper: Okay. And then from Kristoffer one of you, Jorgen, on HVOD and your crackdown on password sharing, could you update us on your progress and the benefits that you've seen so far? Jorgen Lindemann: Yes. They have, in all fairness, been quite significant, particularly in both areas actually. So the account sharing has clearly benefited our sales and also the fact that we ask people to play fair. And if you're buying one subscription, that is actually not shared with everybody. So that has helped in all fairness as well. Same goes for the HVOD, which has proven to be a very good customer acquisition tool as well. We're looking at it right now, we're looking at whatever, 15% to 20% of the base as it is right now is actually coming from HVOD as well. So it is a tool which gives us opportunity to get a very strong product in the market at a good price and at the same time, also capitalize on digital advertising. So that has worked well for us. Matthew Hooper: And I think along the same vein, [indiscernible] Media is asking, how large of sums do you estimate that you have lost to piracy in 2025? And what are you doing to change that trend? Jorgen Lindemann: Yes. That is, of course, the biggest issue for all of us in all fairness. And in all fairness, we're looking at it right now, it looks like it's just continued to increase the piracy as well. There's a range of things that we are doing amongst others dynamic blocking with Sweden's 4 largest ISPs now targeting focused illegal IPTV services. So there's a range of measures, which we're doing right now. There's legislation of as well in the government, which prevents -- should prevent and make it a serious crime to be a pirate as well. So that is a range of measures that we're doing and something clearly we will continue to fight. I think -- if you read some statistics, I think it is -- some statistics suggest that it has increased, as I said earlier, around [ 16% ] from last year, and we should eventually see now around 1.3 million households being private in the Nordics, which is quite significant to be fair. So we are losing a lot there and something clearly everybody, which we are doing also with our partners here, our colleagues in different media companies, but also the government do need to act on this. Matthew Hooper: Going back to Kristoffer from Kepler Cheuvreux. It's a question for you, Johan. I believe you indicated 2% OpEx reduction in '25. What further steps can you take to continue reducing the OpEx base? Johan Johansson: I think it comes back to Jorgen said as well, I think we are working across our sort of cost base to optimize. And I think now with the integration of Allente, we also have these things that we are doing to optimize the setup we have, which we need to come back to and on the effect, which is why I think we have -- as we have guided for now with the run rate synergies from 2027. So -- but it is a range of things that we are doing on the cost base. Matthew Hooper: Okay. I'll come back to you in a minute, Johan, with a question on specifying the rise in net debt level, just so we've clarified that for someone who's asked the question. But before we get to that, Kyle from Arctic has asked, Jorgen, is there anything you can mention on the competitive environment of sports renewals in the Nordics? Jorgen Lindemann: I don't know specifically what that could be. Clearly, we have succeeded in prolonging the agreements that we wanted to prolong and they are strong like the skiing we have prolonged, like the Formula 1 we have prolonged. So those 2 are very important product for us as well. In Netherlands, it's important as well. We have prolonged the Darts as well. So -- and that has been done in close partnership and close collaboration with the partners and understanding how we can utilize and how we can get more out of the product, and they have been super helpful in all fairness to open up a range of new opportunities for us in connection to these prolongations. And also like the skiing, we have much more content than we used to have. And as I said earlier, now with the British -- with the football with the championship in the U.K., we've now got 550 matches that we can show within the same contractual framework that we have today. So a lot of support from the partners. So we have been lucky that we have managed to continue our partnership with the key rights owners that we work with. I think that is as much as I can talk about the competitive environment. Matthew Hooper: Okay. Thanks, Jorgen. [Operator Instructions] So back to you, Johan, just to specify the increase in net debt, please, for Daniel>. Johan Johansson: As a reminder, I think we -- at the time of recapitalization in 2024, we had about SEK 15 billion package, which included on and off GSA and RCF facilities. And now the financing package is much smaller. Based on that, we have closed down the GSA and then taken up the loan for acquiring Allente as well as this new working capital facility. Matthew Hooper: And so net debt at the end of the year stood at... Johan Johansson: The net debt at year-end stood at SEK 5.5 billion. Matthew Hooper: Alex, from SB1 has asked a very detailed question on the cost of each of the various facilities we have. And I think rather than going to that in detail, we have given you an indication of what we expect the financing costs to be during 2026, which is around the SEK 450 million level. And we've said clearly that, that doesn't make much of a change versus what we had in '25, where you need to remember that it's not just the interest cost, but it was also the cost for the guaranteed facility that we had previously. So those 2 things are more or less the same despite the fact that we've taken on SEK 1.7 billion of debt for the -- what was effectively Allente's debt. So financial costs moving into '26, to be very clear should be around the sort of SEK 450 million level. But Alex, if you have any follow-ups, just please let me know. Jorgen, there's a question from 2 people here really on the sports sublicensing side and whether we have anything more that we'd want to do there? And if we could explain a little bit more what the difficult comp was in Q4 '24 that led to a reduction in Q4 '25 versus that period. So what was it that was sublicensed then that caused the comp? Jorgen Lindemann: Yes. I think when it comes to the sublicense part, it is -- it comes in many shapes and forms to be fair. So it might be so that we find it beneficial to sublicense content in order eventually to get new content in where we find new content, which can enhance our position. So not necessarily incremental cost because you sublicense something, get cash for that and then subsequently buy something else. So that is one element. The other element is, of course, that we have a lot, and we have also too much to be fair. So it is really a treat for customers in all fairness, and we would like to offload some more content clearly to the right partners. But also we will never do it in a way which will harm our commercial proposition. That is also important to understand. We have good partners who we have sublicensed with, and it is very good relationships that we're having there in all fairness, long-term relationships as well. So that is something we will continue to do. So either we will sublicense or we will then sublicense from others or license from others as well that can also be the case. There was some special events in Q4 last year, some sports sublicense we did which we didn't do in Q4 '25. I think that is as concrete as I want to mention that. But there were some events which didn't come into Q4 '25. Matthew Hooper: Okay. And then we have a question from Kristoffer, Kepler, regarding Allente sales. And his question is Allente sales declined faster in 2025 than in previous years. Could you help us understand why and what you can do to improve this trend moving forward into '26, '27 and '28? Jorgen Lindemann: Yes, I can talk a little bit about the product. So clearly, what we want to do with Allente is, of course, to enhance the product. That is quite important. And also, we have great marketing opportunities as well through our channels as well to promote all the fantastic offering that Allente offers on the DTH business as well. We have just launched 2 movie channels as well in Allente and more will come. So the partnership with Allente and the content offering now that we can exploit our content so much broader also on Allente definitely should benefit as well. And that is a key focus we're having to preserve these very valuable DTH customers for us and nurse them in a much greater way than it has been done historically. And specifically on the revenue, if there's anything? Johan Johansson: No, I think it's -- as you say, Jorgen, it is about working with the customer base -- serving the customers with a good product offering that is fit for purpose, with a fit for purpose price and work on the churn reduction measures. Jorgen Lindemann: And we do also envisage to create new products clearly as well. That is part of the strategy as well. There are definitely things we can do or will do also with some of the Allente offerings that they are having today, which fit very well into the current Viaplay offering. You don't forget that we used to run Viaplay, we used to run a DTH platform. And there, we had a range of partnerships and a range of very strong product offerings to the market, which benefited us also to the customers. So that is, of course, something now. Again, we will look into. Matthew Hooper: Yes. And just to remind you again, the synergies that we've indicated are cost synergies, the cash cost synergies. We haven't included here at this time any sales synergies, but clearly putting together 2 groups like this will lead to opportunities for us. On the cash synergies, cost synergies, Johan, we've indicated SEK 300 million to SEK 400 million there. Kristoffer has asked if we could walk him through the main sources of those synergies. So where does that come from primarily? Johan Johansson: Yes. I think when combining these type of businesses, there are clearly overlapping functions that we work with to sort of to operate in an efficient way going forward. And as Jorgen said, we know how we run this kind of business before. So we're setting it up fit for purpose. But primarily, it's a combination of the workforces where we have significant functional duplications, but also technology, marketing and other costs. Matthew Hooper: I shift the focus now to advertising. Jorgen, it's a question from [ Kyle ] at Arctic. Can you go a little deeper into the ad market environment expectations for 2026 and remind us of the digital versus traditional split? And given digital is growing so quickly, what does that imply in terms of the rate of decline that you're seeing in the traditional ad markets at the moment? Jorgen Lindemann: Yes. I don't think that those will be linked to be fair. I think that it's just the fact that digital per se is growing quite rapidly as it is right now, and that is independent and linear is growing in all fairness. Linear is very much related to pod level. People using television is decreasing. So that is why the linear TV advertising is also decreasing. So it's difficult to predict clearly. Even we have been surprised sometimes on the market development. But I think if you look at the different bodies, then it should suggest that overall in the Nordics, you would see a decline of around whatever, 10% as it looks right now in '26. At the same time, then you should also see a digital ad market going up by 11%. That is what at least is forecasted. It's a little bit difficult to be specific also because the Norwegian market is actually a combination and doesn't split out linear advertising and digital advertising, but a combination. And that combination is set to grow inclusive radio up around 2.5% in '26. But again, you want to beat those market guidance. Clearly, that is what we would like to do. And -- but that is to give you a rough idea on what the market has forecasted. And I reckon if you ask me, each of the media agencies, they will probably also have different forecasts. So there is no signs. Matthew Hooper: Yes. And again, remembering the 38% growth number that we gave, which is clearly a strong number for the digital... Jorgen Lindemann: Yes. We are growing faster than market, and that is due to a strong effort from the team to be fair, innovating as well on new products. The HVOD has clearly helped us a lot and a lot of other talking to partners as well, to all our distribution partners where we also have digital ad insertion in their offerings as well. We want to have new measurement systems, which we're working on as well to make sure that we can properly articulate the currency, the digital currency that we are selling and so forth. So there's a lot still to be done, but we have done a good job and the team has done a good job last year to be. Matthew Hooper: And is there anything you want to say on the percentage of the advertising revenues that comes from digital today? Jorgen Lindemann: Yes, it is not larger, unfortunately, than the linear, not yet. So we haven't given that split to be fair. But... Matthew Hooper: It's still a minority, but it's growing fast. [Operator Instructions] But going back to the message board again, we had one question, which is more of a general long-term question from [ Magnus Sjoberg ], who's asking, when we see positive results and we begin to see a buffer of SEK 1 billion to SEK 2 billion over time, will you then be looking at buying back shares or paying off the debt? Or what are your priorities at the point at which you have cash available to do those type of things? How do you think about that? Jorgen Lindemann: I think we have been through a 2-year transformation right now, to be fair. So that is something -- and now as we have said as well, we have guided for a range of SEK 1 billion to SEK 1.4 billion EBITDA for the coming year and strong high figure when it comes to revenue. So that is where we are right now, and that is what we want to deliver on. And I reckon the Board at that point in time, we start to look a bit further what they want to do. But that is not something that I have discussed here short term. Matthew Hooper: One more prompt for anyone who wants to ask questions in the conference call. I believe we've now reached the end of the questions that we have in the message board. Hopefully, it goes without saying if you have any follow-ups, please feel free to contact me, and we can come back to you promptly on those. But I think overall, that concludes the question-and-answer session today. Thank you very much for your time and your questions and your participation. We really appreciate your interest and always welcome your feedback on both the format and content of the materials and this session. We're available for follow-up meetings, so please don't hesitate to reach out to me if you would like to schedule a meeting or you have any further questions. But that's it for today. So thank you again, and goodbye.
Operator: Good day, and thank you for standing by. Welcome to the Goodman Group FY '26 Half Year Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions] Joining us today is CFO, Mr. Nick Vrondas. I would now like to hand the conference over to your speaker today, CEO, Greg Goodman. Gregory Goodman: Thank you very much, and good morning, everybody. Goodman Group has delivered operating profit of $1.2 billion for the first half of FY '26 as we continue to provide essential infrastructure in supply-constrained markets around the world. We're building into strong demand for city locations across both logistics and data centers. Large scale logistics customers are targeting productivity and efficiency gains through increased automation and consolidation. And data center customers require low-latency, high connectivity, which they are committing to with unprecedented levels of CapEx spending forecast across the sector. Goodman is set to benefit from these structural shifts given the quality and location of our sites, our power capacity and our track record of developing complex infrastructure. Power, sites and capital are critical to being able to build into demand and provide delivery certainty for our customers. Our power bank has grown from 5 to 6 gigawatts on sites we own across 16 global cities. The increase is primarily in Australia and Continental Europe. And importantly, we've been advancing planning and preconstruction works on sites around the world to provide speed to market. In the quarter, we commenced 90 megawatts fully fitted project in Sydney and we're on track to have data center projects, providing around 500 megawatts underway by June, taking work in progress to approximately $18 billion. We're also partnering with large investors to fund multiyear development programs. We established a $14 billion data center development partnership in Europe and $2 billion logistics partnership in the U.S. with one on the way in Australia. This is consistent with the capital partnering approach we've taken for over 30 years. Our engagement with data center customers is progressing well across multiple sites, with negotiations well underway to provide a range of deployment options. We expect commitments in 2026 as we commence construction on sites and others get closer to their ready-for-service dates. Enquiry and activity across several logistics markets is also increasing, and we expect this to translate into development activity over the next 12 months. I'll pass on to Nick for a few comments. Nick Vrondas: Thank you, Greg. Let's turn to Slide 18 to run through the numbers in the usual way. We'll first cover the items that relate to our cash-back measure of earnings, which we define as operating profit. As usual, this excludes unrealized fair market value movements on properties, mark-to-market of hedges and the accounting fair value estimate relating to our employee long-term incentive plan. These are the items at the bottom of the table that get us to the statutory profit. Our operating profit for the half of $1.2 billion was a little higher than we had expected when we spoke to you at the September quarterly. We had early timing of development and performance income recognition in the half, which were not expected until the full year. As you analyze these results, please keep in mind that FX movements had a $33 million negative impact on the translation of our foreign-denominated operating income before interest compared to the prior period. This was offset with a commensurate benefit in our borrowing costs. This is the result of realized costs on our debt and derivatives, which is how our hedging strategy is designed. I'll call out the impacts on the line items as we go. Looking specifically now at the movement in investment earnings. These are up by $54 million overall, and that's after a $5 million adverse FX impact. Direct property net rental income was $59 million higher. This was due mostly to the increase in assets held directly on the balance sheet following the reorganization of our investments in the Americas. If you go back to June 2024, we had $1.4 billion of directly owned assets. It got to $5.1 billion by June 2025 with the December '24 reorganization of our U.S. investments. It subsequently reduced to just over $4 billion with the creation of a new industrial JV in North America. So this was a $3 billion increase in the weighted average capital employed in this segment when comparing the 2 periods. The bulk of our investment income, which comes through our co-investments in the partnerships was down $5 million, mainly due to FX. The partnership reorganization and the other capital movements reduced investment income by $10 million, which was nearly totally offset by the $9 million contribution from the like-for-like income growth. Again, if we go back to June 2024, we had $13.7 billion of current investments. This reduced to $13 billion at December '24 following the North American reorganization. It then grew back to $14.7 billion at December '25, mainly due to the creation of the new partnerships. Overall, it's a reduction in weighted average capital employed of around $0.5 billion compared to December 2024 half year. Over time, we want to grow this part of the business as we continue to expand our portfolio of assets under management and our investment in it. The creation of new partnerships and the ongoing growth of the existing ones should support this. The portfolio remains 12% under-rented, and we see this continuing to support NPI growth going forward. There is scope for a significant portion of the directly owned assets to create new partnering opportunities over time. This will reduce our direct investments and NPI, but increase our co-investment income in partnership from partnerships and our management income. At the same time, it will provide cash to fund our expansion. Management income was $137 million lower than the prior corresponding half. Of that, a $5 million FX -- adverse FX impact was the main driver -- but the main driver was the recognition of transactional and performance-based revenues. Following the exceptionally strong prior corresponding period, they were down $160 million to $79 million. We encourage you to look at the annual averages as a proportion of stabilized third-party AUM. Our total portfolio stood at $87.4 billion at the end of December. Of this, $75 billion was in external assets under management. And of that, stabilized third-party AUM averaged $69 billion in the period. That's up over $4 billion from the prior corresponding half year. As a result, base management income was $26 million higher on a constant currency basis. Total fee revenue for the period as a percentage of average stabilized third-party AUM was just over 0.9% this half, which is broadly in line with our expected average over the long term. In terms of the outlook for this segment, we expect our third-party stabilized AUM to grow over time as we complete more developments and make new acquisitions net of divestments and the value of the portfolio grows. Our realized development earnings for the half year were down $36 million on the pcp. FX rates had a $26 million adverse impact. So aside from that, the result was largely in line with the prior period. Several things are moving around, but we're managing activity to maintain our profit and return targets. On the one hand, development volumes have been lower. The average annualized production rate was around $6.3 billion this half compared to $6.6 billion in the pcp. At the same time, a larger portion of activity has been initiated directly on the group's balance sheet. That means a greater portion of the development gains can be reflected in our operating results rather than a share of revaluation gains. Yields on costs on the new projects are also increasing. This is commensurate with the longer-dated periods to stabilization of data centers. Moving forward, we'll be progressing more data center developments and are now on what should be an upward trend in activity levels. These projects will, on average, be in WIP longer than our historic projects, so the impact on production rate will not be linear, but should still be positive. The pause we took also means that there is a resynchronization happening that is resulting in a lower volume of completions in the short term. All other things equal, this should correct over time. Given the increased project duration and the leasing time frames, we also expect higher-than-average margins to compensate. At the same time, we expect to continue to originate a significant volume of work on the group's balance sheet. So we'll have the opportunity to crystallize a greater portion of the gains in operating profit. The expected yield on cost in our WIP has increased to over 8%, which is now more than 70% data centers. These estimates are based on our current expectation of commencing data center projects on a fully fitted basis. These projects are largely uncommitted from a lease perspective. So the expected yields are forward projections based on the fit-out funding and commensurate lease type. The current level of pre-leasing is reflective of the stage we are at in the data center expansion and the long lead times to completion. It also reflects the group's desire to optimize the timing of contracting with prospective customers. We are compensating for this by retaining low financial leverage. We did, however, have $2.5 billion of developments completed this half, 87% of which are already leased. Demand from logistics users for quality buildings in strong locations is also picking up, which we expect to start to contribute to growth in WIP in the future years. The diversion to data centers as a better use of our sites is, however, occupying a greater portion of our opportunity set now and expect it to continue to do so in the near future. So over the course of the full year, rising activity level is expected to result in an increase in income from this segment on a sequential half-over-half basis. We remain enthusiastic about the prospects for development demand overall, which bodes well for future revenue as well as growth in AUM. There's been a moderate increase in our underlying operating expenses but that was offset by a higher capitalization due to the rising activity levels on balance sheet. Capitalized costs are part of the cost basis of the assets when we calculate our operating profit. There was also a slight FX benefit. Net interest income increased by $63 million compared to the pcp. Gross interest paid on our loans was $14 million higher due to rising interest rates and the impact of the refinancing of our bonds, which resulted in a slightly higher WACD than the pcp. There were, however, a range of other items that more than offset this. There was a $33 million benefit on the FX hedge to earnings that I mentioned earlier. We also earned $48 million more interest on the cash and derivatives due to the higher interest rates and cash holdings. Our directly owned development assets have increased, so capitalized interest is up by $31 million. The cost of borrowings on our loans is currently around 4%. But considering our interest rate and currency hedges, the net WACD is around 1%. As far as the nonoperating items are concerned, we had over $250 million of unrealized valuation gains in the half, which represents the group's share of around $900 million of gains across the entire portfolio at the 100% share. That's before the $335 million deduction for the now realized prior period valuation gains. We treated these the same way as previous periods, so I don't propose to repeat that methodology here because I think everyone's across it by now. So after the deduction for the prior period gains, and accrued costs, the net result is a deduction from profits of $112 million, which is what you see in the table that reconciles to OPAT. The weighted average cap rate is currently 5.03% on the stabilized assets in the portfolio, and we are very comfortable with that. Another customary area of difference between operating and statutory profit is the fair value movement of hedges. The currency strength in December gave rise to a $150 million increase in the value of our FX hedges but you can see a $325 million decrease in the FCTR. More than offsetting this was a decline in the value of our interest rate hedges, which came about because we have a large volume of fixed receiver swaps to partly fix the income on cash deposits and FX hedges. That's why we end up with a net loss of $48 million in the reconciling table. As usual, we exclude the LTIP accounting costs, but we include the tested units in the denominator when calculating our operating EPS. That's when they actually impact on securityholders. A few remarks now regarding the balance sheet on Slide 19. Wholly owned stabilized assets have decreased since June 2025 for the reasons discussed earlier. On the other hand, even after accounting for the debt funding portion of the acquisitions by the partnerships, our share of the stabilized assets within them were up on a constant currency basis. Compared to June, our development holdings are up from $5.6 billion to $6.5 billion, which represents our share of the developments in partnerships as well as the wholly owned properties. This is consistent with the higher capital intensity of the new projects as well as the higher portion originated on the balance sheet. The directly owned portion was up by around $100 million to $4.2 billion. This was a result of $200 million of net investment, partly offset by the FX translation. This incorporates the impact of the movement of some of the European data center properties from the group to the new development JV but also demonstrates the amount of investment we're undertaking on the balance sheet. The share of development capital in partnerships was up by $1.4 billion to -- from $1.4 billion, sorry, to $2.2 billion, which was largely influenced by the European DC development JV formation. This is progressing as expected at the time we raised equity last year. Our aim continues to be to initiate more projects to give us an opportunity to have meaningful discussions with both customers and investors alike. We aim to continue to bring partners into the developments at the appropriate time to manage risk, capital and returns. Just looking at the other major movements now. Overall, we generated around $1.2 billion of cash-backed earnings through our operations this half. Nearly $600 million of this is reported through the statutory operating cash flow statement, which is up by around $200 million from the pcp. As usual, however, the statutory statement of operating cash flow includes outflows associated with the expenditures on development inventories. A portion of these of our earnings also arise from transactions that are included in the investing cash flow for statutory reporting purposes. That's either because they are in our investment property under development and not in inventory or they were sold from within our partnerships. This is not unusual for us either. So the combined effect of these development activities accounts for over $200 million of the difference between operating cash flow and operating profit. There's always a difference between the timing of distributions and fees received and income or expenses recognized in the partnerships, and that was around $100 million this half. Capitalized costs and other working capital movements created another $100 million difference. And the usual impact of the incentive payments was $200 million. Over the full year, timing difference can be smoothed out but the issue of the investment back into the business is symptomatic of a growing enterprise. The classification of certain transactions in investing cash flows is also a source of permanent differences. Our retained earnings are designed to contribute to funding such investments, which is consistent with the design of our long-term capital management plans and the distribution policy. That's a good point. Turn to Slide 20. Gearing is 4.1%, which is slightly lower than it was in June, and we have $5.2 billion of liquidity, including cash and undrawn lines. That's after we funded acquisitions and CapEx, and we repaid EUR 300 million on the maturity of one of our corporate bonds. As we said before, we'll operate our gearing within a range of 0% to 25% with the level to be set with reference to the mix of earnings and activity. We're very comfortable with where we stand at this time. In fact, we have capacity to increase gearing and remain within the bounds of our FRM policy objectives. This is consistent with the strategy we laid out a year ago, with the aim to build out more data centers and fund the growth whilst maintaining a strong balance sheet. As we continue to partner with investors, it will enable us to recycle capital to bring forward development capacity more rapidly. Over time, we expect to hover around the midpoint of the gearing range once we get further into the data center construction activity. That's all for me. Thanks, Greg. Gregory Goodman: Thanks, Nick. Demand for digital infrastructure in our markets is expected to materially exceed supply over the foreseeable future. Goodman has a significant opportunity to develop into this demand. given our metropolitan sites in the supply-constrained markets, our power bank and our very strong capital position. The scale and location of our powered land bank is rare. Construction-ready powered sites take many years to acquire plan, secure power, undertake infrastructure works and ultimately deliver. We're putting the infrastructure in place to carry out our program over the next 10 years. Also on the logistics side, we're moving forward with larger deployments for customers as they consolidate and invest in robotics and automation to enhance their productivity. The remainder of FY '26 will see us growing work in progress, supported by Goodman's strong balance sheet and our capital partners and the right structures and opportunities to actively rotate our capital. And in closing, now I'd like to confirm our target to deliver operating EPS growth of 9% for FY '26. Thank you, and Nick and I can now take some questions. Operator: [Operator Instructions] And our first question comes from Lauren Berry with Morgan Stanley. Simon Chan: It's actually Simon Channy. I used dial-in code. First question is just for a bit of housekeeping. At the half year, I think, Vrondas, you alluded to this, I think you were thinking about a 40-60 split of EPS for this year. In your prepared remarks, you talked about how you just got some early timing of development performance income in the first half. Does that mean the 40-60 split is out the window now? Or should we still assume a 40-60 split notwithstanding the $1.2 billion you delivered in the first half? Nick Vrondas: So Channy, so the full year target is still the same number but some has come forward. So yes, 40-60 is now not 40-60, but the end target is unchanged. I hope that's clear. Simon Chan: Yes. Okay. That's good. How much of that early recognition or early timing was to do with the establishment of the European JV? Or has -- or will all the profit for European JV come through in the second half? Nick Vrondas: Look, it's a little bit because we had some fee revenue that we would have earned from the beginning. So there was a little bit of catch-up with the closing of part of the transaction, but it hasn't all come through yet. But remember, I mean, that was all in the guidance. We discussed that in August or maybe in September, I can't remember. So yes, there was a little bit of that, but there were other items as well. Simon Chan: Yes, fair enough. Can you guys walk me through your program of works now going forward? So I guess, 3 parts of my question. One, how much of that 497 megawatts on Slide 14 is actually WIP at the moment and how much of it isn't? And then going forward, say, over the next 12, 18 months, should we expect potentially more establishment of data center development JVs as you activate more of pipeline? Or is it, no, no, we've got the partnerships we need, put the queue back in the rack and it's just more about building? Like how should we think about your program of works? Gregory Goodman: Yes. First one is easy one, around 370 Yes, that's in WIP. Simon Chan: 370 of the 497? Gregory Goodman: Yes, that's about $10 billion of $14.4 billion. It goes to about $18 billion in June. And so there's a pickup in regard to, obviously, about another 100 or so coming in. And that's primarily around the starts in Europe. But we've activated about [ 1.82 megawatts ] of 1,926 megawatts in total, so you've activated those sites. So there's another 1,332 megawatts on that slide. which is important to note because that's obviously the pipeline that will be coming through in other years as we start these other programs. Yes, exactly. So we're going to $18 billion in June, and that's not being heroic on industrial. And on the industrial side, first time I've seen billion-dollar buildings, and we'll be doing some big industrial projects all around automation and robotics. And we're talking 100,000 meters plus sort of buildings with very, very extensive robotics and operations inside them, which is then a consolidation of a number of sites into single sites, and that's happening pretty well in all locations around the world. So don't underestimate as well the industrial pickup. And I think that's running at about $4 billion of work in progress at the moment out of the $14 billion. That could be a surprise on the upside as we go into late '26 into '27. Now the second question, which I've -- could you just repeat that? Simon Chan: Program of works. You've done a lot of partnerships already, Japan, Europe, you reckon you'll get Australia done. But is that it? Or as you roll out the rest of your pipeline, you will be seeking to establish one of these new partnerships every 18 months, et cetera. Is that how we should think about? Gregory Goodman: Yes, we're good. We're good at the moment. And moving forward, there will be long-term holding structures rather than development partnerships. There'll be transfers. Work in progress will go into assets under management, I think, as Nick was talking about. So if you sort of think there's $20 billion of work in progress running through to the end of the year, a lot of that as keepers for us because of the locational quality of it. Those over time we'll roll into longer-term holding partnerships and things like that. So yes, it's been the same, Nick reminded me the other day for 30 years. I had 20, but he reminded me of my age. And we'll effectively be continuing the same thing we've done and making sure though we've got the capital and the strength of the balance sheet around the world because one thing you need when you're developing the size and scale of what we're doing globally, you need a lot of money, right? So we're very conscious of that. We went ahead of it. We want to stay ahead of it. We will stay ahead of it. And that is one of our competitive advantages, particularly in the data center sector, where Goodman has been and is very good at partnering capital around the world and the biggest capital partners in the world. That is extremely important for our program and our strategy over the next 5 to 10 years. And I wouldn't underestimate that, and it's going to get harder, not easier for people. Simon Chan: My last question is just on our customers. You got any got any update for us on that one. I guess the reason for the question is it's actually more question to add. Have you guys taken a view internally on AI. You're talking to a lot of customers but then I guess you also know that some AI proponents may be more successful than others. And I guess the quality of the counterparty is very important given you're in the long-duration asset class. So what I guess what's your view on AI internally? Gregory Goodman: Look, the first point is the big customer negotiations and the big volume sites, it's all hyperscalers, right? So I think that's made that very, very clear. And yes, we're adopting the AI products that are relevant to our business. It's going to drive productivity. And this is a 10-year year game, and it's changing the world. And that's just a fact, right? Now whether it all goes in a linear fashion, and it grows at the same rate. I think that's all very, very debatable. But it's a revolution and an evolution all around the world, and we're all adopting it, some has different paces, but yes, we're adopting it. Operator: Our next question comes from Cody Shield with UBS. Cody Shield: Maybe just to expand on one of Channy's questions here around the partnerships. So if you're set, just with respect to Vernon, how are you thinking about that asset and an approach that you'll take there? Gregory Goodman: I'll talk about that a bit later. We are pretty deep in discussions about that at the moment. So we'll leave that for a couple of months. Cody Shield: Okay, sure. Maybe just turning to the Australian DC partnership. Would this only include assets currently in development? Or would you looking to have a combination of existing developments and other sites with approvals and power and so on? Gregory Goodman: The one we're doing at the moment is Tyman, which is already started. Cody Shield: Okay. Sure. And it would just be Tyman, it wouldn't be any of the other thoughts around Sydney? Gregory Goodman: No. Look, we're dealing with partnerships on reality. So if you sort of map what we did in Europe, we spent a number of years getting all the sites ready. We brought in a partner as we were going vertical, right? So there's no delay in regard to starting them. We're starting them. We bring in the capital. We're ready to start. So we're not waiting 6 months and saying maybe what if. Capital comes in, we're starting and then the clock is ticking on the return. Yes, so short enough, do it. Same approach for the customer. It's being built. We're now in discussion with the customers because we can give them a delivery date of '28 or whatever the day might be for the first data hall. That's the way we're running it. Cody Shield: Okay. Great. That's clear. Maybe just a last one on -- sounding like Tokyo, one of those multibuilding campuses, how would something like that progress? I mean I imagine once you do the preparatory work the second and third building come along a bit quicker than the first. Is that right? Like what would the time line of something like that look like? Gregory Goodman: We'll wait and see, but we're right into our big gig site up there at the moment. It is great side, not a lot of power in Tokyo. This is the biggest one in Tokyo and yes, good demand. Operator: Our next question comes from Mithun Rathakrishnan with CLSA. James Druce: Yes. Greg, you might have James Druce here. And can we -- just on the 0.5 gigawatts that were sort of starting before June, can we just talk to the construction contracts? They've all been locked down now. Have they -- what's the remaining to do there? Gregory Goodman: What's remaining to do there? Well, yes, there's a lot of contracts. You're talking billions and billions of dollars. Some have been locked down, some have been started, and some are just in the final pieces of negotiation, right? So no, we've got contractors. We're down to signing contracts and moving on with the prices locked in. James Druce: Okay. And is there -- I mean the data center industry is going to be more complex in terms of development. How do we think about the right time now to actually bring in a tenant? Is it as fast as possible? Or do you want to kind of get all your ducks lined up, get all the MEP equipment done? Or how do you think about sort of the right timing for that? Gregory Goodman: Yes. Look, it's iterative. It's different on different sites depending on the demand signals. So you play a site maybe in Amsterdam differently than you'll play a site in the U.S. where there might be more supply. So it depends on where you are, right? But you need to be building to a design where you've got flexibility. You need to be building to a design, you can build into the demand so you can shorten up the delivery period. So if people are placing orders for '28, you've got to be able to deliver in '28. If you want to deliver in '29, well, you better wait 12 months and then you're probably taking a deal in '29. So build into it, get your essential infrastructure out of the way, make sure you got your buildings coming out around the slabs and sticks are going up effectively and you're building to a design or a program, which is flexible. Now on some sites right now, as we're starting to build, we are having the negotiations, and we are actually designing it to those customers. And there's some AI inferencing in some of these now where you've got waterloops and then you've also got air. So we're sticking to it right now, but it will depend on where you are and what you're doing in the different countries and the demand signals. So there's no one shoe fits all feet. Some feet are bigger than others. James Druce: Can we just talk to -- I mean on Slide 15, it shows the Japan partnership there for the 1 gigawatt. I mean we sort of known the thing there. But I mean, how does that kind of roll out in terms of fundraising for GJCP. And how much of that is actually covered today? Gregory Goodman: Look, it goes building by building. We've got approvals for our first phases. We're doing from the partnership, the partnership then we'll have assets. Those assets as they're stabilized, we'll be in more of a stabilized Goodman partnership. And that's exactly what we've been doing in Chiba, same MO, right? So look for the same approach. In Japan, we've been doing this for a while. I think the team there is very good at this, and we've been doing -- I think we're just finishing our fourth data center in Chiba right at the moment, quite frankly. They are all '50s and rolls off quickly, but 50s are big, right? Just to be clear. Operator: Our next question comes from Adam Calvetti with Bank of America. Adam Calvetti: Greg and team, I mean is there a timing into the 5 additional ones that you're going to be commencing in the second half? I mean what type of fully fitted data center are there? You've got 3 types, whether it's run by the customer, yourself or an operating partner. Where are these ones going to land? Gregory Goodman: Most of them are fully fitted to a mechanical, electrical and plumbing, the MEP program, that's primarily it. But we'll be operating some. A lot will be self-operated by hyperscalers. And there might be a colo where we may be doing a joint venture as well. So yes, there's going to -- we'll hit all those boxes, I think. Then there's some shells that are probably popping in the second half, we don't have on the page, where we're going to deliver some shells to some hyperscalers as well. So you're going to see the whole topography across the board. And it's really important to emphasize that I think we have been doing for a while, but I'll just reemphasize it again today, our competitive advantage at Goodman is around the infrastructure, right? We don't desire to operate everything in the world, and we won't be. There's a number of hyperscalers that want to operate their own facilities, and we're very happy about that. We want to build them world-class infrastructure that then fits for us for a long-term investment, which is also we've got to be very clear. We're building to own and bring investors in. So we need something at the end of the day that actually is saleable and investable, right? So white elephants, that's not what we're about. And I think you might find that's a discipline that Goodman brings to the long-term ownership that may be very critical as we move forward over the next 10 years with so much capital required for the sector around the world and the rotation of capital, you can only rotate it if you got something investable at the end. So a big discipline on that. Adam Calvetti: Okay. That's very clear. And then, I mean, the power banks increased about 1 gigawatts split between Australia and Europe. Can you just comment maybe on how you're seeing demand in those 2 markets and returns? Gregory Goodman: Returns in Europe are very good. They're in line, I think, with what Nick is talking about. And Europe is short of infrastructure in those major markets we're in. So we're building into a very, very strong demand market. But the discipline around building them and getting the buildings up in the air, we are very well equipped because we've got a very, very good development team around infrastructure in Europe. And where you're going to get caught or stuck is getting out of the ground, right? Once you get out of the ground and you got your orders in for all your equipment, it's then a program and we're very good at running programs. We're very good at building basically complex pieces of infrastructure, and we'll be building multistory buildings around the world for highly automated buildings, big customers of 120,000, 130,000, 150,000 meters, right? We've got disciplines internally at Goodman around building these things, which is world-class, and that is one of our competitive advantages. Adam Calvetti: Greg, maybe just to focus in on Australia with 0.6 gigawatts of increase there. I mean I've been hearing that hyperscaler rents in Melbourne have stagnated. How are you seeing the Australian market? Gregory Goodman: All right. Look, I think let's just see what's real and what's not firstly. There's a lot of promises but let's look at the deliveries. So we're focused now, for example, in Melbourne on '28 deliveries, right? So let's work that through. And I think you'll find there's good demand in Australia, but we're going to be sensible about how big that demand is relative to the U.S., which is 70% plus of the global market, right? So we're building into places like Japan, we're building into places like Europe, where there's big demand signals and we'll -- we've got some great sites in Sydney, Western Sydney, Melbourne effectively and North Sydney. So we're in the best locations. And let's just see where we end up. Yes, because we're playing globally, we've got a lot of options and optionality to push U.S. a little harder, Europe a little harder, back off in some other markets if we think there's a supply issue. But even in Australia, honestly, the infrastructure and the timing is still difficult. And it is difficult everywhere in the world at the moment. Operator: Our next question comes from Ben Brayshaw with Barrenjoey. Benjamin Brayshaw: Could you just talk about Stage 1 in respect to 2 things, please, when you expect the project to reach practical completion and be able to generate income. And secondly, the strategy for the leasing, is the intent to lease all of the capacity to one hyperscaler. Would you expect it to be multi-tenanted as in 2 or 3 or more tenants? Gregory Goodman: Yes. Good question. 2028, we'll be delivering the first power available. And I suspect being a 5-story building, very complex, it will be multi-tenanted. That's my view. But that's not to say we don't have demand for whole buildings over a series of time or a series of years. Bear in mind Macquarie Park is becoming difficult. Most developments on the North Shore are either not occurring or delayed, right? So to have something coming out of the ground, which we do now, we're having serious conversations, but we're very happy to manage and operate it over multi-floors, but we're also happy to do a whole building deal depending on the economics and the deal we do. Benjamin Brayshaw: And perhaps it's a question for Nick. Could you provide some color on how many sites have been sold down into the European partnership to deliver the forecast revenue for the vehicle? And how many are remaining on the balance sheet to be transferred? And will that transaction happen in the second half? Or will it be phased over time? Nick Vrondas: Yes. So the ones that have gone in already were the Frankfurt and Amsterdam properties. And the 2 Paris properties will go in, in this half. So that's all that's contracted at this stage. Benjamin Brayshaw: And just finally, in relation to Stage 1, the site, has the ownership transferred to the balance sheet from out of the partnership? And will the establishment of it has -- would the establishment of a partnership to potentially give rise to a trading profit or an uplift on the carrying value when that is settled? Gregory Goodman: I don't think we're commenting on that, but yes, it has transferred and partners will come into the 50%, I suspect that Google, I think, is the plan and partners will come in to the other 50%. But yes, I don't think we'll make any comments on uplifts or anything like that. Nick Vrondas: No. I mean it's not that big either. It won't be much of a needle mover. Operator: Our next question comes from Richard Jones with JPMorgan. Richard Jones: Just following up on Ben's question. Is it fair to assume that the bulk of the land value uplift in Europe across, frankly, Amsterdam has been booked and the 2 Paris project uplift will come in the second half, Nick? Nick Vrondas: Look, we're not commenting specifically, but yes, generally, that is a fair estimate, yes. Richard Jones: And Greg, just interested in your comments about automation and robotics and industrial projects. Are you looking at funding that for the tenant as well? Gregory Goodman: No. No. I think the same approach as we've taken with a lot of the big sheds we've taken. But once you go gate-to-gate, the $1 billion investments but the buildings and the land and where it's sitting, we would be in $600 million, $700 million, and then there is the fit-out components that might be anywhere between $100 million to $500 million in, it's all going robotics. Warehouses in Slide 5, you won't have anyone in them effectively. And some of our big customers are already planning on that, right? So when they pull the trigger on full robotics, warehouses, probably not today, but they've got the technology now to do it, and that's the way it's heading. Most of our big warehouses, we need 6, 7, 8 megawatts of power. So that's the same power discipline using the data centers actually we're using also and have been using around big industrial buildings. So when I talk about essential infrastructure and the ability to get these things powered up and plan them, the discipline around both actually is very, very linear and very parallel and that's why Goodman as an operator of the sand and development in the sector, there's some big competitive advantages we've got around infrastructure because we've been doing that infrastructure for many, many, many years. So I think we're in a really, really good spot to do both and effectively don't underestimate, as I said before, some of the work in progress on industrial because they are getting bigger. And there are 6 buildings going into 1, and that is going to drive productivity and will drive costs out of business over the long term, and they are big customers with big budgets. Richard Jones: And can you clarify what the returns look like on those big industrial projects? Gregory Goodman: Yes, they're good. So you look at our averages, I think we're throwing out between anywhere between 7s and 9s, it's in there somewhere. Richard Jones: I have one more. A quick one, one more quick one for Nick. Just what would be the capital commitment from a CapEx perspective you'd anticipate for the balance sheet in the second half? Nick Vrondas: I don't have that number at my fingertips. And about $0.5 billion, I think, is broadly where I think it's at but that's based on the kind of current projects. That's excluding sort of any acquisition -- new acquisitions or anything that hasn't been sort of identified yet. That's just what's in the pipeline. Operator: Our next question comes from Callum Bramah with Macquarie. Callum Bramah: Apologies if I've missed it somewhere in the announcement, et cetera. But I just wondered, as I understood it, the 2 near-term completions for the data centers with LAX01 and then Hong Kong, I just wanted to know about the customer commitments on those. And if you could give us an update on progress and when we should expect that to be completed? Gregory Goodman: LAX01 is not on completions, yes. And what else do we have in completions? It's just popping in this month. Nick Vrondas: It's mainly industrial items in the completion. So none of the data centers ones were in the completion. Gregory Goodman: The next one to complete is in Chiba, which will be shortly. Callum Bramah: Apologies, I might have asked clearly, but just in relation to the data center projects, when are you expecting to get a customer commitment for L.A. and so I think, was it Hong Kong 9? Are the 2 that are kind of nearer term in completions that are going out? Gregory Goodman: The Hong Kong, 2 months. Yes. So Texaco, we're going fully fitted, so it's going to be a while away yet. That's the plan. And the other one in Hong Kong is already committed. In regard to LAX, we're in discussions at the moment. Bear in mind, we have our first power bank available sort of running towards the end of this year. So we're in good shape on that one. And our view on that, that's a multi-customer building and a full operational building, right? So that will fill up over a period of time as we deliver the program on that one. But look, there'll be more about that in the next month or 2. Callum Bramah: Okay. And that's on track for powered shell completions still in June? Gregory Goodman: No. We're going to actually have our first data already by -- before the end of the year, right? So we're building full mechanical, electrical and plumbing outcome there. Nick Vrondas: The shell -- I think you got to distinguish between the shell and the fit-out. So yes, on the shell, but we're moving them through to the fit-out of the MEP and having progressive available ready for service for the data halls, which will happen, as Greg said, progressively from the second half. Callum Bramah: And I think maybe based on prior conversations, there was an expectation of maybe getting customer commitments 12 to 18 months in advance. Is there a change in that because of the market dynamic or a strategy or a tactical play for Goodman? Are you able to just give us a bit of color about timing on those customer commitments? Gregory Goodman: Yes, yes. It is topography, right? So the LAX01 is going to be multi-customer. You're talking anywhere between probably 1 meg to 10 meg. So we're talking to a customer at the moment that's the higher number. They might take the first bid to power. We got -- it's an operating asset. So that's very different to doing 100 megawatts or 200 in a different location where the customer will want to go earlier. The one in LAX is ready for service and you're leasing it as you go. Time is going to be very, very similar to that as an operating asset will lease it as we go. And there will be some other assets that are going to be effectively pre-committed. We might be starting some earthworks, there might be some transformers and things like that. But there's some big ones we're actually working on at the moment, which are effectively we're designing for those customers. Even though we might have started a few of the earthworks and getting it ready yes. So you'll see both of those types of deals being done, depending on where they are and what they are. Callum Bramah: And if I can just push my luck with one more. Just in relation to the Paris assets going in, which based, I think, on your earlier comments, Nick have yet to go in. Can you just clarify the drivers of the timing of when they go in and maybe what your current expectations are? Nick Vrondas: Yes. So you might recall there were CPs that related to local municipalities in the main that was the main reason the municipalities have pre-emptive rights. And so there's just a regulatory notice period, Q&A, so they can understand the basis of the terms, and then they notify you. So on one of them, we have subsequently been notified. And so the settlement of that, the process for the settlement of the first one has -- is about to be initiated so that will close within the next month. And then the second one is very, very close behind. So yes, expect well and truly before the end of June to have closed those 2. Callum Bramah: And is that across the entire project site or just the first data center, if you like, of the campus? Nick Vrondas: No, the whole thing. Operator: Our next question comes from Tom Bodor with Jarden. Tom Bodor: Just picking up from one of the comments you made about Callum's question, where you do have multi-tenanted facilities such as L.A.? What do you assume for a time frame to stabilization post completion? And where do you see stabilization from an occupancy perspective? Gregory Goodman: Something like that, you could knock that off in a couple of years effectively on the -- as you build it through. So there will be another 12 months in building out the MEP and during that time, I expect you've got most of it done and then there might be the tail at the end. But yes, over a couple of year period would be more than enough time unless you let it to one customer, of course, and then it will take a pragmatic approach to it and take maybe floor by floor over a period of time as they require it. Tom Bodor: So when you pick PC, what's your sort of broader working assumption for these multi-tenant facilities in terms of occupancy and what time frame post-PC do you sort of say it getting to fully let? Gregory Goodman: Look, I think within 12 months, you'd be you'd be aiming for, but you're going to get -- you're delivering the floor by floor, right? So I think LAX01, we got 6 meg, I think 6 megs available. Shortly, right, so we can deliver that and then just move through it in a pragmatic way. So you're spending capital as you go. It's not all spent at that point and you keep spending it on the way through as you need to do that. Tom Bodor: Yes. That's clear. Just a final one for me. There's obviously a huge amount of capital required to develop these facilities as you've highlighted. So a long away, but how do you think about pricing and capital demand for core data centers? Do you think there will be an ultimate takeout at the end? Or do you think a lot of your partners just want to develop the core and sit into the partnerships long term? Gregory Goodman: They're all approaching it differently depending on their view returns, development returns are obviously a lot higher. So there'll be partners that want to click the development returns and move through. Then there's the whole scenario whether a platform value is more -- is worth more than the sum of the parts, which I've got a bit of a view on, which I won't share here, but I think you'll find that, that's starting to play out as well at the moment. So there's a number of different combinations. We're super focused on making sure we've got something at the end that people want to be in, and it's going to have a good growth profile, and it's a good piece of infrastructure investment. And that's why you won't see us owning and holding assets in faraway locations. We're going to be bull's-eye. I think they call it eyeballs, some of the eyeball locations, some of our U.S. friends effectively. So we want to be where we've got flexibility around the buildings, great locations, low latency type facilities that we think over the next 10 years are going to be the best for residual value and for terminal value. Operator: Our next question comes from [ Claire McHugh with Green Street ]. Unknown Analyst: So just to ask more big picture, given this is a 10-year and beyond story, as you strategize internally regarding, say, music stops or a true bear-case scenario, it's everyone's paradox type events, et cetera, how are you positioning the brownfield data center pipeline? Like what would be the next best alternative use for the land? And how does that profitability profile compare? Gregory Goodman: Yes. The good question. The sites are in industrial sites. So for example, we're in planning in Melbourne, Western Sydney, they're industrial sites at industrial loan values. So if, for example, demand wasn't strong enough, we'd flip it around and build a good to oil shed that might be in demand. So we do have flexibility. We're not over our skis in paying big, big prices to land around the world for data centers and there's no options. We do have optionality around everything we're doing because in the main, the 6 gigawatts of sites and to be clear, we're working on double that as a global portfolio, but the 6 we put on the page, which is in secured and advanced, we own it. And where we have bought it, in the last 12 months, we bought the land and then we've grabbed the power cable, right? So we're not lifting the cost basis on these things to the point where we don't have an alternative use in the main. So that's the off ramp. The other off ramp is, to be quite frank, is capital and that's called equity. The amount of leverage that's being raised around the world is all good until you can't get it. So we're making sure we've just got a lot of equity, what we're doing sensible. We're doing it with some of the biggest partners in the world and we can build through for customers even if the debt climates and things change. What our big customers want to know is that can you build it, can you deliver it and can do it in a way where we're going to get a high-quality product and there's not a financial issue on the way through? Now we've all been around or certainly here a fairly long time, and we know things change. We know capital markets change. We know debt markets change, right? So we're building something that's sustainable, resilient and we can deliver for our customers and we can deliver over a long period of time. So yes, be very pragmatic, sensible about what we do. But what we can do, we can do it in volume, and we can do it globally and that is tremendously attractive to our customers. Unknown Analyst: That's helpful. I would have thought resi might be in there on some of them, but yes, I appreciate industrial's bread and butter. Just another one on the economics of the European partnership. So I appreciate there's a stage path to recognizing development profit and profit share. But just focusing on the land uplift that would have been achieved, is it still fair to think about data center land values at around sort of the $4 million a megawatt of critical IT capacity or sort of that 3x to 4x comparable industrial land based on this deal. Are you seeing values edge higher given the depth of demand? Gregory Goodman: Generally speaking, I won't talk about the land values on this deal because I think people try and run comparatives. And quite frankly, we've looked at a lot of land deals and they're at a certain price, but they actually don't have power even though they do have power. So I think it's the big, big differential so I'd be very careful about quoting land rates and things that have been selling, very different if it's shovel-ready and you can go vertical with your slab and your sticks and you can go up as opposed to something that might be right and it's a very, very, very big difference. But I've got to say generally, power infrastructure is costing more money. It is taking more time and. Affectively, you could expect that the cost of these things is going up, not down. And that applies to land as well. So the infrastructure, the basic infrastructure around the grids around the world is it's getting limit long in many, many places. So everything is costing more money around the infrastructure. And the other point is if you look at the demand that's required globally, I don't think we've got enough production. We don't have enough infrastructure to even supply that ambition. And I think that is a concern that's been voiced by a number of big customers around the world or proponents of AI platforms. But very hard to compare land values because they're all at very, very different stage of readiness, put it that way. Unknown Analyst: Yes, no worries. So this was more around land value of power, ready-to-build land. And it just really stems from, obviously, when we're underwriting the value of Goodman, a lot of the value stems in the value creation from the data center pipeline, which where there's land value, which is transactional, but also intrinsic value or platform value. So I'm just trying to sense check how we're evaluating the value of the land. Gregory Goodman: Yes, I understand. So we're not going to help you too much today, sorry. Operator: Our next question comes from David Grace with Evidentia Group. David Grace: Greg, you've got work in progress of $14.4 billion heading for $18 billion. Current yield on cost of 8.1% and just interested where you see yield on cost trend into as you continue to add long-duration projects to the pipeline? Gregory Goodman: Yes. Look, it moves up effectively. So I think it will be depending on how much industrial we do because that will be a little lower. But you can see it moving up from that 8.1%. I think the -- just on the commencements, I think that was through 9%. So yes, a little move up over time depending on that mix. But look, it's healthy. So I go back to the growth here on cost is one thing. The quality of what you're doing is another thing, right? And we are very conscious of the quality and the location because the billions and billions and billions you require and 6 gigawatts, so then ends up at $140 billion of end value on the sort of mix we're doing at the moment. You need a lot of money, right? So you need to be building stuff that you can partner and own that is a good investment. So our eyes on making sure that we have a residual value. We have a terminal value, we have an investment value that is going to hold up over time. So that means you need good sites, resilience, flexibility, all those things above, so you build some -- you build a piece of infrastructure that's not a 5 years run and done. David Grace: Yes. So can I imply from that then that the $18 billion WIP should actually increase just given the nature of the long duration of these projects? Gregory Goodman: Yes. Look, it will -- look, I don't think it's any surprise if it's $18 billion in June with the duration of the projects that it goes higher, it's going to go through $20 billion. I think that's how far through that will depend on how successful we are in regard to -- around the customer side a bit, I think. So we'd regulate it and monitor it but we've got to make sure and we have -- we've got the capital so think we can work through it. We're dealing with some of the biggest companies in the world, all the biggest companies in the world, not some off. So we've got to make sure that we've got sustainability, we've got resilience, we've got capital, and we can deliver over long-term time frames, multiple countries, multiple languages, but you're dealing with the same customers. So yes, it's going to be pretty interesting. Operator: Our next question comes from Andrew MacFarlane with Bell Potter. Andrew MacFarlane: Just a quick one for me. Just interested in terms of turnkeys and power shell, just how you're thinking about it, one versus the other? And I guess whether there's been any change as you've progressed through data centers in time? And I guess the second leg of that would be kind of what you're seeing in the little rate wise and yield on costs is that factoring in thinking of what product are you doing? Gregory Goodman: Yes. Look, down this part of the world running up Asia Pac, just as a general comment. The customers are wanting a data center ready facilities. So that leads us into the MEP build outs and what have you. And pretty well most of the discussions, if not all, in Asia Pac around fit-outs. We're having the same conversation in the Hong Kong at the moment where we're doing a shell that will go through to a full build out. Japan is the same. And down in Australia will be the same. Europe because hyperscalers are doing less of their own builds. So they expect in Europe full build-out program. So everything we're looking at in Europe is a full build-out with MEP and delivering floor by floor effectively. So that's that. The U.S. is different because you've got a lot bigger build-out programs of the hyperscalers. It's the major -- majority of the market globally. And you'll see us with big shell programs but you'll also see us with operating buildings like the program we have in L.A., that's 150-meg gate-to-gate program, maybe up to 200-meg effectively that you'll see those potentially being all operating buildings because of that location and what we're doing. So you'll see more shells in the U.S. plus some operating. Europe will be very much operating MEP type facilities and down Australia, we'll be filling the buildings up with mechanical and electrical facilities for the customers. A lot of it's going to be heavy on infrastructure, yes. Andrew MacFarlane: And sorry, Greg, are you seeing any change to hurdle rates or yield on cost returns? Gregory Goodman: No. But we're very -- like I said, we're very disciplined in understanding that you don't survive in this industry unless you can deliver a good product for investors long term. You can't rotate your capital unless you do that. And then the Goodman investors for putting out the capital at Goodman Group needed to return on their capital. So unless you get that all right, the machine stops. So I think you can be fairly assured we're doing it with the appropriate margins to make sure that machine keeps on going. Otherwise, we don't have a rotation of capital and Goodman Group shareholders don't get a fair return. Nick Vrondas: Andy, though, I mean, you would expect that if you're just looking at yield on cost on mark-to-market value of land, you would expect that something that's fully fitted would have to -- you'd have to compensate with a higher yield than something that's core shell. If you mark-to-market the value of the land like-for-like, theoretically, that is what you should expect, if that's the nature of your question. Operator: Thank you. I would now like to turn the call back over to Greg Goodman for any closing remarks. Gregory Goodman: Thank you very much, and good morning. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Magnus Grenfeldt: Good morning, and welcome to Oslo and Hotel Continental, a fairly calm Oslo, clearly affected by winter break and the fact that Norwegians ski this week. Welcome to you in the room who are not skiing and also welcome to all of you online. We are here to present Q4 of 2025, Smartoptics and also, of course, full year 2025. We will start as we always do and talk a little bit about the highlights of the quarter. Like last quarter, I will let the numbers speak a little bit for themselves. Stefan will come back and talk in great detail about everything that you see on the left of this slide. I will just conclude that it's a fantastic quarter and a fantastic year for Smartoptics. It's an all-time high revenue quarter. We're seeing demand stable to accelerating, I would say, accelerating towards the second half of the quarter and continuing. We're seeing increased traction with our large accounts, independent of customer type, network operators, neo-scalers, cloud providers and so on and so forth. We have an absolutely fantastic market in the U.S. And interestingly enough, we have a Europe that looks very promising and looks very interesting for the coming years, and I will come back and explain that. Last but not least, from a product standpoint, we're growing in all our product areas, and I'm very happy to report that it's a record quarter with super good growth in our business area, optical devices, which is a business area where we changed the leadership, where we started to invest about a year ago. And we're seeing like Smartoptics in the past, where we spend our money, where we invest, we also get growth and good business. So it is working. We are continuing to invest in the company. I said in Q3 that not investing in at this point with this great market ahead of us would be foolish, and I will just reiterate that. We are going to continue to invest. And the question right now is what do we mean by disciplined investments? Well, we do mean that we're going to invest or rather grow our OpEx slower than we grow our revenue. And we are going to grow with profit. But the most relevant question now is, is this a good time to hit the accelerator to capture the market opportunity that's coming from AI-driven capacity extensions over probably the coming decade. And we will, of course, work hard on that over this year, but it's no doubt investments are continuing. Q4, yet another quarter where we are proving that we are the challenger of challengers in our market space with one exception in the numbers that has been reported so far to the industry analysts with one exception, which is purely related to hyperscale build-out, we are growing far faster than anyone else. So we are the challenger of challengers. I want to talk a little bit about what's happening in the market and explain a little bit where we are doing well. And of course, it's nearly impossible not to talk about AI at this moment. And I'm going to do that from a standpoint of our 3 customer segments: Enterprises, Network Operators and Cloud AI, what we also sometimes call ICP, Internet Content Providers. So what is happening in the market? And the reason why I want to talk about it from all these 3 standpoints is that all of them are equally relevant from the standpoint of AI. What's happening in the world is that data centers are being built at a pace that we have never seen before. When you're building data centers, you need one thing more than anything else, and that's cheap electricity or low-cost power. That's available in certain spaces and places on the planet. And if you find it, you will build a data center and you will load that data center up with GPU technology, et cetera. The other thing you need secondarily is to cool that equipment and you need access to water. Having network connectivity to these places because obviously, if you build a data center, much like cloud in the past, you need to connect these data centers to the Internet, to the pairing points and to other places in the network. That's easier to solve. You just buy bandwidth, build networks and the problem is solved. And that is what our customers are doing. So these data centers, they can appear in many different locations. We've heard about building in cooler geographies to achieve natural cooling. I recently attended a big conference where a lot of data center companies were present. What else are they talking about? Well, they are talking about building data centers nearly everywhere. So submerged data centers under the sea. We're talking about data centers on decommissioned oil rigs because you have access to wind power and you have space and you have water. We're talking about -- I was in Tokyo last week in Japan, they are building dedicated platforms in the Tokyo Bay where they will place data centers. And really, any idea is as good as the other ones. So that's clearly one element. Our customers are building new data centers. They need to connect these with multiple terabits. The biggest projects that we have been looking at is day 1 requirements of hundreds of terabits connecting that to the Internet. That's one application clearly. Who are doing that? Well, it's affecting -- so we are selling equipment and networks to the people who are -- who own the GPU clusters, so the neo-scalers and similar. We're selling equipment and networks and services and software to people who own the data center, who in turn rent out capacity to the people who own the GPUs, et cetera. And of course, we're selling an awful lot of networks and services and software to the CSPs, the operators of the world who are providing bandwidth to the people who own the GPU factories, et cetera. So it scales across the whole thing. The last one that I want to talk about enterprise there is the fact what I believe and what many in the market believe is that the whole idea of outsourcing your inference to the cloud, if you're a large enterprise, is great at the moment. But the belief is that more and more enterprises will start building their own GPU-based AI clusters for their demands, so their inferencing demands. One good example of that is Smartoptics. Of course, we're an early adopter. Of course, we need to have control over our models. We have already invested in pretty advanced AI servers where we are running our models, where we're expecting our customers to use our softwares and to run our cloud-based services in the future. That will accelerate. So it's going to be across all customer segments. I only talked about connecting the AI data centers to the network now, so kind of North-South traffic for those of you who are more knowledgeable about that terminology. The other thing with AI is, of course, the West East traffic. So the scale up, the scale out, the scale across, which is really connecting data centers in the region to optimize where you run your workloads, et cetera. We are doing that too. And that's a market that I believe is going to continue to grow as these data centers continue to grow. So it's a fantastic opportunity out there, and it's spanning across all our customer segments and really nearly all of the applications that we are involved in delivering. I want to take you through some of the numbers, where the numbers are coming from in the quarter, and I will start with a slide that we have used one time per year, namely in Q4 every year. We look at the invoiced customers in the year, and we draw some conclusions. The conclusions are very similar to every other year in the Smartoptics history. It is accelerated, yes. But we can see that a certain amount of our business this year, about 15% of our business is coming from brand-new customers. We can also see that we have a super good retention of customers. More than 50% of the revenue in 2025 is coming from customers that we had in 2020. We can see that our partner network is expanding. We have more partners who are using our equipment in their bigger solutions to their customers. And overall, we are seeing just an expanding customer base, which is very good for 2026, 2027, 2028 and onwards. When we look at these customer segments that I talked about, Enterprise, CSP and ICP or Data Center, Cloud and AI, we can see that 2 of them are growing much faster than the third, namely Enterprise. There is also a geographical aspect to this that I will talk about in the next slide because a lot of the business that we have done in Europe is enterprise related. And those of you who have been following us know that several years ago, we started to talk about traction with larger operators in the U.S. market. So U.S. is a couple of years ahead of Europe there. I will come back to that. But the largest growth we find in our CSP segment. And these are -- there's a lot of customers. It's effectively Tier 2 and Tier 3 operators across the world with some dominance in the U.S. We have now several new customers in the year and several existing customers who are continuing to roll out technology. And I talked about availability of power, where do you build data centers and where do you need capacity? Well, in the U.S., one place where you have low-cost electricity is Texas. So it's not a coincidence that our biggest customer in 2025 is a U.S. regional operator with focus on the Texas market. We're also seeing tremendous growth in the green segment, the ICPs. That's where we put in everything that has to do with cloud. So that's where you find the neo-scalers, that's where you find the cloud operators. That's where you find the content, the gaming, the Internet exchanges and all of that. And of course, Enterprise growing a little bit slower. This is heavily dominated by our classical enterprise business, so storage area networks, disaster recovery networks, data center to data center communication basically for security purposes. I'm expecting Enterprise to pick up as AI inferencing is affecting that market more and more in the future. Looking at our channels, we can see a very healthy growth with our indirect business. The fact that our direct business is growing faster than indirect is, I would say, nearly 100% related to the red on the left, namely the CSP. When the CSP market is growing faster, a lot of CSPs prefer to have a direct relationship with us and hence, our direct business is growing. I'm very happy with this split. We have super good partnerships out there, super good channel really across the world. It's several hundred people who have contracts with us and can use our technology in their solutions. So a very solid base of indirect partners. Now we're coming to the geography. And of course, Americas, super impressive. So thank you very much for my team in America, which has grown. By the way, we're investing more in America on the back of this success. So fantastic. EMEA, as I said, the way I look at Europe is that Europe is where Americas was 2 years ago. We are now working. We have closed contracts with larger network operators in Europe. We have delivered networks to larger operators in Europe, and we're sitting on a pipeline and list of opportunities that is highly developed of at least 10 operators in Europe, very, very similar to what I talked about in Americas 2 years ago. So of course, we're seeing signs of this. The fact that quarter-over-quarter, Europe has developed in a fantastic way since midpoint of the year. Q4 is a very good quarter for Europe. I'm expecting Europe to pick up and be -- it's a very promising market for us over the near term. Asia, it is a little bit more project-driven. So we can see that when the large projects happen the quarters grow when the large projects don't happen. And with large projects, I'm talking about 300,000, 400,000, 500,000 projects that we do out there. And apparently, Q4 was not one of those quarters. Am I worried about Asia? No, quite the opposite. I think we have great opportunities in the markets that we are addressing. So Australia, New Zealand, Japan, Southeast Asia and so on. And we have recently invested a little bit more into Asia and Africa, I should say. I mean, it's relatively small investments compared to Americas as a -- for instance, but we are investing and the opportunity is there. I just came back Tuesday morning from Japan, where we have opportunities with Japanese customers. We're continuing our IOWN efforts, and we're continuing the proof of concept with NTT DOCOMO business for the IOWN architecture. We are having good dialogues with a bunch of Japanese companies now, but it will take time, rest assured. Products. So about a year ago, we did a leadership change or rather put in a new leader for business area Optical Devices. We started to renovate and improve the back end of that business. And we can see that, that has clearly paid off. We are in a much better shape to deliver fast and quality to our customers. We are continuing that investment. So right now, we're building a brand-new manufacturing facility for business area Optical Devices in our brand-new facility in Kista, Stockholm, that's being built for us as we speak. So focus there, automation, robotization of that business. It is high-volume business. It's several hundred thousand devices that we're shipping every year. So we will invest in that going forward. That's also going to result in a restructuring cost in the first half of the year of about $500,000, but it's all done in -- to capture future growth and capture the momentum that we have. The most important business area still Solutions, Software and Services growing in a very nice way. So all good. I would like to hand over to Stefan to take you through some of the financials. Stefan Karlsson: Thank you, Magnus, and good morning, all of you. We have a -- we had a strong quarter. We had the revenue increased 37.7% to USD 23.2 million compared to USD 16.9 million last year, and that was mainly driven by high sales in Americas of USD 13.9 million compared to USD 6.9 million. The gross margin in Q4 was down to 46.1% compared to 49.0% last year and was impacted by inventory reserves, write-offs and other inventory-related one-off items. The underlying margins, however, are very consistent and strong quarter-over-quarter throughout the year. The full year margin that I think we should focus on was stable at 47.8% for 2025 compared to 48.1% last year, and that serves as a better guide for going forward as an indicator for the margin development. Looking on EBITDA, it was good on USD 3.6 million compared to USD 2.4 million last year and an increase of USD 1.2 million. And that split is USD 2.4 million is related to the revenue increase and minus USD 1.4 million is related to increase in employee benefit expenses that has increased to USD 5.7 million over USD 4.3 million last year. And that's driven by the organizational growth of 7% from 131 to 140 full-time equivalents, and that's including new hires in sales in the U.S. We have FX impact that worked against us with 8 percentage points. We have inflation and increased variable compensation due to the positive development in sales. Other operating expenses is rather flat year-over-year and quarter-over-quarter. EBITDA margin increased to 15.3% compared to 14.4% last year. Cash flow from operations was super good this quarter was at USD 6.8 million compared to USD 0.2 million last year and mainly driven by the good underlying business and some reductions in inventory. The equity ratio was 54% as a result from a growing balance sheet. We have non-current assets of USD 9.1 million compared to USD 7.1 million last year. Current assets is USD 39.7 million compared to USD 33.9 million, and it's mainly inventory and trade receivables. Cash is up compared to last quarter, up to USD 7.3 million, but down a little bit from last year that was USD 8.0 million. We have available credit facilities of NOK 75 million, USD 7.4 million equivalent. We have a high focus on cash and mainly inventory forecast process that has been improved, and we are doing continued management on trade receivables. Non-current liabilities is only USD 0.3 million compared to USD 0.8 million last year. Current liabilities amounts to USD 12.8 million compared to USD 10.7 million last year and it's mainly trade payables and tax liabilities and personnel-related expenses. Deferred revenue up to USD 12.8 million compared to USD 9 million last year. And the increase is related to stable higher revenues from business area software and services and growing revenues. The working capital amounts to USD 14.5 million compared to USD 14.9 million last year and down from USD 18.4 million last quarter, and that's mainly driven by inventory reductions and increased deferred revenues. The inventory is now on USD 18.7 million compared to USD 12.6 million last year, but a little bit drop from last quarter when it was USD 20 million flat. And the increase from last year is mainly driven by that we now have longer lead times and the components we have now are more expensive. And the higher inventory level that we set, we talked about that last quarter that is essential to secure the future growth in sales. But the improved forecasting process that we have done during the quarter have reduced inventory slightly. But despite the high level, there is a low risk sitting in inventory. Trade receivables decreased to USD 18.7 million compared to USD 19.9 million last year, down from USD 19.0 million last quarter. We have good collections in Q4 and this quarter, the sales was more evenly distributed over the month compared to the average quarter where we actually have a bump in the last month of the quarter. And we don't see any risk in trade receivables at all. Trade payables increased to USD 5.6 million compared to USD 5 million. And net other short-term liabilities amounts to USD 17.2 million compared to USD 12.5 million last year, and the increase is mainly driven by increase in deferred revenue. And then we also have a little bit of tax liabilities of USD 1.7 million, a slightly bump up from last year when we had USD 1.1 million. Thank you, and back to you, Magnus. Magnus Grenfeldt: Thank you very much. Like last year, the Board intends to propose a dividend of NOK 0.6 per share. So no change there. This is, of course, pending AGM approval later in the year. I want to talk a little bit about how we're viewing our future right now. This is more or less the same slide that we've been using now since we introduced our new long-term ambitions. One major difference today compared to 6 months ago is that we need to focus on our core markets. We need to focus on our business because we're doing great. There is no doubt about that. So continued focus on our 2 big home markets and of course, the initiatives that we have running. So you notice that when we talk about new growth drivers, we have now removed M&A from the chart. And the reason why we've done that is we want to convey that we are not actively working with that question at all at the moment. Maybe we will later in the year, we shall see and maybe opportunities will arise that we choose to pursue and go after. But at the moment, the focus is on what we're doing. And of course, adding new growth drivers, committing to major accounts, yes, we are doing it. You can see it in our product development. We're developing much more advanced products for release later this year and next year. We are developing the company in all aspects, anything from compliance to procedures and how we conduct our business. We are going into the new geographies to a very large extent, following our customers also, don't forget that. It is not going into South America with a completely brand-new -- brand-new play, it is the same. The hyperscalers are building data centers in Mexico, too, meaning our network operator customers needs to connect those data centers. So the business model is the same. So it's all very controlled in a sense. And we are investing more in our software automation and AI tools. This is both external, meaning softwares that we will sell to our customers, both as part of the SoSmart network orchestration platform and as [indiscernible] software packages that will help them automate their processes. It's all about going after the OpEx of our customers and help them to improve that. And also our internal tools. AI is now something that scales across our whole company. All functions are building a pipeline and a road map for our internal tools development team. And I have really good hopes that, that's going to dramatically improve the way we conduct our business in 2026. Remember that we are a company that can do this. In order to do this, you need software skills, you need to have an understanding of how you develop these architectures because the architecture is the important thing here rather than the actual coding and we're in a very, very good position to do that. Looking forward, a great market out there. We maintain our ambition to grow our market share by 2 to 3x in the relevant markets that we have been talking about, and we're continuing to believe and to target the 13% to 16% EBITDA range -- sorry, EBIT range that we have been discussing before. Now the question is, of course, how big is this market and how fast is it growing? And we will have to come back with that. We have, through 2025, talked about 5% to 6% growth in the market up until 2030. We know that the industry analysts are now working their numbers, working their Excel sheets to figure out how fast is this really growing. I believe we will see a larger number in the first half of 2026. So when we come back in Q1 or Q2, we will be able to share some more projections on that. With that, I'm happy to take questions, and I suggest we start in the room, Per. Per Burman: Yes. Any questions in the room? Markus Heiberg: So Markus Heiberg, SEB. I have 2 questions. I can take them one at a time. So the first one is on several competitors are flagging now supply constraints into 2026 and long lead times. How did that affect your Q4 and your outlook into the next quarters? Magnus Grenfeldt: So far, it has been mainly positive. We are clearly winning new accounts because some of our competitors, especially the larger ones are, of course, super focused on hyperscaler business. We have also seen some of our competitors coming into 2026 pretty much sold out, probably not completely, but to a large extent. That is, of course, positive for Smartoptics. The mid-sized players are turning to us for help to get deliveries. They need to connect their customers, and we have several wins of that nature. The good thing is that these are not decisions you take lightly. You don't bring in a new supplier for transport networks and optical networks and throw them out a quarter later because you're done and dusted and you can get deliveries from someone else. It is strategic choices that these people do to bring us in. And my expectation is that we will stay there for a very long time, just as normal. The only difference is that it's faster now. Markus Heiberg: So you didn't see any meaningful impact in Q4 or? Magnus Grenfeldt: Yes, we did. Markus Heiberg: And the second question is partly related because we see the surge in memory prices and also availability of components. So 2-parted question there is, how is that affecting the discussions with customers, the end-demand projects ramping up? Are they being impacted? And the second part of that is, of course, your own gross margin and how that will affect 2026? Magnus Grenfeldt: So I think it will affect nearly all our customer dialogues -- all our customer dialogues this year are, to some extent, going to be related to delivery performance and our ability to deliver. So it's going to be a very important topic to us. Stefan said that we have, in a disciplined way, worked through Q4 with our inventory. And if anything, I'm expecting our inventory to go up now. That's a good thing for us. If we can deliver, we will win business. And there are very long lead times, not only on memories, as you said, also on optical components, every optical component that sits inside our solutions is typically half a year lead time. So my procurement team is now working with Q3 and Q4 demand. That's, of course, a difficult task. But to me, it's more problematic if we sandbag that than if we have a slightly higher inventory and a little bit more working capital. That is not a big problem for me. So it's very important, no doubt. I think the margin impact of this will be marginal. I don't think that's where we should look. We should look at how much inventory we have and consequently, how much we can deliver. So far, so good. We still have very short lead times. We are operating with 4- to 6-week lead times typically, which is extraordinarily good in our industry right now. And of course, our ambition is to maintain that through the year. That's going to be a real power play in 2026 and 2027, I'm sure. On the other stuff, you mentioned memories, and I can just say that we're good for 1.5 years or something like that. So we have secured that position. Markus Heiberg: That's very good. So just one final follow-up there is on the gross margin. I think you mentioned that it will -- you expect that to be sort of flat into 2026 or you should look at the 2025 gross margin and that's a good guide for '26? Or are there other things that we have to keep in mind on the gross margin for '26? Magnus Grenfeldt: No, I think it's a good guidance. So 2024 is very similar to 2025. It's going to fluctuate over the quarters, as Stefan mentioned, but I think it's a good guide for the future now that we will operate in this range, 47% to 50% for the foreseeable future. Per Burman: Any other questions in the room? No. Then let's go to the call. So we have Christoffer Wang Bjornsen from DNB Carnegie. Christoffer Bjørnsen: Can you hear me? Magnus Grenfeldt: We can hear you. Christoffer Bjørnsen: Great. So just wondering, you have like an interesting comment on the East-West traffic. I think you're primarily and historically, your bread and butter has been metro area networks and more like, let's call it, North-South. So can you help us understand kind of what's prompting you to start talking about like within data center East-West traffic in that part of the network? Magnus Grenfeldt: Well, what's prompting me is that we're doing it with customers. We have a fairly large project in 2025, which is all about that connecting AI data centers to each other over a geographically dispersed area. So typically, what we're talking about here is probably below 100 kilometers between all data centers. So that's what's prompting it. Why is this important? Well, as as the knowledge and as the AI companies are developing their methods, they will need to distribute the workloads across many data centers for several reasons. One thing is the whole model routing or whatever you call it, right, where do you run a specific request? Where do you have the resources available to run a specific request? And then it's also, of course, a question of scale, how big data centers can you build? Well, there is an upper limit there. Although I have had the pleasure to see one of these data centers, they are huge. That was one of our neo-scaler customers that I had the pleasure to see. They are huge. But there is an upper limit, then you need to go to a second location and a third location and so on and so forth. and that will up the requirement for data center to data center or front end to front end or however, East-West type of traffic. So it's as simple as that. We're doing it. Christoffer Bjørnsen: But still kind of coherent pluggables for longer distances, like so it's between data centers, not kind of within the data center rack to rack. Magnus Grenfeldt: That's correct. What I'm talking about is between data centers, and it's absolutely coherent technology. In fact, it's our whole product portfolio, well, maybe with the exception of devices, of course. Christoffer Bjørnsen: And then on the inventory, so it's been kind of steadily growing through like sequentially over the last couple of quarters, but now it's down. So that downtick in Q4, is that a hint that you're expecting kind of lower top line momentum in Q1? Or is it more about just demand pulling so hard that you haven't been able to continue to grow the inventory? Some reflections on that. It seems a bit cautious and why? Magnus Grenfeldt: I think it's 2 things, Christoffer. One thing is that when we started Q4 on the 1st of October, our ambition was to optimize our inventory, of course. And I think at least I have kind of changed my mind on that topic. It is not that important anymore. The other reason is that -- so meaning we worked with inventory optimization for -- through the quarter. The other thing is, of course, that Q4 is a very big quarter, and we have delivered an awful lot of products in Q4, hence, inventory goes down before we can backfill it. Per Burman: Okay. Then we have Oystein Lodgaard from ABG on the call as well. Øystein Lodgaard: Congrats on the strong numbers. I have a couple of questions. Maybe we can start with, you mentioned on the call some new product launches, more advanced products than what you have in your product portfolio currently. Can you say what kind of products these are or what kind of use cases they are aimed at? Is that more data centers or ROADMs for telcos? Magnus Grenfeldt: Certainly. So if we look at the journey that we've been on for a number of years, moving from being basically 3, 4, 5 years ago, a point-to-point data center network provider into developing our ROADM portfolio, aiming first at the metro networks, then going after the regional networks. So one natural evolution for us now is to continue that journey, meaning improve the performance of our ROADM family to be able to do longer reach and also in the other direction, more capacity to introduce a broader spectrum, what's referred to as L-band technology, as an example. So more of that. If we look at our transponders, muxponders, the Layer 1 products in our family, more advanced versions of that. We have just released our 800-gig transponder now, which I think will become a high runner. We will develop more of those and more advanced versions of our transponders, muxponders more multiservice type products. Yes. And then, of course, continuing our efforts at the edge where we still see a lot of opportunities in the sort of low-cost, both ROADM-based and kind of active-passive type products. So it's across the board. And last but not least, our software platform, which today, I consider to be phenomenal and it is really becoming a mature tool for our customers to really take advantage of. We have a lot more to do on the automation, AI side. It's not necessarily AI, but certainly automation, data collection, multi-vendor, there is a lot of development that's ongoing there that I have really strong belief in the near future. Øystein Lodgaard: Perfect. And one other question on the near-term growth or kind of the growth momentum going into 2026, and it's a 2-part question. One is we've seen, like also was mentioned previously, several of your competitors have very long lead times. That's kind of a more -- something that has come up relatively recently. Does that mean that -- I guess there is big opportunities like you mentioned in customers switching providers to you because you are able to actually deliver on a short notice. Is that still ahead of us? Or did you get much boost from that in Q4? Magnus Grenfeldt: We did get boost from that in Q4 for sure. It was not -- I wouldn't say it was instrumental in any way. But these are typically mid-sized operators, those are typically the ones that suffer when this scenario happens. And it also happens to be a sweet spot customer type for the products we have, the kind of company we are, the responsiveness that we can offer them. It has happened. There are probably a handful of new accounts that we have won through Q4. But the world is big, and there are thousands of these, and it will continue, I'm sure. Øystein Lodgaard: And on -- do you still have some large customers now still ramping up, as new customers ramping up volumes with you, for instance, these neo-scalers, et cetera? Or kind of all those big customer wins at full pace already in Q4? Magnus Grenfeldt: No, I would say nearly all of them are ramping up, right? So it takes time to grow accounts. Most of the accounts that we have been talking about in the past, Crown Castle, WIN, all of those type of accounts that we have publicly talked about. I mean, there is still a huge growth possibility in all of those accounts as we qualify ourselves for new applications, as we become relevant for new type of network scenarios. And of course, as they grow their business, which they are on the back of data centers rolling out left, right and center. Per Burman: Perfect. We have a question on the portal as well from [indiscernible]. You aim for 2 to 3x market share for 2030. What market growth do you expect in the same period? Magnus Grenfeldt: Yes. I talked about that just a few minutes ago. I think it's a little bit early to say. So for now, I think 5% to 6%, and we will come back in the first half of the year as our friends at Cignal AI develop their models because that's what we're relying on for that purpose. So we're going to come back to that. It will not be lower. Per Burman: Perfect. Thank you. That was the last question. Magnus Grenfeldt: Then thank you very much. Have a good skiing holiday to all of you, Norwegians, and talk to you again in a quarter. Bye-bye.
Operator: Welcome to Oncopeptides' Year-end Earnings Call for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Sofia Heigis; and CFO, Henrik Bergentoft. Please go ahead. Sofia Heigis: Hello, everyone, and welcome to the presentation of Oncopeptides' Year-end Report for 2025. My name is Sofia Heigis, and I'm the CEO of the company. Before we begin, I would like to direct your attention to our standard disclaimer regarding forward-looking statements. I am joined by our CFO, Henrik Bergentoft. And today, we will review a highly transformative year for the company and outline a 2026 that brings exciting potential. Let's look at where we stand today. As we have already communicated, we delivered strong commercial progress in 2025, with full year net sales more than doubling to SEK 71.1 million, representing a 125% increase compared to 2024. For the fourth quarter, net sales reached SEK 18.6 million, an 88% increase compared to the same period in 2024. We have today also announced a rights issue of up to SEK 200 million, allowing us to invest in the first step to expand our PDC platform into the high unmet need of glioblastoma patients, an opportunity that comes with the potential to unlock significant value for both patients and Oncopeptides in the future. The rights issue will furthermore bridge our commercial operations towards our goal of positive cash flow in 2027. Henrik will discuss this in more detail shortly. The fourth quarter was shaped by a diverse performance in our key markets. The demand for Pepaxti in Italy exceeded our expectations. Our positive growth trajectory during the first half on European level was, however, muted during the second half of the year by a slower-than-expected growth in Germany and the medical doctor strike in Spain during Q4. Looking at events post period, we have completed a strategic review of our German as well as R&D operations to sharpen our focus and optimize our business model. As many of the facts and figures for the fourth quarter has already been communicated, I will spend much of this presentation focused on our pipeline and the exciting opportunities that comes with the potential to completely transform Oncopeptides. Before that, I will hand over to Henrik to provide a closer look at our financials and the rationale behind today's capital raise. Henrik Bergentoft: Good morning, and thank you all for joining today's call. Let me begin with the rights issue announced today. Based on the mandate received from the AGM in 2025, the Board has decided to launch a rights issue of SEK 200 million, of which SEK 190 million is guaranteed through underwriting and subscription commitments. Our main shareholder, HealthCap, together with members of management and the Board intend to participate in the rights issue. The purpose of the rights issue is to support the continued commercialization of Pepaxti in Europe. While the launch efforts have been focused and diligent, external market factors have negatively impacted the acceleration of our sales trajectory. Hence, the company has assessed the additional liquidity required for our commercial operations to reach cash flow positivity in 2027 based on the European commercialization of Pepaxti. In addition, we have promising development projects within our pipeline, particularly related to the indication glioblastoma. Part of the proceeds will be used to enable a window of opportunity study in man for glioblastoma, an important step in clinical advancement of the assets. Turning to the quarter's financial performance. Net sales for the fourth quarter increased to SEK 18.6 million, nearly doubling compared to the same quarter last year. For the full year, net sales more than doubled to SEK 71.1 million. Gross profit for the year came in at SEK 68.7 million, corresponding to a strong gross margin of 97%, which continues to demonstrate the scalability and robustness of our business model. Operating expenses decreased by 16% in the quarter and 7% for the full year, reflecting disciplined cost control across the organization. EBIT for the year improved to minus SEK 224.7 million from SEK 283 million minus last year. The full year financial items were impacted by a noncash fair valuation of warrants amounting to minus SEK 12.2 million. All in all, the year showed strong revenue growth, stable gross margin and reduced operating expenses, all key pillars supporting our path towards a positive cash flow in 2027. Looking more closely at our operating expenses. Sales and marketing expenses for the full year amounted to SEK 137.2 million, in line with last year. Already during 2024, we finalized our commercial organization in Spain and Germany. And in 2025, we established our Italian organization, all key markets for the launch of Pepaxti in Europe. General and administrative costs decreased to SEK 57.4 million from SEK 60.8 million, while R&D expenses decreased to SEK 103 million from SEK 121.2 million, reflecting a more focused R&D structure. We currently have no ongoing clinical studies, but we have made meaningful progress in our preclinical portfolio, particularly with glioblastoma. The chart illustrates the quarterly development of our operating expenses over time, showing a steady and disciplined cost trend that supports our financial targets. Finally, a look at liquidity. Cash at year-end amounted to SEK 82 million. Our liquidity position will be significantly strengthened through the announced rights issue of approximately SEK 200 million. With the proceeds from the rights issue, we will be well positioned to continue executing our strategy and drive value creation. The proceeds will enable us to maintain momentum in our European launch while accelerating the development of our PDC platform towards indications beyond multiple myeloma, where we particularly look forward to initiating our clinical trial in glioblastoma in 2026, where we have the potential to address a significant unmet medical need. And by that, I conclude the financial update and hand over back to you, Sofia. Sofia Heigis: Thank you, Henrik. Let's turn to the business update and our strategic priorities. Oncopeptides rests on 3 strong pillars. We are building the company from our commercial base in Europe. We are looking to add revenue streams by partnerships for the rest of the world, and we do have a potential in our pipeline that can transform Oncopeptides. So why invest in our business at this time point? We have a fully approved product with SEK 1.5 billion European market potential. We have demonstrated a strong European growth momentum year-over-year, and we are working on strategic partnerships. And we do have an exciting pipeline targeting global multibillion-dollar markets like glioblastoma. Our preclinical efforts have really paid off as the data generated demonstrates a strong scientific rationale to advance the PDCs into clinic for glioblastoma. To ensure you all get a good understanding of this exciting opportunity, I will today talk about our scientific findings and do a deep dive into our pipeline. But let's start with our Pepaxti business with focus on European sales first. This graph illustrates our sales trajectory. While we faced some external headwinds in Q4, the fundamental fact remains. Our sales have more than doubled year-over-year, providing the scalable demand for Pepaxti in Europe that will support a strong growth during 2026. This map shows our European footprint in 2025. We have successfully transitioned from the market access phase into the full commercialization across our key territories. Looking back at how we built this throughout the year. In Q1, we negotiated price in Italy, which secured that we now have the solid foundation of 3 key markets. In Q2, we saw momentum building rapidly, especially as we unlocked regional access in Spain and started to unlock regional access in Italy. Q3 was, as we anticipated, hit by the vacation period, but still demonstrated our ability to grow and expand our prescriber base and deepen our engagements. Our Q4 map shows the full robust picture of our current European footprint with the 3 key markets with close to full market access. Behind those data points are more than 600 patients treated since our EMA approval. We have a clear inclusion in the EHA/EMN guideline, and Pepaxti is increasingly recognized as an important treatment option for triple-class refractory patients. Germany remains a critical market. We now have 2 full years of experience, and our analysis tells that the fully innovative late-stage myeloma market is facing slow growth. Germany is a scattered market with few patients per HCP. This in combination with that, in particular, the office-based physicians have restricted access for pharma, some not allowing visits at all in their clinic and majority only allowing 1 to maximum 2 visits per year, results in that it takes longer time than anticipated to unlock new prescribers and identify new patients. In Q4, we did demonstrate double-digit growth in Germany, but at lower levels than we accounted for in our projections. To ensure we stay realistic about our investment versus the growth pace, we aim to -- and we do aim to reach country level profitability in Germany during 2026. We are streamlining the organization and focusing our resources strictly on high potential areas and areas with a positive momentum where we do have access to the physicians. In Italy, 2026 is the first year with full or close to full access down to hospital level. Italy has been a standout performer, exceeding its targets for the first year. This is due to an excellent team built in a timely manner, a centralized prescriber base with recent experience of Pepaxti just ahead of launch. 2026 is the first year of full regional access in Spain. The full Spanish late-stage myeloma market was hit by the HCP strike in Q4. The strike was clearly affecting the number of patients reaching their hematologists on time to get a new treatment initiated. This is partly still a big concern, not least for patients as the strike is continuing. Having said that, our team is very active. We are working with the KOLs in Spain and have initiated both national and regional projects together with them to catch up. Insights tells us that despite decreased sales in Q4, our position remains clear and the experience generated is positive, which is the foundation we are building from in 2026. And then we, of course, truly hope that the strike situation will be solved for soon to allow patients to visit their HCPs in a timely manner and in addition, allowing time for the HCPs to properly interact with the pharma industry. Even though our investment is currently focused on our key markets, we are looking into how to capture the full European potential. We do have market exclusivity until 2037, meaning there is still time to both gain access and reach peak year sales in more countries across Europe. We are committed to find the most value-generating business model for the company and to make this happen as soon as possible. We will, of course, keep you posted on progress. Let's now move from Europe and look into the rest of the world. Outside of Europe, our strategy is straightforward: grow geographically and partner smartly. Our greatest focus is on Japan, but we do, in addition, have a partner in South Korea and opportunistic partnerships with the World Orphan Drug Alliance for more complex geographies. We have all the time known these geographies will be slow. But based on recent insights from our partners, we do hope to see progress in the MENA region this year. For Japan, we have a good foundation to stand on with formal positive advice from the regulatory authorities. We are currently focused on one well-established pharmaceutical company that has become our preferred partner option. The contemplated transaction features an upfront payment, milestone payments and a double-digit royalty. The time line for the deal is currently at large out of our control, which means it is difficult to estimate when a potential deal can be closed. We will, of course, keep you posted. Now let's move into our pipeline, which I am very excited about. We have, over the last quarter, made some significant progress generating data that has given us a better understanding of why our PDCs are so unique. The data is validated by external experts and supports us to take the first step on the journey to expand our PDC platform into indications with very high unmet needs. If we manage to generate clinical data in line with what we see in the preclinic, we will be able to transform Oncopeptides into a company with global potential reaching far beyond our current opportunity with Pepaxti in multiple myeloma. As a recap, Oncopeptides holds 2 proprietary technology platforms, the PDC and the SPiKE. The pipeline includes OPD5 offering a global opportunity for additional indications in difficult-to-treat tumors with high unmet needs and OPDC3 designed for enhanced selectivity in solid tumors. OPSP1 is the first candidate drug selected from our innovative immunotherapy platform focused on NK cell engagement. To facilitate the shift from preclinical research into clinical development that we will make during 2026, we are reallocating our resources. To stay cost conscious and focused, we are reducing our internal R&D efforts in preclinic and will rely more on external strategic collaborations to advance these platforms. I am very excited about us being able to move into a new and more advanced phase for our PDCs, targeting large patient populations with high unmet needs. Our European commercialization of Pepaxti serve as an important foundation for Oncopeptides, and it is the real-world proof of concept for the PDC platform. The majority of the future value, however, lies in our pipeline as we expand into addressing global markets with high unmet needs, serving us with the opportunity to create shareholder and patient value far beyond where we are today. As I have indicated in the past, we believe that through the commercialization of Pepaxti, we have achieved a strong clinical validation of our science. Lately, we have also gained an even better understanding of why PDCs can support patients with aggressive and resistant disease. So we are now aiming to deploy the same mechanisms to new indications. Let me tell you more about our latest findings. What we have realized is that our PDCs enhance alkylation through dual targeting of both nuclear and mitochondrial DNA, which results in that we can support patients with very aggressive tumor types that has developed resistance to other treatments. So what does this really mean? And how does this really work? Let's start with the basics and what we have known for a long time. The idea behind the PDC platform is that by conjugating peptides to an alkylating or cytotoxic payload, the PDCs becomes very lipophilic, fat-loving, which means they are entering cells freely without the need of transporter proteins. This is due to that the cell membrane is built of lipids or to put it simple, fat. Once inside the PDCs are quickly hydrolyzed or cut into pieces by peptidases and esterases that act as small scissors. Certain tumor cells like, for example, multiple myeloma cells have an overexpression of these scissors. The pieces are active and cytotoxic metabolites that are more water loving and now trapped inside of the sick cell, which are filled with fluid. This process happens rapidly, which triggers a concentration gradient that is drawing more of the PDCs into the sick cells. So the result is a high concentration of alkylating or cytotoxic agent inside of the cell that leads to cell death. What we have realized is that the cell is most likely not only killed due to double-strand DNA damage inside of the cell nucleus, like with conventional alkylators. But we have lately generated evidence suggesting that the PDCs have a dual killing mechanism, also damaging the mitochondrial DNA. This is a critical finding and super exciting as the mitochondria is acting as the powerhouse of the cell. The ability to damage the mitochondria means the ability to overcome resistant and kill aggressive tumor cells. This finding suggests an explanation to why we have seen in clinic that our PDCs are so powerful and can support patients that are refractory to other alkylators and why the PDCs can support patients that has developed resistance. Let me take some time to explain this in more detail as this is important for you to understand and to get how valuable the full PDC platform can be. One example is that patients with multiple myeloma and p53 deficiency hardly respond to any treatment but do respond to Pepaxti. Now let me explain this more in detail. The p53 is a tumor suppressor gene and normally acts as a safety guard. It checks for DNA damage. It stops damaged cells from dividing, and it can kill damaged cells to prevent them from growing a tumor. When p53 is deficient, that is not working, damaged cells don't stop growing, cells with DNA errors can survive and multiply and this increases the risk of cancer growth. Because many cancer treatments works by damaging only the nucleus DNA and not the mitochondrial DNA, p53 deficiency can make cancer cells resistant to treatment, such as conventional chemotherapy or radiation, and this is happening by upregulating the repair mechanisms of the DNA in the nucleus. With our dual mechanism of action, we can address the barrier of resistance developed by the upgrade of DNA repair in the cell nucleus and support patients with no treatment options. This has already been proven with Pepaxti in multiple myeloma, and we are now looking to further prove this in glioblastoma, but there are also other high unmet need indications like, for example, acute myeloid leukemia, where we have interesting preclinical data generated. To summarize all of this in brief, the PDC platform is now a validated scientific breakthrough, and we now understand why we can overcome treatment resistance, which opens the door for us to developing PDCs into supporting patients with very aggressive tumors and very high unmet need indications such as glioblastoma, meaning we can target multibillion-dollar global market potentials. We now do have multiple opportunities, but our financial reality tells us we need to focus, which we will do on the opportunity of glioblastoma. And let me tell you a bit more why. Glioblastoma is a very aggressive brain cancer with no cure and poor survival rates. It is a rare disease with high unmet need. And if there are new treatment options approved, there is an estimated global market opportunity going from today's around USD 3 billion to around USD 8 billion in 2035. There are a number of challenges in treating glioblastoma. The tumors are sturdy. Most agents exhibit no activity at pharmacological concentrations inside the brain. The first challenge is treating -- in treating this disease is, however, the blood-brain barrier, which blocks most of the drugs from even reaching the tumor. Glioblastoma is a typical tumor where upregulation of DNA repair mechanism commonly happens and resistance is being developed. And finally, the tumor is cold, meaning the opportunity for immunotherapy is limited without making the tumor hot, which means that you have to ensure the immune cells that can support cell death actually reaches the tumor. The current standard of care is an alkylator, temozolomide, which can partly support patients, but it is well known that it has no efficacy in patients with upregulated DNA repair mechanism. And if we look at how temozolomide can support patients, we can conclude that alkylating agents do have activity in glioblastoma cells. But in the case of temozolomide, there is limitation due to both only 30% bioavailability as well as that temozolomide is a single-arm alkylator, meaning it breaks only one of the DNA strands, which is why upregulating or repairing the DNA is commonly developed and the tumor becomes resistant. It is also important to note that temozolomide is not damaging the mitochondrial DNA. With our unique PDC platform and the unique mode of action I just described with the dual killing mechanism, we believe we have the potential to provide a better response to this incurable disease that has proven really difficult to find new treatment options for. Our focus on glioblastoma actually originates from external findings in 2020, which was published in 2022 and eventually led to a research grant from Sweden's Innovation Agency to explore our PDC platform in what we call the GLIOPEP project. The data published in 2022 demonstrates that the PDC was the most efficacious compound in killing glioblastoma cells, clearly outperforming the standard of care. So this graph is showing the viability of glioblastoma cells. The lower you find the dots, the more cell killing. And in this panel, melflufen was used. And as you can see, the dots in the yellow box are much lower than most other drugs. Today's standard of care is circled in the red box. The GLIOPEP project consists of 4 collaboration partners and the grant was received to explore the potential of the PDC platform in preclinic. The data from this project confirms that the PDCs and in this case, OPD5 can address some of the most evident barriers for drug development in glioblastoma cells and in animal models. OPD5 has shown promising preclinical data with good activity at pharmacological concentrations and OPD5 has shown an efficient blood-brain barrier penetration and strong tumor reduction in preclinical models. Stay tuned for more data to be published from this project. These findings are logical based on the PDC mode of action as it's also well known that mitochondrial function is critical for glioblastoma growth. This aligns perfectly with the mode of action to target mitochondrial DNA in addition to a double-strand break of the nucleus DNA. The last 2 quarters, we have generated evidence that altogether provides a very strong and logic scientific rationale, suggesting that we can address all the most common glioblastoma barriers. In summary, our preclinical data demonstrates that our alkylating PDCs have low sensitivity to DNA repair upregulation due to both being a double-armed alkylator and damaging the mitochondrial DNA, concluding a dual mode of action and crucially demonstrated near 100% bioavailability in the brain, which translates into strong tumor reduction in animal. As we have an alternate mode of action, we are not dependent on the immune system like all the immunotherapy that is making great breakthroughs for other cancer types, but has not managed to address the unmet need of glioblastoma patients. So we believe we have an answer to a very high unmet need. What is then our next step? Historically, glioblastoma trials have 1% to 2% success rate, partly due to the difficulty to get drugs over the blood-brain barrier. So we ask the experts within the field, what is the most clever approach to enter the clinic? The conclusion is to initiate a capital-efficient window of opportunity study. Using our approved drug melflufen as a clinical probe in approximately 10 patients, we will generate human proof-of-concept data with the aim to confirm that PDCs passes the blood-brain barrier also in humans. This cost is a fraction of a full Phase I trial and can inform if we are to move and invest into the development of our next-generation asset, OPD5, which is an excellent PDC candidate for glioblastoma patients. Bringing this all together, we enter 2026 with an optimized business model and a clear focus on the most value-driving activities. With the rights issue we have announced today, we expect our commercial operations to be funded to profitability, which, of course, is contingent upon revenue growth. Furthermore, we are excited to initiate a clinical trial for glioblastoma to generate proof-of-concept data of blood-brain barrier passage in humans. Our mission remains unchanged. We are bringing hope through science to patients with difficult-to-treat cancers. Thank you for your attention today, and we will now open the floor for any questions you might have. Operator: [Operator Instructions] The next question comes from Richard Ramanius from Redeye. Richard Ramanius: I have 2 questions. Let's start with Pepaxti. Could you give us some more details about how the situation is in Spain in Q1 versus Q4 and similar comments for Italy? Sofia Heigis: Thank you, Richard. When it comes to -- so we refrain from commenting on sales already now for the first quarter. When it comes to the situation in Spain, the strike, and you can read this in media is unfortunately continuing. It's less intense than it was in December because in December, it was a full week that was where doctors were basically out of office also due to bank holidays. And that, together with the Christmas holiday period, concluded very few days for patients to visit doctors throughout all of December. Of course, the situation has improved somewhat from that in January, which is not so crowded with bank holidays, but it is a fact that the strike continues, which is influencing patients to get new treatments initiated and which is influencing all of the pharma industry to interact with the HCPs. As I said, we are working with the top experts in the field to understand how we can catch up during the year, of course, and in effective ways, be able to communicate with the HCPs and ensure that more new patients get Pepaxti prescribed. When it comes to Italy, it's -- I mean, we have a very successful launch in Italy, and that is based on that we have excellent team members that have managed to really capture the prelaunch experience and build on that. And I would argue that there are no changes to that kind of dynamic in Italy. Richard Ramanius: All right. Could you say something more about the clinical development in glioblastoma? So what's the medium-term plan for clinical development? Sofia Heigis: Yes. So what we are doing, as I said, is that we are initiating a window of opportunity study. You can also name it Phase 0, if you want to, because you do such a study ahead of Phase I. And we are currently working to, of course, prepare for this study. We are interacting with investigators. We are interacting with regulatory authorities. And our aim is to initiate this study during the year. As said, it's 10 patients, and we will be able to monitor these patients one by one because what you are doing to get a bit detailed is that you are giving one dose of a PDC in this case, melflufen ahead of surgery. And then you examine the tumor post surgery to see that you have been able to pass the blood-brain barrier. And you can also as secondary objectives, look into the cells, the tumor cells as well. So stay tuned for more information, and we will, of course, keep the market updated on any progress we are making here. Richard Ramanius: Okay. I have a last question about the rights issue. How much of the proceeds are intended for Pepaxti and how much for other uses? Henrik Bergentoft: So thank you, Richard, for that question. And we have not expressed any exact numbers, but we are stating that the purpose of the rights issue is to support the continued commercialization of Pepaxti in Europe and also advancing our very exciting opportunity with glioblastoma. But the majority of the funds is still directed towards the commercialization of Pepaxti in Europe. Operator: [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Henrik Bergentoft: Thank you. We have a few written questions. First one, you communicated cash flow positivity by the end of 2026 as recently as the Q3 report in November. What specifically changed during Q4 that caused the target to shift? Sofia Heigis: Thank you, [ Simon ], for the question. So first half of last year, we had a really positive momentum, and we did deliver on our kind of projected growth of 30% to 40% and even more in Q2. In Q3, we were hit by the vacation period, in particular in August. So Q3 came with lower growth, but we anticipated that we will be able to catch up in Q4 based on the first half of the year and that you commonly see this effect in the third quarter. What happened in the fourth quarter, I mean, as I said, different dynamic in the different markets. But if you take kind of the countries one by one. So Italy did exceed expectations in the fourth quarter, which was very positive and it kind of proves the unmet need of Pepaxti continuously. But the other markets, we had some issues. So Spain, there was this doctor strike in December. It took some time, we should admit for Spain to recover from the vacation period. But just when we started to recover and we saw a positive momentum, this strike completely disrupted our sales. We basically had very, very few new patients in December in Spain. And as our sales and our business model is built on that you get new patients that are treated for 4 to 5 months, it really kind of disrupted and decreased sales in Spain. What should be mentioned and what's important to understand is that Pepaxti is injected or infused once a month, but which is good for patients and physicians. It is possible to delay the administration if needed. And the physicians really took advantage of this given that they had so few slots to treat patients during December because of the strike and bank holidays and other things that are happening in December. So we saw a lot of postponed treatments, and we saw very few new patients coming in, in Spain. And we have, of course, been analyzing the market, and this is true also for all our competitors. All the myeloma late-stage drugs decreased during December. So that was a big hit because we, of course, should have and have had ambitious targets and such a decrease in one of our key markets really affected us, also kind of built on the lower-than-anticipated growth in Q3. Germany is important to understand because we did see very good speed in Germany in the first half of the year, but with increased volume, the kind of growth rates start to slow down. And this has to do with that the German market has changed in the way that -- our prescriber base is large. It consists to the majority of office-based physicians. And during the second half of last year, 2 more companies launched into multiple myeloma. This means that there are many companies currently that want to speak to the office-based physicians about myeloma. They are treating around 20 different tumor types. So -- and they are overall restricting visits to pharma. Some of them are saying that we can't allow pharma anymore in our clinics because we need to meet patients because that is, of course, generating their business. So some are seeing us maybe once or twice a year because they only have so much time to speak about myeloma when they also need to speak about lung cancer and breast cancer, et cetera. So this dynamic with a crowding market when it comes to share of voice, together with kind of the scattered market, has made us realize that based on where we are now and the volumes that we are at now, it takes longer than anticipated to grow Pepaxti. So we did have a double-digit growth and a fair growth, but not to the level of 30% to 40%. And this, together with that we actually had very limited orders from Greece in the fourth quarter. It's a small market, but it's a volume market. So we count on getting some volumes every quarter. And the volumes in Greece, they were pushed at large into 2026 because of budget constraints from the authority that is actually ordering and paying Pepaxti from Germany to Greece. So all of this together concluded decreased sales and made us realize that we will not be able to reach the cash flow positive target in 2026, but we have pushed it to 2027. So I hope that, that was a detailed answer enough for you to get a better understanding. And then if we look at 2026, we are obviously working very hard and we are very active in all of our markets to ensure that we grow as fast and as strong as possible. Henrik Bergentoft: Thank you. Can you give an accurate description of what your go-to-market and sales strategy is beyond working with partnerships, considering the weak results from the partnerships, one would expect Onco to be more hands on in the sales process considering you know the product best? Sofia Heigis: Thank you for that question. So I would say that we have different types of partnerships, and I would like to describe them. We have a partnership in Greece that is working very well. That is a commercial partnership. The Greek team is very close to Oncopeptides team and the market was very well prepared because the investigators or the physicians in Greece had experience from Pepaxti. We have a similar situation in South Korea, where the investigators or the clinicians have had experience from Pepaxti and they are actually currently using Pepaxti in early access. But in South Korea, we have the regulatory process to pull through, both to kind of apply for orphan drug designation as well as pulling through the regulatory process and market access process. And that is what our partner is working on currently, and that's a lengthy process and why you don't see any sales from South Korea at this time point. When it comes to the rest of the world, I would agree that I would have hoped to see more demand even if we have complex geographies like Africa or Middle East. But it has taken time for our partners to kind of convince and get a good understanding for their experts that had no understanding of the PDCs whatsoever. We are starting to work up an interest, in particular in the Middle East. There is an interest in Africa, but in Africa, the payer situation is very difficult. So several patients have kind of been rejected in Africa from a payer perspective. So -- and the reason why we are not doing this alone, but we have chosen to go for a partner in the rest of the world. And of course, to your point, we will assess your partner to see if it's the right partner over time. But for us, it would take a lot of resource and effort to build that kind of prelaunch understanding and demand. And then we rather focus those resources based on the size of the company to the markets in Europe where we actually do have price negotiated and can drive sales. Henrik Bergentoft: Thank you. Two questions on the same topic, and you addressed it in your presentation, but can you say something else about the partnership with Japan potentially? Sofia Heigis: Well, I think I said what I can say. The time line is a bit longer than we had anticipated. Usually, you kind of aim to close a deal like this in a year, but it's at large out of our control on our partner side. So we can't control their internal processes, their internal decision-making and their internal strategic kind of priorities. So we do believe we have a very good partner that we are discussing with. But I wish I could give you a time line, but I unfortunately can't because it's really out of our control. But we are, of course, doing everything we can to push this and supporting them with all the information they need to have from us. Henrik Bergentoft: Thank you. And with that, back to you, Sofia, for concluding remarks. Sofia Heigis: Thank you so much. So thank you to everyone who has been attending this investor conference. I know there has been a lot of information shared today as we are entering 2026 with focus on Europe, of course, on our geographic expansion, but we also see very exciting pipeline advancement that I really wanted you to get a better understanding of because these opportunities can really take Oncopeptides from being, in a sense, a quite niche player with the European commercialization to becoming a big player with several indications for the PDC platform beyond multiple myeloma. So thank you for your patience, for listening in all this time. And of course, should you have any more questions, just reach out to us. And by that, I wish you a very nice day.
Operator: Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q4 2025 Results Presentation Webcast and Conference Call. At this time, participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Bruno Morand, CEO. Please go ahead. Bruno Morand: Good morning, and thank you for participating in Borr Drilling Limited fourth quarter earnings call. I am Bruno Morand, and with me here today in Dubai is Magnus Vaaler, our Chief Financial Officer. First, covering the required disclaimers, I would like to remind all participants that some of the statements will be forward looking. These matters involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements. I, therefore, refer you to our latest public filings. For today’s call, I will start with a review of Q4 and highlight key developments since the quarter end. Magnus will then review our quarterly and full year financial results. I will follow with a deeper look into the commercial execution and we will conclude with some comments on the business outlook. Let us get started. Before going to the results, I would like to take a moment to recognize our teams around the world. During the fourth quarter, several of our rigs achieved noteworthy safety milestones. That includes the rigs Idun and Grid, reaching six and three years LTI free respectively, and the rigs Gunnlod and Gerd reaching one year incident free. Additionally, we are proud to highlight that our rig Arabia 3 has received an award from Aramco’s offshore department for the rig with the best safety score in 2025. These achievements underscore the team’s commitment to safety and I would like to take this opportunity to thank each member of the Borr Drilling Limited family for their efforts. Now into the results. Our operational performance in the fourth quarter was solid, with technical utilization of 98.8% and an economic utilization of 97.8%. Fourth quarter operational revenues totaled $259,400,000. Adjusted EBITDA of $105,400,000 came in line with our expectations, bringing full year adjusted EBITDA to $470,100,000 at the top end of the guidance range. This performance underscores the resilience of our organization navigating several headwinds in 2025 while delivering strong operational and financial execution. Our fleet contract visibility continues to improve as we reduce remaining open days. Recent awards and extensions have increased 2026 coverage to 80% in the first half and 48% in the second half, including the recently acquired rigs. Since our last quarterly report, we secured new commitments for seven rigs and expect further coverage gains in the coming months as we progress negotiations on multiple active leads. We believe the jackup market bottom is behind us now, and we see fundamentals recovering gradually as demand increases. Most notably, in the Middle East, multiyear tenders are in progress for an estimated 13 rigs. In Mexico, we are seeing better visibility of payments and a more positive operating outlook. These improvements are being supported by financial measures introduced by the government, while at the same time, Pemex announced plans for a 34% year-on-year increase in upstream CapEx and reaffirmed its mandate to raise production. Overall, modern jackup market utilization remained steady at approximately 90%. Standards are awarded, available supply is absorbed, we expect market conditions to firm. Against this backdrop, we are pleased to have expanded our fleet through the accretive acquisition of five premium rigs from Noble. These rigs are highly complementary to our existing portfolio, and well suited with the capacity to pursue near-term opportunities. Integration is in progress, and ahead of expectation. Looking ahead, market dynamics are setting the stage for improvements in 2026, and a recovering day rate and earnings visibility into 2027. But before I add color to this, I will hand the call to Magnus to discuss our financial results. Thank you, Bruno. I will now go into some details of the financials of the fourth quarter. Total operating revenues were $259,400,000, a decrease of $17,700,000 or 6.4% from Q3. This is mainly explained by a $16,000,000 decrease in dayrate revenue primarily due to rigs transitioning into contracts with lower dayrates. Activity level in terms of total number of operating days stayed even over the two quarters. A decrease in variable charter revenue explains a further $3,100,000 decrease primarily due to the Gerd’s end of contract and its planned transfer to a contract in Angola. These decreases are offset by a $1,400,000 increase in O&M revenue. Total operating expenses for the fourth quarter were $192,100,000, an increase of $13,200,000 or 7.4% compared to the third quarter. The increase in cost was primarily due to an $11,600,000 increase in rig operating and maintenance expenses attributable to increases in personnel costs, accelerated amortization of deferred cost for the rig Hild, and reimbursable expenses. Overall, for the quarter, we recorded a net loss of $1,000,000, adjusted EBITDA of $105,200,000. Looking at full year 2025, net income was $45,000,000, and full year adjusted EBITDA came in at $470,100,000, a decrease of 7% compared to 2024. Moving into cash. Cash increased by $151,900,000 in comparison to the prior quarter, and is primarily driven by the following: $34,800,000 cash from operations, which is after $94,700,000 of interest payments and $8,800,000 of cash taxes paid. We spent $52,100,000 in investing activities consisting of $36,000,000 deposits for the five-rig acquisition and $15,900,000 additions to jackup rigs. Lastly, cash from financing activities was $169,200,000 consisting of SEK 159,300,000 net proceeds from the foundations, $80,300,000 net proceeds from share issuance, net of provisions cost, offset by $70,800,000 repayment of debt in the quarter. The company’s cash and cash equivalents as of December 31 were $379,700,000. In addition, we have $234,000,000 of undrawn revolving credit facilities resulting in total liquidity of $613,700,000. It is worth noting after year-end, we completed the five-rig acquisition from Noble and paid $174,000,000 in cash consideration in January. The remaining consideration was settled by way of a $150,000,000 letter of credit. We are very pleased with the five-rig acquisition and the accompanying capital market transactions we concluded in December. We completed an offering of an additional $165,000,000 of bonds due June 2030, issued as part. In addition, we completed an equity offering raising gross proceeds of $84,000,000 for the same purpose. Both transactions saw very high investor interest and were significantly oversubscribed. In December, we also made the first steps to return to the Oslo Stock Exchange through listing on the Euronext Growth. This decision was made after seeing high investor interest from the Norwegian and European investor base in addition to strong following by Norwegian sell-side analysts. We are planning on a full uplisting to the main list on Oslo Stock Exchange in 2026. I will now turn the call back to Bruno. Thank you, Magnus. We have been busy on the contracting front to start the year. Year-to-date 2026, we secured five new commitments adding approximately $145,000,000 to our backlog. Together with the two contracts we secured in December, these mark seven new commitments since our last quarterly report. I am pleased to see both short and long-term commitments in this mix. Filling idle space in our 2026 schedule remains a key focus, while at the same time, we are mindful of positioning our fleet to capitalize on improving market conditions from late 2026 and onwards. I will now spend time discussing the commitments we secured since the last quarterly report. In the Americas, the Rán received the one-well extension with Eni in Mexico. The well has an anticipated duration of 75 days keeping the rig on firm contract through March 2026. Eni remains a core customer of ours in Mexico and globally. Ongoing engagements leave us reassured that we will have more positive news soon for the Rán. Additionally, the Odin secured a contract for two wells plus an optional well with an undisclosed operator in the United States. The campaign is expected to commence in July 2026 with an estimated firm duration of 120 days. As a result, Odin is now committed into November, with options that could keep the rig utilized in the United States through mid-2027. Staying in the Americas, today, we announced a two-year contract extension for the Njord in Mexico, keeping the rig committed into 2028. This extension highlights the strength of our business in Mexico, a market that remains critical to the jackup industry. Moving to West Africa, the Njord secured work with Eni keeping the rig busy through the end of this month. The rig is scheduled to move to Nigeria in early Q2 to commence its 11-month contract with Shell. In Asia, Brunei Shell extended the Saga contract by an additional five months. The Saga is now committed into April 2027 with an additional one-year option remaining available under the contract. In Thailand, the Idun secured a 75-day extension with PTTEP, extending its commitment into the second quarter of this year. And finally, in Vietnam, we have entered into a contract with Thang Long for the Gunnlod for a one-well campaign anticipated to commence in May. The well has an estimated duration of 70 days and should place the rig well to find follow-on work in the region. I remain proud of the continued contracting success which is a testament to our strong customer relationships and ability to deliver reliable and exceptional operational performance day in and day out. Now looking ahead, as of today, our 2026 fleet coverage stands at 64%. With the inclusion of five newly acquired rigs, our coverage for the first half of the year currently sits at 80%. As a comparison, before factoring these new rigs, this coverage figure would have been approximately 85%. Based on current customer engagements, we are confident that in the coming months, our fleet will continue to secure commitments and bring our contract coverage above 70%. On a full-year basis, we see a pathway that allows contracting days in 2026 to modestly exceed the number of days achieved in 2025. In parallel, and as noted by various industry analysts, tender activity is entering levels not seen since January 2023. According to information from Petrodata, there are approximately 120 rig-years in the tender and pre-tender phase for opportunities commencing within the next 12 months. And based on operator schedules, we anticipate that a meaningful amount of these will be awarded by mid-2026. Should this materialize, we believe that several of the awarded rigs will need to undertake lengthy contract preparations leading to a boost in utilization from this year. Noting the strength of the tendering pipeline, coupled with current utilization levels, we remain optimistic that the foundation is set for positive momentum as we progress to 2026. To close, I would like to reiterate key points around our 2025 execution and leave you with some thoughts on the business outlook. At the beginning of last year, we indicated we were comfortable with consensus for full-year adjusted EBITDA that stood at $460,000,000. During the year, however, we faced unforeseen headwinds including temporary contract suspensions and sanction-related contract terminations. We responded by leaning into the Borr Drilling Limited platform, which continues to be our competitive advantage. We filled the white space through close customer relationships, deep market knowledge, and our track record of safe and reliable execution. As a result, we delivered full-year adjusted EBITDA of $470,000,000 which was at the top of our final guidance range. Further, in 2025, we took decisive action and completed successful equity and debt transactions that strengthened our liquidity position and positioned the company to pursue consolidation opportunities. Then in December, we announced the accretive acquisition of five premium jackups. We acted opportunistically and bought these assets at an attractive price at a point in the cycle when demand is improving. We expect the transaction to be immediately accretive to adjusted EBITDA and to reduce our debt per rig. Looking ahead, we expect market conditions to continue improving through 2026, with ongoing dynamics supporting a clear recovery in dayrates in 2027 and beyond. Our expanded fleet will provide good scale and operational flexibility, positioning Borr Drilling Limited to deliver long-term value to our shareholders. We will now open for questions. Operator: Thank you. Once again, please press 11 for any question and a follow-up so that everyone is given the opportunity to ask their questions. Please standby while we confirm the Q&A roster. This will take a few moments. Thank you. We are now going to proceed with our first question. The question comes from the line of Scott Gruber from Citigroup. Please ask your question. Scott Gruber: Yes. Good morning. Appreciate all the detail this morning, and the tendering pipeline boost is certainly encouraging. I am curious on the outlook of the two acquired rigs that are idle, the Sif and the Freya. Do you have any line of sight to securing contracts on those two? Bruno Morand: Hey, Scott. Great to have you online, and thanks for the question. Indeed. Great question. We are looking at a pipeline of opportunities for both rigs. What is interesting is, as I said in the remarks, I think the capability of these rigs is very well suited for the pipeline of tenders that we referred to. At the moment, we feel quite confident that the Sif will have a contract for it in the coming months that will put the rig back into the operating fleet in relatively short term. In the case of Freya, I do think that it may take a bit longer, but as I said, the pipeline in the second half of the year continues to strengthen, so I would think about that rig probably going to work sometime in 2026, potentially early 2027 depending on the scope it is assigned to. Scott Gruber: Great. And apologies. I jumped on a minute late, so apologies if I missed this. But just thoughts on how EBITDA shapes up during the year. Consensus is close to $440,000,000. Just some initial thoughts on the achievability of that level of EBITDA? Bruno Morand: Yes, for sure, Scott. I think at this stage, still probably a bit too early for us to provide kind of a formal guidance. What I can share, as I say, is that the outlook continues to improve and the team is working really hard to make sure that we derisk and cover the days in 2026. What I will share, which is not far from what I mentioned during the last call, the outlook for 2026 right now seems to indicate that we should be able to achieve, or we have a pathway to achieve, an activity level in contracting days that is modestly higher than 2025. And when I say that, I am referring to a 24-rig to 2024 rig, with the Noble-acquired rigs or the recently acquired rigs being an upside to that. So I think that is the simple way to think. Activity level will track slightly higher than it did in 2024. Now let us see how the rates mature in 2026, particularly in the second half. And that should leave us in a position to provide better guidance in the coming quarters. Okay. Scott Gruber: I appreciate the color. Thank you. I will turn it back. Bruno Morand: Thank you, Scott. Operator: We are now going to proceed with our next question. The question comes from the line of Craig Rosie from BTIG. Please ask your question. Craig Rosie: Yes. Hey. Thank you, and good afternoon or good morning, and thanks for taking my questions. Bruno, I did have kind of a question around what you are seeing in the Middle East. I mean, clearly, part of what drove the last or the more recent softness in the market was the laying down of rigs and just kind of a slowdown in overall Middle East activity. There have been some rumblings about tenders coming to market for some time now. Any sense for when we could actually see some of these talked-about tenders in the Middle East actually, not have the rigs start working, but when we could start seeing maybe some rigs be contracted around some of that? Bruno Morand: Yes. No. And thanks for joining, Craig. Very fair question. When we were talking about some of these tenders in the fourth quarter, in our November call, we were looking at that, anticipating them to be out. At the moment, the larger ones that we were expecting, including Aramco and KJO, are in progress. And in fact, KJO is in full tender evaluation from what we understand, and the Aramco tender submission phase. This is very actual. This is very real, very tangible. There are a few more prospects in the region that we have been expecting to come to the tender pipeline, including KJO, which is not yet fully developed. But that should come in the next couple of months, we would think. As I mentioned earlier in the call, the outlook at the moment, based on the conversations that we have had with our customers, is that they should be planning to award sometime around midyear, maybe some of it earlier, some slightly later. But by midyear, I think that visibility will have formed quite nicely. So that is one of the reasons why we feel excited. There is a large volume of work coming from those tenders, and it is probably worth highlighting that not all of it, but a portion of these requirements not only are large volume, but they require very specific technical capability. Right? And we feel the fleet that we have, particularly with the recent acquisitions, places us well to evaluate, and we will see. They are long-term tenders. For us, it is a very interesting body of work. But it has to make sense from a commercial standpoint as well. In any case, once that volume gets absorbed in the market, whether directly awarded to us, Borr, or just to the peer group, it will put a lot of tightness in the market, which I think is what everyone is looking forward to. Craig Rosie: Okay. Super helpful. Thanks for that, Bruno. And hey, congrats on Noble, on those rig acquisitions. Clearly, not transformational for the fleet, but definitely gives you a nice boost. It does look like we are at an inflection point or the cycle is turning. And I guess what I am kind of curious about is how you think about, and is there room where the fleet is today to potentially acquire more rigs? And really, I do not know how deep you want to get into that conversation, but I am kind of curious around, I mean, it is not Keppel anymore. It is, I guess, they call it Sembcorp Marine. You know, they still have some rigs that, you know, I guess they are operating some jackups from previous orders from other customers. They have these rigs. Is there any kind of, when could we see these rigs? Or, I mean, are they being, do you have any sense for if these rigs are being actively marketed for sale? And yeah, I mean, I guess that is kind of it and kind of, you know, where we kind of think pricing is now for a premium rig. Bruno Morand: Very good, Craig. Let me tackle maybe the question on the Sembcorp rigs first. And when you said rigs, I understand that there is one of them that had been operating with Aramco before and was returned to the yard. I think the rest of them are either committed through BBCs or have been sold. I think it is probably fair to assume that a rig gets offered in the Middle Eastern tenders. If it is a rig that was around 2014, and it has specifications and complies with the requirements, I would expect that rig to eventually be offered in a tender. From experience, we know that the Singaporeans are not really in the business of selling rigs cheap, and they probably see the market responding, and they will have expectations. So I am not sure if they get sold, but I do expect that there will be people looking at those rigs and trying to place them. Now on the broader M&A picture, the answer that I have for you is probably not very different than what we said in the call in the last quarter. I think we have an operating platform that is very well recognized around the globe, including very well recognized by our customers, and that gives us a chance to look into M&A opportunities and see how we strengthen the platform further. For us, we continue to think about consolidation very selectively. It is not consolidation and growth for the sake of growth. We would have to look at something complementary to our fleet, and I think less likely to be looking at individual asset things. We want to see things that could potentially help us continue to transform and consolidate the sector. Now we said it before with 24 rigs, and I have to emphasize again now with 29. We think we have a very interesting fleet size. We have scale in pretty much every key market around the globe. So growth is something that we will look at opportunistically. But I do not think it necessarily composes a core to our strategy. I think we have a good operational platform to do so if the opportunity comes, but we will look at that very opportunistically. Craig Rosie: Super helpful. Thank you very much. Operator: We are now going to proceed with our next question. The question comes from the line of Fredrik Stene from Clarkson Securities. Please ask your question. Fredrik Stene: Hey, Bruno. Magnus. Hope you are well. And as always, thank you for being prepared remarks. I wanted to dig a bit deeper into what is going on with the market at the moment, and I think we have a shared view that it is exciting times. Tenders are up. And utilization will likely point upwards as well. And on the back of that, I was hoping you could give a bit more color on how you kind of specifically see, you know, rate development trajectory going forward. Typically, there will be, I guess, first you will see the tenders, then you will see the awards, and then you will see the dayrates. So any color on when you think we will see this higher activity level starting to really make an impact on bidding levels across the globe. Bruno Morand: Yes. Fair question, Fredrik. And what we have seen over the last, and we have been very open about it in the last few months, is that rates have been walking in most regions a bit sideways. I think in some regions like Asia, maybe a bit downwards a little bit, but it has been fairly contained. For us, the way we think about 2026 at the moment is utilization is obviously in the forefront, particularly for opportunities that we have that are short term in nature that help us fill the gaps, help us derisk the execution during the next year. Now what is the date for the market to change? You are absolutely right. I think fixtures come first, then rates come second. As we said, a large volume of the work that is in the tender pipeline at the moment is driven by the Middle East. We currently anticipate that these awards will start coming out during the second quarter, midyear, thereabouts. And what is interesting, as I mentioned in the prepared remarks, is that Middle East tenders generally require a fairly lengthy preparation process for the rig. So it basically means that once we see awards coming through, those rigs are effectively out of the market for a given month and until they actually can be deployed. So I expect that the pricing dynamics start to progress once those tenders conclude, or shortly after those tenders conclude, which would imply that we are looking at, you know, Q3 is when we will probably have better visibility of those dynamics playing out. That is my best guess. As I said earlier, for 2026, the name of the game for us is really derisk the outlook, make sure that the fleet is occupied. I think 2027 is when we turn our focus again very sharply into economics and rates. Fredrik Stene: That is very clear. And just to follow up on that, and I guess you kind of partially answered it, but in terms of recontracting your fleet now, while I definitely appreciate that 2026 is a utilization game for you, do you have any kind of strategy around what type of contract length you would go for at the current time? Are you on short contracts to reprice when the market starts accelerating again, or do you still want to have a base load of longer-term contracts if and when they are available? And I would like, as a side question to that, since the current Middle East tenders are long in nature and I would assume that you would be interested at least in some of them, are there any changes to Saudi Aramco contracting terms, you think? Obviously, we are referencing suspension ability for the Kingdom as we saw two years ago. Thanks. Bruno Morand: Yes. So let me break it down here, Fredrik. To your first part of the question, with a 29-rig fleet, we obviously have to have a mix of short and long-term contracts. It is obviously important that we have a baseline of backlog. Clearly, as we have regions where dayrates push closer to cash cost or cash operating cost, we do not want to be securing these contracts long term, and we are looking for opportunities to close gaps as best as we can. Some other regions where margins are still a bit more stretched and more interesting, we are obviously more flexible in extending the term of the contract a bit longer. And that depends a lot on the opportunities. There are regions that could be a bit more competitive at times, but certain tenders within that region have particular requirements that are well suited for the fleet, and we look into how we optimize these things. So there is obviously a quite strong combination of flex factors playing out at the moment. Now in terms of the second question on Aramco, yes. The tender is still ongoing, so let us see where we land. It does seem that in the tender documentation, Aramco has made some of the terms a bit more flexible, particularly some of the provisions around termination that were of concern since the last round of suspension terminations. And they indicated some flexibility to discuss a few terms, I think mainly on the technical side, maybe not so much on the commercial side, but they did indicate some flexibility to discuss. So let us see how the tender progresses and where we land in that discussion. Fredrik Stene: Alright. Thank you very much. Bruno Morand: Have a good day. Thank you, Fredrik. Operator: We are now going to proceed with our next question. The question is from the line of Charles Olson from DNB Markets. Please ask your question. Charles Olson: Thank you. Good afternoon, Bruno and Magnus. A couple of questions for me, starting off in Mexico. You collected a bit, call it, extra from Pemex or OpEx, if you will. Now you are obviously confident about more regular payments coming from Pemex or Mexico this year. How should we think about this? And what is the current level of outstanding on your balance sheet? Bruno Morand: True. Thanks for the question. I thought we would go the whole call without a question for Magnus, so I will let him take this one. Magnus Vaaler: Yes, thanks, Bruno, and Charles. Yes, as we said, we have seen that payments from Pemex have picked up over the past quarter, and we actually received around $46,000,000 in total in the fourth quarter. We estimate we had around $90,000,000 to $100,000,000 outstanding at the end of the quarter. Also, in January, we received a further $23,000,000. So that is bringing the outstanding balance further down. So I think this is very positive to see. We see also peers, the companies reporting normalization of collections. And indications we have from Mexico is that it will continue into 2026 and that they are preparing for a new payment plan with the government to tackle 2026 invoices. So I think we are positive about the development. I think also, as we noted in our previous contracting update, the contract extensions for the Galar and Gersemi include improved payment terms with our counterparty. So we are guaranteed to have payments of operating costs within 45 days and no more than 180 days of outstanding variable hire. So we are also improving on the terms towards our counterparty. Thanks. Charles Olson: That is great to hear. And I would expect those terms to be included on the rig and the letter of intent as well? Bruno Morand: No. No. True. I think the rig that got extended right now continues on the historical contract structure, which is on a pay-when-paid basis. However, as Magnus pointed out, we do have encouraging signs that payments will reach a better normalization going forward. Charles Olson: Okay. Okay. Thank you. Good to hear. On another topic, and obviously, it is boring to talk about dayrates, but it ultimately remains important, if you will. I mean, the spread seems to be very high at the moment, obviously, Asia, Middle East being more competitive than West Africa. Are there other moving parts to think about? I mean, you talked briefly about terms you are discussing or are being discussed with Aramco, if you will, in terms of that tender batch there. How do you see that sort of progressing or moving elsewhere? Bruno Morand: Yes. And I think that the dynamics in our contracting is always very fluid. We are always kind of pushing and pulling on terms and conditions of the contract with the customers. So it is normal through the cycle. I would say that today, there is not a huge focus from our customers in trying to renegotiate terms. I think that the terms have been fairly solid in the cycle so far. The discussion has obviously been a lot about rates. And as you pointed out, in some regions there is a bit more competitive pressure, some other less pressure. If I look at regions like the North Sea, for example, they have very well-established frameworks for contracting. I do not think that we have been spending a huge amount of time revisiting provisions with the customers. Keep in mind that we very frequently are talking about customers that are repeat customers for Borr, and we do have a well-established framework in these contracts. So that takes a little bit of the pressure in negotiating terms both on our side and the customer side. But inevitably, there is always a commercial push and pull while the negotiations mature through the cycles. Charles Olson: Understood. Thank you. And the final one for me. As we think about those rigs that you currently have not secured any work for, the one which perhaps stands out a bit more than the other ones is the Var. Should we think about that as probably the last one to find work, given that it has been inactive previously or coming from yard, if you will? Bruno Morand: Yes. I think it is a fair statement, Charles. The thing when I look at the pipeline and the things that we are pursuing at the moment in near term, I would think or hope that we will have commitments for the Hild and the Sif. They have been operating until recently. We have a pipeline of opportunities for them. That is the most obvious movement in the near future. I do think that the Var and the Freya are rigs that will probably come a bit later, probably back into this year, early next year, with some focus on some of the developments in the Middle East that will likely create a catalyst to deploy those rigs, but that is probably a fair way to think about it. Charles Olson: Understood. Good stuff. Thank you, guys. Keep up the good work. Bruno Morand: Thank you. Operator: We are now going to take our next question. The question comes from the line of Joshua Jain from Daniel Energy Partners. Please ask your question. Joshua Jain: Thanks for taking my questions. First one, I just wanted to follow up on Scott’s question a little bit. As you talked about an asset that is stacked potentially coming back to work, are you thinking about requirements from a return perspective in an initial contract to get a rig up and running today after it has been stacked? You could just elaborate on that a little bit. Bruno Morand: Yes. Thanks, Joshua. And the answer to your question may vary a little bit from rig to rig. I am thinking in our case, except for the Var, all of the rigs have either been working until recently or are rigs that would be rolling off contract. At this stage, we do not expect any meaningful CapEx in putting those rigs to work. The Var would probably require a bit more, probably somewhere close to $56,000,000, somewhere in that ballpark. So for the rigs that require little CapEx, the calculation becomes a bit easier. And it is probably less a question of just off-the-gate economics and more a balance of the opportunity pipeline. We certainly do not want to have a rig going back to work to just work for a short amount of time and then come idle again. It kind of defeats the purpose, and it hardly ever generates sufficient economics. So balancing between feasibility of a pipeline and rate is obviously significant. But for the fleet that we have at the moment, the CapEx component, reactivation component, is not a big factor because, as I said, these rigs have either been operating until recently or are rigs that are normally rolling off contract as we go along. Joshua Jain: Thanks for that. And then I am going to ask the Venezuela question, I guess, a little bit differently. Any thoughts on what you are seeing and hearing there in the region? And if things are calmer there or quieter, just given geographic proximity, does that further open up Trinidad, Colombia and Guyana a bit more for the shallow water market? Maybe you could speak to that a little bit. Bruno Morand: Yes. And Trinidad has been a fairly busy jackup market over the years. There are still some opportunities around there. Suriname, there have been a few opportunities in discussion. It is mostly exploration work, and some of it is a bit further in the future. Colombia has had some work in the past and has been quiet. I do think that as things calm down in the region, some of the operators may be a bit more compelled to go. Do I see a near-term large volume of rig requirements in the region? That is probably not the way I would put it. But I think the moment you start getting a couple of jobs in places like Suriname and Colombia, then it starts to become interesting to see how you can put a scope together that supports a rig. Generally, it is a region that requires rigs with larger capabilities, which is obviously very interesting for our fleet. I would not think that it is a large play. Joshua Jain: Understood. Thanks for taking my questions. Bruno Morand: Thanks, Joshua. Operator: Thank you. That concludes the question-and-answer session. I will now hand back to Mr. Bruno Morand for closing remarks. Bruno Morand: Thank you. That concludes our call. We appreciate the interest in the company, and I look forward to speaking to you again next quarter. Operator: This concludes today’s conference call. Thank you all for your participating. You may now disconnect your lines. Thank you.
Graham Chipchase: Good morning, everyone, and thank you for joining our presentation of Brambles' First Half results for the 2026 Financial Year. Today, I'll be sharing the highlights of the first half, a detailed look at the operating environment as well as our progress against our strategic priorities. I'll then outline our revised outlook for FY '26 before handing over to Joaquin to take you through the financials in more detail. Let's start with our first half performance highlights. Our first half result reflects the resilience we've built into the business and our disciplined execution on factors we can control to drive efficiencies across our operations and improve the customer experience. We achieved sales revenue growth of 2%, with strong net new business growth offsetting consumer demand pressures on like-for-like volumes and pricing recovering cost to serve increases. Underlying profit was up 7%, reflecting meaningful operating leverage driven by supply chain and overhead productivity improvements, together with disciplined cost management across the business. Higher earnings and sustained improvements in asset efficiency delivered robust free cash flow before dividends of USD 482 million. As a result of this strong cash flow generation, we are pleased to declare an interim dividend of USD 0.23 per share, up 21% on the prior corresponding period. Our strong financial performance has enabled strategic reinvestments to strengthen our customer and investor value propositions over the long term. Chief among them are enhancements to the customer experience, encompassing platform quality, service reliability and responsiveness. These improvements continue to position us as the partner of choice for existing customers, while supporting considerable new business momentum in all regions. Customers are also benefiting from our ongoing focus on collaboration to drive efficiencies across their supply chains alongside productivity improvements in our own operations. Together, these initiatives are making our business more agile and ensure we deliver strong value for customers relative to alternative solutions. The FY '26 on-market share buyback is on track for USD 400 million by the end of June 2026, with USD 191 million of shares purchased during the first half of the year. Finally, we are proud of our ambitious 2030 sustainability program launched in September last year. The program guides the next phase of our regenerative ambition, building on our success to date, while extending our focus on nature and deepening our net positive impact across the value chain. Let's turn now to the key operating dynamics and their impact on our business in the first half. Our operating environment was characterized by moderating rates of inflation and challenging consumer demand conditions across key markets. Inflationary pressures were modest and primarily driven by labor and transport, while fuel prices remained stable. Lumber prices were varied across regions, while the average capital cost of a pallet for the group, excluding mix, was broadly aligned with the first half of FY '25. Against this backdrop, our price realization reflected modest increases in the cost to serve with inflationary pressures tempered by the efficiencies and benefits we generated across customer supply chains and our own operations in the period. This included benefits from the overhead restructuring program we announced last year, which positioned us well to manage the impact of the demand headwinds we experienced in the half. Consumer demand remained weak, particularly in the U.S. and Europe due to ongoing cost of living pressures and increasing labor market uncertainty with the U.S. further affected by a prolonged government shutdown. As a result, pallet volumes with existing customers declined across both markets in the first half. We also saw lower like-for-like volumes in Australia as retailers and manufacturers reduced inventory levels in response to normalizing consumer demand patterns and stable supply chain dynamics. Importantly, there was no material inventory optimization in other key markets, where optimization largely occurred during FY '23 and FY '24. Despite softer demand from existing customers, our overall volumes were supported by continued success in winning new business, building on the momentum established in the second half of FY '25 and reflecting our sustained investment in sales capabilities and a compelling customer value proposition. As automation becomes more prevalent across supply chains, customers are increasingly recognizing the quality, reliability and efficiency benefits Brambles and its platforms can offer in navigating complex operating environments. Broader market dynamics in Whitewood, including price increases and challenges to the availability of quality recycled pallets in the U.S. during the first quarter also supported new business conversions in the period. From a cost perspective, we continue to see increased costs driven by excess pallets in the U.S. and inventory optimization in Australia. These included incremental transport costs in both markets, while the U.S. continued to incur storage costs and additional repair activity due to ongoing increases in pallet damage rates. Finally, we ended the period with approximately 4 million excess pallets in the U.S., in line with levels at the end of FY '25 as softer consumer demand conditions and pallet inflows from Latin America meant surplus plant stock was not absorbed as quickly as anticipated for the half. However, we still expect to return to optimal plant stock levels by the end of the first half of FY '27. Turning to our Brambles of the Future strategy and the progress made in the half. Delivering an effortless customer experience remains a core pillar of this strategy, and we are pleased with the ongoing improvements across key customer metrics, including reducing the time for complaints resolution and improving our performance in both the delivery and collection of pallets. This contributed to a 9-point gain in our Net Promoter Score against the first half of FY '25, which has also been supported by our ongoing investment in pallet quality to help meet the evolving requirements across customer and retailer supply chains. Initiatives, including incremental repairs, enhanced quality checks and audits and automated end-of-line inspections are all helping to ensure quality remains a core part of our customer value proposition. We continue to make steady progress in digital and data to build solutions that ultimately drive efficiency and connection by illuminating supply networks to solve supply chain problems. Our portfolio of digital customer solutions, including proof of delivery, reusable asset optimization and end-to-end fresh continues to gain momentum as we scale pilot programs and engage additional customers during the first half of FY '26. We now have engagements with a wide range of retailers, manufacturers and fresh producers spanning 9 countries, including the key markets of the U.S., the U.K., Spain and Australia. Within our own operations, our focus is on building a leaner, more agile circular model that can set new standards in safety, efficiency and resilience and to do that at scale. This starts with safety, where we delivered meaningful improvement against key measures. Our sustained commitment to a safety-first culture has translated to a lost time injury frequency rate improvement of 38% against the prior corresponding period. At the same time, our supply chain initiatives ranging from procurement, transport and plant network optimization and operational excellence have supported an 80 basis point margin improvement. We have also steadily progressed our Plant of the Future program, which includes our long-term ambition to develop touchless repair capabilities and identify opportunities for the integration of modular technology across our service center network. Finally, we are progressing our regenerative ambition to build supply networks that deliver positive outcomes for the environment, communities and economies. We recognize that in applying regenerative principles to meaningful areas across our operations, we are working at the forefront of sustainability strategies. As a result, our early focus has been on developing a road map with stakeholders throughout the business and in collaboration with leading nongovernment organizations to deliver our 2030 targets. This includes leading-edge metrics and measurement systems that help drive and track our net positive impacts, while ensuring we maintain credibility and the confidence of all stakeholders. Among early achievements of our 2030 program has been the continued steady progress in decarbonization with a 5% reduction in our Scope 1 and 2 emissions, while we lowered Scope 3 emissions by 1%. Our leadership in sustainability continues to be recognized externally. We are proud to have retained CDP's maximum A-List rating for both climate change and forest, while also achieving global top employer certification for the fourth consecutive year. Turning now to an update on our Serialization Plus program, which has the potential to deliver significant incremental value across all pillars of our strategy. In Chile, our pilot market for Serialization Plus, the focus remains on delivering value to our customers through the end-to-end visibility of supply chains enabled by our pallets. In the first instance, this is about offering a new effortless service offer that significantly enhances the customer experience by removing the burden of pallet declarations and audits. At the end of the first half, 95% of customers have converted to this effortless service offer, and we remain on track to convert the remaining customers to this model by the end of FY '26. At the same time, we continue to systematically explore additional sources of value Serialization Plus can unlock for customers and our business, which I'll address in more detail on the next slide. Operational testing continued in North America and the U.K. as we seek to optimize the key cost and operational factors that are critical considerations for any future decision to roll out Serialization Plus in these markets. In North America, we continue to build the base read infrastructure across our service center network that underpins the Serialization Plus operating model. During the half, we instrumented an additional 10 service centers and remain on track to have read infrastructure in place to cover 2/3 of planned flows by the end of FY '26. We also took meaningful strides in reducing the cost of tags in the period. After trialing 48 different tag types in the half, we reduced tag costs by over 20% with exploration of further optimization opportunities underway. In the U.K., we continue to explore the feasibility of lower-cost tracking devices. Performance to date has been encouraging, particularly in how these lower-cost devices complement the autonomous tracking devices already deployed. Together, these technologies are expected to capture data and insights in a more cost-effective manner. Turning to Mexico. We are scaling our continuous diagnostics program by deploying our autonomous tracking devices with full functionality. While the primary benefits from continuous diagnostics is improved asset control and network visibility, we have also been encouraged by our early success in our end-to-end fresh subscription offering. Finally, we are leveraging our smart asset base in North America and Europe to enable new customer propositions. We are encouraged by the positive feedback received to date and look forward to further developing this offering to enhance the customer experience by reducing the administrative burden as well as expanding the lanes we can potentially service. Turning to the value insights from Chile this half. We continue to refine our understanding of value across the Serialization Plus scorecard outlined in August, which is guiding our efforts to prove out the value potential of Serialization Plus. From a customer experience perspective, as we have converted our customers to the effortless service offer, we have seen the number of transactional queries from customers reduced by 1/3 with the greatest decrease seen in audit-related cases. As one of the major friction points in our traditional pooling model, this result gives us comfort about the improved customer value proposition that Serialization Plus enables. On growth, the effortless service offer continues to facilitate new business growth in Chile with 5 new customer conversions and 2 lane expansions in the first half. Particularly pleasing was the fact all 7 customers attributed their decision to choose CHEP to the simplicity and benefits of the effortless service offer. For pricing, Serialization Plus continues to identify unauthorized reuse across the supply chain, providing opportunities for us to monetize this in line with the cost to serve. We know that by optimizing the cost to serve, including asset efficiency, we can deliver value for both Brambles and our customers. To advance this, we have released our first version of our Serialization Plus app. The app allows us to interrogate damage rates and cycle time in a visual manner, presenting us with the opportunity to partner with our customers to support asset performance in their supply chains. These insights are also being combined with additional data to identify leakage points across the network to improve asset efficiency. On generating value from supply chain insights, we are looking at our own service network to determine the benefits of being able to identify an individual pallet at additional stages of the integrated repair line, including understanding the additional efficiencies this can create. Secondly, we are trialing the ability to scan pallets at manufacturer sites to assess opportunities to optimize pallet reuse. We aim to further develop these capabilities in the second half to understand the value potential from these areas and other supply chain insights. Finally, I would also like to reiterate that any full market rollout is contingent on achieving the previously communicated hurdle of greater than 15% return on capital invested once the market pool is fully serialized. Let's turn now to our FY '26 outlook before I hand over to Joaquin for the financial overview. Based on our performance in the first half and expectations for the balance of the year, we have revised our full year guidance. We have narrowed our expectations for revenue growth to 3% to 4%, previously 3% to 5%. And this reflects our view that consumer demand is likely to remain subdued while also recognizing there is uncertainty in how sentiment evolves during the year. Our guidance for underlying profit growth remains unchanged at 8% to 11% as the anticipated supply chain and overhead cost efficiencies we expected at the beginning of the year accelerate in the second half, delivering operating leverage despite modest volume growth. We have upgraded our guidance for free cash flow before dividends by USD 100 million and now expect free cash flow generation of USD 950 million to USD 1.1 billion for the full year. This reflects reduced pooling capital expenditure in line with volume growth expectations alongside the rephasing of the automation and digital investments. We expect total dividends for FY '26 to remain in line with Brambles' dividend payout policy range of 50% to 70% of underlying profit. Finally, we remain on track to complete the USD 400 million on-market share buyback by the end of FY '26, subject to the full range of conditions customary for buybacks. I'll now hand over to Joaquin to take you through our financial performance in greater detail. Joaquin Gil: Thanks, Graham, and good morning, everyone. Before getting into the details, I wanted to touch on the key highlights of our first half performance. These were the strong new business momentum across our pallet businesses in the Americas, Europe and Asia Pacific as we continue to convert new customers away from the whitewood alternatives. Our ongoing commercial discipline that recovered cost to serve increases in the period, the continued focus on supply chain and overhead productivity, which delivered strong operating leverage with margins expanding by 1.1 points and the sustained improvement in the capital intensity of our business, which underpinned the strong free cash flow generation in the first half. Overall, our results highlight the resilience of our business as we continue to deliver on our investor value proposition despite like-for-like volume softness with total value created for shareholders of approximately 16%, including EPS growth of 13% and a dividend yield of 3%. Turning now to Slide 12, which provides an overview of our first half results. I will focus on our profit after tax and EPS performance here as I will address revenue and underlying profit in the slides that follow. Profit after tax from continuing operations increased to 11%, ahead of the 7% growth in underlying profit as lower net finance costs and a reduction in the hyperinflation charge more than offset the increase in tax expense during the half. Net finance costs decreased 7%, reflecting strong free cash flow generation that reduced the average balance of floating rate borrowings during the period. Despite a 3% increase in tax expense, our underlying effective tax rate decreased by 1 percentage point at actual FX rates, primarily due to the reduced impact of the base erosion and anti-abuse tax in the U.S. EPS growth from continuing operations increased 13% and included a 2 percentage point benefit from the on-market share buyback undertaken during the 2025 calendar year. Finally, our continued capital allocation discipline and focus on driving productivity improvements resulted in ROCE increasing 1.1 percentage points to 24.3%. Moving to Slide 13. Group sales revenue increased 2% in the half as continued momentum in net new business and ongoing commercial discipline to recover cost to serve increases more than offset the impact of weak consumer demand on like-for-like volumes. Price realization of 2% was primarily driven by price increases to recover inflation, mainly in labor. As you'll see throughout the presentation, price outcomes varied by region, reflecting local inflation and sharing cost-to-serve efficiencies and productivity benefits with customers, as Graham outlined earlier. Net new business growth increased 2% as the strong rate of new business wins achieved in the fourth quarter of FY '25 continued into the first half of FY '26. The Americas and European Pallets businesses delivered net new business growth of 4% and 2%, respectively, across quarter 1 and 2, providing an encouraging platform as we headed into the second half. Like-for-like volumes declined 2%, reflecting the consumer demand and inventory optimization dynamics Graham outlined earlier. Performance across all components of revenue growth was broadly consistent in both quarter 1 and quarter 2. In the second half of '26, like-for-like volumes are expected to benefit from cycling a weaker second half '25 comparative period. In addition, we expect some improvement in U.S. consumer demand in the remainder of the year, subject to prevailing market conditions. Turning now to Slide 14. Underlying profit increased by 7%, including approximately $15 million of one-off restructuring costs. Excluding these costs, underlying profit grew by 9% as sales revenue growth and benefits from supply chain and overhead productivity initiatives offset inflationary pressures and increased investments to enhance the customer experience and progress digital initiatives. Looking at the key drivers of profit growth, sales revenue growth contributed $72 million to profit, while North American surcharge income increased $5 million, in line with prevailing market indices for lumber, transport and fuel. Plant and transport costs collectively increased $19 million as cost savings of $73 million from procurement, transport and plant network optimization initiatives were more than offset by several cost increases across the group. These included input cost inflation of $53 million and costs associated with higher damage rates in the U.S., driven by increased asset utilization in line with improved asset control in the region. In addition, we also saw higher transport activity in the first half as we optimized pallet balances across North America and averaged a longer length of haul in Europe. IPEP increased by $1 million as continued asset control improvements in the Americas were more than offset by higher IPEP expense in Europe in the first half, driven by increased pallet loss rates and a higher first-in, first-out unit cost of pallets written off. The first half '26 IPEP expense also included a $5 million charge relating to the timing of audits in Europe, with a higher percentage of annual audits conducted in the first half of '26 compared to the first half '25. This is expected to normalize in the second half of the year. Other costs increased $5 million as cost management initiatives were more than offset by a reduction in asset compensations in Europe due to lower losses in compensated channels and increased scrap pallets in the U.S. due to the impact of higher damage rates. The overhead restructuring program was a net expense of approximately $1 million in the half as $15 million of costs were largely offset by the realized benefits of $14 million. Central transformation costs reduced by $8 million, reflecting the receipt of government research and development incentives relating to our digital program and the capitalization of Serialization Plus equipment in Chile following the successful customer adoption of the ESO. Turning now to margin performance on Slide 15. At our FY '25 results announcement, we revised our FY '28 margin expansion target to 3 percentage points plus, up from 2 points plus compared to the FY '24 baseline. As shown on this slide, we continue to make good progress towards this goal, delivering 1.1 percentage points of margin improvement half-on-half, and we remain on track to deliver our FY '28 margin improvement target. Several key drivers contributed to our first half margin performance, which I'll cover now. Supply chain productivity, measured by the group's net plant and transport cost to sales ratio contributed 0.8 percentage points to the improvement in margin. This was driven by cost savings from procurement, enhanced transport productivity and plant network optimization initiatives. Overheads and other cost productivity contributed 0.3 percentage points to margin improvement, reflecting the ongoing benefits associated with streamlining operations, improving processes, leveraging technology and reducing discretionary spend. Following a strong contribution to margin expansion in FY '25, asset efficiency remained stable this half and did not provide incremental margin benefit. This outcome reflects continued improvements in asset control in the Americas, driven by digital insights and enhanced data analytics, which offset the higher IPEP expense charge in Europe I outlined earlier. Turning to Slide 16. You can see the impact of asset efficiency improvements in stabilizing the capital intensity of our business, reflected in both the IPEP to sales ratio and the group's pooling capital expenditure to sales ratio. These outcomes demonstrate that the gains we have delivered in asset efficiency are structural in nature. The pooling capital expenditure to sales ratio remained broadly in line with first half '25 at 11.8% as the increase in pooling capital expenditure due to pallet purchase mix was offset by sales revenue growth. Pallet purchase units remained in line with first half '25 as higher volume growth in first half '25 was largely supported by the utilization of excess pallets in the U.S. in that period. There was no capital expenditure benefit from excess pallets in first half '26, given excess pallet balances in the U.S. remained in line with the FY '25 level. Growth and replacement requirements in the U.S. business in the first half were managed through pallet inflows primarily from Latin America. While the IPEP to sales ratio remained in line with first half '25 at 2%, it is expected to be approximately 1.6% for the full year, driven by ongoing improvements in asset control and the normalization of the audit timing impacts in Europe in second half '26. The increase of 0.2 percentage points on the FY '25 ratio reflects the impact of higher FIFO unit cost of pallets written off and an increase in uncompensated losses, primarily in the EMEA segment. Moving to our cash flow performance on Slide 17. Free cash flow before dividends increased $53 million to $482 million in first half '26. This increase was driven by a combination of higher earnings and lower working capital outflows, primarily due to normal variations in the timing of creditor payments. These benefits were offset by $73 million increase in capital expenditure on a cash basis, mainly reflecting the timing of pallet purchases in the period, a $20 million net increase to finance and tax payments due to earnings growth, partially offset by lower finance payments due to strong free cash flow generation. A $7 million decrease in proceeds from sale of property, plant and equipment due to lower losses in compensated channels, particularly in Europe, and a $3 million net increase in other movements, primarily due to increased spend on intangible assets relating to technology investments to support customer experience, digital and supply chain initiatives. This is partly offset by lower outflows from employee provisions. As outlined on Slide 16 on asset efficiency, there is no cash benefit from the utilization of excess pallets in first half '26. Turning now to Slide 18 and looking at segment performance, starting with CHEP Americas. The region delivered new business momentum and meaningful margin and ROCE improvements driven by efficiencies across all aspects of the business. Revenue growth of 2% reflected a balanced contribution from price and volume. Price realization of 1% recovered cost to serve increases, while volume growth of 1% was driven by a 4% increase in net new business across all pallet businesses, which more than offset a 3% decline in like-for-like volumes. This decline reflected weak consumer demand in the U.S. and Latin America across most consumer staple sectors as well as weather-related impacts on the beverage and produce sectors in Mexico. Margins increased 2.1 points as asset efficiency improvements and benefits from supply chain and overhead productivity initiatives more than offset incremental repair costs linked to higher damage rates in the U.S., increased relocation activity to optimize pallet balances across North America and one-off restructuring costs. These benefits also supported further investments to improve the customer experience, notably quality investments, including enhanced end-of-line quality control and pallet durability as well as digital investments, including Serialization Plus. ROCE increased 2.3 points as profit growth more than offset the 2% increase in ACI with asset efficiency improvements in the region, partially offsetting increased pallet purchases in Latin America and investments in automation. Looking now at U.S. pallet revenue on the next slide. The U.S. Pallets business delivered revenue growth of 1%, supported by volume growth as strong net new business momentum offset consumer demand headwinds to like-for-like volumes. Price realization was in line with the cost to serve as price increases to recover inflation, primarily labor were offset by sharing benefits of better asset control and other cost-to-serve efficiencies with customers. Net new business volume growth of 4% was driven by enhanced sales capabilities and an improved customer value proposition as well as favorable market trends, including increased automation in customer supply chains and retailer advocacy for pooled pallets. This sustained momentum offset a 3% decline in like-for-like volumes, reflecting weaker consumer demand due to persistent cost of living pressures, together with prolonged U.S. government shutdown in the period and increased labor market uncertainty. We continue to have a strong new business pipeline in this region and expect this rate of net new business growth to continue in second half '26. Turning to CHEP AMEA. While first half margins in ROCE were impacted by one-off items and timing, we still expect profit growth and margin expansion for the full year. Revenue increased 2%, driven by 2% price realization to recover modest inflation. Net new business wins increased 1% as a 2% growth in European pallets more than offset the impact of a large customer contract loss in the automotive business. Like-for-like volumes decreased 1% due to weak consumer demand in Europe across both pallets and the automotive business. This was partly offset by growth in South Africa and Turkey. Margins declined by 1.6 percentage points as sales growth and supply chain and overhead efficiencies were more than offset by one-off restructuring costs of $5 million, input cost inflation, higher pallet collection activity and a $15 million increase in the Europe IPEP expense. This increase included the $5 million timing impact I mentioned earlier, which is expected to normalize in the second half of the year. The balance of the IPEP increase reflected higher uncompensated losses and increased FIFO unit cost of pallets written off. Return on capital invested decreased 1.9 percentage points, reflecting lower underlying profit and a 2% increase in average capital invested, driven by higher lease costs associated with service center additions and renewals and investments in service center automation. Moving to CHEP Asia Pacific on Slide 21, where productivity initiatives and commercial discipline supported investments in customer experience and financial returns. Revenue increased 3%, reflecting price realization of 4%, offset by a 1% decline in volumes. Volume performance was driven by a 3% decline in like-for-like volumes, reflecting a lower average number of pallets on hire due to inventory optimization at retailers and manufacturers in Australia as well as weaker consumer demand in New Zealand impacting RPC volumes. This was partly offset by contract wins across the pallets and RPC businesses. Underlying profit margin improved by 0.9 percentage points, reflecting operational efficiencies, including supply chain and overhead productivity initiatives. These benefits were partly offset by inflation, investments to improve customer service and quality as well as increased repair, handling and relocation costs associated with higher pallet returns due to inventory optimization. ROCE increased 2.2 percentage points, reflecting profit growth and a 1% decrease in average capital invested, which included the benefit of asset productivity improvements across the region and lower leased service center assets. Moving now to the Corporate segment on Slide 22, where central transformation costs decreased by $8 million. This primarily reflects the receipt of government research and development incentives related to digital investments and the capitalization of Serialization Plus equipment following the successful conversion of the market in Chile to the effortless service offer. While other corporate costs decreased $1.5 million, reflecting productivity and cost management initiatives. Turning to our updated outlook considerations for FY '26 on Slide 23. We now anticipate full year sales revenue growth of between 3% to 4% with contributions from both price and volume. This reflects our view that consumer demand will remain subdued, while recognizing there is uncertainty around how demand will evolve through the remainder of the year. Second half '26 price realization is expected to be broadly in line with the first half, while second half volume contribution is expected to increase, reflecting continued net new business momentum as well as the benefit of cycling weaker like-for-like comparatives in second half '25 and some improvement in U.S. consumer demand in second half '26. Underlying profit growth guidance of 8% to 11% remains unchanged and includes expansion in group and all 3 segments' profit margins. At a group level, the FY '26 combined plant and transport cost ratio is expected to improve approximately 1 point compared to FY '25, reflecting benefits from supply chain efficiency initiatives. As I previously mentioned, we continue to expect the IPEP to sales ratio for the full year to be approximately 1.6%. The FY '26 overhead and other cost contribution to margin is expected to be broadly in line with the first half of '26. This includes the net benefit from the overhead restructuring program of $15 million and further investments in central transformation costs, including Serialization Plus, digital customer solutions and IT upgrades. Importantly, we remain on track to deliver an annualized benefit of $55 million in FY '27 from the overhead restructuring program. Moving to Slide 24. For the full year, we expect to deliver between $950 million to $1.1 billion in free cash flow before dividends. This $100 million upgrade to the lower end of the prior outlook is primarily driven by 2 factors. Firstly, a reduction in the pooling CapEx to sales ratio range by 1 point to between 13% and 14%, reflecting lower volume growth and lower-than-expected pallet prices. Secondly, a $50 million benefit from lower non-pooling capital expenditure, driven by delayed spend on service center automation equipment and rephasing of Serialization Plus expenditure as the business continues to refine the optimal technology approach and mix in the U.S. and U.K. based on learnings from Chile. In terms of other considerations, while I do not propose to go through each item, we do expect net financing costs to be lower than our original expectations, due to strong cash flow performance. In summary, we are pleased with our first half performance, which reflects the resilience of our business and disciplined execution on factors we can control. While the consumer demand environment remains weak, our focus remains on driving net new business wins in all markets and enhancing efficiency and productivity across our business. We expect these actions to support margin expansion and sustainable free cash flow generation, while enabling us to continue investing in strategic initiatives that underpin our long-term success. I will now hand over to the operator for Q&A. Operator: [Operator Instructions] Your first question is from Justin Barratt from CLSA. Justin Barratt: 2 questions. First one, I just wanted to understand if you could talk a bit more actually about your net new business growth cadence throughout the first half of FY '26. I guess I'm just also asking that in reference to if we look at the cadence of your growth in new business wins a couple of halves, it looks like it moderated a touch in this first half? Joaquin Gil: Thanks, Justin. You're talking at an overall group level? Is that right? Yes. I'd say moderated very, very slightly. So you can see that essentially, when you look at Europe and the U.S., our exit rates at the half were the same as how we exited Q4. I think one thing to note on -- sorry, just one thing to note, Justin, on new business is to a lesser extent, but it still is impacted by consumer demand. So obviously, as you see weakness in consumer demand, then the new business that you win, you get slightly lower volume than you would have otherwise got. Justin Barratt: Yes. Okay. And then net new business initiatives in the first half, anything to call out there? Joaquin Gil: I think continued conversion from Whitewood across both the U.S. and Europe and also Asia Pacific. So I think strong new business pipeline and the team continue to do a great job of converting in my view. Justin Barratt: Okay. Fantastic. And then I just wanted to ask, again, you've got still the 4 million pallet surplus in the U.S. But you're still expecting to get the same benefit in FY '26 and you're still expecting to reach optimal levels in FY '27. I was just wondering if you could, I guess, reconcile those comments for me, please? Joaquin Gil: So in the first half, we finished, as you said, the same level of excess pallets, which was $4 million in the U.S. as we finished FY '25. And essentially, any pallets required for both replacement and growth came from Latin America, the flows from Latin America. As we've talked about a little bit in our outlook considerations in the second half, we expect some improvement in U.S. consumer demand. And so based on our current forecast, we'd say by the end of first half '27, we would expect to have worked our way through the 4 million excess pallets. Justin Barratt: And that obviously hasn't changed since the first -- since August. Joaquin Gil: Yes, that's right. It's just based on the forward look at demand and also expectations on Latin American flows. Operator: Your next question is from Peter Steyn from Macquarie. Peter Steyn: At full year '25, there was considerable conversation about measurements and measurement intent, Graham. Is there any update on progress around your thinking there? Graham Chipchase: So measurement intent on what? Peter Steyn: Just management, measurement. Graham Chipchase: The LTIs and things like that. Okay. Yes. So the issue was if you look at the metric, one of the metrics that's used for the LTI, it's that grid of sales growth and ROCE performance. And it was clear that, again, one of the pressures that RemCo is always under is to ensure that the -- you're not paying for backwards performance, however unrealistic that is sometimes. So the grid was increasing the range on sales growth yet at the same time, we were saying, look, look at our investor value proposition, which is saying low to mid-single-digit growth on top line and then leverage on the bottom line. So there was clearly becoming a bit of a disconnect between that grid and the investor value prop. So what we are going to try and put in place for next year, so FY '27 onwards is a revised LTI sort of setup, whereby there's still the RTSR piece in there, but there's also rather than that ROCE sales grid, there will be something much more closely aligned with the total value creation that comes out of the investor value prop. But that is, of course, subject to us, in fact, not the Chairman and the Chair of the RemCo going around to the investors and the proxies and getting their buy-in that obviously then go to vote at the AGM in October. So that's the plan, which I think from a management perspective, much more closely aligns what we're trying to do with what we promised to deliver on the investor value prop. So that's what we're working on at the moment. Peter Steyn: Yes. Which I suppose kind of comes back to the comments you made about the customer value proposition and Net Promoter Scores and U.S. pallet repair costs and damage rates. I'm just curious to draw the line to that and get your perspective on your repair status at this point Joaquin made the point that it's really about incremental utilization. Just wanted to be really certain there that you guys are very comfortable that you've got that balance right and that there's not perhaps a backlog in repair building at all? Graham Chipchase: Yes. I mean I think in the past, the distant past, hopefully, there's been an opportunity or a play to not spend the money on repairing pallets to boost the P&L in the short term. But I think that lesson has been well and truly learned in that we cannot sit here and say that in terms of our customer value proposition that we are going to deliver the premium service with a premium product, when our customers need it if the pallets aren't up to the spec. So we're putting every effort we can to make sure that, that is front and foremost of everyone's minds, almost the point of treating product quality along the same lines as safety. So there will be no delaying of spend, both capital or OpEx if it means putting quality at risk. So that's our philosophy. And I think that's sort of very much what Joaquin was talking about in terms of we're continuing to push that through because as we start seeing volume and demand pick up, we need to make sure we have enough high-quality pallets ready for the customers, and that's always been what we try to do now. Joaquin Gil: I think -- sorry, Peter, I was just going to say the proof points of that, I think, is our pooling CapEx to sales number at that 11.8%. So if we were buying pallets, if I call that unnecessarily or to avoid repair, then you'd see a spike in that KPI. Operator: Your next question is from Owen Birrell from RBC. Owen Birrell: Just to start with, I just wanted to ask a question around the $4 million of surplus pallets at the moment. Can you confirm whether they are repaired for service or still yet to be repaired? And I just wanted to get a sense as to what the current storage cost of keeping those pallets. And you did mention relocation costs of the pallets at the moment. Now I'm just wondering, are they costs that are going to unwind into the first half of '27? Joaquin Gil: Thanks, Owen, and good morning. So pallets are stored not being repaired. So as they come out of storage, they're repaired. In terms of plant and transport ratio, what you can see is that despite obviously continuing to incur storage costs at a slightly higher level than we expected, we've still been able to deliver really good margin improvement and efficiency in that ratio. I think for me, the step change that you're talking about to do with storage comes after we've worked our way through those pallets. So I would see that happening post first half '27. Does that help? Owen Birrell: Yes, I'm trying to give you a sense of what the magnitude of that will be. Joaquin Gil: I think, Owen, as you'd appreciate, there's a lot of moving parts. So I think what we really tried to do to help everybody was give you what we expect the full year plant and transport ratio to be. And hopefully, that allows you to work back. Owen Birrell: Sure. So that's that 1 percentage point improvement that you're sort of talking to? Joaquin Gil: Exactly, Owen, yes. Owen Birrell: Okay. And just second question for me. Just looking at the growth splits in the Americas. LatAm, 9% sales growth, Canada, 6% sales growth, significantly boosting that Americas, I guess, percentage. Just wondering if you could give a sense as to what was happening within price and net new wins across both of those regions. Was it all price across both? Was it all net new wins across both? Just give us a bit of flavor there. Joaquin Gil: Yes. So I think, Owen, obviously, when you look at LatAm, what we saw a dynamic of obviously strong price realization to recover cost to serve increases, saw good momentum in net new business, but then some challenges around consumer demand or organic like-for-like volumes. If you then look at Canada, again, pleasingly, again, strong net new business wins in Canada and again, that recovery of cost to serve or inflation. So that were the key drivers, whereas like-for-like volumes in Canada were more or less flat. Owen Birrell: Okay. That's great. And just one final question while I've got you. There's been a lot of movement in the market around AI impacts on companies. Just wondering if you can give us a sense as to whether you think Brambles has, I guess, great opportunities or greater threats from AI. Graham Chipchase: I mean I think one of the good things is we've been using AI for a while. So it's not like there's a big step change we have to make. So we have -- if you look at some of the -- because it also -- obviously, it depends on your definition of AI, it can range from everything from machine learning, use of digital optical capabilities, when you're looking at plant repairs. So all that stuff we've been doing. Obviously, the stuff we're doing around S Plus and the whole digitization of the supply chain relies a lot on algorithms and AI. So we think there's plenty of opportunity. I think particularly when you start looking now at back-office processes, there is a lot to be done. And the interesting thing is the technology is changing so fast that you just got to try and pick your moment to start implementing it. And our approach has been very much let's look at the processes that we think have got the most opportunity to streamline and then apply AI to improve that process. And we've been -- we started work on that. I think it's one of those things that will be going on probably for a very long time as -- particularly as the tools get more sophisticated, but we're certainly embracing that and seeing benefits from it already, I would say. Operator: Your next question is from Jakob Cakarnis from Jarden Australia. Jakob Cakarnis: Well done on a good result in a tough operating market. I just had 2 questions, if I could, please. Just on CHEP AMEA. Can you just help us through the dynamics through the second half? It looks like the IPEP timing audit realignment, I guess, on the audits will give 1.5 percentage points of growth. But I just wanted to drill in on the expectation that, that will be back into EBIT growth through the second half. Can you just help us what are the other initiatives there? Is some cost savings? How do we think about that, please? Joaquin Gil: Yes. Jake, thanks for the question. You're exactly right. So one thing is that IPEP timing reversal, we expect a slight acceleration in net new business wins and then improvements in the plant and transport ratio in the second half. So there's the 3 key drivers, I'd say, of the improvement in the EMEA performance. Jakob Cakarnis: Okay. And while I've got you, Joaquin, just given the strength of the free cash flow, I was interested in the outlook that you're phasing some of the non-pooling CapEx items, particularly ones that we could maybe argue are more important to the longer term just on automation and Serialization Plus. I appreciate it's at the margin there. But can you just give us a sense of why those programs have shifted to the right a little bit? How do we think about that going forward as well? Joaquin Gil: Yes. And I want to assure you, we're very much committed to investing in the business and building the business for the long term. It's a combination of things really in terms of that non-hire stock CapEx. So the first one is -- when you look at some of our things like end-of-line quality systems that we're putting in at the moment, there's technology changes that are coming. So rather than invest now, we've just delayed that slightly, that will be into the first half of '27. So I think, again, what that shows is a good disciplined approach to capital allocation. But I think for me, what's pleasingly is we've been able to find other initiatives that are either CapEx light or don't involve CapEx to still make sure we're delivering the financial performance. And then on S Plus, it's again just timing of rollout. I think as Graham touched on, we've essentially moved the market to the effortless service offer. But to make some further investments, we -- as we work through the U.S., for example, we need to see some turns of those pallets to get a better understanding. And we continue to work through technology mix. So for me, it's not about us not wanting to invest. It's more about making sure the technology and the availability of that technology for that investment. Jakob Cakarnis: And then just to follow up on S Plus in the U.S., Joaquin. Is that going to be supported by customers initially? Or is that, I guess, a proof and evidence sort of arrangement and then that conversation happens later on? Graham Chipchase: Yes, Jake, I think it's very much -- Chile will be a great example then to be able to take to customers and say, look, we've done this in Chile. Here's what we think the benefits are both to you and to us. And here are the improvements we can get in your efficiency. So we can use Chile as a sort of a reference case, if you like. But the other good -- of course, good news is being a global company with global customers, some of the customers in Chile are also customers in the U.S. So already, we're pretty sure that some of them are talking to their counterparts in the U.S. saying this is working really well. And that will help again with the introduction of S Plus if we decide to roll it out in the U.S. Operator: Your next question is from Matt Ryan from Barrenjoey. Matthew Ryan: Just had a question on the new business wins. I think from what you've said, that sort of offsets the volume decline in the second half. So just hoping if you could give us some color on the wins that you're getting either by size or geography? Graham Chipchase: Yes. I mean it's pretty evenly spread across the geographies. I mean everyone is doing a great job. And I think for us, the confidence is around looking at the pipeline. So one of the investments we made a few years ago around into Salesforce gives you that much more granular view about what is coming down the pipe and what the probabilities of converting it are. And I think that's -- and I think we made some predictions about 18 months ago about the conversion of the pipeline, which has been pretty accurate. It was a bit slow to start off with. So I think we've got a very good view now about what's happening. And the majority of it is converting whitewood users into CHEP pallets. So again, it's not going to disturb any competitor balance in the major markets. It's about these new customers you want to move into a pooled environment. So I think we're pretty confident about it. We've got pretty good visibility for the next 6 months. So we wouldn't be saying what we're saying. We didn't have some pretty good visibility. The only caveat is the point that Joaquin made earlier, if you win a new customer, you assume the existing level of activity. But if consumers generally are buying less, then it just takes longer to get up to the level you assumed when you won the business. But we haven't really seen it as a material issue so far. Matthew Ryan: And just a follow-up on that effortless service model. Are there any differences between Chile and the other markets that you're looking at? Graham Chipchase: I mean I would say the biggest one is just scale. I mean, so one of the reasons we chose Chile was it's a fairly contained market, and therefore, getting a good view about just how the data works in terms of using the algorithm to come up with the effortless service offer. Things like, for example, if you have very small customers in Chile, you can't necessarily look at them customer by customer. You might have to aggregate them into subsector groups and segments. Now in theory, that might be a lot easier in the U.S. because you don't have quite so many -- those even small customers are quite big compared to Chile. But other than that, yes, you've got some operational differences like the climate makes the performance of the glue and the tag different, but that's stuff that we'll just crack on through and sort out. And that's one of the reasons we're doing the trials we're doing in the U.S. already is to get ahead of those sorts of issues. Other than that, no, I think pretty similar. Clearly, you've got some slightly different dynamics with the retailers versus -- U.S. versus Chile. But other than that, we don't see it as a major difference. Operator: Your next question is from Anthony Moulder from Jefferies. Anthony Moulder: If I can start with the U.S., you've said that you're scrapping more pallets in the U.S. and you've also talked about a higher damage rate. I'm wondering if those 2 issues are related and specifically what's driving that higher damage rate in the U.S. Joaquin Gil: Anthony Yes, you're exactly right. What we're seeing is the pallets are experiencing more damage, and that means more scrap pallets. And that's a combination of things, obviously, as you inject less new pallets into the pool, then while they're fit for purpose for customers, as they come back, the damage tends to be a little higher. Anthony Moulder: Right. And picking up on that previous comment about the geography of growth. I think you said during the comments that the growth in net new wins in the Americas was Latin American focused. Why aren't you growing into the white pallet space in North America, please? Joaquin Gil: No, sorry, Anthony, maybe my fault here. The question was around the Americas. And given that we already split out the U.S., I covered Canada and LatAm. But if you look at the U.S., we had net new wins of 4% in the first half. Anthony Moulder: Right. Okay. But you're not using those surplus 4 million pallets in the U.S. Wouldn't you use those if growth was originating in the U.S.? Joaquin Gil: You would, 100%. And the impact was really because we saw consumer demand or like-for-like volumes down. So the -- in the first half, the volume that the U.S. needed for either replacement or to meet growth came from Latin America. And the difference is really that decline in like-for-like volumes of 3%. So then as you look out to the second half and into first half '27, we expect obviously like-for-like volumes to improve, good momentum on net new business, and so we'll work our way through those 4 million pallets. Anthony Moulder: Okay. The overhead costs, you've called out, I think it's $15 million savings for FY '26 on top of $35 million from FY '25 and another $55 million next year, so $105 million of what we thought was about $189 million of overhead. Is that the appropriate level of overhead to keep in the business beyond FY '27, please? Joaquin Gil: I think I look at it a different way, Anthony, rather than have a target for what does overhead need to be. It's about making sure we invest to drive the growth in the business and long-term success. So similar to the answer we gave during transformation, we're investing where it's right. But as we touched on, we are also looking for productivity initiatives and making sure that we're doing what we can. So how I would more look at it, Anthony, if I was you, is we gave our margin improvement target of 3 points plus by the end of the FY '28 off the FY '24 baseline. So you can see how we're progressing on that. And then, you know, we've said asset productivity, we're more or less are where we're mature in that, with still some opportunities to go in overheads and supply chain. Anthony Moulder: Okay. And lastly, if I could, the cost to serve benefits are now being shared with customers since perhaps the price impact. How specifically should we think about cost to serve benefits for customers impacting price going forward, please? Joaquin Gil: Yes. I think, Anthony, this is one we've chatted a little bit about, which it really is about us recovering the cost to serve. So where a customer can help us lower the cost to serve, then we share that benefit. So I think how I would look at it is, ultimately, this is about margin, profitability and free cash flow generation. So depending on the cost to serve, we'll recover it through pricing. But obviously, it's a win-win if we can lower that cost to serve and customers pay less. Anthony Moulder: So less pallets going down into NPDs and the like. Is that a key component of that change, please? Joaquin Gil: No, I think what it's more about is 2 things that I think are really great. Obviously, the investments in technology like Ultra devices have turned NPD lanes that were initially very high cost to serve, lower cost to serve. And then obviously customers assisting in converting customers or improving controls at NPD customers. So there are less losses. So it's not about not servicing customer demand here, it's just how can we all do it at a lower cost. Operator: Your next question is from Andre Fromyhr from UBS. Andre Fromyhr: First question is just about the composition of sales and in particular, in the guidance commentary. So if I understand, you're suggesting that net new business would sort of track similarly in the second half at around 2% price, similarly around 2%. So at the 3% to 4% group level, implying sort of a like-for-like in the minus 1% to flat environment. So is that a fair read? And that implies sort of actually positive like-for-like in the second half, not just improving. So what gives you that confidence on the, especially on the consumer side of like-for-like following the last few years that we've seen in like-for-like trend? Joaquin Gil: Yes. Thanks, Andre. And look, your interpretation of the FY '26 outlook considerations is broadly in line with ours. I think the things that give us confidence as you look out is, as we get to the second half, we are cycling easier comparatives from the prior year. So that's essentially 2 points of decline that we're cycling. And then you look at expectations on the U.S. consumer demand, as obviously there's been some tax changes, et cetera, you have the World Cup. So what we wanted to do in the outlook considerations is very clearly lay out our assumptions and then people can form their own judgments as well as ours in terms of what they expect to happen to consumer demand. Andre Fromyhr: Okay. And then expanding that into the EBIT guidance, can you help us understand what has changed in your expectations since August by -- and just in terms of the ability to still be able to attain the top end of the 8% to 11% underlying profit range, given we're now expecting the sort of lower end of the sales. Does that make sense? Joaquin Gil: Yes, that does. I think a couple of things, Andre. One is obviously it depends where you sit on the sales revenue guidance of 3% to 4%. Then when you look at our productivity and efficiency improvements, in particular, in supply chain, it depends how successful we are at those. So if we were to overdeliver then that gets you to the top end of the range. And I think IPEP is another one, I think, really pleasing progress continuing in the Americas, some challenges in Europe. We're confident in our plans for the second half, but that is also a swing factor. So a range of moving parts, but we're still very confident with our guidance. Andre Fromyhr: Okay. And then last one for me is just on Serialization Plus, in particular in the U.S. You've referred to continued rollout of the read infrastructure there at the moment. So how much of a sort of precommitment is that on the project? Like are we still considering a scenario where you decide not to go ahead with S+, or is it more like you'll do it at some point, but it will take your time to make sure you sort of learn the most you can out of Chile and another examples. Graham Chipchase: I mean, I think, when we talked about the -- putting the read infrastructure into the U.S. in the first place, I think there were a couple of considerations there. One is, there's a lot of the spend, we think, is no regret or little regret because we can use a lot of the cameras, for example, in the repair line if we wanted to, if we decide not to go ahead with S+. The other thing, though, is that I think the initial readout from Chile is looking very promising. So this would be to get to value quickly, putting the read infrastructure in, given that it's low regret, makes a lot of sense because then when you put the instrumented and tagged pallets into the U.S., you'll get value much quicker. So that was sort of where we were coming from. I think that was 6 months ago. Roll-forward now, we have this target of trying to convert 100% of the customers to the effortless service offering in Chile. We're at 95% at the half of the year, first half. Last night, we got another 1 converted, so we're pretty close to 99% now. So again, that is great. But to really prove out some of the use cases and the value cases, we need the assets in those converted customers to turn 2 or 3 times. And that, therefore, means 9 months-ish. So I think we're talking now about let's just make sure we've got the data to absolutely cross the Ts, dot the Is on the value cases. We're getting a much closer, better idea about the cost because we've now gone through various iterations of that. And then we can make the decision. So we're not -- we haven't decided to roll it out yet, but it's fair to say we are getting close to that point. And all the green shoots are there, but we still want the capital discipline point that Joaquin mentioned earlier, we're not going to do this unless we're very sure that we'll get the 15% return on investment. Operator: Your next question is from Sam Seow from Citi. Samuel Seow: Just a question on margins, in particular, Slide 15 there. On supply chain, the productivity is about 80 basis points. So that looks like it's up almost 240 basis points year-on-year. So just wondering, one, if you can talk about what the big drivers there were? And two, as we think about the future, do we expect, that additional margin expansion, call it, 120 basis points to come incremental to normal operating leverage? Or is that just included in it? Joaquin Gil: Okay. I'll have a crack at the first question. The second one was a little tougher. But I think your read of the supply chain productivity is right. And essentially, what has driven that is, I would say, procurement initiatives. So we've got enhanced processes in terms of our procurement, transport, productivity and plant optimization. So I think the team have done a great job of looking at the network, understanding structures, where could we make improvements in our plant network. And obviously, we continue to get the benefits from automation and the durability investments where we've invested. Your question, I think, was on the margin improvement as we look out. How I would... Samuel Seow: Yes. Is it going to be incremental? Or do you think it's just normal operating level? Graham Chipchase: Yes, I'd sort of bring you back to just our investor value prop and how we think about it, which is that we would expect to be delivering high single digits UOP growth. Samuel Seow: Got it. Okay. That's helpful. And then maybe on that asset efficiency line, you know, IPEP, not a contributor to this result. You said that lever is mature and plus or minus. We expect that the percentage of sales is going to be largely flat. So just wondering with S+ yet to really fully roll out, is that going to be incremental to your previous kind of IPEP to sales commentary? Or should we see the benefits as S+ in another line? Thanks. Joaquin Gil: Sam,, you're exactly right. So we've been talking about that sort of target of IPEP to sales at 1.6% of sales. That is pre S+ rollout. And then, the benefits of S+, I say, we'll see not only in asset efficiency, but we'll see it in all lines of the P&L. So helping with revenue in terms of attracting new business, retaining existing customers, supply chain productivity. So I think there's a broad range of benefits that could come from S+, but asset efficiency is definitely one of those. Samuel Seow: Got it. Got it. And then lastly, on net new wins. Is there like a number or percentage or a stat you can give us that kind of explains the wins coming from Whitewood from NPD or expanded lanes, as you'd call it? Just trying to get some insight into these new customer wins that basically aren't coming from competitors and you're seeing the benefit of those expanded lanes? Graham Chipchase: Yes. I can give you an indicator, which is most of it's not coming from competitors. That's your indicator. We're telling you, it's not -- it's coming from competitors. It is the majority, as you've just said, is Whitewood, and then there's a chunk of new lanes. I think if we look back over the last 18 months in the U.S. market, for example, our estimate of the market share movement between us and PECO, who obviously the major competitor, is minimal. I mean it's almost zero. So yes, there have been some ups and downs, but over that 18-month period, the relative market shares haven't changed. And that's obviously our analysis. It is hard to get the numbers because they're not a public company, but that should give you some confidence that it's largely coming from Whitewood and other lanes. Operator: Your next question is from Cameron McDonald from E&P. Cameron McDonald: Two questions from me. Firstly, just in that outlook with the improved volumes that you're expecting to see gather the -- we've got the point about the weaker PCP in the second half as well. But we've seen a range of companies come out in that CPG space talking about having to discount to drive volume growth. What are you seeing and what engagement are you having with some of those customers around their -- expectations around discounting or promotion? Graham Chipchase: So when we talk to them, I mean, one of the interesting things is we're interested in what their volume -- their view is, and whether it's coming from discounting or not, is not irrelevant to us, but certainly, we just want to know what they think the volume pattern is going to be like. And I have to say the majority of the ones that we talk to don't actually know. I mean, I think it's such a volatile environment out there that it's very hard for them to predict, and therefore, it's hard for us to predict. The only sort of signs that we see are that there seems to be a slight uptick in U.S. consumption. It was looking very good in January and then they had the big winter storm snowstorm, which has made -- put a bit of fuzz into the equity of the data. But again, looking into February, I think it's beginning to look good, back on track again. So that's very, very green shoots and wouldn't want to call that yet, but it feels like -- if you put that in conjunction with potentially some of the tax changes in the U.S. and the World Cup coming up, it would sort of gives us a bit more confidence that the U.S. certainly appears to be going in the right momentum. Europe is very difficult because it's not one market. Some parts of the continent are doing pretty well like Iberia, others not so well like the U.K. and Germany. So it's very mixed in Europe, much harder to predict. But that's -- and yes, our customers are saying the same thing it's hard for them to predict. Cameron McDonald: And you've mentioned the weather, Graham. I mean, a few companies have called that out. What do you think that headwind for the -- has been in terms of sales in -- early in this second half? Graham Chipchase: I don't think -- so it's U.S., clearly. I don't think it's been more about disruption to the supply chain and costs to then catch up. I think some of the sales I've been hearing you, they are catching up in February, so they're not lost forever. Some of them will be, undoubtedly, but it's not going to be material from what I see at the moment. Cameron McDonald: Okay. And can I also ask about Serialization Plus in Chile. And thanks for the examples of some of the benefits. Joaquin, you're probably going to expect this question, but can you actually give me some quantification of what those benefits have been, either numeric or operationally, in terms of what the improvement in either the turn rates or the margin or anything other than just anecdotes? Joaquin Gil: I'll do my best here, although as Graham talked about, we're really keen to see a few more turns in the Chile market. But I think Slide 8 was our attempt to give you when you look at the Serialization Plus value scorecard, the areas where you might see value. And I think, Graham, in the answer to one of his earlier questions, is a really good example of that. If you think about damage rate in a market, it's been very hard to know where has damage occurred. So it comes back, but that pallet may have gone from a manufacturer to a retailer and back to us. what the team have now been able to do in Chile is you can map essentially the flows, so you can understand in this leg of the journey, the pallets being damaged. So then that allows us to take action either training of staff, thinking about how we do it. So I think that's one. Net new wins. We've seen some progress there where customers have converted to our offering in that market because of the lessening of the administration burden and the insights that we can provide. So I think for me, there's a whole range of benefits, but before we wanted to put numbers on a page and say this is what it looks like, we need to see a few more turns. And then obviously, before we made a full decision to roll out in the U.S., we'll present an update on what's happening in Chile and why we have confidence in returns. So may not have fully helped you, Cameron, but hopefully a start down that journey. Cameron McDonald: Yes. Well, I think to put you on notice, you're going to -- if you come back and ask for a couple of hundred million dollars worth of support investment, you're going to have to give us some actual data, right, in terms of what the returns have actually been. And so just in terms of the hurdle of the 15%, presumably because you haven't either had enough turns or you have not decided yet to execute the full rollout, can we read that as being you have not reached a 15% return or you do not see an immediate pathway to 15%. Joaquin Gil: So a couple of things, if I can just chip in. One was, firstly, I'd expect nothing less than the staff to give you a really solid proposal. And let's be honest, Graham and I wouldn't approve it if there wasn't a solid proposal. So I think that's a very reasonable ask and you have our commitment on that. And then I think what we talked about on the 15% return is that was annualized after a pool that's been fully serialized. So when you think of Chile, Graham touched on it earlier, we're essentially fully at the ESO offering. So that's why we think we need another 9 months or so to be able to show the returns and have confidence in that number. Cameron McDonald: Okay. Great. So halfway through first half '27 or at half year '27 results, you're going to have -- it's a decision point effectively. Joaquin Gil: Yes, I'd say somewhere between sort of that point and 30th of June, let's say, roughly, right? So it's very hard to be fully specific. 9 months from now is a little longer, but obviously if we had enough information at the February results, we would share it. I mean, we're very conscious that once we're in a position and we have the information, then we will share it with the market. Operator: Your next question is from Scott Ryall from Rimor Equity Research. Scott Ryall: Perfect. Joaquin, Cam just noted down 19 November, just so you know. Now, I had a question on Slide 8 as well, and it's not for quantification, but I'd be fascinated on the right-hand where you progress today, you talk about customer conversions and line expansions. You've talked about the customer experience, and I'm wondering if there's -- and then you've also talked about insights. Could you just talk about the noncustomer experience? And I guess that the reduced admin burden, simplified billing model, I get that, that's pretty clear when you do Serialization. But -- just what are the other benefits that you're seeing in the early stages that customers are finding that's helping you win business, please? Graham Chipchase: I think, Scott, the main one is it's easier to do business with us. I think that is the main one. I think as we start using the tools at S+ and ESO is giving us in terms of working with the customers to show them exactly where some of the damage is occurring or where some of the loss is occurring, so that we can then work with them to improve their supply chains, their businesses, take waste out of their operations. That is what, I think, that will start making a big difference for them and for us. But at the initial, go-to-market proposition is you don't have to deal with these audits and declarations. That's what's got us to the business so far. Scott Ryall: Okay. So it's still pretty preliminary on those further benefits around helping customers take out waste and those sort of things. Graham Chipchase: Yes. Scott Ryall: Great. And then just, I'm just coming back to the pallet balance being optimized and your comments about the U.S. pallet balance being optimized by the end of first half '27, so end of calendar year. Does that -- what's the implications with respect to CapEx levels once that happens, please? Joaquin Gil: Yes. I think we -- that's why we've really tried, Scott, to quantify the CapEx benefit. So, in this half, we haven't had any. I think if you look back on what we said for the full year FY '25, we've roughly quantified that as 0.5 point. But obviously, that will vary depending on volume growth, et cetera. But I think the key message that I would take away from this is the asset productivity and cash flow performance is sustainable. It's not driven by the use of excess pallets. Scott Ryall: So, Joaquin, just to follow up on that. Because I remember that feedback you gave at the full year. And that was, I was a bit confused with the fact you've still got surplus pallets, but you've had no benefit in this half. But yet that surplus will be will be optimized by the end of this calendar year. So why is it up? So does that mean relative to the fiscal '25 number, it's kind of 0.5% or is it -- is there another way of thinking about it? I'm just a bit confused about what you're saying. Joaquin Gil: Yes. I think another way, maybe, that might be simpler is, we've often quoted a rough rule of thumb that is 1% of volume growth is 1% of pooling CapEx to sales. So the way I look at it is the business delivered 11.8% pooling CapEx to sales with essentially flat volume. So then if you forecast volume growth at a group level, let's say, volume was 2%, then you would add 2%. So for me, Scott, another way, just linking back to that, is if you think about Investor Day, what we said is you should expect pooling CapEx to sales to be in the 15% to 17% range, and that was based on 2% to 4% volume growth. So were essentially in line with that, if that takes all the noise away of excess pellets, et cetera. Operator: Your next question is from Niraj Shah from Goldman Sachs. Niraj-Samip Shah: Just another question on Chile, following up on Matt's earlier question on the differences between Chile and say, the U.S., for example. Graham, I think you said that the biggest difference is scale, I guess, both of the market and of the competitors. Does that mean the market structure is similar? Is the pooled solution roughly half the market and you guys are kind of 80% of that? I'm just curious. Graham Chipchase: We are -- of the pooled market, we are bigger than 80%. We've got a small competitor in Chile, not a PECO-like competitor. And the penetration of the market, I'd have to double check, but I would think it's probably a bit more penetrated actually, maybe it's not. I mean it's probably about the same as U.S., I would guess, but we'll have to check that out. Operator: [Operator Instructions]. There are no further questions at this time. I'll now hand back to Mr. Chipchase for closing remarks. Graham Chipchase: Well, thanks, everyone, for your questions and for joining the call. Looking forward to seeing, I think, most of you over the next few days. So we'll have more questions then, I'm sure. Thank you very much.
Operator: Hello, everyone, and thank you for joining the LKQ Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Lucy, and I will be coordinating your call today. It is now my pleasure to hand over to your host, Joseph P. Boutross, Vice President of Investor Relations, to begin. Please go ahead. Joseph P. Boutross: Good morning, everyone, and welcome to LKQ Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are Justin L. Jude, LKQ Corporation's President and Chief Executive Officer, and Rick Galloway, our Senior Vice President and Chief Financial Officer. Please refer to the LKQ Corporation website at lkqcorp.com for our earnings release issued this morning as well as the accompanying slide presentation for this call. Now let me quickly cover the safe harbor. Some of the statements that we make today may be considered forward-looking. These include statements regarding our expectations, beliefs, hopes, intentions, or strategies. Actual events or results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors. We assume no obligation to update any forward-looking statements. For more information, please refer to the risk factors discussed in our Form 10-Ks and the subsequent reports filed with the SEC. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release and slide presentation. Hopefully, everyone has had a chance to look at our 8-Ks, which we filed with the SEC earlier today. And as normal, we are planning to file our 10-K in the coming days. And with that, I am happy to turn the call over to our CEO, Justin L. Jude. Thanks, Joe, and good morning to everyone joining us on the call today. Before we get into the quarter, I want to start with an important message to our LKQ Corporation team. This past year tested us in meaningful ways and yet it also showcased the strength, discipline, and resilience of LKQ Corporation. We accomplished a lot in 2025 and are focused on keeping this momentum going in 2026. Justin L. Jude: In February, I committed to delivering $825,000,000 of free cash flow in 2025. And despite multiple headwinds, our colleagues around the world executed, adapted, and delivered on that commitment. Importantly, we also made meaningful progress simplifying our portfolio. The divestiture of our self-service segment was a key element of the simplification strategy we outlined at our 2024 Investor Day. We delivered on that commitment in 2025. Transactions of this scale and complexity require significant leadership focus and discipline. Executing successfully in the midst of a challenging year across our global enterprise reflects the strength of our teams and our ability to deliver against our strategy. I am proud of the outcome and our continued focus on creating long-term value for shareholders. The headwinds of 2025 were real and significant: a continued decline in repairable claims, the impact of tariffs, and persistent softness in the European market. Any one of those would have been a challenge on its own. Taken together, they created a difficult environment. And yet our people found ways to serve customers, maintain discipline, and deliver on our free cash flow commitment. That is an exceptional achievement and a testament to the grit of our employees. As many of you are aware, in 2026, LKQ Corporation's board of directors formally initiated a comprehensive review. Given the strength of our underlying performance even in a year defined by significant headwinds, it has become increasingly clear that our current stock price does not reflect the true value or long-term potential of our businesses. The board and I, along with our entire management team, are aligned in our confidence in that future, and that confidence compels us to explore whether alternative structures could unlock value more effectively than the market is recognizing today. This review will run in parallel with our relentless focus on operational execution. Please note that we will not be answering any questions or commenting further on our strategic review process until further disclosure is appropriate or required. Let me focus for a few moments on the operating highlights in the fourth quarter and the full year across our business. In North America, organic revenue decreased 1% on a per-day basis in the fourth quarter and decreased 1.9% for the full year 2025, reflecting a continued environment of weak repairable claims. Even so, we gained market share by deepening relationships with MSOs and insurers, maintained pricing discipline, and leveraged the scale and breadth of our branch and distribution networks to outperform repairable claims. Throughout 2025, each quarter, we saw improving comparables. Comparable claims were down approximately 10% in Q1 and improved sequentially each quarter. In Q4, repairable claims were down in the range of negative 4% to 6%, demonstrating steady recovery from the early-year low point. Our bumper-to-bumper hard parts business continued to grow in Canada. We plan to expand this business further given the still fragmented do-it-for-me hard parts market across North America. Now I would like to provide you with an update on our performance in Europe. In 2025, our organic revenue experienced a decline of 5.2% on a per-day basis in the fourth quarter and a 3.9% decrease for the full year. This was primarily due to continued weak consumer confidence, macroeconomic uncertainty, and competitive pricing pressures. In response, we implemented a more aggressive pricing strategy in select markets to protect share and accelerated our focus on private label growth. We expanded private label inventory in the fourth quarter with introductory pricing to drive adoption. While these actions have pressured revenue and margins in the near term, we believe they will deliver meaningful long-term benefits. We also completed a review of more than 85% of our Europe SKUs portfolio, bringing the total delisted SKUs to 71,000 or roughly half of our overall target. While we anticipate eventual market recovery, we are not being passive. Our team is proactively making bold decisions. This year, we are streamlining key business areas to improve cost efficiencies through targeted productivity initiatives. Our efforts include fast-tracking our integration plan throughout Europe, streamlining our product lineup, sharpening our go-to-market approach, and applying successful tactics from our North American strategy. And we are on track to go live with a key system integration in 2026 which will serve as a significant catalyst for cost reduction opportunities. As CEO, I want to express my disappointment in Europe's results. While we never promised that progress would be linear and understand the risks involved in our three-year strategy, we remain fully confident in our team and the decisive actions we have taken. We are committed to overcoming these setbacks and delivering sustainable value for our shareholders. We remain confident in our leading position across our core markets and I remain committed to delivering the margin expansion we have previously communicated as we execute through near-term challenges. Now turning to Specialty. This segment remains a strong performer, delivering 7.8% organic revenue growth on a per-day basis in Q4, and 2.7% growth for the full year 2025. We have seen improving results from targeted initiatives to sharpen focus, improve pricing execution, and strengthen channel relationships. As discussed last quarter, we returned to positive organic growth for the first time in 14 quarters and sustained that momentum again this quarter. We continue to move forward with the previously announced process to explore the potential sale of our Specialty segment. Interest in our Specialty segment remains robust, and we expect to provide updates in 2026 as appropriate. In 2025, our teams gained share in North America while maintaining pricing discipline. We grew our bumper-to-bumper business, made progress on our European initiatives, simplified the portfolio through the sale of our former self-service segment, and grew free cash flow. We entered 2026 with stronger management teams, pricing and cost measures supporting margins, ongoing efficiency improvements, and productivity initiatives supported by a recently approved restructuring plan and early signs of demand improvement across our businesses. With that, I will turn the call over to Rick to walk through the financial results for the quarter in more detail. Joseph P. Boutross: Thank you, Justin, and welcome to everyone joining us today. Justin L. Jude: Before turning to the fourth quarter, I would like to echo Justin's comments on some of our accomplishments from 2025. We completed the sale of our self-service business, further simplifying the portfolio and sharpening our focus on core assets. Joseph P. Boutross: Delivered strong free cash flow in what remained a challenging market environment. And we continued to aggressively reduce costs through restructuring and productivity initiatives to better align our cost structure with demand. In Europe, these actions improved the efficiency of our logistics footprint and reduced facilities and overhead costs. In North America, we focused on rationalizing overhead to more efficiently serve our customer base. Justin L. Jude: Turning to fourth quarter results for continuing operations. We reported revenues of $3,300,000,000, up 2.7% year over year. Diluted earnings per share were $0.29, Joseph P. Boutross: which includes a $52,000,000, or approximately $0.20 per share, goodwill impairment related to our Specialty business. On an adjusted basis, Justin L. Jude: diluted EPS was $0.59 compared to $0.78 in the prior year on a comparable basis. It is worth highlighting that the prior year included Joseph P. Boutross: a $0.10 per share benefit from a nonrecurring legal settlement in North America. Our balanced capital allocation strategy contributed positively to earnings, with share repurchases and interest expense each adding a penny, and favorable FX and tax rates contributing an additional $0.02 each. Justin L. Jude: These benefits were more than offset by organic revenue Joseph P. Boutross: declines and lower EBITDA in North America and Europe. For the full year, diluted EPS was $2.31, and adjusted diluted EPS was $3.01, at the lower end of the range we guided to in October. Free cash flow in the quarter was $274,000,000, Justin L. Jude: bringing full-year free cash flow to $847,000,000. Joseph P. Boutross: Exceeding our expectations and driven primarily by trade working capital initiatives. Justin L. Jude: We returned $116,000,000 to shareholders during the quarter through share repurchases and dividends. In North America, top-line performance remains solid despite headwinds from repairable claims and tariffs, Joseph P. Boutross: and we believe we continue to gain share. That said, pricing remains competitive, and our ability to fully pass Justin L. Jude: through higher costs while maintaining margins continues to be constrained. Segment EBITDA margin was 12.7%, down 380 basis points year over year. Gross margin accounted for approximately 140 basis points of the decline, Joseph P. Boutross: driven by tariff pass-through dynamics and customer mix. Overhead leverage accounted for approximately 260 basis points, primarily reflecting the impact from the prior year nonrecurring favorable legal settlement that I mentioned earlier. Justin L. Jude: Importantly, our ongoing productivity and restructuring actions continue to support cost discipline Joseph P. Boutross: in the current demand environment. Justin L. Jude: Looking ahead to 2026, we expect EBITDA margins to be slightly down from 2025 as we annualize the impact from tariffs. In Europe, Joseph P. Boutross: revenue pressure weighed on margins, and segment EBITDA margin declined 180 basis points Justin L. Jude: to 8.3%. Gross margin declined approximately 160 basis Joseph P. Boutross: points due to heightened price competition and higher input costs. Justin L. Jude: While lower volumes pressured overhead leverage, Joseph P. Boutross: productivity and restructuring initiatives helped offset this impact, positioning the business well when market conditions normalize. Our expectation is that Europe will get back to near double-digit EBITDA in 2026 with aggressive execution on our strategic initiatives and further cost actions. Specialty delivered an EBITDA margin of 4.5%, Justin L. Jude: approximately 40 basis points better than last year. While mix weighed modestly on gross margin, strong cost control drove favorable overhead leverage. Joseph P. Boutross: With two consecutive quarters of organic growth, we believe Specialty is well positioned as its end markets continue to recover. Turning to the balance sheet. We paid down more than $500,000,000 of debt in the fourth quarter following the self-service divestiture and strong free cash flow generation. Justin L. Jude: With the help of our lending group, we also extended the maturity of our revolver to December 2030 and our Canadian term loan to March 2029, improving our maturity profile while preserving the liquidity and flexibility. Joseph P. Boutross: At year end, total debt was $3,700,000,000, Justin L. Jude: with leverage at 2.4 times EBITDA, Joseph P. Boutross: down sequentially. We remain committed to maintaining a strong balance sheet and our investment-grade rating. Justin L. Jude: Our effective interest rate was 5%, slightly lower than the prior quarter. In total, we returned $469,000,000 to shareholders in 2025, Joseph P. Boutross: 55% of free cash flow, exceeding the capital return commitment we outlined in our 2024 Investor Day. Turning to guidance for 2026. Our outlook reflects current market conditions and recent trends and assumes tariffs in effect as of February 1. Importantly, we believe it is prudent to not reflect a meaningful market recovery in our guidance until we begin to see Justin L. Jude: sustained improvements in underlying volumes. As a result, our assumptions remain intentionally conservative. While we are cautious on demand, Joseph P. Boutross: our confidence in the outlook is grounded in execution, Justin L. Jude: particularly the actions we are taking on costs, productivity, and capital allocation, which are largely within our control. That said, we are encouraged by several early indicators that could support Joseph P. Boutross: improved demand over time, including easing insurance premium pressures, improved consumer confidence in automotive, and continued stabilization and improvement in used car prices. While these trends are not yet reflected in our guidance, we believe they represent positive developments for LKQ Corporation as volumes recover. We expect organic parts and services revenue growth between negative 0.5% and positive 1.5%. Justin L. Jude: North America is expected to be slightly positive. Europe remains challenged and is expected to be slightly negative. And Specialty is expected to grow closer to mid-single digits. Joseph P. Boutross: Adjusted diluted EPS is expected to be in the range of $2.90 to $3.20. Justin L. Jude: We remain focused on offsetting volume and inflationary pressures through productivity initiatives, Joseph P. Boutross: additional restructuring actions, and disciplined capital allocation. As part of our continued focus on execution and discipline, we recently approved a restructuring plan designed to better position our cost structure to more efficiently serve our strategic markets and support improved performance over time. This plan is expected to result in costs of approximately $60,000,000 to $70,000,000 in 2026 and supports our broader strategic transformation objectives, including sharpening our go-to-market approach, rationalizing our logistics footprint, and further consolidating back-office functions. We expect these actions will generate more than $50,000,000 in annualized cost savings, with over half to be realized in 2026. Justin L. Jude: Free cash flow is expected to be between $708,000,000 and $750,000,000. The midpoint reflects more normalized working capital expectations compared to 2025 while maintaining disciplined capital spending. Joseph P. Boutross: As in prior years, we expect the first quarter to be a use of cash, followed by positive cash generation throughout the remainder of the year. Thank you for your time. And with that, I will turn the call back to Justin for his closing remarks. Justin L. Jude: Thanks, Rick. Before we begin Q&A, I would like to note some positive early signs of improving market conditions in North America. We are seeing lower insurance premiums, rising used car prices, and major insurers suggesting claims could return to historical patterns by late 2026. At the same time, as I have emphasized on our second quarter in 2025 call, we will not build a recovery into our base case until we see it clearly materialize in the marketplace. We are being cautious and conservative as we enter 2026. Stepping back, I am highly optimistic about the future of our company. We begin this year on stronger operational footing with a more focused organization. Our foundation is solid. Our opportunities are compelling, and our people continue to prove why LKQ Corporation is such a powerful organization. Operator, we will now open the line for questions. Joseph P. Boutross: Thank you. Operator: When preparing to ask a question, please ensure your device is unmuted locally. And we kindly ask all participants to limit their questions to one main and one follow-up. The first question today is from Scott Lewis Stember of Roth Capital. Your line is now open. Please go ahead. Justin L. Jude: Good morning, and thanks for taking my questions. Hey, good morning. Yes, just a follow-up on the comments about, I guess, potential green shoots in North America. Just trying to, you know, maybe dive into that a little bit more. What are you hearing? And, you know, I know that there is a chance that maybe by the end of this year, but just trying to get a sense of, you know, the reality of when we could actually start to see things balance out. Yeah. Thanks for the questions. We are not only hearing it, but we are seeing it. I mean, if you paid attention to some of the insurance premiums in 2025, they have been reduced around 6%. We expect those numbers to continue to drop, which will make insurance more affordable. Then consumers will lead to more, you know, there is the number of, as we talked about in the past, is not really down. It is just repairable claims. So people use insurance to get their vehicle repaired. As insurance becomes more affordable, and we are seeing it become more affordable, that will be good for us. I think a couple large carriers also mentioned that they are expecting to see claims increase in the back half of the year, which will drive their profits down, but obviously leads to more repairable claims and more cars getting fixed. In addition, we, you know, it is one month, but in January, we actually saw demand, you know, Manheim saw the used car value increase 2.5% over December, but really up 2.5% or 2.4% year over year. So those are good things that lead to more cars getting repaired. So those are the kind of green shoots we talked about. Got it. And then a follow-up question about Europe. You maybe talk about performance, both sales and, I guess, competition by market? Yeah. We will not disclose necessarily by market, but we are still seeing a lot of pressure in the overall demand. Just the economies in most of the countries we operate are still struggling. A lot of consumers are cutting spending. That is leading to aggressive price cutting by some of our competition. I would say we were a little bit more aggressive in Q4 on combating price than we have in the past to make sure that we hold share. We intentionally increased our private label. So we have talked about it in the past to try to drive our private label to increase that adoption. We pushed it out in new markets, and we pushed new product lines in our private label with introductory pricing. So that came in more aggressive. As we get that adoption rate up and we see the volume increase on our private label, we can then start moving pricing up. And as you can imagine, margins long term are better on private label. Trade working capital is better on private label. But as we move in that private label and we are replacing some of those tertiary brands, we are not replacing the primary brands, but we replace those second- and third-tier brands. We got a little bit more aggressive on prices of those to make sure that we are not left with excess inventory. So some of that was our own doing intentionally, but the majority of the headwinds that we see over there is still just market demand. Got it. Thank you. Joseph P. Boutross: Yep. Operator: Thank you. The next question comes from Jash Patwa of JPMorgan. Your line is now open. Please go ahead. Joseph P. Boutross: Hi, good morning and thanks for taking my— I wanted to start with your comments on Jash Patwa: expanding relationships with MSOs. You maybe peel the onion a bit further and provide some color on the development and share gains with MSOs over the past year? Additionally, I am curious if you could share any insights on the differential in alternative parts utilization between MSO and non-MSO customers. For now for follow-up. Justin L. Jude: Yeah. Thanks, Jash. On the MSO side, I mean, you look at the stats, repairable claims, we said we were down around that 4% to 6% range, which is good news. It is improving. It is still down, but it is improving from prior quarters. But if we look at our volumes with MSOs compared to our volume with non-MSOs, and then we back into what we feel market share gains have been had with MSOs, we are up, you know, I would say in the teens with the MSOs from an actual volume. Most MSOs that we talk to are probably flat to slightly up a few percent. So if you look at our share of wallet with the MSOs, that is outperforming their overall volume growth, and we are up with every MSO that we have today. So we just feel that the value prop that LKQ Corporation offers—competitive price, great quality of products, great service levels—allows us to continue to win with the MSOs. We will not report on the exact stats of APU by the MSOs, but for sure, with the MSOs, they have more direct contracts with insurance carriers that drives more alternative parts utilization as part of their agreements with the insurance company. So we do see as MSOs gain share, the APU grows. And so that is great for us. And the MSOs, as you can imagine, have much more volume at a rooftop level than a non-MSO. We gain efficiencies just by delivering more products to them. So when the MSOs grow, it has been good for us. Jash Patwa: Understood. That is super helpful. And then just as a quick follow-up, you know, we are starting to enter an anticipatively strong tax refund season that could bring customers back into collision repair shops. Wondering if you sense that optimism from your customers, maybe anecdotally or in terms of sourcing activity to date. Thank you. Justin L. Jude: Yeah. I mean, that is a possibility. We have not really talked with our customers about it. That has not been brought up. But that could be another green shoot that could benefit us. Jash Patwa: Thank you, and good luck. Operator: Thanks. The next question comes from Craig R. Kennison of Baird. Your line is now open. Please go ahead. Justin L. Jude: Good morning. Thanks for taking my question. Justin, I wanted to dig into margin in North America. I mean, you talked about competition. But LKQ Corporation is significantly larger than any single competitor there. So I am trying to understand the source of that competition and how pervasive it might be across your competitive landscape. Justin L. Jude: Yeah. The uniqueness of LKQ Corporation when it comes to pricing and competition really against most other aftermarket or most automotive sectors is we have both the competitors that provide alternative parts, so the salvage yards, the aftermarket distribution businesses, as well as the OEMs. And when you are in a compressed market, repairable claims are down, everybody is fighting for more volume. Sometimes folks feel that they are losing share and start to be a little bit more aggressive on pricing, and so we see that on the OEM side. We see that on the aftermarket side. We still feel our right to win is better. We might have to give up prices on some parts such as A and B movers, but then we see the offset on some of the slower-moving stuff that we carry. Our competition does not necessarily carry that in stock quickly to that customer. So we still feel that there is some pricing, but we can navigate through that. Using some of the AI technology that we have been implementing with one of our partners just helps us react quicker to that. Craig R. Kennison: Thanks. And maybe you could just shed more light on your use of AI and how it can impact your pricing algorithms? Justin L. Jude: Yeah. We had a pretty good system before. We have leveraged, once again, a partner to help us get more real time, more reactive, looking at SKU, looking at, you know, a SKU down to a regional level, maybe even a shop level, understanding the demand. I mean, if you look at the data that is existing out there, understanding the market, when I talk about repairable claims, we probably have more data combined than any other entity out there. And so how do we take that data, leveraging what the demand is, leveraging what the opportunity is, and acting real time on pricing to make sure that we can have a right to win. And we are seeing even more opportunity, as I mentioned, on kind of the C and D movers. Where we have it, and every time there is a quote, we are getting the sale. So there is an opportunity for us to push price on that, and maybe we need to offset price on some of the faster-moving stuff. But it is just becoming more real time down to the SKU level, down to the location level of the shop. So we have good sophistication to make sure that we have the right to win. Operator: Thanks. Joseph P. Boutross: Yep. Operator: The next question comes from Brian Butler of Barclays. Your line is now open. Please go ahead. Joseph P. Boutross: Hey, good morning, and thanks for taking my questions. I just want to delve a little bit more into Europe. Can you just talk about the factors that impacted the business in Q4 versus what happened in Q3? Want to understand that a little bit more. And also, if you could break that out between market-related factors and company-specific factors, that would be useful. Justin L. Jude: Yeah. Thanks, Brian. I mean, the overall market continued to deteriorate Q3 to Q4. The overall uncertainty, consumer spending was down. The competitive pressure continued on. Some of the headwinds on the revenue side were somewhat self-inflicted intentionally. That was kind of in our guidance when we looked at the overall EPS that we may have to do this, and so the majority of the headwind on the volume is market. And, you know, when that market comes down, competitors get a little bit more aggressive on price. Once again, some of the headwinds were self-inflicted where we intentionally tried to replace and did replace volume of private label against the tertiary brands that exist out there. And when you are introducing the new products and you want to make sure that customer switches that brand over to you, we came out with introductory pricing. So a little bit of that headwind was us just getting more aggressive on pricing with the private label to get the adoption rate up. In addition, as that is replacing some of the delisted product, we cut the prices on some of that delisted product to make sure that it moved off the shelf, we did not take any excess and obsolete. And so some of that stuff we will correct—I do not want to say correct because it was intentional—we will be able to move the pricing up on private label as the volume has grown. As a percentage of revenue, private label was roughly still flat from Q3 to Q4. But if you look at the actual volume of units, that number increased to, you know, around 25%. So we are seeing market adoption on the private label. We have the pricing power to be able to push that pricing up as the adoption comes. But it is still the majority of it is just that market headwind. But we are not standing still. As we mentioned and Rick talked about, we are still working on the integration to get the cost out of the business to make sure that when the market does recover, we will be even that much stronger. Brian Butler: Alright. Thanks. And in terms of 2026, I mean, it sounds like you are expecting to get back up into the double digits there. Is pricing going to be part of that, or what else are going to be the big drivers that are going to get you there? Rick Galloway: Pricing will be part of that for sure. The majority of it is going to be things that we can control on the cost side. So I mentioned an ERP migration that we are going to do in a region in early Q2. That will be a catalyst to help us drive significant cost cutting on the business. So we are working at continuing to drive productivity initiatives up, get some of the cost out. And we will be able to get some price as well in 2026. But the majority of it is things that we control on the cost-cutting side. Brian Butler: Okay. Thanks. And then just last question before I turn it over. Just on repairable claims in North America, just kind of curious how you are thinking about that in 2026. Do you expect the trend to improve steadily? What are you thinking there? Joseph P. Boutross: Yeah. So in our number, Brian, what we have got is we said we are not going to put a lot of improvement into our forecast. So, you know, as Justin mentioned, Justin L. Jude: there is a lot of good news that we are seeing, but until we see it actually in our numbers, we are not going to put it in our forecast or in our budget or guidance. Joseph P. Boutross: So what we have got is similar to what we had in Q4, Justin L. Jude: we are assuming that kind of goes through the full year of 2026, Joseph P. Boutross: with a little bit of improvement throughout the year. So the back half of the year, we expect to be a little bit better than the first half of the year. Brian Butler: Very helpful. Thank you. Jash Patwa: Thank you. Operator: The next question comes from Bret David Jordan of Jefferies. Your line is now open. Please go ahead. Justin L. Jude: Hey. Good morning. Comment about up with every MSO, you know, I guess, market share in 2025. Do you expect that to be the case in 2026? Is there anything out there sort of moving around on longer-term volume contracts in the competitive landscape? No. I mean, we saw our share and our volume grow throughout 2025. Some contracts just became renewed. I do not see any risk. If anything, maybe some more growth on that side, just because on a run rate coming out of 2025, we saw a good improvement on that. Bret David Jordan: Okay. And then within Specialty, Justin L. Jude: you talk about the strength and then obviously rebounding. Is it light vehicle or RV or both? I guess as you look at maybe divesting that, you know, is it strong across the board supporting maybe a better valuation, or is it sort of spotty where you are seeing the recovery? It is across the board, both on the automotive side and in the RV side. So that is good for us, and that process—I mean, that process is still ongoing for the sale. It has been robust. Great interest on it. And, you know, with the market recovering on both sides, once again, the automotive and the RV, we see that one being a pretty positive turnout. Brian Butler: Okay. Great. Thank you. Joseph P. Boutross: Yep. Operator: The next question comes from Gary Frank Prestopino of Barrington. Your line is now open. Please go ahead. Brian Butler: Good morning, everyone. Justin L. Jude: If you can answer this question, Justin, in what you are experiencing in Europe, is that more or less just on the continent itself, or does that also include UK operations? I seem to recall that when you bought Euro Car Parts years and years ago, that was a pretty steady business. So if you could parse that out, and if you do not want to do that, I understand. Yeah. So it is across the board in Europe. I mean, there are pockets that are doing a little bit better than others, and UK was one that we talked about in the past that had, you know, the economy was tough over there. Consumer spending and discretionary spending was low. You know, the good news is we are still seeing vehicle aging grow. But right now, with the environment on the economic side, consumers are just still spending less. So it is across the board that we are seeing some pressure, higher in some areas than others. And, you know, I know there are some markets in Europe that are positive, and some of those markets are where we do not operate yet today. But overall, I would say on average, it is really across all Europe. Jash Patwa: And then just Justin L. Jude: in Europe, are you doing things with recycled parts there in that market? I seem to recall you had some activities going on there versus, you know, there are very few parts on the continent itself. Yeah. One of our initiatives has been to drive salvage or recycled parts over there and leveraging our North American talent and some of our processes over there. We have been in salvage in a very small scale. We have increased that volume with an acquisition of a joint venture with Ritchie Brothers or Insurance Auto Auction called Synetiq in the UK. We see as we enter that space, there is more and more demand growing for green parts, more for used parts. The industry just needs a solid distributor of those parts to make sure that they can deliver on time and quality. That is what we bring. We see that as a good growth opportunity, but we are still in, I would say, the infancy stage as we introduce more and more recycled into those markets. Jash Patwa: Okay. Thank you. Operator: Thank you. We have no further questions at this time, so I would like to hand back to Justin for final remarks. Justin L. Jude: Thank you. I want to make sure you know we remain highly enthusiastic about our business. Despite the challenges in the environment in 2025, I feel our team successfully executed on our core business strategies. We streamlined our portfolio, generated strong, very strong free cash flow, and maintained a disciplined approach on capital allocation. The resilience of our underlying business, coupled with the anticipated market recovery in the latter half of 2026, should translate into positive results. And with that, we will conclude this call. Thank you, everyone, for joining. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your line.
Kaarlo Airaxin: [Foreign Language] Luis, nice to see you again. How are things? Luis Gomes: Nice to see you, Kaarlo. Things are going well, with normal challenges, but with a good outlook for the year. Kaarlo Airaxin: Yes. So Luis, a busy year, one might ask. So please walk us through the highlights and what the future might hold. Luis Gomes: Surely. So the year 2025 was a year that did not meet our expectations. We were -- I was personally disappointed with the outcome of the year. But at the same time, quite encouraged by some of what we achieved and some of what we have actually prepared for the future. So our net sales were below what we expected. They were below what we had reforecast, mostly down to 2 programs, one which is delayed in terms of being started and the other one, which has a few issues that are external to us, but that has actually affected our net sales quite substantially. Despite this, we were still able to deliver a positive EBITDA, that was one of our objectives for the year, even if the other objective originally, that was to actually have a positive operational cash flow, could not be fulfilled, mostly because of that delay in the start of a very large project, and that has affected us in terms of our cash flows. But as I say, it's a year of mixed results, disappointing in terms of our growth, but we still managed to actually deliver positive EBITDA, showing that we could adapt to the fact that we had lower-than-expected revenues. And particularly, there are some interesting aspects. And one important aspect for us is that our Data & Services business, something that we have been investing in and we have been growing over the last few years, is actually performing quite well. So it grew year-on-year about 78.5%. And that was good to see. It's not just in terms of the increase in net sales, but it's also the fact that this is a high EBITDA part of the business. And as such, it has actually delivered the kind of growth, the kind of expansion that we wanted and expected. But of course, the reverse of that is our Products & Missions had some challenges. And as I mentioned, that comes down to the fact that we had delays on an existing project that delayed our revenue recognition. Now this is not revenue that disappeared, it's revenue that has been moved into 2026. And then also one large program, EPS-Sterna that we expected 6 months ago. That is delayed in its start. We already expected to have some revenue in the year, but we didn't. So that has affected our mission and products business line. We still expect those -- we expect it to improve in 2026 quite substantially. But 2025, we did have some challenges there, and those affected our overall performance. Now in terms of our business, as I say, this is why I'm encouraged by what we have done in 2025. So we brought in a new important large investor, long-term investor for our stock. It is Bonnier Capital. It is great to have them on board, not only because it allows us to actually do the developments we want to do, but also because they are an important investor. And as I say, with a long-term strategy to invest in us. And that is a good feeling. It's a feeling that the investment community is looking at us and saying, our strategy is appealing. At the same time, we started also building Sedna 3 and 4. These are our next satellites for the maritime business. They will be launched early next year. VIREON 1 and 2 for our Earth Observation business, for our land monitoring business are now on their way to the launch sites. They might already be there today, getting ready for a launch in the end of March, which is quite an exciting period for the company. And this will be quite an important tool for us to expand our Data & Services business. And we are already building #3 and #4 for launch later this year, beginning of next year. And over the next 6 months, it's a number that I find interesting. It's important for us to say this. We are expecting to launch or there to be launches of 15 satellites built by AAC Clyde Space. Some are for ourselves like the VIREONs, others are for our customers. So this will be quite a lot of new AAC Clyde Space designed satellites in orbit. It will be good to see an expansion of the number of satellites that we have built that we have put in orbit. And then, of course, we have INFLECION Phase 2 program coming online. So we are now just in the last aspects of closing Phase 1. And we are just in discussions with the European Space Agency on Phase 2. And that is going well. Those discussions are going well. We're just going through all those aspects. It is going to be very important for us to actually start that Phase 2, so that we keep to the time line of having a constellation late '27, '28 of new maritime services -- satellites for new maritime services. And then, of course, probably the biggest thing, the biggest focus for the company over the last few months is getting ready for EPS-Sterna. And the project, as it's well known and well documented, has been delayed. EUMETSAT had some delays internally in terms of approvals. But on the 12th of January, EUMETSAT got the green light and the go-ahead to start the project. And on the 27th of January, they actually signed their contract, the agreement with the European Space Agency to start the procurement. And we are now going through that phase of final negotiations, discussions, and we expect to actually start working on this project quite soon. So that is quite a positive development. And as such, and this is why I remain very optimistic for 2026. I think it is a year that is shaping up to be very good for us, and it has the right ingredients. Even if 2025 was a bit of a disappointment, 2026 has the ingredients to be a great year for us. Thank you. We'll take some questions now if there are some. Kaarlo Airaxin: Excellent. I think we lost you there for a minute here. I think you already gave the indication of when you expect the EPS-Sterna orders to come in. That was probably on the last slide. But we have another question here. What is the reason for the lower EBITDA margins in the Data segment? Luis Gomes: We are expanding that side of the business. So we are doing investments there. We are expanding the number of people we have on sales, for instance. We are expanding the number of people we have to manage the data flows in preparation for the new satellites coming on board. And as such, we will see a reduction on EBITDA levels now until those satellites are online. But we have to prepare the work. We have to invest. We have to get more people, as I say, both on the sales and on the data management, distribution side and processing side of the business. So we will see that happening now. But when the satellites are online, when the data flows are going to the customers, we expect those numbers to improve again. Kaarlo Airaxin: And as you mentioned, you're in a good position for 2026, but looking at the 2025 numbers, there are some disappointments in the market, and we have one comment here on the generally lower level of order intake during 2025. What's the main drivers behind that? Is there one main driver? Would there be any lessons learned? Or what can you -- could you elaborate a little bit on that? Luis Gomes: I would say the lesson learned is that working with governmental organizations sometimes is a bit more challenging than we would like to be. I think the main point in terms of order intake is that we have a very large order in the form of EPS-Sterna. And that is one we have focused quite a lot. So we have focused our effort internally in capturing that. And a lot of our work -- a lot of our backlog is dependent on that. So when that comes in, that will actually change things quite dramatically. And because we have been waiting for that, it's also not like we can just go and replace start new orders. We have to actually choose and we have to focus on a certain number of orders. And that probably will have actually meant that our order backlog, because of the delays on that project, actually was reducing. But in general, I think this will be a very different situation. We'll see a very different reality once that project comes in. In terms of 2025 in general, yes, it was disappointing, and it was very disappointing for ourselves, because we expected a better year. And as I say, there are the delays on EPS-Sterna, but we also have another project where, due to external circumstances to us, there is a technical disagreement between one of the suppliers and the customer. And that has led to some delays in terms of recognition of revenue, because there are some work that we can't do until they actually agree. But this is something that is being resolved. And as I say, moved from '25 to '26. And it is something that we really couldn't control. Kaarlo Airaxin: And if we're looking forward here, guidance and long-term outlook, what shall we expect? And will there be a full year guidance? Luis Gomes: Once the situation with Sterna is all resolved and everything is done, we will give guidance to the market. Until then, it would be premature just because the impact is so big on our finances for the year. So we will give that guidance once everything is settled. Kaarlo Airaxin: And we have a viewer question here. Should the additional Sterna launches be considered a constellation expansion or a renewal? Luis Gomes: Both. So our objective is to expand our maritime constellation. We want to do that. But of course, we also have old satellites in the fleet. So some of those will start reentering, they will stop working. And the new ones are needed to both replace them, but also to expand. So our objective is to have a net positive in the expansion of the fleet in terms of the amount of satellites and data that we deliver to customers. So that's what we are working towards. But it's a mix of both. Kaarlo Airaxin: And you mentioned earlier the 15 satellites that will be launched in the next 6 months. And we have a question. If you could tell us which ones they are, if we can get some more granular information. Luis Gomes: So I can just mention the 2 VIREONs that we own ourselves. The other ones are customer satellites, and we are not in a position to discuss those. But it's just to give the number of satellites, but we can talk about the ones we own. The other ones are for our customers. Kaarlo Airaxin: Okay. And what is a reasonable time line for the VIREONs constellation to start earning revenues? And now we're moving into forward-looking statements. Luis Gomes: So after they are launched, we expect a commissioning phase of about 3 months. That is where we are, verifying, checking, putting the satellites in the right place, because they will still take a while to actually place in the right place. It can take a little bit longer, can be a bit quicker. But after that phase, we will be in a position to start delivering data to customers and to start making revenue out of them. Kaarlo Airaxin: Thank you. And we have some questions here on INFLECION. What is the current form? And how much is in your hand now vis-a-vis the third party? And as I said, it takes 2 to tango, but here apparently, it takes 3 to tango. Luis Gomes: Yes. In this specific case, I would say 3 is the right number. And as you can imagine, that's quite a difficult tango. What we have right now is most of the proposals, most of the plan is all arranged. There is one outstanding item to be discussed. It involves another partner. And as such, we still have to finalize that. But I think we are in a pretty good position to go ahead. But ultimately, as I said, we have to agree together with the European Space Agency and the other partner. We have to agree all the details. But it's something that I expect to have a fairly quick solution. Kaarlo Airaxin: And we have a viewer question connecting to that and that is a statement. There hasn't been any updates. Is that due to, well, let's say, the third party or other party. So you are somewhat stifled in what you can communicate. And the next question is, would you say that these projects are moving forward as expected with what you know? Luis Gomes: Starting by the end, yes, I think they are moving forward as we expected, maybe with a little bit of a delay. We expected to have closed this December, January. So there is a little bit of delay. But nevertheless, projects are still working as we expected. And yes, I cannot disclose details about the ongoing discussions, because as I say, it involves other parties. So we can't give updates on that. But in general, we are still seeing an evolution. Things are, as we expected, as I say, with a little bit of a delay. Kaarlo Airaxin: Okay. And is the SKAO progressing again, or is there still a problem with the suppliers? Is there a problem with the suppliers? Luis Gomes: So I won't talk specifically about any details on the program. I'll just say, the program is moving, but we do have some delays there. But the program is moving, not as quickly as we would like. Kaarlo Airaxin: And so bearing in mind that you're not discussing particular targets here, but there is a viewer question. In Q4, you communicated SEK 32 million in the SKAO will shift from 2025 to 2026. This is only SEK 2 million more than in Q3. What is the main factor that the net sales came in SEK 22 million lower than your estimates from November? What is the factor here? And I believe, in the beginning, you said sales may be postponed. Luis Gomes: We expected to recover some of the movement on that revenue on quarter 4 still. We had some expectation that we would still recover some of that. We also had some expectations that Sterna will come earlier, and so we could actually recognize some revenue, because we've already done some of the work, particularly preparation with subcontractors and so. So there were a few things that we expected towards the end of the year that didn't happen. They moved into 2026. So that's the main cause, the main reason. Kaarlo Airaxin: And I have a question from someone mailing it in. You press released that VIREON 1 and 2 have been shipped to launch and launch is end of March. But if I understand correctly, exact launch date is not set. So why is that? And how will we know in the market? Luis Gomes: You might want to go and ask Mr. Musk why that is. So SpaceX has changed the date of the launch a little bit over the last few weeks. Now we have a nominal date, but we don't want to commit to it because it has shifted a little bit over, as I say. And so we prefer to say it's the end of March. And as we get closer, we will know better exact dates for the launch. Kaarlo Airaxin: And I will expose my ignorance here, but a launch, is that the same as being operational? Or how many steps would there be before you are operational? Luis Gomes: No. So that is the first step in operational and the spacecraft being operational. The spacecraft will then separate. We will have to stabilize it, get it pointing in the right direction, get solar panels deployed, so that we have enough power for the spacecraft. We will have to start communication, series of sequences of checks that we will do that's called early operations. And then once all of that is done, we'll get into the commissioning phase. That's where we will then start actually testing in detail every single subsystem on the satellite. We'll verify all the communication chains, from taking a picture, all the way to download it to the ground station. We'll iron out any bugs on the software, any issues that we observe. We will optimize the operation of the spacecraft. So that period is commissioning. That will take about 3 months. So all in all, from launch to a fully operational satellite, usually, we'll be looking at around 3 months. Sometimes it takes a bit longer, sometimes it takes less. It depends on how things go, how many issues we might find during the duration. So it's a period. As I said, we can make it quicker sometimes, but we also want to make sure that the satellite is safe. We don't want to do anything that might damage the satellite. So we also like to take our time. Kaarlo Airaxin: Makes sense there. And if we continue on the time line here, customer conversion, would you have a number? Could you give us a feel for customer conversion? And also the time frame between, let's say, discussion to an actual order. So 2 questions in one. Luis Gomes: Yes. Customer conversion in the space industry is always a difficult subject in the sense that many conversations are very top level at the beginning. You have many conversations. At which point that becomes a serious conversation is always difficult to actually decide. In some cases, for instance, in the more institutional side, that is when we are talking about big programs like Sterna, that's a conversation that started many years ago, went through everything. And basically there, the conversion -- for that kind of programs, the conversion is almost 100% once the conversation starts to be serious. Of course, in the more commodity side of the market, it is products, data, conversion rates vary very much depending on what you are doing. But you could [Audio Gap] with customers. On the satellite side, on the mission side, you probably have a similar conversion rate. But then the time lines that you have between starting a conversation and actually having a contract is very variable. Again, looking at the more commodity side of our business, that is where we sell products and data, readymade data, let's call it, that time lines are fairly short. You're talking about a few months from first contact to actually having an order. When it comes to satellites, or more specific products like Sterna, then you are talking probably 1 year, 2 years from having a first conversation to actually having a contract. When we are talking about large data delivery, secure data deliveries, for instance, exclusive, again, that is a few years of discussions and contract negotiations. So it's very dependent. The market is very different. And as I say, going back to the conversion rate, it's very difficult to actually from -- we have many conversations, many discussions with potential customers, but many of those are very top level, very initial. At some point in there, they become serious. So it's very difficult to actually have a proper assessment of conversion ratios. But the numbers I gave are reasonable. But it tends to be a long process in some parts of our business to actually get from first discussions to converting to a contract. Kaarlo Airaxin: And we have a question here on COMCUBE-S, and it's a statement here. It's a significant project and the questionnaire or the person writing the question has read the study, and it seems to have been successful. Would you give us some insight in this project? Luis Gomes: So that's a very large project, as stated, and it's very large, but it's still dependent on being approved by the European Space Agency by being approved and financed by countries, by member states of the European Space Agency. So we have done what we can that is to do a good job with our partner and lead partner on this project. But there are still many milestones that need to be achieved before it becomes a real project. So it's something that we continue to work on. But as I say, it's a big governmental project, and it will require quite a lot of steps. So it's something that might happen. And if it happens, it will be great in its full format. But at this stage, we are not able to comment further than that. Kaarlo Airaxin: Okay. And when we look at the defense sector, you have ongoing discussions, I take it. So how much can you tell us? Or is it the same thing here when you're having, let's say, a third party that everything is classified? Luis Gomes: So we can't actually discuss and we can't disclose most of the work we do or the discussions we are having, not until the other parties decide they want to make that public, if they want to make it public. We're having several discussions. We are working on several things with some defense organizations around the world that ranges from supplying equipment for satellites to actually work on potential missions to look at service-based activities. There are many ongoing discussions. There are many ongoing studies and work, but I can't say much more than that. But of course, it's a sector that is growing. It's part of the things that governments are paying a lot of attention to. And so we are participating and benefiting from that dynamic right now. Kaarlo Airaxin: And we have another question here, and I believe you touched upon it when it comes to the maritime data, but DNB Carnegie, who back on the EPS-Sterna green lighting from EUMETSAT, recently raised the target price to between SEK 107 and SEK 138. And obviously, you can't comment on the share price. However, they are expecting maritime data offering and thus revenue in the second half of 2027 in this report. Would you say that that's a fair assumption? Luis Gomes: I believe that was for data from Sterna or for revenue from Sterna. Kaarlo Airaxin: Yes. Luis Gomes: So I would say that, that would be a pessimistic view. It would be a pessimistic view in my opinion. It will be a pessimistic view of how things will evolve. In terms of maritime, yes, we will increase -- next year, we expect to increase our maritime revenue. But when it comes into revenues from Sterna, I would say that's a pessimistic view. Kaarlo Airaxin: So if one were to summarize here, the 2025, particularly on sales, disappointing, but the sales may have been pushed forward. And you seem to be quite satisfied with the order pipeline. Is that a fair assumption? Luis Gomes: Yes, it is a fair assumption. So we have built quite a large order pipeline and we expect to start converting that this year. And so from that perspective, we are very comfortable with what we have been doing and preparing, and at the same time, our investments in new data services is going ahead as planned, and that opens other opportunities in terms of pipeline and growing our pipeline for the coming years. So yes, all in all, I would say that 2026 is shaping up to be a good year, more or less. Kaarlo Airaxin: And I just received another question here, so I'll just read it off the printer here. You mentioned last year that you had early discussions about possible new VDS constellation. Any progress within this area? Luis Gomes: So we are working -- this is a more generic aspect in terms of maritime. So we are working several opportunities right now. We are having several discussions, both on just AIS and VDS. And so yes, there are plenty of opportunities there. There are things we are progressing with customers. In some cases, it's data and services. In other cases, is hardware sales. So we are in discussions right now on that. And yes, we expect that continue to grow is an area where there is a lot of interest. I don't have specifics to tell you right now, but just we are in discussions and we are in planning phase for our own data services, but also in discussions with potential customers for constellations of that type. Kaarlo Airaxin: So you're leaving a rather busy year and you're entering perhaps an even more busy year, if I interpret it correctly. Well, thank you, Luis. Educational, interesting. And if people have any more questions, they should contact yourself and the company, I take it? Luis Gomes: Yes. First point of contact usually will be Hakan Tribell, but he will then direct the questions to the appropriate person to answer. So first point of contact, please feel free to contact Hakan. Kaarlo Airaxin: Right. Thank you so much. It's been a pleasure. [Foreign Language]. Keep up the good work.
Stephane Pallez: So good morning, everyone. Welcome to our annual results presentation for 2025 and outlook for FDJ United Group. So before handing to Pascal to detail the financial results, as we always do it together, I will start by commenting on the key events of 2025, first year of Kindred's integration into our results. And I will then, of course, come back to present our outlook, and we'll conclude with Q&A. So just to say where we are today and what we are. So we are FDJ United, a group with a unique profile with solid assets and a strong business model, and this illustrates this statement. So in 2025, the group generated a gross gaming revenue of EUR 8.7 million, a revenue of EUR 3.7 million and current EBITDA of EUR 902 million, representing a margin of 24.5%. FDJ United has developed over the year, a unique profile based on solid assets and a robust business model. And this is what I want to illustrate briefly through those numbers. We detain assets in all gaming activities and distribution channels. We are present in most European markets and of course, very strong in France, where we generate more than 3/4 of our revenue. We combine point-of-sale activities with digital activities, and we believe in this combination. Our online activity now represents 1/3 of our revenue, and this was part of our strategic goals. And we generate solid financial results, enabling us to finance our investment and to offer a good return to our shareholders as is our promise. So as you know, this was achieved through a deep transformation over the last years. I won't come back to the different steps that we went through. It was, of course it started with the IPO of FDJ United in 2019. And we have now become a true champion of online lottery, betting and gaming in Europe. This result was, of course, primarily achieved through successful organic growth, but it has been complemented with selective mergers and acquisitions since 2022. And in numbers, what this means is that this from 2019 to 2025, our financial profile has, of course, significantly evolved and positively evolved. Our overall performance has changed. The numbers have changed. Revenue has been multiplied by 1.8. Current EBITDA has been multiplied by over 2, 2.1. We gained almost 400 basis points in terms of EBITDA margin coming today at, again, 24.5%. Free cash flow was multiplied by 2.6 and the dividend payment was multiplied by 4.6. So all this, I think, illustrates what we are today, a solid group with, of course, good perspective, and we'll come back to that. So to come back to 2025, I want to start by underlining some key highlights that we have achieved during this year in terms of business transformation and of course, looking out to our 2 main business units. So for the Lottery and Sports betting in France, I think 2 main transformations that were -- one was already started. It's the sales force internalization, which has been completed into 2025. And you know that this is something that has been a high contributor to our margin improvement into the last year and even more to our capacity to drive our business in France over the whole territory with our retail network. We've also started a new phase of development of our retail network, again, which we -- in which we believe strongly with the opening of more than 500 point of sales until -- under banners, particularly with large full retailers like Carrefour/E.Leclerc, in line with the objective that we communicated during our Investor Day last June to increase our client base in France, which we think is still an opportunity today. So good start for this, and thank you to everyone for giving us this good start. But of course, it's not finished. We'll come back to that. For online betting and gaming, I can say that the integration of Kindred has been completed. Kindred is completely today part of our group. It's been now -- it's now part of OBG online business and -- online betting and gaming BU. We have definitely now, again, a complete online business in France and in Europe of our gaming activities that are open to competition. This BU, of course, is undergoing a strong transformation over the next -- which will go on over the next years. It is, of course, a technology transformation, and we'll come back to that. It's also a transformation that implies to completely separate our competitive activities from our exclusive rights activities as we committed to the antitrust authorities. We have achieved that in France. We have achieved that in France with the separation of our player accounts between online lottery and online sports betting followed by the merger of Parions Sport en Ligne, and ZEturf accounts at the end of June, and this was an important step, which prepares what will happen this year and particularly in March with -- on our brands in this activity. In the United Kingdom, we deployed 32Red and Unibet brands on our proprietary platforms. This road map is, of course, not achieved today. We will come back later on our vision of this transformation for this year and next years. With the decisive contribution of AI, this BU continued also to transform and implement its operational performance at the highest level. Two things worth mentioning. First, the ramp-up of automated marketing campaigns with more than 70% of direct marketing campaigns automated in most of our markets and the optimization of our customer service operation, enabling us to manage an increase of nearly 20% in interaction with reducing costs at the same time by more than 10% in 2025. So very significant transformation, which is again not finished, but which has started nicely. So when I look more globally at 2025, of course, it is fair to recognize that in '25, our performance, our results were significantly impacted by major adverse factors. This is not a surprise. We described those over the year. Some came at the latest part of the year. And of course, we incorporate all those in our results and in our vision for 2026. First and foremost, in those factors, tax increase in France, in Netherlands and Romania. And over the total financial year, their impact on revenue and EBITDA amounted to more than EUR 50 million. So very, very significant impact. At the same time, in the Netherlands, in particular, regulatory decisions that I can only describe as ill considered were implemented in a short time frame with a very negative impact on the legal market, on all the operators, of course, including us. The market for operators in Netherlands has been shrinking by around 25%, at least in favor of offshore online betting and gaming operators, resulting in a loss of tax revenue for the country and in the last, of course, of control on players who visit sites without any protection and guarantees. And this is clearly not good news for the sector, but it shows how regulation can definitely, if it's, I would say, ill implemented, go in the wrong direction. However, we had to adapt to these developments, and we acted and very quickly put in place a broad-based performance plan to improve our operational efficiency all over the group. This plan is off to a very good start as the 2025 target that we communicated at the beginning of the year has now significantly exceeded, reaching approximately EUR 50 million compared to EUR 20 million that we announced at the beginning. We, therefore, raised in our forecast for the future, our target. First, our target for this -- for the impact of this plan from EUR 120 million to EUR 150 million of recurrent cost efficiencies that will improve -- will continue to improve our margin over time till the end of 2028. Therefore, in this particularly challenging regulatory and fiscal environment, FDJ United has managed to preserve its fundamentals and to meet our financial commitments as we formulated them at Q3 results particularly. We reached an EBITDA margin of over 24% -- 24.5% exactly. We generated a record operating cash flow generation of nearly EUR 300 million. And therefore, we are in a position to propose in the continuity of our guidance on dividend, which is a payout ratio of 20% -- of 80% of our adjusted net income. We are in a position to propose to the next general assembly in April a raise of our dividend to EUR 2.10 per share. So this, of course, shows our solidness, our strong performance, the solidity of our model and the trust that we have in the future. So to look a little more at our performance in our 2 main BUs that, of course, are the cash generator of the group. I want to look a little more at LSF than OBG. So for LSF, I've just mentioned the 2 key achievements in terms of business transformation. And again, those achievements are very structural in the way we have managed and will continue to manage this business. In financial terms, the BU gross gaming revenue and revenue increased by 3% to EUR 6.9 billion and to 1% in terms of revenue to EUR 2.5 billion. This, of course, is including the impact of the tax increase in France that has been implemented from July 1 and which amounted to more than EUR 28 million. So when you look at our underlying growth for the lottery, you see that GGR grew by 3%, identical for both draw games and instant games and revenue grew by 2% to, again, a little more than EUR 2 billion. In terms of games, we had, again, good trends in our main games. Instant game businesses benefited from the success of promotions and relaunch in our portfolio, such as the launch of Royaume d'Or of 600,000 carats and the strong performance of the exclusive online offering, including the record launch of some games as Bubblecaster game in Q4. So good results in Instant game business. And the draw games business was also positive, driven by long Euromillions cycles with more than 50 draws offering jackpots of over EUR 75 million, including 6 with EUR 250 million. So strong activity and strong business in our draw games and particularly for Euromillions but we also had good momentum on Crescendo and the new Keno formula that we launched last November. For online lottery revenue, we grew by 8% and this online business in the lottery represent now more than 15% of our lottery activity, an increase of nearly 100 basis points compared to 2024. I think it's worth noting that this strong performance is attributable to growth in the number of players that now exceed 6 million at the end of December 2025, thanks to record recruitment. Of course, we need to continue to work both on recruitment and increase the value of those players. But again, a very solid trend in this online lottery business which, as you know, has also high impact on our margin improvement over the years. For sports betting revenue in the point of sales, it had a slight decline of 2%, which is attributed to lower stakes, which reflect mainly unfavorable comparison with the Euro 2024 soccer, which has been, as you know, a high success. So these achievements in the -- in our lottery and sports activity under exclusive rights in France has lead us to actually a very strong performance into EBITDA margin. We had a very good implementation of our performance in our lottery in France. And therefore, we were able to generate a current EBITDA of EUR 913 million, up 3%, representing a margin of 36%, an improvement of 60 basis points compared to 2024. So very -- again, very solid fundamentals and very good results for LSF and again, a very strong asset in the group financial assets as of today. OBG is under transformation. We know it. It's not a surprise. It's a transformation that is going to be a journey and we have known it even, of course, if we are impatient to go further and to accelerate. As I said in the beginning, we have completed the Kindred integration. So that's done. We also, during this year, continued to launch major marketing and commercial initiatives, including the launch of 32Red e-casino brand in Romania in July, for instance. And in casino, we launched a new exclusive cross-market chatbot, which was very successful in 7 countries in the second half of the year. So again, good level of marketing initiatives. Also very significant increase in the number of active players up to more than 10% which is, of course, a pillar of our marketing and responsible gaming strategy in OBG. However, it is fair to recognize that level activity was disappointing with GGR declined by 8%, reflecting a particularly unfavorable base of comparison with 2024, of course, marked by the Euro Soccer and of course, the impact of tightening of regulation, particularly in the Netherlands that has started in October 2024, but that has been, I think, over -- again, over restrictive all over this year. So considering the cumulative effect of numerous tax increase on gaming in France, Netherlands, Sweden and Romania, amounting to more than EUR 23 million, revenue was down 12% to EUR 908 million. If, however, you look at what we did without United Kingdom and Netherlands, which were the markets where this negative trend was the most significant, GGR rose by 6% and revenue by 1%, thanks particularly to the performance of OBG in the French market, where we definitely outperformed the market and continue to gain market share. So again, very definitely mixed performance, but I think it's important to underline the strength that we want to continue to develop for the future. So the BU current EBITDA amounted to EUR 181 million, which represents a margin of 20%, of course, down as a consequence of activity decrease in some major markets. At a general level, as you know, we are completely convinced that at FDJ United, financial and nonfinancial performance go together, have to go together if we want to drive a sustainable business. So as everywhere -- as every year, we measure and publish our positive economic and social impact in France at this point. And for the 10th year, we have done this assessment with an external auditor, which illustrates our impact in France. Social and economic contribution of more than EUR 7 billion has been assessed. Of course, a good part of it is through the fiscal revenues that we pay in France, more than EUR 5 billion, including EUR 4.8 billion in public levies on games. We have also contributed to create or preserve more than 57,000 jobs, including more than 20,000 in bar, tobacco, newsstand network. This particularly benefits local businesses in France with a record remuneration of more than EUR 1 billion that has been paid to our 29,000 retailers last year. So high contribution to the French economy and the French territories. To look more broadly at our extra financial highlights, you know that we have further to the establishment of FDJ United, we have also adopted a new purpose to cover our new international scope, which is to embody the future of entertaining and responsible gaming in a model that creates positive impact for society. In that framework, I think 2 main objectives. One, of course, is responsible gaming. Responsible gaming, as you know, is part of our business model. It's not only a conviction, it's a necessity. And therefore, we continue to invest in that, particularly in terms of communication to our players because we know it's a never-ending objective to increase our efficiency with our players. So it is part of our brands to talk about responsible gaming. This is what we've done through Safe Play. It's a campaign with a new identity that will be adopted over time by all the group brands to highlight our, again, definite commitment into this responsible gaming activity. We have also invested in new tools, state-of-the-art tools to control the risk of this activity, particularly in France with a new tool, FDJ Protect, which is -- has been deployed to better control risky gaming practices, of course, specifically to online lottery activities. And we are deploying another tool, which is called Crucial Compliance that has been implemented in United Kingdom and the Netherlands and will be gradually deployed in other European markets for OBG. So again, strong investment to continue this and to accompany the development of our business. We also invest -- we also invest in carbon reduction footprint. For the fourth year, we have been awarded an A+ and A carbon rating by Vérité40 Index. And we have taken positive voluntary commitments into social and environmental contribution to dedicate over the year, 5% of our published net income. And this year, it took the form of a EUR 5 million investment in a fund launched by Ardian to finance projects to restore forests, wetlands and mangrove to sequester a large amount of carbon. So again, also medium-term objective that we fulfill during this year. So I will now hand over to Pascal for a presentation of financial results and come back later to talk to you about 2026. Pascal Chaffard: Thank you, Stephane, and hello, everybody. This first slide presents our key figures for 2025, some of which Stephane has already touched upon. The 2025 figures are compared with the 2024 reported, meaning published, consolidating Kindred from its acquisition 11th of October 2024 and also 2024 restated up to EBITDA. Restated meaning as if Kindred had been acquired on January 1, 2024, and based on the scope of business retained by FDJ United. The comparison to the reported figures shows the group change of scale and record level of GGR, revenue, EBITDA or free cash flow generation. We will come back on more detail on every KPI presented on this slide. First, the GGR, gross gaming revenue, which is stakes minus player winnings. In other words, the amount spent by the players. This KPI is growing in 2025, even in restated figures. But due to the gaming tax increase based also on the GGR in France, in Netherlands and in Romania, public levies went up by 3% and the net gaming revenue went down by also 3%. The impact of the tax increase that reduces mechanically our revenue and our recurring EBITDA by the same amount. We have grown our activity, but for the benefit of the different states, if I may say. As a result, the average tax on the GGR is now close to 60%. You show the figures of 59.9% on the slide in 2025 versus 58.5% in 2024. The net gaming revenue represented on this slide is a major part of our total revenue. And to get the total revenue, you must add the revenue from other activities, which are the B2B part of international lottery and payment and services. Let's now look at the bridge between revenue and recurring EBITDA for the group. Total costs have decreased by 2%. It's close to EUR 50 million in 2025 compared to an activity, the GGR that was up 1%. This is a result of the performance plan put in place in 2025, and I will come back later on this point. Cost of sales amounted to EUR 1.5 billion, down 1%, including, in particular, more than EUR 1 billion of retailers' remuneration, growing at a pace of 1.4% and the pace is the same at the one of the stakes in point of sales in France and in Ireland. It means that the other cost of sales went down by nearly 5%, reflecting notably the benefits of the sales force reorganization in France. Marketing costs include advertising and also the product design. They amounted to EUR 306 million in 2025 and were down 11% compared to 2024, which was impacted by the Euro football and the Paris 2024 Olympics, but the decrease is also the result of the performance plan. IT services reached EUR 173 million, plus 4%. They cover the costs associated with the outsourcing contractors of the development and IT operations. The increase is the net impact of the performance plan on one side that has decreased the costs and the investments on our proprietary platform, mainly in LSF and OBG on the other side. The personnel expenses were stable at EUR 583 million, although they include EUR 12 million related to the employee share ownership plan that has been put in place in the middle of the year. And to finish with this slide, administrative and general expenses, which are -- which mainly include consulting fees, operating cost of central functions and building costs, et cetera, were down EUR 8 million, minus 5% to EUR 166 million. So as it has been already said, the recurring EBITDA thus stood at EUR 902 million with down 6% compared to 2024 restated in the context of what I've already said, Stephane, of around EUR 50 million gaming tax increase. Let's take a look now at the same bridge from revenue to recurring EBITDA, but on the 2 main BUs. If we start by the French lottery and retail sports betting, the LSF BU revenue amounted to EUR 2.5 billion, up 1%, as Stephane already told you, based on the GGR growing at a higher pace, more than 3% -- the total cost remained barely stable despite a plus 3% GGR that was impacted -- that has impacted the variable cost. And I will come back to that a little bit later, but the variable costs are 70% of the cost base, demonstrating the performance efforts that has been performed to maintain a stable those costs in total. Cost of sales amounted to EUR 1.2 billion, stable despite the increase of retailers' remuneration. This increase is offset by the performance plan, notably, as I said it before, the effect of the sales force internalization. The marketing costs were stable at EUR 114 million despite the impact of the new tax on advertising and promotional expenses from July 1, 2025, for more than EUR 6 million. Other costs, namely IT costs, personnel costs and administrative and general costs increased very slightly by 2% to in total, EUR 322 million. In addition to this excellent execution of the performance plan, the BU has also benefited from a favorable mix effect on margins with the accretive effect of a higher digital penetration. Stephane told you earlier that digital penetration has now reached 15% compared to 14% last year. These factors enabled LSF BU to record current EBITDA of EUR 913 million, up 3%, representing a margin of 36%, an improvement of 60 basis points compared to 2024, which is a very good performance. And the strict cost control measures implemented in 2025 will, of course, continue in 2026 and further on. For online betting and gaming BU, the revenue amounted to EUR 908 million. Cost of sales were down 2% to EUR 261 million. The marketing expenses were down minus 11% to EUR 174 million, were optimized and further adapted to certain regulatory constraints, but also implementing some performance plan measures. The increase in other costs, plus 5% is mainly attributable to the plus 17% that you can see on the IT cost, reflecting the platform migrations and developments that we are performing. OBG has a fixed versus variable cost split of around 2/3 for the fixed and 1/3 for the variable, which creates a significant negative leverage when business slows down. This explains the sharp decline in the current EBITDA margin this year, which stands at 20%, compared to 28.5% in 2024. So our main focus is, therefore, the return to growth in order to activate the leverage effect that will automatically lead to a fast improvement in recurring EBITDA. We will, of course, continue to optimize the cost base in parallel as part of the performance plan also. In 2025 compared to the 2024 reported, revenue increased by 20%, but compared to the restated, it fell by 3% as it has already been explained. As we have just seen, the decline in revenue is directly linked to taxation. I will not come back to this point more. And Stephane has already commented in details on the 2 main BUs, LSF and OBG. So I will tell you a few words about the international lottery and Payment & Services. The international lottery recorded a drop in revenue of EUR 21 million due to the sale of Sporting Group at the end of 2024 and the termination of B2B contracts. Those activities have ceased because they were not profitable. You will see thus a positive impact on the EBITDA. And to finish with international lottery, the Irish lottery, PLI is growing. The activities of Payment & Services are down slightly minus EUR 3 million. It's 4% due to the cessation of high volume but low profitability activities. Let's have the same look at the EBITDA bridge by BU. As I already said on the revenue, Stephane has already commented the margins of LSF and OBG. So I'm going to focus already on this slide on International Lottery and Payment & Services as well as the holding costs. Regarding international lotteries, the recurring EBITDA amounted to EUR 38 million, up EUR 13 million compared to the previous year, thanks to the positive impact of the sale of Sporting Group. I've touched upon when I spoke about the revenue and the increase of profitability of PLI, and this is a very positive point, resulting notably from the group synergies that we have put in place. The margin of this BU in total is now 22.5% compared to 13.1% in 2024. On Payment & Services, recurring EBITDA was down EUR 5 million -- was minus EUR 5 million compared to minus EUR 1 million in 2024. In parallel with the optimization of its business portfolio to focus on profitable services, the BU continues to invest in developing Nirio brand and services. This explains the minus EUR 5 million. Central costs recorded in what we call holding amounted to EUR 226 million, down EUR 13 million compared to 2024. The rationalization of costs as part of the performance plan more than offset the EUR 13 million total costs related to the employee share ownership plan that has occurred in the first half of the year. Okay. This one, I think it's not necessary to comment it in details. So I will just move to this slide very quickly. To give you a few words complementary to what I've already told on OBG on fixed and variable cost split. As you can see on the slide, at the group level, this split is close to 50-50, allowing strong operational leverage. This leverage is even higher in OBG with a level of fixed cost that I already said close to 2/3. This means that when the BU is growing, the profitability is increasing rapidly. But when we face headwinds like in 2025 with a revenue decline faster than the GGR, the EBITDA margin is going down rapidly. We can mitigate this effect, reducing the fixed cost base, but it cannot be enough. Our focus has to be back to growth to benefit again from the powerful operational leverage. In the LSF BU, the split is different at the weight of the retail remuneration is heavy. Nevertheless, on the online lottery, the split is comparable to the one on OBG, allowing a strong operational leverage that is one of the 2025 good performance of LSF explanation. So our focus is obviously growth and optimization of the fixed cost base. Let's talk now about the performance plan. In 2025, we had announced a EUR 20 million positive impact of our performance plan. This was at the beginning of the year when we have faced the increase of the tax in France. And we have done far better because we are announcing here a EUR 50 million recurring cost reductions. And as Stephane told you, we are 1 year ahead in the implementation of the multiyear performance plan. This acceleration allows us to increase the total amount of this performance plan to more than EUR 150 million by the end of 2028 compared to the EUR 120 million that we announced initially in June. More than half attributed to OBG and nearly 40% to LSF. This plan, to be clear, is not just a cost-cutting plan. It's far from being a cost-cutting plan. It is more a transformation of our operating model, of our processes, of our tools to do more with less. And let's take maybe some example to make it very concrete. We have just finalized the internalization of the LSF sales force with substantial savings that I already commented. We continue to streamline the processes, for example, new commercial criteria to the point of sales with also the reduction of the number of agencies. We are transforming OBG's customer operations using automation and AI, which makes it possible to enter more client contacts, better quality and less costs. Also on OBG, but it will be done in a second time in LSF, marketing automation to optimize the creation and TTM of the campaigns, thanks to AI and also the globalization of the advertising purchases at the group level with scale economies. Transformation of IT, including infrastructure cloudification, DevOps, test automation, et cetera, et cetera, and many others. So we are -- with an ongoing transformation that is concerning the whole company. Let's now look at the bridge from EBITDA to the adjusted net result, which is the base of our dividend calculation. The net depreciation and amortization amounted to EUR 336 million, of which EUR 200 million of PPA amortization. The nonrecurring items of EUR 199 million mainly correspond to impairments of intangible assets recognized in PPA, EUR 166 million and restructuring costs, EUR 28 million. The financial result for the 2025 financial year amounted to minus EUR 63 million compared to plus EUR 5 million in the previous year. This change is mainly due to the interest of the debt and the lower level of cash following the acquisition of Kindred. This is completely in line with our expectations. The tax expense amounted to EUR 130 million, including EUR 27 million in additional taxes on large companies, i.e., an effective tax rate of 42.9% compared to EUR 138 million in 2024 and an effective tax rate of 25.8%. And as you know, the exceptional contribution on profit of large companies introduced in France in 2025 will be prolonged in 2026. The net income amounted to EUR 176 million compared to EUR 399 million in 2024 reported. The adjustments of EUR 311 million correspond to the amount net of tax of the depreciation of PPA, EUR 170 million and the net asset impairment already mentioned of EUR 140 million. Those are noncash events. This is why we adjusted to calculate the adjusted net income of EUR 487 million, close to the figures of last year, which was EUR 490 million. Free cash flow reached a record level of EUR 782 million compared to EUR 675 million last year. It's an increase of 16%. In surplus, the conversion rate of recurring EBITDA into cash was 87%, which is very satisfactory and a level well above the medium-term guidance of 80%. The group continued to invest in 2025 and even intensified with CapEx of EUR 172 million versus EUR 150 million in 2024, with the majority of its investment remaining devoted to information system developments. As a reminder, for the purpose of comparability between financial years, certain components of free cash flow linked to cutoff and nonrecurring effects are restated. These restatements mainly cover nonrecurring CapEx in group's business cycle, including in 2025, the additional equalization payment that we paid for an amount of EUR 97 million as well also as calendar effects impacting the variation in working capital, nothing different from what we did the previous years. Let's conclude this section with a few words about our financial situation. Taking into account other debts, total financial liabilities amounted to EUR 2.3 billion at the end of 2025. It's down EUR 200 million compared to the end of 2024, reflecting the debt repayments made this year. With available cash of nearly EUR 550 million, the net financial debt amounted to EUR 1.7 billion at the end of 2025, a reduction of nearly EUR 100 million compared to the end of 2024. This reduction is not exactly up to EUR 150 million that we have forecasted initially. This is explained by the slight lower recurring EBITDA compared to the situation beginning of the year and also by elements difficult to predict precisely, such as the winnings to be paid to players, which are at a lower level than expected at the end of 2025. They mainly depend on the jackpots 1 or not 1 and the fact that the players have claimed their prices end of December or beginning of January, you see that it's mostly a cutoff effect and not a structural one. The financial debt ratio, net financial debt on recurring EBITDA is at a level of 1.9x, stable compared to last year. And to really conclude and give back the floor to Stephane to talk about the outlook, a slide to maybe help you model 2026, taking all the key elements. We will have a split between fixed and variable cost in average that will be in the region of what we have seen in 2025. Second, the cumulative effects of the performance plan will amount to EUR 100 million. It means EUR 50 million in surplus compared to the EUR 50 million that we already did in 2026. Our business will be impacted by 900 additional calendar effects of new gaming taxes, including 2/3 on OBG and 1/3 in LSF. I would like to point out that the calendar effect is the additional effect of taxes. For example, in France, we only consider the additional taxes in H1 since H2 has been allocated from 2025. The cumulative impact of the new gaming taxes in 2026, if we compare it to the initial situation in 2024 on the NGR amounts to EUR 140 million and more than EUR 150 million impact on the EBITDA, considering also the new advertising tax, which is accounted for in the costs. The exceptional corporate tax on companies that generated yes, external corporate tax of the companies that generated more than EUR 1 billion in revenue in France having being renewed. I've already said that. We will once again get a sort of tax burden around EUR 27 million additional. The amortization of the PPA will be at the same order of magnitude as in 2025, i.e., a gross amount of EUR 200 million for a net amount of EUR 170 million net of deferred tax. CapEx will be in the region of EUR 160 million. It means that it will be on the lower end of the 4%, 5% revenue range that we have in our guidance. And finally, a reduction in the net financial debt is expected of around EUR 100 million. And now I can hand over really to Stephane, who will present our outlook. Stephane Pallez: Thank you, Pascal. So I think it's important to understand, as Pascal has done the weight of taxes on our business, but it's also very important to look at the activity and the drivers of the activity because this is what says, where we go from now and how we can project ourselves. So to start with LSF, lottery and sports betting in the point of sales, I think we have some interesting drivers of activities. First, of course, is the acceleration on the basis of the success that we had this year in the banner point-of-sale rollout. As I said in my first part, we are able to open 500 new point of sales. We will aim this year to open 700. And again, this means new clients, new type of clients also because it's a very different type of network. So that's a great factor. We will, of course, continue to work on the efficiencies that we can get from the integrated sales force model now, now that we have completed this internalization. So this is also a lever for efficiency and good marketing drive of our network in 2026. We will also, as usual, in 2026, we will animate our commercial activity through numerous events and innovations, of course, coupled with initiatives to continue to develop cross-selling at point of sales. So in the lottery, we will benefit for a lot of -- from a year with a lot of events. We will use the celebration of the 50th anniversaries of Loto. We will have 3 Friday -- 13th Friday, which is, as you know, an occasion also to animate our games. We will offer on this occasion Super Loto and we'll continue to offer extra benefits on the game that we launched in 2025, EuroDreams -- well, since the last year, including '25, which are EuroDreams and Crescendo to continue to develop them in our draw games portfolio. For the instant game portfolio, we aim to launch at least one new game or one relaunch of a current game every month, such as the relaunch, of course, of iconic games like Cash, Numéro Fétiche. And we'll also continue to invest in the online lottery to recruit new players while ensuring responsible gaming with, again, our new tools. We also continue -- we will continue to develop our exclusive games portfolio. We also plan to have each month new games in our exclusive web portfolio to further develop our offer in the online lottery, including multiplayer game, Lagoon Clash that will be launched in June and which will be a real innovation. So again, lots of innovation in our gaming portfolio to sustain our growth this year and for the future. And of course, for the sports betting, it will be a year of World Cup. And therefore, we plan to use this event as we know how to use it to have good growth in the sports betting activity in our point of sale. So let's turn now to OBG. OBG will see in 2026, the acceleration of its transformation that we started in 2025 and further implementation of the operational performance plan that Pascal has described at financial level. It will be executed through a new management and organization under the leadership of Pascal, who has been very involved in the integration and successfully integration of Kindred and who will take a key strategic operational responsibility with the management of OBG, which shows the importance for the group of this transformation in our strategic road map. He will also continue to lead major transformation project at the group level. And I really want to thank him for his results and his commitment to this transformation that we want to make real in 2026 and further. We'll -- of course, since Pascal will move to this operational responsibility, we are in the process of hiring a new CFO in the very next weeks or months. And of course, you'll be informed of this move as soon as it is completed. So we have in nobility an intense operational agenda. Of course, in France, a very significant move, which is the shift of Parions Sport en Ligne under the Unibet brand. It's important in commercial terms. It's also important in terms of our capacity to, I would say, get more efficiency from our commercial spendings under one powerful brand, which will be Unibet starting in March. So it's a strong move that we have been planning to do, and that will be done again this March, but it's also important for the future of this business, successful business, again, in France. We will also expand further our automated marketing campaign, and we'll expand also further the optimization of our customer service, supported by artificial intelligence in all OBG business. And we will prepare as we have already started for the opening of the Finnish market, which is now scheduled for mid-2027 after the framework for regulation has been adopted. So we will -- we intend to benefit from continuous commercial and marketing initiatives such as the internalization of the 32Red brand follow the success that we had with the launch in Romania. We will -- we plan to launch it in other markets during the year. And we also will finalize our multi-license strategy in Sweden that we started this year. And of course, OBG will -- intend to use the World Cup also to drive major commercial and marketing initiatives to get back to growth and recruitment, of course, through recruitment of players during this 2026 year. So very active agenda. Looking forward, I also want to say a word about our other activities. Pascal has commented them in terms of results for this year. But I also want to comment them in terms of how they will contribute to our growth and performance in the years to come. So we have the intention, as we said during our Capital Market Day to look for further growth in our international lottery business beyond PLI, which is today a success in terms of integration and synergies within the group. We have set a strong team to prepare to seize opportunities, which might be tenders or acquisition as they arise around us. And again, to look to those opportunities in short term and medium term. So we are now ready, I think, to be in that capacity to do so. We also continue, and this is more, of course, for France to invest to create differentiating assets in payment and service to serve our group strategy in France and particularly to serve our clients in the network and our retailers. So we offer now to our clients local bill payment systems in almost half of our network and a payment card. And we have built also a solution which is dedicated to local businesses of course, our retailers, but not only with Nirio business. So second trend. And more broadly speaking, at the group level, we have been building in 2025, our team and road map for data and AI acceleration. We are convinced that all our activities are and will be profoundly transformed and strengthened by data and AI use. And we have started to roll this road map with 2 priorities. One is, of course, to use it to improve gaming experience, more personalization with our customers, more efficiency in responsible gaming, which is, again, completely integrated into our new tools and objective and which will be a key driver to achieve this efficiency. And we want also to use data and AI to achieve operational excellence into our customer service operations. And we have started to also get new partners to help us to do so, such as the partnership that we signed with a company to develop AI within FDJ United. So all this, of course, is not only short term, but I think it's worth noting that in this context, we invest for growth and efficiency for the future. So to look at the 2026 outlook, I want to give you a global view of how we see 2026 year, which, of course, as Pascal has already explained, does have to absorb calendar tax increase of a significant level. So our target is definitely to increase our gross gaming revenue, again, despite this level of tax. I think Pascal has been quite specific in terms of level and calendar. But again, you have to remember that for France, lottery and network sports betting, the calendar of the tax introduced in July 2025 is expected to be close to EUR 30 million. And it is close to EUR 60 million for OBG as a whole, given the taxes in different countries, including, of course, France, Romania, United Kingdom and the Netherlands. So by business unit, GGR growth is expected to be higher for OBG than for the French lottery and network sports betting BU. However, given the level of tax increase that we got on OBG, revenue growth for the 2 BUs should be fairly comparable. And also, I want to underline that given the timing of tax increase and the high basis comparison in the first half of 2025, the expected growth in GGR and revenue will be more pronounced in the second half of the year, where we will benefit from, again, having absorbed part of the taxes that have been announced earlier. So this will translate considering the ramp-up of our performance plan that Pascal has been described into a stable EBITDA margin, both at group level and for the 2 business units. We aim for stability, again, to compensate the adverse headwinds, but also to continue to invest to generate growth in our market. And for the future, this is why we have set ourselves this aim of stability of the EBITDA margin. This stability will put us in, of course, the right condition to continue to fulfill our promise in terms of dividend distribution, which is to increase year-on-year our dividend based on a payout ratio of more than 75% of adjusted net income, and we are completely confident in our capacity to fulfill this promise over the years to come. So looking beyond at the medium-term guidance, you remember that we presented our medium-term outlook in our Capital Market Day. However, at this time, we didn't -- we could not include the bad news that we received on the new taxes for U.K. and Romania, which are not decided and not known at this time. So in that context, we now expect to gradually accelerate our revenue growth over the period to reach the 5%, which is our medium-term ambition in 2028. Our other medium-term projection remain unchanged with a current EBITDA margin of over 26% in 2028, a conversion rate of current EBITDA to cash of over 80% as we showed this year, a CapEx level stable between 4% and 5% of revenue. And therefore, again, on this basis, capacity to fulfill our promise of annual dividend increase. I want also to mention that to achieve this, you have understood that we have major milestones that we have been working already this year and will continue to work over the next years, which is, of course, a performance plan on which we were able to continue to increase our perspective for recurrent efficiencies and of course, the building of our technology assets, particularly through proprietary sports betting platform that we will -- we aim to roll by the end of 2027. So to conclude before letting ask questions, of course, I want to reiterate our confidence, our trust and our commitment to fulfill our medium-term ambition on the basis of what we have already achieved today. Thank you very much. We are ready for your questions. Hugo Paternoster: Hugo Paternoster from Kepler Cheuvreux. I will have 3 questions. The first one is on the tax impact and the EUR 90 million you mentioned for 2026. I understand this is not an annualized amount since U.K. will start to be implemented in midyear. Just wanted to have if you can have a breakdown by jurisdiction, potentially to isolate the U.K. one, what could remain to be expected for 2027? The second question is on your tech stack implementation. Just wonder what remains to be done by jurisdiction, by brand, especially ahead of the World Cup? And also in terms of IT cost services, what should we expect for this year? And the last one is on the M&A. I know you have a kind of a road map there. Your leverage is already below your target. So technically, you could already do some bolt-on. Just wanted to have an update on the bolt-on and potentially also an update on the U.S. I know that you have some view there for the lottery. Stephane Pallez: So maybe, Pascal, you can start with the tax. And maybe tech stack or as you want. Pascal Chaffard: Okay. I do both. On the tax impact, yes, to help you, the impact related to U.K. is around EUR 30 million in 2026. It will raise over EUR 40 million in 2027 as it will begin in the 1st of April. So there is an annual effect in 2027. And the tax will be raised in 2026 on the gaming, casino online part, and it will be raised in 2027 on the sports betting side. Happily in the U.K., our split between -- happily or not between the sports betting and online gaming -- online casino is 80%, 85% casino and 15-plus percent on sports betting. And in 2026, you will have also the annualization of the impact of the Romanian tax for an amount of something like EUR 8 million. And the rest is related to the annualization, the calendar effect of the impact of French tax that has been, I think, quite heavily commented in detail. Does it answer your question on the tax part? Tech stack. So I think it's interesting to -- yes, to draw all the picture. We have already a PAM that is internalized and live in all our jurisdictions. The remaining efforts to do and the PAM is player account management. It's very important because it is where you implement the KYC of the clients, you implement the CRM, you implement all the compliance and responsible measures to monitor the spend of the player. So it's a key asset that is already live everywhere. The only element that has to remain to be done is to move France on the Kindred PAM on the PAM that is running in the rest of the jurisdictions. This is the only remaining thing that we have. It's not urgent to do it. We will do it in the coming years. No problem. Second point, I will end by sports betting. Second point, on poker, we already have our full internalized tech stack with the poker of Relax. And when we will move in France all the activity under the Unibet brand by the end of March, we will also move the provider that we have on poker to Relax. So we will have in France full Relax, so internalized poker stack as on all the other jurisdictions. Then on casino. Casino is more than 50% of the global revenue of the OBG BU, and we have internalized the tech stack in the casino side. I do one precision that is very important. On the casino, what is important is to be able to connect thousands of games. Part of those games are totally internal, developed by Relax and part of those games are both from international actors like everyone is done -- is doing. It means that we have never envisaged to internalize thousands of games directly developed internally. It will be completely a nonsense. So what is important in casino is the ability to connect to an enormous portfolio of games, and this is what we have already done and the capacity to have specific games that are 100% ours to differentiate more from competitors. Last part is sports betting. Sports betting, we have currently a little bit less than 60% of our revenue that is totally internalized in France. In France, we are totally internalized with a platform that is internal and at a good level. And in the rest of the jurisdiction, we have implemented KSP in Romania, in the U.K., both brands, 32Red and Unibet and also in Estonia. The rest of the remaining countries to be moved to the internalized platform is mainly Netherlands, Denmark, Sweden, Belgium and Australia, but it's very, very small. Okay. So this answers your question. Stephane Pallez: Okay. So M&A, as you rightly underlined, we are deleveraging at, I would say, a reasonable pace, and we are below 2. And so we will continue to deleverage at a reasonable pace, which gives us, obviously, financial capacity to do M&A. So I think the question for M&A is more an operational question on the -- particularly on the OBG side connected to what Pascal has just described, which is are there opportunities and capacity to do small M&A in the context of the tech migration that we want to pursue and complete in the best condition. So it is not our priority. Again, it's not a significant priority for OBG. I think we will continue to look at in a pragmatic way to what could be done if it's, again, consistent with our tech migration because we definitely want to continue to complete in the medium term our scope, but we would prefer, again, this year to concentrate -- to continue to concentrate on the tech stack migration even if it's already well advanced. And of course, there is no intention of doing anything during World Cup that's for sure. So M&A, I think, is more a question, as I said, M&A or tenders or investment is more a question related to lottery, international lottery business. We are already active in looking at opportunities also in, I would say, in a realistic way. And at this point, with small initiatives in terms of investment, which is probably what you referred to in the U.S. In the U.S., we believe we have opportunity to be present in the online lottery development, which is as we know, not as mature as the French or European market. So we have been competing in partnering with other actors in tenders or renewal of license that do include this online lottery development in which we consider to have good track record and experience. Apart from that, if I may, the U.S. market we're not at all in the sports betting U.S. market. And in a way, we are happy not to be because we see that this market is already quite, I would say, questioned about potential disruption from other type of activities. So we're not concerned by that. This is a positive. Okay. Other questions? So if no, if it's clear. Thank you very much. Pascal Chaffard: Thank you. Stephane Pallez: So we'll stop at this point. And of course, we'll be happy and ready to answer further questions if you have some. Thank you very much. Bye-bye.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Charter Hall Group 2026 Half Year Results Briefing. [Operator Instructions] Please note that this conference is being recorded today, Thursday, the 19th February 2026. I would now like to hand the conference over to your host today, Mr. David Harrison, Managing Director and Group Chief Executive Officer. Thank you. Sir, please go ahead. David Harrison: Good morning, and welcome to Charter Hall Group's First Half FY '26 Results. Joining me today are Sean McMahon, our Chief Investment Officer; and Anastasia Clarke, our Chief Financial Officer. Today, I will provide an overview of the highlights of a very active last 6 months and then cover the usual funds under management, equity flows, valuations, operating environment and finish with our property investment balance sheet portfolio. Sean then will take you through development activity and our sustainability initiatives, followed by Anastasia with the financial highlights. We'll conclude with our outlook and Q&A. Turning to the group's highlights. Operating earnings for the half were $239 million or $0.505 per security, reflecting continued momentum across every segment of the business. This strong performance underpins today's upgrade to FY '26 guidance to $1.00 per security, representing 23% growth over FY '25. Return on contributed equity continues our multiyear trend of generating above 20% returns, which has increased to 23.1% post-tax and over 28% pretax. FY '26 also marks the 15th anniversary of consistent dividend growth. Over that period, dividends have grown at 7.8% CAGR, well ahead of historic inflation in the REIT peer group. Group FUM increased from $84.3 billion to $92.2 billion on a pro forma basis, which includes additional FUM created post 31 December, while property FUM rose from $66.8 billion to $73.6 billion. During the first half, we had a very active total transaction volume of $9.8 billion. Acquisitions and development activity more than offset divestments, supported by positive net valuations, largely driven by rental growth as economic growth and increased tenant demand met with a severely reduced supply across all of the markets we operate in. Our balance sheet remains exceptionally strong with balance sheet gearing of just 7.7% and $1 billion of dry powder providing for accretive acquisition capacity, which contributes to the more than $7.8 billion of total platform deployment capacity. Importantly, we also recorded the strongest level of gross equity flows in our funds management business in our 3.5 decade history. On Slide 5, the Investment Management business secured $4.8 billion of gross equity inflows during the half. Inflows over the past 6 months have accelerated materially exceeding the prior full 12-month period. We also are pleased to report average annual inflows over both the last 5- and 10-year period at close to $4 billion annually, highlighting our consistent capacity to attract inflows through cycles. Total transactions were $9.8 billion, comprising $6.6 billion of acquisitions and $3.2 billion of divestments. Acquisitions, development completions and valuation growth, as I said earlier, comfortably outweighed divestments. Turning to Slide 6 and our strong earnings growth history. Operating EPS has tripled over the past decade, delivering a 12.6% CAGR while distributions have grown at over 10% per annum. Around half of our post-tax earnings are reinvested back into the business, funding growth in property and development investments. This enables us to invest alongside capital partners, expand our funds management earnings and generate strong return for security holders without the need to issue new public market equity to grow. This is a key competitive advantage we retain, and we will continue to organically grow the business through the retention of earnings via our payout ratio policy. Given our capital-light business model, this is a powerful and sustainable driver of organic earnings growth. Slide 7 highlights the long-term strength of our distribution profile. Over the past 16 years, Charter Hall has delivered consistent dividend growth higher than the growth rate of U.S. REITs currently included in the U.S. S&P 500 Dividend Aristocrats Index. Slide 9 provides a deeper look at our property funds management platform. Institutional investors contribute over 76% of total platform equity, while more than 82% of our property funds under management is across the unlisted wholesale and direct channels. Investor demand for unlisted property remains strong, reflecting the safe haven characteristics of Australian real estate and the diversification benefits unlisted assets provide amid a heightened listed/liquid asset class market volatility. Turning to Slide 10. Property FUM increased from $66.8 billion to $73.6 billion on a post balance date acquisition-adjusted basis, driven by acquisitions, development completions, positive valuation movements and of course, our previously announced Challenger mandate, which was secured during the half. Growth was led by the wholesale unlisted platform. This reflects early signs of valuation recovery and the benefits of disciplined portfolio curation across all 3 of our listed REITs, which has helped deliver meaningful earnings and NTA value growth for those REITs. Property FUM has now surpassed the peak achieved in June '23 before the devaluation cycle the market experienced. With $7.8 billion of available investment capacity, we expect further growth through acquisitions, valuations and ongoing develop-to-hold strategies over the remainder of FY '26. Our property platform, as highlighted on Slide 11, comprises over 1,600 assets, spanning 11.5 million square meters of lettable area with 97% occupancy and a market-leading 7.5-year WALE, or weighted average lease expiry. Our integrated property management team secured more than $3.6 billion in net rent each year, a critical metric as rental income underpins everything we do. I&L or industrial and logistics is our largest sector exposure at 37% of the platform, whilst convenience retail continues to grow and now represents over 20% of the platform. Our office platform at over $26 billion is the largest in the country. We are seeing encouraging early signs of recovery and are actively planning increased development and deployment in high-quality CBD asset locations, whilst we're also repositioning opportunities such as the recent acquisition of 1 O'Connell Street and the adjoining assets in the core of Sydney CBD, which on a combined site area basis of approximately 6,800 square meters is one of the largest site consolidations in Sydney CBD alongside our 7,500-meter Chifley site. which, as you're all aware, we're well progressed on developing a second Chifley Tower, which on a combined basis will generate over 110,000 square meters of lettable space in 2 adjoining premium-grade towers. Turning to equity flows. During the half, Funds Management secured $4.8 billion of equity inflows, a record for a 6-month period across the history of the group. Inflows were broad-based, spanning all 3 wholesale pooled funds, CPOF, our office fund, CP Industrial Fund and of course, our recently launched CCRF or convenience retail fund. Partnerships have also been a strong contributor, including the Challenger mandate I mentioned, and we have seen a notable uplift in fund or equity flows for Charter Hall Direct, which in 6 months has exceeded all the flows generated in the whole of FY '25. Slide 13 summarizes our industrial platform. We manage over 7.2 million square meters of lettable area, representing $27 billion of funds under management and importantly, close to a 20 million square meter land bank across that portfolio, making this the largest third-party industrial platform in Australia. The portfolio is modern, most of which has been developed by Charter Hall, attracting a high occupancy and is underpinned by Long WALE, strong leasing renewals during -- achieved during the half. And importantly, we still believe the portfolio has got a 17% discount to market rents, providing positive rental reversions over the course of coming years. Our development pipeline sits at $6.5 billion in industrial. This is underpinned by a significant land bank of over 223 hectares. And I also note our recent media announcement on a new 20-year lease on a 100,000 square meter facility to ALDI at one of our largest states in Melbourne as an example of the ongoing pre-committed development activity we are completing within the industrial platform. Slide 14 outlines our office platform. Clearly, Australia's largest at $26 billion with 2.1 million square meters of lettable area. Leasing momentum was strong with 124,000 square meters leased across 134 transactions during the half. Net effective rents outpaced face rent growth and 93% of tenants were retained in their existing or expanded footprints. Occupancy remains high at 95% relative to peers and clearly relative to the market, well ahead of our broader aspirations for occupancy. And I also note that in a strongly improving net effective rental market, it's also helpful to have a bit of vacancy so you can capture those positive market rental growth reversions. I anticipate that you'll be hearing a lot more from us on various office activity as we move forward. We are positive on the outlook for our assets and also deployment as this market is clearly at least for quality CBD holdings in the early phase of what could turn out to be a sustained and attractive recovery for office landlords. Our convenience retail platform on Slide 15 manages around $15 billion of assets or over $17 billion, including our Long WALE Bunnings assets. The sector represents a significant long-term opportunity given limited institutional ownership and the increasing difficulty of replicating well-located assets in inner and middle ring metropolitan markets. Last year's successful take private of HPI was just another example of us expanding our Long WALE convenience retail platform, and recent acquisitions of Bunnings portfolios such as the $290 million sale leaseback acquisition we closed with Bunnings in the last half is further evidence of our conviction to grow into the convenience net lease retail sector with the market-leading tenants in each of those sectors. When we think about barriers to entry in this submarket, including land availability, zoning, scale and capital, we do believe that Charter Hall has a durable competitive advantage in securing further growth for our investors. More importantly, it's also providing another string to our bow when we talk to our tenant customers around curating their existing lease portfolios, but also being able to fund sale and leaseback transactions if that suits these major retail customers. Slide 16 and social infrastructure remains a core strategic focus. These assets provide essential services, exhibit low correlation to economic cycles and are among the lowest risk property sectors. With Australia's growing population, demand for these services will only increase, and Charter Hall is well positioned to play a leading role across all aspects of social infrastructure from government leased essential service assets through to childcare. The portfolio is 100% occupied, supported by Long WALE and predominantly triple and double net leases. Now just looking at our tenant relationships on Slide 17. Our top 20 tenants contribute 53% of platform income. We manage over 5,300 leases, collecting more than $3.6 billion in net annual rent. Over 69% of tenants hold multiple leases, enabling deep long-term relationships across assets, locations, states and sectors. During the half, we were highly active with renewals, expansions and sale and leaseback transactions virtually across every one of the sectors that we operate in. Long-term tenant partnerships remain a cornerstone of our broader strategy. Slide 18 and our transactions. As mentioned earlier, we completed close to $10 billion during the half with net activity up strongly. Office and convenience retail were the largest contributors to acquisition growth during that 6-month period, whilst we continue to actively curate our industrial portfolio. Slide 20 provides an overview of our property investment portfolio, which those of you who are not familiar with the terminology represents the Charter Hall on-balance sheet investment portfolio. The $2.8 billion portfolio spans over 1,500 properties, 97% occupancy and an 8.2 year WALE and a 3.3% weighted average rent review. That is reflective of our co-investments predominantly in all of the funds and partnerships we manage. In addition to that, we also have curated property investments on balance sheet generally for warehousing to provide assets that will attract further external capital. Cap rates compressed by 10 basis points over the half with the weighted average discount rate now at 7%. Geographically, New South Wales or Sydney represents close to 40% of our exposure. Brisbane, predominantly Brisbane or Southeast Queensland and Victoria, each around 20%. Our balance sheet exposure to office is deliberate. We believe these assets offer most attractive prospective IRRs, will attract external capital and provide income uplift potential across the platform over the next 3 to 5 years. With that, I'll now hand over to Sean to cover development activity and sustainability. Sean McMahon: Thanks, David, and good morning to everyone on the call. Our development pipeline now totals $17.9 billion. Our development capability and track record has been a significant key strength of the group for over 30 years. Developed to own next-generational assets are highly accretive to long-term returns for our investor customers. Development activity continues to drive modern asset creation, providing property solutions for our tenant customers and enhancing returns whilst attracting new capital to our funds and partnerships to deliver on strategic objectives. Development completions totaled $1.3 billion in the last 12 months. Notwithstanding completions, the pipeline continues to be restocked and is currently $17.9 billion. There are currently $4.8 billion in committed developments with 74% of committed office developments pre-leased and 94% of committed industrial and logistics developments pre-leased, providing derisked adjusted accretive returns for our funds. We have generated a $5.5 billion pipeline with living and mixed-use projects that have now obtained strategic planning approvals, optimizing existing holdings and providing optionality to grow in the living sector. The successful said planning approval of Gordon Shopping Center that potentially delivers a mixed-use multistage project of $1.6 billion in value was the material addition to the pipeline in the first half. Noting David's previous comments on Australia's strong forecast population growth, we expect that the creation of new developed investment stock and opportunities for investment management platform will continue to feature prominently. Now turning to Slide 24. Over the first half, our industrial platform completed $515 million of developments for the WALE of 10 years. We currently have $2.3 billion in industrial development projects committed and underway. Our total pipeline of future industrial investment-grade stock now sits at a material $6.5 billion. There are 3 major projects driving the pipeline growth pre-committed by Australia's major supermarket retailers, Coles, Woolworths and ALDI that have a combined completion value of $1.5 billion. That will deliver state-of-the-art automated facilities to service their respective networks. There is also good momentum at our Western Sydney Airport joint venture site where there are multiple major pre-commitments secured or at advanced stages. Charter Hall has one of the largest industrial footprints in the nation, comprising over 20 million square meters of land, and we are focusing our efforts to maximize for our investor customers from the land we own. Given the scale and diversity of our land holdings, there are multiple key data center sites existing in with this industrial land bank. There are a number of data center sites in focus in our land banks that are located within availability zones, and we're in the process of unlocking significant power supply and associated planning approvals over the next few years. Importantly, we retain optionality to sell this powered land at a material premium to industrial land values or negotiate long-term ground leases with hyperscalers as we have done before. Now turning to Slide 25. The Chifley precinct, which includes the existing North Tower and the South Tower where construction is progressing well, will eventually have a precinct value of approximately $4 billion. The project is Sydney's premier office address and will be Charter Hall Group's largest asset with a combined net lettable area of 110,000 square meters. The project is scheduled to complete in mid-'27 and is owned by various Charter Hall managed wholesale investment vehicles. Our wholesale clients are participating in the investment with the objective of long-term retention of this iconic asset. As you can see, the group has been very busy delivering new high-quality office developments across Australia, anchored by government and Tier 1 tenant covenants. Now turning to Slide 26. We continue to drive our industry leadership across all facets of ESG, demonstrated by recent GRESB global and regional awards with 18 of the group's funds in the top quartile and notably, 5 CHC funds were ranked in the top 10 global funds. Our listed entities achieved an A ranking under the GRESB public disclosure rating and the AA MSCI rating. Pleasingly, we have now installed 89.7 megawatts of solar power across our platform, and this equates to sufficient power for approximately 20,000 homes. And our green loans now exceed $8 billion. From July '25, our whole platform operates as net zero through existing on-site solar and renewable electricity contracts. I'll now hand over to Anastasia to discuss the financial result in more detail. Anastasia Clarke: Thank you, Sean, and good morning to everyone on the call. The first half of FY '26 delivered strong operating earnings after tax of $238.8 million, representing an increase of 21.6% on the comparable prior period. Top line revenue growth was driven across all 3 segments, comprising property investment income, development investment income and funds management revenue. Growth in property investment income was underpinned by like-for-like funds income growth of 4% on our co-investments, together with a material contribution from the incremental deployment of $290 million net equity investment over the past 18 months. This results in a full period contribution of the FY '25 investments and partial period contribution from the year-to-date investments to PI EBITDA, all on significantly higher equity PI yields. Development investment EBITDA has increased to $38.1 million, representing approximately 10% of the group's EBITDA, achieved through the successful completion of developments primarily sold down to funds. Funds Management EBITDA remains in line, which follows the usual historic pattern of strong equity inflows in the half, translating to fully annualized funds management fees in the following financial year post a period of deployment. Underlying FUM growth through valuations and net acquisitions and progressive funding of the $4.8 billion platform committed development pipeline is supporting growth in base fee revenue and transaction fees, offset by higher operating costs. Pleasingly, the group is reporting a healthy statutory profit after tax for the first half of $272.8 million, reflecting the combination of operating earnings and positive property revaluations. OEPS increased 21.6% to $0.505 per security, whilst DPS continues to grow consistently at 6%. This results in approximately half of the group's earnings being retained for reinvestment, primarily into higher-yielding property investments. As noted earlier, this reinvestment is meaningful in scale, underpins growth in property investment EBITDA and provides a pipeline of assets to create new funds. Slide 29 provides further details on funds management earnings. Funds management base fees increased by 5.3% in the first half, driven by higher FUM arising from valuation uplifts and net acquisitions. Transaction fees are materially higher at $32 million, reflecting large transaction volumes with net acquisitions supported by high equity inflows across the platform, most notably within CCRF. Property services revenue was lower in the first half due to elevated leasing fees in the prior period. Notwithstanding this, the group expects a sizable positive skew across all property services revenue in the second half of FY '26. Variable operating costs has increased in first half '26 to $73.5 million, reflecting employee and payroll tax accruals. Overall, this resulted in FM EBITDA of $142.3 million for the first half. Importantly, elevated net equity inflows lead to future deployment resulting in full contribution to funds management fee revenue in the following financial year. Turning to the balance sheet and total returns on Slide 30. The group's balance sheet investment in the property investment and development investment portfolio has increased to over $2.8 billion. And pro forma adjusted for post balance date deployment, including investments such as the O'Connell precinct in Sydney, exceeds $3 billion. Positive revaluations and retained earnings during the half has driven an increase in NTA to $5.54. Gearing remains low at 7.7%. And subsequent to balance date, the group has added $400 million of new undrawn debt lines, together with existing cash providing investment capacity of $1 billion, positioning the group well to pursue investment growth opportunities. Further refinancing across existing bank debt lines to extend tenor, combined with new bank lines results in a lower margin and line fee of 22 basis points in the second half. Total returns continue to grow with the group delivering an after-tax annualized return on contributed equity of 23%. Maintaining strong return metrics is fundamental to ensuring optimal deployment of both the group's capital and that of our partners. This continued focus on total return outcomes ultimately generates long-term earnings growth and sustainable value creation for our investors. On Slide 31, similar to the group's balance sheet, we had a highly productive half year, which continues, raising $10 billion year-to-date of new debt and refinancing existing debt across our funds management platform, supported by favorable credit market conditions. We expect the pace of refinancing to further accelerate in the second half through to 30 June 2026. Credit appetite from our lending partners, including both domestic and international banks remains very strong. This is evidenced not only by the significant new and extended loan volumes completed year-to-date, but also in wider covenant headroom and lower credit margins, averaging savings of 27 basis points. This debt financing activity has increased investment capacity to $7.8 billion, providing additional flexibility to deploy capital across a range of various real estate strategies and opportunities. Whilst the RBA cash rate and market floating rates remain higher than previously expected, we have progressively implemented hedging throughout the first half across funds, providing protection against earnings volatility in both FY '26 and FY '27. Overall, the group has achieved a 10 basis points lower WACD across the funds management platform as at 31 December compared to 30 June 2025. Before handing back to David, in summary, the first half of FY '26 represents a strong earnings result. The combination of elevated equity inflows and balance sheet capacity positions the group well to deliver ongoing FUM growth and sustainable future earnings growth. David Harrison: Thank you, Anastasia. Turning now to Slide 33 and our earnings guidance. I'm pleased to advise that due to strong performance within our investment and property services business, today, we are providing a further upgrade to earnings guidance for FY '26. Based on no material adverse change in current market conditions, FY '26 earnings guidance is for post-tax operating earnings per security of approximately $1.00 per security, which represents 23% growth over FY '25 earnings and an additional $0.05 above the AGM upgraded guidance provided of $0.95. This earnings guidance excludes any expectation for performance fees. FY '26 distribution per security guidance is for 6% growth over FY '25, continuing a 15-year history of annualized DPS growth. That now ends the prepared remarks, and I now invite your questions. Operator: [Operator Instructions] Our first question comes from the line of Suraj Nebhani with Citi. Suraj Nebhani: Great results, guys. A couple of quick questions from me. Firstly, on the CCRF fund, you called out $2.4 billion of gross equity. Can I just confirm how much of that -- how much of that has been filled in terms of transacted upon? And what capacity does that give you in the second half, please? David Harrison: Thanks, Suraj. The -- well, the answer is that there's another $1 billion of acquisition capacity over and above what we announced or issued in the media today with another $360 million portfolio acquisition. The other part of that capacity is we're continuing to raise equity in CCRF. So I think that dry powder will accelerate over the next few months with further inflows. And what typically happens with these open-ended funds is that particularly with the scale and diversity of the LPs that have supported that fund, I think we're going to see an acceleration in both domestic and offshore wholesale investor inflows into that fund. So whilst it might be $1 billion of dry powder now, I'm sort of expecting that to continue to grow even as we deploy further. So I don't sort of really give guidance on how much I expect to acquire further in the second half, but it's fair to say with today's announcement of $360 million and various other acquisitions, I expect it will be a pretty strong contributor to further FUM growth in the second half. Suraj Nebhani: And maybe just one question for you around your -- you obviously called out a very favorable backdrop and record inflows, yet we have seen 10-year rates move up pretty strongly and even the longer-term rates in the U.S. are up pretty strongly in the last, let's say, few months. Is that having any impact on the discussions you're having with capital partners with respect to property investments? David Harrison: Well, I think it'd be naive to say that movement in bond yields doesn't have an impact. The only thing I'd say is before we even went into this almost historical view on multiple interest rate rises, there was already a pretty strong gap between bond yields and unlevered IRRs and levered IRRs that we can deliver to our capital, both in core value-add and opportunistic. So I think the demand still exists. I've said it before, even though there's been some corrections in stock markets around the world, the reality is that most of the capital we talk to are underweight, their strategic allocation to property. A lot of our capital have experimented in various forms of alternatives, some of which have blown up completely, some of which have been highly disappointing in terms of the return you should be getting when you're going into sort of new sectors. So I think there's both absolute underweight pension capital. And I think we're also going to see further reallocation away from some of what I call the alternative experimental investments we've seen in the last few years back to really good quality core, particularly when in all core sectors, office, retail, industrial, you're buying existing buildings way below replacement cost. And I'll call out things like office where we went through a period of quite elevated rising incentives and incentives are coming down. And so effective rental growth is outpacing face rental growth. So it will become a strong deliverer of good total returns. And as I've said before, because cap rates in office are virtually 150 bps above where they were pre-pandemic, whereas other sectors have more or less got cap rates back to pre-pandemic cap rates. The total return proposition for prime office is pretty strong. So I think we'll continue to get good demand in convenience retail, logistics. And I think, as I've said on a couple of occasions, I think office might surprise everyone over the next 2 or 3 years. So overall, yes, I don't really see the latest sort of gyration in long-end bonds sort of material having an impact for all the reasons I just outlined. Suraj Nebhani: And if I can just ask one last question from Anastasia, please. Around the costs in the funds management division, the $73 million, that seemed reasonably high compared to first half last year. Is there a skew Anastasia there to the first half this year or maybe expectations for the full year, please? Anastasia Clarke: Thank you, Suraj. Not a particular notable skew to call out. I did say that it's variable costs, employee costs and payroll tax, and it's really associated with the outperformance we've achieved in the business. You've seen 2 earnings upgrades and associated with that outperformance, obviously subject to Board discretion, but there's an accrual there for further short-term incentive and the payroll tax that goes with that. Operator: Our next question comes from the line of Solomon Zhang with UBS. Solomon Zhang: First question was just, I guess, in relation to the volatility in global capital markets that you referred to in your opening remarks and the result announcement. You've mentioned that, that's increased the institutional demand for Australian property. Just wondering if you've got any data points around this. Are you seeing an uptick in year-to-date inbound inquiry and appetite to deploy on the platform? David Harrison: Look, as a broad statement and every pension fund or super fund is different. But what we're seeing is a reduction in allocations to international listed equities. The -- I'm not sure I'm necessarily seeing an absolute reduction in allocations to domestic equities. If you sort of think about the private markets and most pension funds have people running listed equities, fixed income and private markets. And within private markets, you've got property, infrastructure and private equity. We are seeing globally a lower new investment into private equity because it's well understood that private equity has materially increased their investment holding periods, and therefore, the cash coming back to investors out of realizations from private equity has severely been reduced. So we think we will be a beneficiary of incremental dollars not going into PE and sort of coming into property. Infra has obviously sort of performed pretty well, but it's often very lumpy, the new deployment opportunities that exist. So all of that sort of puts it into, I think -- property into a basket that will have demand. And then when you split the world into regions, I'm not sure we're seeing a lot of narrative around incremental CapEx going or investment into U.S. property from global investors who need to make a choice where they want to invest. We're certainly seeing a good acceleration in demand out of European pension funds wanting to sort of invest in Asia Pac. And the backup in bond yields in Japan is actually helpful because most Asia Pac core capital really doesn't see core markets outside of Japan and Australia. Most of the other options are sort of seen as a little more volatile and higher risk. And with the backup in bond yields in Japan, there's some question marks around whether or not the 30-year yield spread play where there's not a lot of capital growth and/or potential negative capital growth. Now a lot of people are starting to wonder whether there is going to be negative capital growth with the backup in Japanese bonds. So all of that sort of means we're getting accelerated demand for investment in Australia. And as the biggest player in the country across all the sectors, we're a natural port of call for this capital. And we just don't wait for them to walk into 1 Martin Place. I've got a team traveling the world regularly talking to capital. So I sort of feel that we're in a good position. Australia is generally in a good position. And I think we're going to see, as I said earlier, both core value-add and opportunistic risk capital wanting to get deployed in Australia. Solomon Zhang: That's good color. And as a follow-up to that, would you have an estimate of where property allocations might sit versus their strategic asset allocation targets? I know we have good visibility into the Australian super fund data, but less into offshore. David Harrison: I mean I think even the Australian super fund data is very different, whether it's a defined benefit fund and accumulation fund. But it's a broad cross-section, and this is all available on APRA. I'd say domestic super allocations to property could range anywhere between 6% and 13%. We've found global capital typically would have a higher allocation at the bottom end. And in some cases, I've seen allocations up to 17%, 18%. But if you want it at a rough rule of thumb, I'd say 9% in domestic and 10% or 11% to 12% for international capital. And then depending on the particular partner, whether European -- whether it's a pension fund or a sovereign wealth fund, some of them are very opaque in their weighting. So it's difficult. But all I care about is do people have incremental appetite and everyone I talk to has got incremental appetite. So that hopefully gives you the color. Solomon Zhang: Maybe just a final question for Sean. Just on the $5.5 billion living and mixed-use pipeline. Can you just give us some math sort of how you've built up to that amount, i.e., maybe just how many lots rough area of value per square meter? And can you just confirm whether this is assuming -- you assume you hold 100% of the project equity at the end? Or do you assume that you bring in a capital partner for part of that stake? Sean McMahon: Yes. Thank you. Look, that's the pipeline completion value on the assumption that we build out the strategic planning approvals we've delivered over the last year or so. So in terms of optimizing our existing assets, which is the real strategy, that's a big accomplishment, which leads to $5.5 billion. And that's more recently, a material addition was Gordon Shopping Center, where we just got a set amendment for a potential $1.6 billion mixed-use project. So we now have the optionality to bring in new partners to strategically develop these assets out or we can optimize the existing assets as they are and trade them for a premium. I think the main thing is we have optionality now to grow in these sectors, which is a new thematic, if you like, in the living space. But I might add that over the last 5 or 6 years since we've owned Folkestone, we've built out about 6 in global residential subdivisions, which has been very successful. So it's not a brand-new sector for us, but we're just optimizing the existing assets that gives us optionality to deliver future earnings in different spaces in the future. Do you want to add to that, David? David Harrison: Yes, I'd just add, over 95% of the gross completion value is build to sell. So one of the reasons why pension capital likes build-to-sell is over the course of a sort of 3- or 4-year project, they know they're going to get their money out plus their profit because that's the nature of build-to-sell and there is absolutely no way we're funding any projects without majority external capital. So I think that answers your question. I think the other thing I'd say is that we're probably -- when you think about this pipeline, we've added value to assets that we already own in the platform. We're not going out there buying overpriced Sydney land, which has been the case for a lot of people trying to do residential. We're actually cultivating and adding value to our existing owned assets or managed assets. So it's quite a different model. But depending on market cycles and obviously, us attracting external capital when we're ready to go, that's how these things will get developed out. Operator: Our next question comes from the line of Simon Chan with Morgan Stanley. Simon Chan: David, you talked about pretty successful fundraising campaigns over the last 6 months. Just wondering if you think office market now has stabilized to a point where flow of equity could come rushing back into CPOF, because from memory, you're going to kick off a capital raise there, right? Have you got any insights for us? David Harrison: Yes. No, we already recently raised $0.25 billion in CPOF. I think as I said before, Simon, when I look at like-for-like cap rates for prime office versus the other sectors, they've got the most cap rate compression just to mean revert back to pre-pandemic levels. I think all the hysteria around work from home is dissipating quickly. You only have to look at the occupancies, the vibrancy in both Sydney and Brisbane. Obviously, Melbourne is going to have a slower recovery, but it also has got very little new supply, and we're starting to see double-digit, unbelievably double-digit net effective rental growth coming through in the Paris end of Melbourne, albeit off high incentive levels. But -- so yes, I think I've been saying for 12 months, I think you might find over a 5-year period, offices are sleeper in terms of inflows. Do I think that's going to be the next 6 months, 12 months, 18 months? I don't know. I can say we're having a lot of constructive discussion with investors and the smart ones who realize you want to get in early in a recovery cycle, not at the later end of it to maximize your IRRs, having a really good look at jumping in now. If you look at our acquisition of 1 O'Connell Street, that's a pretty big statement about where we think really strong potential growth is going to come in the prime core of Sydney. And all I can say is that we're looking to play that office recovery across core value-add and opportunistic. And I think there's a bit like I was saying about build to sell on our existing assets, it's pretty hard to go out there and buy a block of land and make things work. So quite often, as we've done with Chifley, we'll cultivate what we've already got. In Melbourne, about 8 years ago, we built another 26,000 meters on an existing 30,000-meter building, effectively didn't know me anything on the land, and I created 2,500 meter floor plates on the bottom 10 levels. And so I think there's different ways that you can play that market. But yes, I think office will provide sort of outsized go-forward equity IRRs compared to other sectors. And there'll be some that are sort of smart enough to get in early, and then there will be others that wait for a couple of years of solid NTA growth before they sort of jump back in. So that's the sort of landscape we're looking at. Simon Chan: Fair enough. If I think about your guidance, originally, you were guiding to $0.90 for the year and now you're guiding to $1. Essentially, over the course of the last 6 months, David, you found an extra $50 million somewhere, right? That's not -- that's a sizable number. Like what has driven -- I know in your prepared remarks, you kept saying our business is better, but $50 million is a big number. Like did you just completely misread the market back in August? Or like where is the bulk of the $50 million coming from? David Harrison: Well, first of all, if you think about $4.8 billion of inflows in 6 months, which is probably higher than any full year inflow we've ever had, even with my optimistic outlook, I didn't think we'd sort of raise that amount of capital. And obviously, there's some wins in there that we wouldn't have necessarily anticipated at the start, like the Challenger mandate. There's a few other things that are happening in the second half that we'll eventually announce. We've also done, I think, a good job in further recycling equity we had, selling it down to capital partners and then redeploying into new investments that has helped drive the PI line. So look, I've said it before, Charter Hall has historically been able to deliver very, very strong and consistent multiyear earnings growth after a correction cycle. If -- you're an analyst, you have a look at the history of Charter Hall's earnings. So we're in a positive momentum situation, but the last thing I'm never going to do is over guide based on, I might raise $4.8 billion of equity in 6 months. I'd prefer to guide where we have visibility. And if we can deliver upside through further deployment, particularly further equity flows, that's the way we've run the business for 21 years since it was listed. The other thing I'd say is, and I've called this out before, there's a bow wave or delayed impact on revenue and hence, earnings from strong inflows. If we have $4.8 billion in the first half, you won't see an annualized impact on that until FY '27. So if we can have another strong inflow year in the second half, so we've got an even bigger record of inflows in FY '26. The bow wave effect means you're not going to see a full year annualized revenue and EBIT impact from that until '27. So this is why we're pretty constructive about the future. And obviously, myself and the rest of the 600 team are out there raising more equity, continuing to do active leasing and grow the business. So hopefully, that gives you the answer that you wanted. Like if you're asking me why I didn't know we'd be at $1 when we guided $0.90, well, that's the answer. Operator: Our next question comes from the line of James Druce with CLSA. James Druce: I just wanted to clarify something on [indiscernible] I mean you've done 11.5% return over 10 years. Since inception, it's probably better than that. Is that in performance fee territory for '27? David Harrison: Mate, I don't give you 1-year forward guidance, let alone 2-year forward guidance on anything. So all I'd say is you'll recall, we generated performance fees out of Charter in FY '19 and FY '20. As you point out, there's another measurement period in '27, what I would say to you is we're going to need a decent level of cap rate compression to get that back to the high watermark because your IRR calculation on all performance fees always goes back to time 0 and has regard for previously paid performance fees. But -- so I wouldn't say it's out of the question, but I certainly wouldn't say it's in the money at the moment. James Druce: Okay. All right. And then just second question just on the $5.5 billion mixed-use opportunity. How do we think about the timing of getting further go to market for that? I mean it sounds like you've got all the pieces of the puzzle together, the strong demand in that sector. David Harrison: You're talking about residential? James Druce: Yes. David Harrison: It's all about market cycles. So some of those have got Stage 2 planning approval like 201 Elizabeth Street and would be ready to go. Similarly, at Westmead, Gordon needs to go through another stage before it's fully ready to go. They're all income-producing brownfields opportunities. So we're in no hurry. So what I call the planets aligning is, a, having vacant possession and planning approval; b, having external capital partners to fund it with us maybe doing a bit of a co-investment and more importantly, our team having conviction that's the right time to go. Now if you think about build-to-sell, you're not going to start construction on any build-to-sell without a significant level of presales. So if I sort of think about all of that, you need the planets to align, including presales, so you can get nonrecourse project finance to -- like anything, you've got to match the equity funding with the debt funding and presales for you to start construction. So that's how we're going to prosecute those development opportunities. Whilst residential, particularly luxury REITs such as 201 Elizabeth Street is strong. We think there will be very, very strong demand for something like Gordon. The reality is you've got to make all the planets aligned, including getting fixed price, construction contracts that makes sense. Fortunately, we're starting to see some deflation in construction pricing in industrial, where we've let a lot of building contracts well below what it would have been a year ago. But it's still -- it's not easy, as you probably heard from some of the on-balance sheet resi developers. It's not easy to sort of lock down decent pricing on construction. So they're all work in progress. And as I said, for the time being, we're getting good passing yields on those assets in the various funds and partnerships that own them. Operator: Our next question comes from the line of Adam Calvetti with Bank of America. Adam Calvetti: Just trying to reconcile, I mean, first half, you've done $6.6 billion in acquisitions, transaction revenues, $32 million. I mean last financial year, you did about half the transactions and the same transaction revenue. So I mean, is there some unrealized acquisition fees there? Are they going to fall into the second half? I mean, have you had to give away just the structuring of the different funds, some are having acquisition fees? What's really going on there? David Harrison: Well, first of all, when CQR put its seed assets into the core retail fund and swapped part of them as an equity investment in that fund, we were not charging CQR divestment fee. So it's a good question. But what I'd guide is that not all of the transactions are generating fees if there's that sort of related party transaction. The other thing is that there is a bit of a deferment on transaction revenue if something wasn't completely unconditional at 31 December, it will become a second half transaction fee. And of course, as you'd expect, it's hard to charge a client like Challenger gives you a mandate an acquisition fee when they already own the assets. So that's the reason why when you look at those transaction fee revenue numbers versus the volume, it looks a bit different than prior years. Adam Calvetti: Okay. That's pretty clear. I mean on the $1.9 billion of post [indiscernible] acquisitions, will those be generating any fees? David Harrison: Yes. Anastasia Clarke: In second half. David Harrison: In the second half, yes. Adam Calvetti: Yes, correct. Okay. And then I mean, just thinking -- if you just double first half, you're probably going to see some growth in PI and FM. We're above 100. So what's going to be dragging it down? David Harrison: This is my 21st year doing this, and you guys always do the same thing. You just double all the first half metrics to get to a full year number. It's not that simple. And there will be various items. But like it's hardly a first half, second half skew at 50.5 versus 49.5. So I wouldn't get too excited about why aren't you doubling everything to get to a higher number. Adam Calvetti: Okay. That's somewhat clear. David Harrison: It's about as clear as I'm going to be. But look, what I would say, and I said it earlier, we have an expectation for the second half, which has sort of guided our recommendation to the Board who signed off on the guidance. If like the answer I gave to Chan earlier, if we pull off some miraculously great deals or inflows that drive our revenue and EBIT above our expectations, then we might beat that guidance. But at this stage, we're pretty comfortable with that guidance. And as I said earlier, I think you guys should be thinking about the bow wave effect and what this sort of equity flow and FUM growth is going to do on an annualized basis into '27 and beyond. Operator: Our next question comes from the line of Ben Brayshaw with Barrenjoey. Benjamin Brayshaw: David, I just have a question on the operating expenses. Historically, there has been a skew to the second half. How are you and the team seeing the composition for this financial year? David Harrison: Anastasia? Anastasia Clarke: Yes. As I said earlier, we're not seeing a very significant skew. You should see it as fairly in line in terms of the expenses we've reported in the first half is indicative of second half. Operator: Our next question comes from the line of Tom Bodor with Jarden. Tom Bodor: I just was interested in your acquisition of 1 O'Connell post balance date. I noticed that's not in the development pipeline for office. I'd just be interested in your thoughts around that project, the potential to maybe take onboard the other 50% over time and what scheme you think makes sense for the site? David Harrison: When you buy a site consolidation, that's cost a vendor a lot of money, and we're buying it well below what they accumulated for, I wouldn't necessarily think the highest and best use is bowling over 5 buildings and creating a 100,000 meter tower. So we like that because we effectively think that we've got optionality. The sum of the parts and the realizable value on each of those buildings once Charter Hall adds its active asset management, it may well be a much better outcome than doing a major development, whether it's a 100,000 meter single tower or 250,000 meter towers. So we and our partners are just looking at that with lots of optionality. Clearly, we have a preemptive right over the other 50% when and if that fund decides to sell. Given what's happening with that series of funds, I'd be surprised if we -- they don't go down a path of looking to sell it. And if they do, well, we've got a preemptive right to look at it at sensible pricing. So because of all of that and because it's a Stage 1 DA, not a Stage 2 planning approval, I wouldn't see any potential development scheme, as I said, whether it's 1 tower or 2 towers sort of coming into our uncommitted development pipeline until we went down that path, if, in fact, we even go down that path. So I think that's the best way to answer it. But there's no doubt we have a Stage 1 planning approval for 100,000 meter tower that virtually has to be worth $40,000 to $50,000 a meter. By the time it's built, it's $4 billion or $5 billion of built form. So that is the way I sort of look at it. But by the same token, if -- unless it beats an alternative strategy, which is our base case, we won't be doing 100,000 meters of development on that site. Tom Bodor: Yes. That's very clear. And then maybe just a follow-on question just around the valuation cycle is clearly troughed, all the REITs have seen positive revals. But if you look in the sort of smaller and mid end of the sector, there's still some pretty significant discounts to NTA. Do you see that -- how do you see that evolving? And what opportunities do you see in the listed sector over the next few years? David Harrison: Well, as you know, we've been running prop securities money for a long time, ebbs and flows. But if you're sort of roughly -- say we've got roughly $1 billion in our various prop securities funds invested in the REIT sector. I think there's some dogs out there, and I think there's some really cheap buying. So as an investor in REITs on behalf of the balance sheet and our capital partners, I think there are some good buying. Just if you look at my 3 REITs, just because the market trades them at a discount to NTA, it doesn't mean that me or the rest of the direct buyers in the world don't think that NTA is real. You only have to look at how much money we've raised in our retail fund at NTA to show what the wholesale world thinks. So we're just going through a normal listed cycle where the listed markets are punitive on good quality portfolios for macro reasons. It doesn't mean I think the listed pricing knows what it's doing. And if you look at the history of this group, when the listed market is not pricing things correctly, we've taken opportunities to take REITs private. So I don't see that being any different over the next 10 years, for the last 15 years. So -- but we're not going to jump into something we don't like. And as I said before, the sort of planets have to align for that to work. But if listed markets keep mispricing things, well, yes, I think there's -- whether it's us or others, you're going to see a continuation of REIT take private. You've already got NSR on the block. We did HPI last year, a bit like virtually half of the listed infrastructure sector, it's all gone off the boil is because the wholesale capital is prepared to price the assets different to the listed market. So yes, I don't see it being much different, to be honest. Operator: Our next question comes from the line of David Pobucky with Macquarie Group. David Pobucky: Just the first question on Chifley South, if I could, 60% committed. Just curious to know how you're thinking about the pace of the lease-up and any anecdotes on current interest levels that you can provide, please? David Harrison: I'm in no hurry. All of our internal forecasts suggest to me we're going to be getting well into double-digit net effective rental growth in the core of Sydney CBD, and we're really the only new top of the hill premium quality tower. There is one other, which I call down in Tank Stream is nowhere near the sort of level of what Chifley South is. And to be honest, the achieved face and net effective rents sort of prove that. So yes, we'll be patient about how we do deals in the rest of the tower. I think we'll probably get -- of the 20,000 still to lease, we'll probably get 10,000 done with sort of multi-floor tenants and the rest of it will be whole floor tenants who literally will have no other choice to go into a whole floor premium grade tower at the top of the hill. So I think we're going to get a very good result on both the rents and the end value of that new tower. So yes, I'm very relaxed about being where we are with 60%, but it's fair to say I think it will be higher than that in June and then higher again in December. And I'm not too much in a hurry given the strong growth in rents. David Pobucky: Just a couple of quick ones for Anastasia. Just firstly, around tax expense. I think the rate was around 18% versus 23% in the PCP, just the driver of that and how you think about the tax rate going forward? Anastasia Clarke: Yes. We've done some cross-staple capital reallocation, $400 million in the year prior and $200 million recently. And that certainly has particularly the prior one had a result in lowering our effective tax rate on CHL side of the staple by about 5 percentage points is our estimation for FY '26. David Pobucky: And just a second one around where your weighted average debt margin currently sits and how much that's come down by versus last year, please? Anastasia Clarke: For the head stock main balance sheet, it's come down from 1.65 by 22 basis points. I don't necessarily think it will land there. We've got some further plans around refinancing, which actually translates right across the platform. We talked -- we -- the result today was $10 billion of refinancing, and we're accelerating that pace all throughout the second half. And so across the platform, we reduced margins by 27 basis points, and we expect that to build as a number as we get through that refinancing program just because credit markets are very, very strong. And we're also wanting to lock in the higher covenant headroom that we're achieving across the platform. Operator: [Operator Instructions] Our next question comes from the line of Richard Jones with JPMorgan. Richard Jones: Just interested in your high-level views. So obviously there were market discussion about AI and the potential impacts for office. So just interested in your views and the associated views of capital as to whether that may delay potential office investment. David Harrison: Look, there's a lot of theories out there. And I think there's an unnecessary focus on white collar employment versus all sectors of the economy. We're seeing a massive acceleration in automation going into warehousing. So whether you want to call it technology or AI driven, like the reality is we're seeing an acceleration of what I've seen for 20 years in terms of blue-collar workers being in warehousing, being replaced with automation. In terms of the office markets, our view is that if sort of processing type roles are going to be most at risk from AI, we think that's going to have an outsized impact on suburban office markets as opposed to sort of core CBD, which is virtually where most of our assets are. And look, right now, we're continuing to do lots of leasing with both whole floor and multi-floor tenants. And I'm not seeing any planned reduction in floor space when people are signing up on 10-year leases. So I think that just reflects that the whole corporate world is not quite sure whether headcount is going to be materially impacted or whether there's going to be a reallocation of roles and/or whether AI is simply going to augment productivity rather than replace human labor. So that's sort of how we're playing it and have a very strong view that the very best modern office buildings in the best core markets will prosper. Right now, who would have thought the net effective rental growth in Brisbane is higher than the Sydney CBD. But that's what's happening. It's tightening up very quickly up there. We're fortunately sort of be in high conviction on Brisbane in core CBD for a long time. So I don't have the answers. I don't think anyone's got the answers. But I think if you're going to shape your portfolio towards the very best locations and keep them as modern and as relevant as possible, you'll do better than a lot of other buildings. Our team have constantly reminded me that virtually 90% of all vacancy in most markets, but particularly in Sydney, sits in about a dozen buildings. And will be no surprise. Most of them are sort of older buildings that haven't had capital invested in them and aren't necessarily in the sort of absolute core locations. So I think each market will be very bifurcated by the quality of the building and its location, and we'll continue to see sort of, if you like, centralization. That's why I've never like North Sydney, we're seeing a centralization of relocation, tenants relocating into the city because the new metro basically has taken away the time advantage that used to exist for people to locate in North Sydney. We're also seeing a flight to modern quality. We've secured ING Bank to move from a pretty old boiler in 60 Margaret into a modern 1 Shelley Street building. So I think these are the sort of bifurcation trends we're seeing. And that's why you'll see us continue to have modern buildings in good locations that are going to attract the tenants. So -- and if anyone else can give you a better answer on the future impact of AI, please let me know. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to David for closing remarks. David Harrison: Okay. Thanks once again for your time. And I'm sure we'll be meeting various people at investor meetings following the results. Thank you.
Operator: Welcome to the Mondi Full Year Results 2025. [Operator Instructions] I'm now going to hand you over to Andrew King. Andrew, please go ahead. Andrew King: Good morning, everyone, and welcome to Mondi's 2025 Full Year Results Presentation. I'm Andrew King, your Group CEO, and I'm joined this morning by our CFO, Mike Powell. As usual, I'll begin with some highlights for the year. Mike will then take you through the financial performance in more detail. I will then return to provide an update on our business units, discussing at the same time the current trading environment and then take you through why we believe Mondi is strongly positioned to capture the upside as markets improve. After that, Mike and I look forward to taking your questions. So as you'll see on the first slide, in terms of our full year performance, I believe we did deliver a resilient outcome, EUR 1 billion of underlying EBITDA, marginally down on the prior year. Pleasingly, cash generated from operations of EUR 1.07 billion was up on the prior year. As Mike will explain in more detail, we were also able to reduce CapEx below previously guided levels, which further supported our cash flow and balance sheet. As I mentioned, this is a resilient performance in the context of what remain challenging market conditions and reflects both the strength of our integrated asset base, the value of our unique product offering, and the impact of the self-help measures we have taken. While we remain confident in the structural drivers underpinning through-cycle growth in our sustainable packaging solutions, we're equally cognizant of the impact of the current downturn and the impact it's having on our near-term performance. In response, we have taken deliberate and decisive actions across the group, intensifying our focus on cost discipline, on operational excellence, on proactively optimizing our production footprint and on cash generation, while at the same time, continuing to focus on delivering a great value proposition to our customers. These actions together with the significant competitive advantages we continue to enjoy as a business, ensure that Mondi is strongly positioned to capture the upside as market conditions improve. With that, I'll hand you over to Mike for more color on the 2025 financial performance. Michael Powell: Thanks, Andrew. Good morning, everybody. Thank you for joining. On to our 2025 results, which demonstrate a resilient performance against a backdrop of the prolonged cyclical downturn that our industry continues to face. Underlying EBITDA of EUR 1 billion saw continued margin pressure associated with the challenging trading conditions, the makeup of which I'll come on to on the next slide. During the year, we successfully completed the build and start-up phase of a number of major capacity expansion projects into our core markets. These investments, together with the Schumacher acquisition, position us strongly to capture the upside as market conditions improve. They have, however, led to a higher capital base. And as a result, you see an increase in depreciation and finance costs, which reduces the group's basic underlying EPS and return on capital in the year. And on the right-hand side, I'm pleased with the stronger cash generation from operations increasing to EUR 1.072 billion through strong working capital management. So let me take you through the main movements in underlying EBITDA when compared to the prior year of EUR 1,049 million that you can see on the left-hand side of the chart. As you can see, the performance was resilient in an environment of macroeconomic uncertainty and geopolitical tensions with only small movements year-on-year, which is a testament to the strength of the cost advantaged and integrated assets, the quality product offering and the targeted actions taken. Sales volumes were up on the prior year, which included additional volumes from ramping up the new capacity. With respect to selling prices, this is mostly comprised of higher containerboard selling prices, which were more than offset by significantly lower uncoated fine paper and pulp selling prices, and Andrew will provide a little more color on that in a couple of minutes. The cost increase is mainly in relation to labor inflation with other costs well controlled. Input costs were overall flat year-on-year against a muted economic backdrop. In the first quarter of 2026, we are seeing overall input costs remaining flat on 2025 despite some sizable headwinds related to lower energy-related income and emission credits. And lastly, the forestry fair value gain, EUR 32 million higher in the year when compared to prior year, all that adding up to the results of an underlying EBITDA of over EUR 1 million for the year. As Andrew said, we're cognizant of the impact from the current downturn and its effect on our near-term performance. So I wanted to spend some time outlining the actions we're taking to proactively manage the fixed cost base. Andrew will touch on operational excellence and productivity later. We execute targeted cost-out initiatives to drive efficiency, eliminate nonessential activities and strengthen the core revenue-generating areas of the business. It is what we continuously do to improve. Whilst we do have targeted incremental costs in growth areas, whether that's due to new capacity or customer demand, we have reduced headcount over the last 12 months elsewhere by approximately 1,000 heads, driven from greater efficiency in our operations, plant closures and about a 13% reduction in our group services offices. We've also recently announced 3 further plant closures, which will reduce headcount by approximately another 200 in the coming year. We combined our Corrugated Packaging and Uncoated Fine Paper businesses into a single business unit, and that facilitates a more streamlined organization, supporting faster decision-making, cost takeout and delivery of operational synergies across our pulp and paper mills whilst retaining our customer-focused value chain orientation. And therefore, for the 2026 year, I expect these actions to offset labor and other cost inflation. Let me now take you through the movement in net debt. We started the year with EUR 1.7 billion. You can see the EBITDA contribution I've taken you through of the EUR 1 billion. In terms of working capital, I'm really pleased with our delivery since the half year. As you'll remember, at the half, we outflowed about EUR 100 million in the first 6 months, which tells you we drove around a EUR 200 million inflow in the second half of the year to leave the total inflow that you see on the chart of EUR 83 million. Including interest, tax and other items, the net result of these 3 items was cash delivered of EUR 767 million, and you see that highlighted in the box on the slide. The next 3 columns shows how we've allocated capital in the year. We invested EUR 673 million in property, plant and equipment, lower than the previously guided EUR 750 million to EUR 850 million, driven by our ongoing focus on cash management. Dividends paid totaled EUR 352 million. And lastly, we completed the acquisition of Schumacher, which expands our geographic reach, drives greater optimization across our plant footprint and unlocks efficiencies that support long-term growth. Integration remains on track. We're confident in the delivery of the EUR 32 million cost synergies over the 3 years from completion, and that's an increase from the EUR 22 million that we initially envisaged. So to conclude, all of that leaves the group with a net debt balance at the end of the year, EUR 2.6 billion, which is 2.6x levered. I also want to set out our robust financial position. We have investment-grade credit ratings. Our available liquidity totals around EUR 1.3 billion and places us strongly to protect value in the short term and capture opportunities in the long term as they arise. We've refinanced short-term debt maturities in the year and have no further debt maturities until 2028. And as a reminder, we have no financial covenants. Let me now take you through some capital allocation points, starting on Slide 9. So the group has a well-invested and cost-advantaged asset base in structurally growing packaging markets. Over the past few years, we've invested in a number of major capacity expansion projects, and we're very proud of the teams for completing the build and start-up phase of these projects on time and on budget. Our focus is now on delivering full productivity ramp-up, executing our commercial strategy, driving cash generation and delivering strong returns. In addition to these growth projects, we invest through the cycle in our asset base to maintain competitive advantage. And you can see here in the gray bars that exclude those growth projects that this has averaged 107% of depreciation over the past 5 years. Our cash capital expenditure for 2026 is expected to be approximately EUR 550 million, lower than the EUR 650 million previously guided. Within the EUR 550 million is approximately EUR 50 million of cash still to flow for the growth projects, leaving a base of around EUR 500 million. This spend will focus on maintenance and targeted cost optimization opportunities, including enhancing energy efficiency, improving productivity and strengthening the resilience of our asset base. On to dividend, the Board does recognize the importance of dividends to our shareholders. Over the last 2 years, we have consciously recommended dividends in excess of our policy on each occasion carefully reviewing expectations for the coming period. Notwithstanding our continued confidence in the resilience and competitiveness of our business, consistent with our objective of retaining financial flexibility, the Board has recommended a total ordinary dividend of EUR 0.2825 per share for 2025, reflecting a return to the group's stated dividend cover policy of 2 to 3x underlying earnings on average through cycle. And lastly, the technical guidance slide for 2026, hopefully, all relatively self-intuitive. With that, let me hand back to Andrew. Thank you. Andrew King: Many thanks, Mike. I'll now take you through the review of the business unit performance and some thoughts on the current market dynamics before coming back to our competitive positioning. Before we get into the segmental review, I remind you that in Q4 2025, we combined the Corrugated Packaging and Uncoated Fine Paper businesses to form an enlarged Corrugated Packaging business unit. So the segmental numbers are all based on the new reporting structure. But to help comparability in the appendix to these slides, we have provided unaudited numbers on the old basis of segmental reporting. So coming first to Corrugated Packaging. A highlight was very much the good volume development achieved across all segments. Containerboard volumes were up around 15% year-on-year against the backdrop of a flat European market demand, supported by increased export sales and the ramp-up of completed expansion projects in our Swiecie, Kuopio and Duino mills. In Corrugated Solutions, we achieved like-for-like volume growth, excluding the Schumacher acquisition of around 2%, in line with overall European market growth. In UFP, we were able to hold volumes stable despite market demand declines of around 5% in each of our key regional markets of Europe and Southern Africa, testament to our cost competitiveness and the quality and reliability of our products and services. The margin squeeze you see came through price. In containerboard, average prices were moderately higher than the prior year, although this does mask a tale of 2 halves, where prices were moving up through the first half, followed by declines through the second half. In Corrugated Solutions, margins were squeezed as higher input costs were not fully passed on to customers due to intense competition in all key markets. In Uncoated Fine Paper markets, prices came under significant pressure through the year as industry moves to reduce capacity were not sufficient to mitigate the impact of significant demand side weakness. This was exacerbated by lower pulp prices, which gave some breathing room to the higher cost unintegrated producers. Our South African business, which I remind you is a net seller of pulp was further impacted by the unusually strong rand, which negatively impacted the rand price achieved for export pulp sales. It is nevertheless encouraging to see some modest pickup in pulp prices over recent months, and we are currently implementing price increases in certain uncoated fine paper grades in Europe on stronger order books and ongoing cost support. If I look back at where we are today in the corrugated packaging markets, margins remain under pressure due to the lingering supply-demand imbalance. Demand has clearly been impacted by the prolonged economic downturn seen in our core markets, lasting now the better part of 3.5 years. That said, it is encouraging to see that even against a soft macroeconomic backdrop, box demand in Europe was still up around 2% last year. And in fact, if you look at the size of the European box market, it has still grown by around 7% since 2019, the year before COVID for a compound annual growth -- average growth rate slightly above 1%. While clearly below historic growth rates of nearer 2% per annum, it is nonetheless still growing and I believe reflects the structural support we see from demand drivers such as e-commerce and sustainability. With a healthier macroeconomic backdrop, one would certainly expect these markets to return to trend growth rates of around 2% per annum. What has clearly been a major contributor to the overhang is the supply side response. Containerboard capacity over the same period since 2019 has expanded by around 15%. In the short term, this overhang will continue to hold back margins in the industry in the absence of meaningful capacity rationalization and/or stronger demand side recovery. In this regard, there's clearly ample incentive for capacity closures with a significant portion of the industry cost curve currently loss-making. As for ourselves, we'll continue to focus on the controllables that we know will serve to strengthen and reinforce our advantaged competitive positioning in these markets, leveraging our market leadership positions, cost advantaged asset base and integration strengths, and I'll come on to more of that a bit later. If we move then to the Flexible Packaging business, I'm very encouraged by the strong volume growth we achieved in our global paper bags business with good contributions from all key markets that we serve. Pleasingly, in addition to the steady performance from traditional industrial end users, we are seeing an acceleration in demand growth for e-commerce solutions in both Europe and the U.S. We continue to invest behind these important growth markets that we are very well positioned to serve. Similarly, our Consumer Flexibles and Functional Paper and Film segments continue to display their defensive qualities as we drive product mix improvements, supported by recent investments and ongoing innovation centered around sustainable packaging solutions. As noted on the slide, volumes in kraft paper were moderately down year-on-year as we responded to a generally softer demand environment with production downtime, particularly in the second half. While there is seemingly something of a disconnect between the strong volume growth in our bags business and the relatively softer kraft paper markets, our analysis suggests this is due to a combination of industry stocking and destocking effects and product mix impacts. On the back of the softer demand, kraft paper prices came under pressure over the second half of the year and into early 2026, following modest increases through the first half of 2025. With the ongoing good demand picture in bags now seemingly translating into better order intake for our key sack kraft grades, we are currently implementing price increases across our range of sack kraft grades, reversing the declines we saw in late 2025 and early '26. Again, if I step back briefly to understand how our industry dynamics are playing out in the context of the current challenging macroeconomic environment. Unlike in the corrugated markets, we see the current margin pressure in this segment as being very much a cyclical demand side story. I remind you that sales in flexibles are split roughly 50-50 between more cyclically impacted industrial end users and the more defensive consumer end markets. On the industrial side, if I take, for example, European industrial bag demand from 2019 until today, it is off around 7%, heavily impacted by the slowdown in cyclically sensitive markets like cement and building materials. Over the same period, European sack kraft capacity has actually remained relatively flat. This is clearly a cyclical demand side challenge. As already mentioned, encouragingly, industry demand is improving, albeit modestly from the lows seen in 2023. European industrial bag demand was up around 2% in 2024 and a further 2.5% in 2025. This also excludes new applications for our bags in nonindustrial applications like retail and e-commerce and consumer markets, which are also adding to demand sources and contributed to the 5% growth we achieved in our bags business. With this backdrop, we will continue to support the growth of our global leading paper bags franchise, supported by our strong backward integration into kraft paper and our complementary offering in functional papers. We are not waiting for the cyclical recovery, but rather continuing to develop new markets for our products while also driving our operational excellence and cost optimization programs to enhance our competitiveness. Coming then to our competitive advantages, I just want to discuss briefly how we see Mondi positioned in these markets and reminding you of the significant advantage we have to deliver resilience in the most challenging of market conditions and similarly capture the upside as market conditions improve. I'll talk to each of these points over the next few slides. Our scale and market positions are a major strategic advantage. In corrugated, we enjoy market leadership positions in the niche virgin grades where we also enjoy significant cost advantage. In emerging Europe, which typically enjoys higher growth rates, we are the leading integrated box producer. As you know, through the Schumacher acquisition last year, we have now extended our geographic reach across Northern Europe, so that we can be a genuine option for regional key account customers, while at the same time, leveraging our paper integration strengths. In Fine Paper, we are the #2 player across Europe with real strength in our core regional market of Central Europe, while we are the clear market leader in our other core market of Southern Africa. In flexibles, we are the clear global market leader in both upstream kraft paper and downstream paper bags with an unmatched global reach and integration strength. Similarly, we enjoy real strength in niche consumer flexibles markets in Europe with, for example, the leading position in the high-growth and highly demanding pet food market. These positions matter. They underpin our customer relationships, supply chain relevance and cost competitiveness. As I've already mentioned, packaging demand is heavily influenced by macroeconomic growth in the short term. While there are many defensive end markets such as food and beverage and other consumer nondurables, there's always an element of cyclicality in demand, even in the most defensive of markets. This is accentuated in our industrial exposures, as already noted, most notably in construction and related markets like cement and building materials. This has clearly been the dominant theme over the past 3 years as the fallout from COVID, wars in Ukraine and the Middle East and the more recent trade wars have all served to undermine consumer confidence, particularly in our core European markets. However, as I've already mentioned, it is pleasing to see that despite this very difficult macroeconomic backdrop, we are starting to see some growth coming back into these markets, albeit off a low base. Most importantly, we remain confident that the structural growth drivers in packaging are very much intact. Key among these are the increasing importance of e-commerce and the drive for sustainable packaging solutions. We are extremely well positioned to leverage these trends. As I'll show you shortly, we offer a one-stop shop for all paper-based e-commerce solutions, while I firmly believe our expertise across different flexible packaging substrates and our vertical integration strengths gives real advantage when developing sustainable packaging solutions for our customers. You'll see on the right-hand side of the slide, we show an example of how new applications, largely driven by sustainability requirements are driving demand for our specialty kraft paper products with a significant increase in applications across e-commerce, nonfood and industrial. A trend we expect to see continue and likely accelerate driven by both regulation and consumer preferences. We continue to seek ways to bring this differentiated product offering to our customers in a way that delivers the best value proposition for them. Last year, we combined our e-commerce sales team from across corrugated and flexible packaging to provide a single point of entry for customers. Similarly, we continue to drive innovation across our broad portfolio of packaging solutions. I was delighted that we recently won Nine WorldStar Packaging awards for innovation, following a long tradition of success in developing innovative packaging solutions in partnership with our customers. This is, of course, all underpinned by our ongoing focus on operational excellence, which focuses on delivering right first-time performance, reducing lead times and providing customers with the agility and flexibility that they expect from us. You'll see on the right-hand side of the slide how our product breadth supports 2 of the most important end-use segments, FMCG and e-commerce, which together make up about half of our packaging portfolio. For each, we offer a full suite of corrugated and flexible solutions that are genuinely complementary and designed around our customer needs. This is what customers value, One Mondi, comprehensive solutions and consistent quality. Our integrated model is a fundamental competitive strength. And here, we need to differentiate between what I refer to as our bulk and niche packaging grades. We firmly believe that in the bulk grades, strength in integration is key. From the paper perspective, it provides security of offtake, allowing us to run our mills as efficiently as possible while also allowing us to optimize logistics into our converting operations. Similarly, from the converters perspective, it offers security of supply, logistics benefits and innovation opportunities using the combined knowledge and expertise of the whole value chain. As you can see from the charts on the left-hand side of the slide, we are highly integrated in these grades. By contrast, in the niche virgin containerboard and specialty kraft grades, we are very comfortable with our strong open market positions. These products are sold on a global basis to a wide number of different customers, many of whom are other integrated producers who do not have these products in their portfolios. Key here is cost competitiveness, quality, reliability and innovation, where we are again very well placed to outperform. Coming to our cost competitiveness, which is particularly important in our upstream paper businesses. This chart illustrates that around 3/4 of our production is in the lower half of the relevant cost curves, a key determinant of long-term outperformance in these markets. We have achieved this by having the right assets in the right places to secure access to cost competitive raw materials. We have then built on this natural cost advantage through judicious investment in the assets on a through-cycle basis. In addition to the scale benefits that come with the capacity expansion, these investments also deliver efficiency and cost optimization through increased energy self sufficiency and raw material efficiencies. A culture of continuous improvement, delivering operational excellence is then key to extracting the full value from these privileged assets. On the topic of operational excellence, as Mike says, this is a continuous program and embedded in our culture. We are very proud of our long track record of continuous improvement, as you can see from the example of what has been achieved at one of our flagship operations, Swiecie in Poland over the past 10 years on the right-hand side of the slide. However, we are always striving for more. And in early 2025, we initiated a multiyear program, aimed at taking us to the next level of operational excellence through a zero loss mindset, embedding standardized processes and ensuring the sharing of best practice, facilitated by empowering our people and strengthening our leadership teams. While I'm being constantly reminded by colleagues that this is a long-term program, and I shouldn't be expecting significant quick wins, I am nevertheless delighted by the initial results from the pilot projects. In Swiecie, for example, this has already led to strong efficiency gains and reduced downtime on the machines. We are very excited by what this program can do for all of our operations as we systematically roll it out across the group. Our converting operations also have a proud track record of driving efficiency gains. Over the past 10 years, we have closed 22 plants while at the same time growing volumes. As our larger plants get increasingly efficient, we are able to successfully transfer volumes from smaller operations, which in turn drives further efficiencies. The chart on the right-hand side of the slide illustrates the track record of productivity gains over the past 10 years in our Corrugated Solutions and paper bags plants, respectively. After a short period of slower rates of improvement, I'm delighted by the significant productivity gains achieved in the last 12 months of 4% to 5%, reflecting a renewed focus on driving this key performance indicator. The Schumacher acquisition has further strengthened our Corrugated Solutions network, enabling further optimization across our footprint and unlocking efficiencies that support our long-term growth. As Mike mentioned, we recently announced 3 further plant closures, again, with the intention of transferring the volumes to other nearby plants in our network. While we fully acknowledge the challenges for those valued colleagues directly impacted by these decisions, we also recognize the critical importance of driving the ongoing optimization of our plant network. We will not hesitate to take the tough decisions on plant or mill closures when required. So let me then finish where I started. In the context of a prolonged cyclical downturn, we have delivered a resilient performance. We have taken and will continue to take decisive actions to drive value. We remain strongly positioned to deliver in the short term and capture the upside as markets improve. Our conviction is driven by our belief in the structural growth drivers underpinning growth in our packaging businesses, our leading market positions, our well-invested and highly cost competitive assets, our compelling customer value proposition and most importantly, our committed and highly capable people who live and drive our culture of excellence and continuous improvement. In this context, I'd like to finish by extending my sincere thanks to all our people for their great commitment and energy in navigating the current challenging market conditions and remaining steadfast in pursuing our goal of delivering sustainable long-term value for all our stakeholders. With that, I thank you very much for your attention, and Mike and I are now delighted to take your questions. Operator: [Operator Instructions] Our first question comes from Reinhardt of Bank of America. Reinhardt van der Walt: I just want to go to one of your comments. You mentioned that you won't hesitate to take tough decisions on plant closures. I think you mentioned that a lot of your assets are in the bottom half of the cost curve, but some of them are obviously not. So if we think about rationalizing supply here on the Mondi side, where do you think that incremental closure could potentially come from? Andrew King: Yes. I think, Reinhardt, -- I mean, as I said, we've got a track record of taking those decisions in order to continue to facilitate the drive for more efficiency. Now typically, historically, a lot of that has been facilitated by our existing plants getting increasingly efficient. And so we are able to continue to serve our customer with a smaller fixed cost base. And that's something we've continued to do, and we won't hesitate to where the opportunity arises. And as I mentioned, we've just recently announced and are in the process of closing a further 3 plants that are plants in Hungary, Germany and Turkey. And if the opportunity arises to drive further efficiencies while making sure we look after our customers, is something we'll continue to do. So the plant network is obviously extensive and it lends itself to those. I think your reference is specifically to the paper mills. Clearly, the most important value driver in the paper mills is your cost position, that's why you see us -- talk so much about the relative cost positioning. Now those cost curves are not precise. It's -- we take the industry cost curves from the various consultants to get a sense of where we are in that space. Quite a lot of -- because people always point to the 25%, as you, I think, have alluded to that is not in this lower half of the cost curve. Some of that one has to acknowledge is pretty much in the sort of specialty camp, which in some ways, it's not appropriate to look at it on the simple cost curve analysis. And certainly the margins that we see in those businesses are not necessarily the case. Clearly, the one asset of ours, which is currently loss-making is the Duino mill in Italy for 2 reasons. One is it hasn't been optimized yet. It only started this year. So we are not yet in a fully optimized position because, of course, as you grow -- as the capacity ramps up, so the unit costs go down and also your input costs get optimized. So we are in the process of doing that. But undoubtedly, there's also the market dynamic that's at play there. And as I mentioned, swaves of industry capacity are currently loss-making. The big challenge in that regard is, of course, you would logically see that the more marginal assets should go first. That's at the moment happening to some degree, but one expects more to happen, frankly, if the current paradigm continues. Duino is a mid-cost producer by the time we are fully optimized on it. And importantly, we also require the security of supply that comes with having some recycled containerboard in our portfolio. As I pointed out in that slide on the integrated system, we actually remain short of recycled containerboard as a business. While it might not feel like it at the moment, given the oversupply in the recycled containerboard market over -- through the cycle, it is important to have some of your own recycled capacity for security of supply reasons into your box business. So there's always that strategic element as well. But suffice to say that all the rest of our paper mills are extremely well placed and extremely cost competitive. Reinhardt van der Walt: That's very clear, Andrew. Maybe if I just flip that question on its head and ask about your capacity at the box level, the box plants. You're driving efficiency, that seems to be a focus right now. But how do you think about maybe some countercyclical consolidation investments? I mean, dividend is down now, CapEx you're pulling back. So there seems to be some balance sheet capacity in the next few years. How are you thinking about countercyclical investments at the box plant level? Andrew King: Yes. I won't even ask Mike to comment on the balance sheet capacity because I know his answer at 2.6x leverage. I think we're very conscious that we're at the top of where we were comfortable in terms of leverage. And so our focus is very much on driving those self-help actions that we spoke about and being as well placed as we can to serve our customers in the current dynamic. And we've invested heavily in the business. We know that. And we have the capacity now. We have all the weapons in our armory to compete very effectively in the markets. That's the job to do right now with the assets that we invested in and the portfolio that we have. That is the focus. Operator: Our next question comes from Detlef of JP Morgan. Detlef Winckelmann: Just a quick one on your CapEx. If I look at 2025 coming in roughly good EUR 130 million below midpoint of guide, putting down '26 by EUR 100 million. Can you run us through kind of what you've paid back, any specific projects? And has anything kind of been kicked to 2027? Or is this kind of EUR 550-ish roughly okay, ex any growth projects? Andrew King: Short answer is, yes, we're very comfortable with that number. Clearly, in the current low growth market environment, one, it's not a difficult trade-off to cut back on anything of a significant expansionary nature. That said, there are some pockets of growth that we are still continuing to support, but they're very small and they're within that overall number. The primary focus at the moment is on in terms of the CapEx program going forward is investing and to make sure the asset integrity is not impeded and, of course, that we do retain the exposure to the upside. But having invested significantly over the last few years, we're very confident that we can pull back on the CapEx spend without prejudicing the asset integrity and similarly, without prejudicing the exposure to the upside. In terms of what we might have prioritized or deprioritized, that is always that constant work being done to prioritize your CapEx programs and the like. But we are very confident that there's nothing we're doing now that, as I say, either prejudices asset integrity or indeed limits our exposure to the upside in the near term. Clearly, if we see markets starting to show real recovery in terms of -- from the demand side, there might be some other opportunities. And we have a great asset base that we continue to leverage if the opportunities are there, but we're very comfortable operating in this sort of envelope for an extended period of time. We've always said maintenance CapEx, and that's not just -- not just sort of holding on to what we got, but adding some opportunity is in the sort of 100% to 110% of depreciation. So that's what we're operating with this year. Michael Powell: Yes, Detlef, just to be explicit on your 2027 question, we're not stoking an issue for 2027. As Andrew said, we can operate at this 110%. We've got capacity that we've put on the ground that isn't yet full. And in this environment, I think we're very comfortable. We've got well-invested assets and now we need to generate the cash and fill those assets. Operator: Our next question comes from Lars of Stifel. Lars Kjellberg: I'll just start with the big question in terms of where your margins are today, they're obviously down quite a bit on the cyclical pressures and of course, you reinvested in your business with headwinds from starting up, et cetera, et cetera. Where do you think considering what seems to be somewhat structurally higher wood costs that your margins could -- where they should be in some sort of normalized environment? And just on the short-term comments, you did say kraft paper order books are starting to improve and you're reversing the sort of couple of quarters on price declines. What are you seeing containerboard when it comes to demand trends? And of course, you have spoken to and many others, of course, and it's reality there's been a distress here for a long time. Are you seeing any real signs of this cracking? Andrew King: I think on the first question, I'm not going to -- I know it's flavor of the month, but I'm not going to give long-term forecasts. But I think Lars, yes, European wood costs are structurally higher than they were pre-Ukraine for obvious reasons because of the restriction or the prohibition of supply out of Russia and Belarus, which, of course, caused prices to go up -- and yes, they've come down to some extent from the peak levels in 2022, but they're still above pre-Ukraine levels. So I think that is a structural change. At the same time, it clearly affects all players in Europe to a greater or lesser degree, but clearly, everyone is impacted. So the whole cost -- industry cost base has gone up. That's particularly relevant for, for example, the sack kraft grades, which are primarily made, as you well know, in Northern and Central Europe. And so the relative positioning hasn't materially changed on that. Clearly, where it has changed on a global basis is in, for example, pulp, where as a globally traded commodity, you are competing with other continents where maybe you haven't seen that same level of input cost pressure. From our perspective, we are -- we are not a pulp player. I mean the only place we make open market pulp of any significance is in South Africa. And of course, there, the wood cost situation is actually relatively improved versus the European cost base. Clearly, that was the other reason that attracted us to Canada, where, again, in our Hinton mill, the wood costs are extremely favorable compared to Europe. So I think it's in that sort of market where you might have seen a relatively less competitive dynamic. In the kraft liner market, which is the other big grade of virgin product that we make, again all the European competitors have seen similar input cost inflation. I guess, on a relative basis, people like the LatAm producers have enjoyed a relative advantage. But as you know, they produce their kraftliner out of virgin hardwood grades. You can't add things like recycled content into those grades, which the Europeans and ourselves, in particular, are able to benefit from. So we can offset some of those cost disadvantages on the wood front with the PFR content and the like. So I think to your point, Lars, it is a relevant consideration on a global basis, but then you have to look grade by grade where you are -- have to compete on a global basis versus what are more regional markets. The question on containerboard, I think you mentioned it was basically twin question on pricing and sort of where is the supply-demand picture, which, of course, are linked. Yes, I mean, right now, margins across the industry are heavily squeezed. Clearly, the big capacity problem is in recycled containerboard. It's not on the virgin grades. But at the same time, we're the first to acknowledge that the overhang in the recycled grades is putting a cap on the ability to push pricing on the virgin grades because on the margin, there is substitution. So the question is how fast -- how quickly this overcapacity can be -- can be absorbed into the market. I firmly believe it has to come through a combination of factors. Clearly, the demand side, albeit we're starting to see some okay demand last year, bag, I think the box -- Europe -- box volumes were up around 2 percentage points. If you look at the industry statistics, that's okay in a normal environment. Of course, it's off a low base because we saw a sharp decline in sort of 2023 into '24, and now it's only rebuilding now. So you have seen on a trend basis, a low trend growth for the last 5 years. At the same time, the capacity has been coming in on historic trend rates, if you look at it. So that has caused this oversupply. I do believe it will require further capacity closures to balance. I don't think we can assume that demand in itself is going to do all the heavy lifting here. But as I said in my opening remarks, there's every incentive for that. Now we are starting to see some movement on that front. It's not these big ticket sort of headline grabbing moves, but you are starting to see closures take place. I firmly believe, as I say, there's every incentive for more closures. There must be huge pain at the high end of the cost curve. And simply put, the current margins are not sustainable. So if you believe in a structurally growing market, which we do, the current incentive price is not there certainly for new capacity and the incentive is for closures and you've got to believe something is going to -- something is going to change on that front. I hope that answers your questions, Lars. Lars Kjellberg: It does. Operator: Our next question comes from Cole of Jefferies. Cole Hathorn: I appreciate the actions taken on the cost front, and Mondi has never, like many of your peers, announced separate kind of cost initiatives, but 1,000 headcount, group services pulled back, that's all ultimately helpful for 2026. I'd just like a little bit more color on the message on costs. You're talking about stable costs '26 versus '25. I'd just like some moving parts there. And then after the input costs, can you give any color on what would be the potential contribution from the Schumacher acquisition and the EUR 32 million synergies that you're trying to achieve in 2026? And also a difficult one is the contributions from the CapEx projects. I know prices are low and the market is still challenging, but the contribution from the major CapEx projects would be helpful. Michael Powell: Sure. Let me start, Cole, and with the first couple, and then the last one sort of relates to wider market issues, which Andrew can comment on. Just in terms of costs, just so we're clear, if I take what some would call overheads, we call them fixed costs, we have taken those actions. We continue to take actions on overheads. Large part for us is people costs, some maintenance of equipment, but clearly, that's around assets. Those people actions that we have taken, plus those other efficiencies that will drive through our overhead base will offset, as I said in my words, will offset any inflationary pressures. So we still have -- we like to pay our workforce that are precious to us, inflation increases, the work we have done will offset that. So I'd expect our fixed cost overhead base to be flat given the actions that we've taken. I think you also touched on input costs, so above the line direct materials, others might call it. Again, within that, it's early in the year. I would guide to flat if I was sat here today. Clearly, that will change as the year goes on. But as of today, we're seeing it flat on 2025. Why is that? We're seeing some headwinds. There's less energy emission credits in various forms from governments. I think you've heard the rest of the peer group talk about those. For us, that's about EUR 60 million headwind on energy. We'll work hard to offset that. We've got some other cost categories coming down still, which I think reflects sort of a pretty lackluster economy, things like chemicals are still coming down. And then within wood, we've got some ups and downs. We've got Scandi Wood coming down, Central Eastern European wood going up. I would say the ups and downs are much smaller than they've been. I know we're in a much more volatile world. So I don't want to diminish a sort of 20% up and 30% down, but those movements are much smaller ups and downs than they were 2 years ago or frankly, that they would be if economies recover. So I think what the puts and takes to give me confidence to guide to flat is the puts and takes are probably a bit either way, and we're working hard internally to offset those energy grants from governments in various forms. So best guidance is flat on input costs [ goal ]. I hope that's a bit of color within the categories that you're after. And Andrew, in terms of markets and volumes. Andrew King: Yes. So I think just adding to the cost story, I frankly prefer our procurement guys to be struggling a bit more because it generally means an economic pickup, which puts more pressure also on input costs, but that's a far more favorable environment than sadly the one we continue to struggle with the geopolitical and macroeconomic backdrop that we see. But still -- but coming back to, call it, the self-help [ goal ], which is very much also linked to the CapEx program. I guess it can be divided into 2 parts. The one is what is within our control and the other, which is clearly the market dynamic that we're selling into. And of course, the 2 are somewhat interlinked. But if I look at it in broad terms, on the big upstream capacity expansion, we've probably got another 300,000 tonnes to come this year from ramping up the projects. Now about half of that is Duino, which I think I've already explained to you. Clearly, in the current paradigm with the current recycled containerboard price, you're not seeing a big contribution on those extra tonnes at the moment. But as I said, it's -- the focus there is very much driving the productivity improvement. And of course, that also has benefits on cost optimization and the like. For the rest, it's obviously very valuable tonnes even in the current difficult environment because it's expanding both the virgin capacity out of Swiecie and Kuopio and also the sack kraft production out of the PM10 in Steti. And I remind you, last year, we took down the Stambolijski mill. So this incremental capacity for the market is really absorbable. And again, we're excited by the underlying growth we see in our bags and other applications for our kraft paper. So very confident that, that can be placed into good markets. So that's where a lot of it comes from. In terms of the absolute contribution, the big challenge here is what is your pricing assumption, particularly on the paper grades, which is what we're saying is this is going to support our volume growth in 2026. We think we can for all of those reasons grow above market. The absolute pricing will obviously determine exactly what the contribution is from that. But this is good low-cost tonnage that we are bringing into the market. And similarly in the converting businesses, again, there is always a much closer interplay with the market dynamics and the capacity -- putting up the capacity is the easy, but getting it into the market at the right price is something which obviously is also a function of the overall market conditions. Again, though, I think we've got all the tools to be able to grow above market in the key markets where we've increased capacity, and that includes the Schumacher acquisition, which as we said at the time, also comes with effectively some latent capacity, which it's incumbent on us to grow into the market, and we're very confident we can continue to do that. I think a very exciting area for us is that e-commerce area where, as I said in my opening remarks, we do have a fantastic and unparalleled breadth of portfolio there that is genuinely what our e-commerce customers are buying from us across the platform. I think I've got an example of the protective mailer behind us and the like. These are all products which are combining expertise in our Corrugated and our Flexibles business, which is fantastic. And that's why we brought together the sales team that can talk as one voice for all our offering across our Flexibles and Corrugated business. Cole Hathorn: And then just as a follow-up, bringing the CapEx down to EUR 550 million is -- it's a strong effort considering you had commitments for the major projects as well as the recovery boilers. Could you just break down that EUR 550 million CapEx number because reducing it to that level, I know must have involved a lot of work. Andrew King: Yes. I mean just to be clear, we're not making any -- we're not investing in a new recovery boiler at the moment. Those things are properly expensive. We've got a few -- I think you're referring to just biomass boilers. Firstly, just to be very clear, those are all in the numbers. So there's nothing on top or anything like that. No, I mean, as I said earlier, we feel confident we can do this. Yes, I mean as you rightly say, when you work across the organization, it's always a challenge because everyone's got essential CapEx, et cetera, and great -- growth opportunities and the like. But we are extremely confident that we are managing this CapEx at a level which doesn't impair the integrity of the asset base, it doesn't store up a problem for later because we're not believers in that. We believers in building a long-term sustainable business. But at the same end similarly doesn't prejudice the upside as and when it happens. So yes, in short, we are very confident. It does still allow us to make those important investments in, for example, these biomass boilers, which are very important, both in terms of -- because there is a stand business element, some of these -- the existing capacity is end of life. But as importantly as that, it also gives us upside in terms of cost opportunity and importantly, CO2 reductions and things, which are very important for our customers. Our Scope 1 and 2 emissions is our customer Scope 3. They are very focused on that. It is a genuine selling point and a very important value for them. So these are very important steps and -- but that's all included in the numbers we guide to. Operator: Our next question comes from Andrew of UBS. Andrew Jones: So yes. You have some relatively encouraging comments about the kraft paper market. Can you just point to like which pockets of demand are sort of starting to come up at the moment? Are you seeing more growth in export markets? Is it specific customer segments within Europe? Like what's the moving parts? And how much do you put down to kind of a restocking dynamic after last year's destock versus like a fundamental underlying improvement in trend? And how do you see the rest of the year, given we've obviously got some infrastructure investments coming through on the cement side and things like that? Can you just talk through that dynamic, if that's okay? Andrew King: Yes. As I said in my remarks, it is a bit confusing this seeming disconnect between bag growth because bags use sack kraft and relatively soft picture in the kraft paper markets in 2025. Actually, if you recall, 2024, it was a bit of a reverse. It was the other way around as the kraft paper markets were stronger relative to the underlying bags. But to me, first and foremost, you look at the end users, which is the bag demand, and it is encouraging that last year, as I said, we grew 5%. If you look just at the European market, the industry numbers tell us that it was about a 2.5% growth market in Europe. North America seems to have starting to show some growth as well now, which is encouraging. Again, we were growing strongly in North America or the Americas, but it's mainly North America for us, it's Mexico and the U.S. And then, of course, important markets for us are also Middle East, North Africa, which always some volatility in those markets in individual pockets of that, but if you take it as a whole, again, some good growth. So, when I look at last year's contribution to the bags growth, it was everywhere contributed. On top of that, we obviously, as I mentioned, got these new sources of demand for the likes of -- I mentioned again, the e-commerce mailer bags and things like that, a nice extra area of growth. I mean, the core of that business remains in the industrial space, but these sort of applications are coming through which both support the growth of our converting business, but also, of course, demand for the paper grades. So that is -- that has been a picture of 2025, and it's certainly continued into '26 in terms of a decent looking demand environment for our bags. It seems as though having, as I say, having been a bit softer into the second half of the year with the kraft paper volumes. We did see that in our order books into the Q4. I think we cautioned about that in Q3 numbers. And certainly, that did continue into January, we shouldn't -- we generally not saying it's sort of 1st of January, suddenly, things changed. But certainly now, we are starting to see that good position in bags, translating into a certainly stronger order position in the kraft paper business. Yes. And on the back of that, we're in currently in the market for price increases. I hesitate to say -- remind you that this is very much recovering the pricing erosion we saw Q4 into early Q1 this year. Andrew Jones: Yes. That's clear. And just a second question on the ramp-up of projects. I mean, I remember when you acquired Schumacher, it was running at roughly 50% utilization after a large plant came on. Can you give an update as to sort of broadly where that is and maybe also where Duino is running at just so we can understand how that kind of movement in board versus sort of board demand internally sort of evolves as we go through this year? Andrew King: Yes. Duino is easy because it's much easier to measure capacity in the paper machines. I think I said earlier, we could expect another 150-odd tonnes production -- incremental production this year out of Duino if we run full. In terms of the Schumacher market capacity, I mean, again, it is also a function of the overall market. So clearly, we are confident we can grow above market because I say we've got a very strong base on which to believe that in terms of the asset base that we have, we've obviously invested now in growing the commercial infrastructure to support the growth of that business in that Northern European region. But we have to also acknowledge, when I mentioned that box demand growth across Europe was 2-ish percent. That does mask quite different regional growth rates. Clearly, Southern Europe, Spain was the a star performer, where unfortunately, we don't have direct box exposure. We do obviously sell containerboard into that, so that's helpful, but it's not direct exposure. Our direct exposure in the box business from a European perspective is very much Northern Europe -- and Northern and Central Europe. Clearly, Germany, I think box demand was probably 0.5 percentage points or something growth last year. The overall market remains slow and we are working in that context. So we have to be realistic about what we can do in the short term because what we don't want to do is chase volume at the expense of margin that would be stupid in a very short term -- shortsighted because we're here for the long term, so we must do it in a structured and systematic way, but we're very confident in the capability we have there to continue to grow above market. So that is the primary focus in terms of how we grow out and fully utilize, as you say, the underutilized capacity we acquired as part of that acquisition. I think we've got time for one more, and we're probably over time, but I'm happy to take one more. Operator: Yes, we'll take our final question from Kevin of Deutsche. Unknown Analyst: If I could sneak in 2, if I could. The first was on your guidance for downtime and the impact on EBITDA this year. I just presumably, that's weighted very much towards the Corrugated Packaging segment, but I just wondered if you could sort of help us think about the sort of weighting by segment and cadence we might expect during the year? And just if I could sneak in a second quick one. There's clearly a number of elements in the numbers today addressing capital allocation decisions. And I think you signaled in your piece earlier, Mike, that it's your leverage is sort of the higher end of where you're comfortable with, I guess. I just wondered what you're trying to signal today in terms of the time frame you might get that leverage to a bit more of a comfortable -- a more comfortable position for you guys. So any color on those 2 would be great. Michael Powell: Sure. On maintenance, to keep it simple, it's about the same as last year. We've guided to about EUR 100 million, EUR 20 million first half, EUR 80 million, 2nd half. I think you should assume the same split. Yes, on leverage, listen, I don't think you should use the phrase uncomfortable with where we are. I think it's at the top end of where we'd like to be to have that financial flexibility. And you've seen a number of measures that we continue to take through last year and into this year around working capital, around cash generation of the assets, around spend on CapEx. I think that's just prudent financial management in the current economic environment. How quick we delever. It depends on 2 things. One is the net debt. I don't want to be sort of flippant. That's the one that we can control to an extent in terms of the cash that we consume and the cash that we choose to spend as a business. And then the other one is EBITDA, which actually on a math basis is much more powerful in reducing your leverage that, as Andrew has said, will be a function of both the actions we take, but also how the market operates, over the coming period. Clearly, if price moves, you deleverage very, very quickly. We're not waiting for the markets to move. We're taking control of our own actions there. And I think you've seen that today. I think you'll continue to see it, as I said earlier, it is what Mondi does. Hopefully, that answers your question. Unknown Analyst: Yes. That's really helpful. Apologies for the difference in wording, I guess, but you get that. Michael Powell: No, no, not at all. I just want you to understand. Andrew King: Very good. And with that, we've taken up more than, more than -- a lot of time. So I really appreciate the interest, as always, Fiona and team are available for any follow-up questions. And for those of you we look forward to seeing you in -- on the road shows over the next few weeks. So again, really appreciate the interest. I think in summary, we know the world is difficult out there. We are not standing still in that environment. We are seeing good growth in some of our core businesses. We're supporting that with the right actions to make sure we're extremely competitive in any environment and was really good positioning for the upside when it comes. So I really appreciate your interest, and thank you very much for your attention today, and goodbye from us. Michael Powell: Thank you.
Operator: Welcome to the 2025 full year results. [Operator Instructions] Now I will hand the conference over to the speakers, Julien Hueber, CEO; and Vincent Piquet, CFO. Please go ahead. Julien Hueber: Thank you. So good morning, everyone, and thank you for joining us today for Nexans' Full Year 2025 Results Call. This is Julien speaking. So let's start, as usual, in Slide 2, a short disclaimer noting that this presentation contains forward-looking statements subject to the usual risks and uncertainties. Moving to Slide 3. So before diving into the presentation, I would like to officially welcome and introduce Vincent Piquet, who, as you know, recently joined Nexans, our CFO. Nexans (sic) [ Vincent ] brings a wealth of experience from the automotive and industrial sectors and was previously CFO of Ampere at Renault Group. So I am very pleased and we are all very pleased to have him on board. He's fully already engaged with the teams and deeply involved in the preparation of its results and our outlook. You will, of course, have a chance to hear from him in a moment. So before we move into the results, just a brief technical clarification. So in compliance with IFRS 5, the Industry & Solutions businesses are now classified as discontinued operation in the 2025 consolidated financial statements. This is reflected both in 2025 and in the comparative 2024 figures. Let me now walk you through the key highlights of our 2025 performance. Let's move to the results slides. Yes. So 2025 was a pivotal year for Nexans marked with an excellent financial performance. We have reached a major step in our portfolio rotation, fully refocusing the group on electrification, and we delivered a strong set of results across all key metrics. The group standard sales, if I start by this, reached EUR 6.1 billion with an organic growth of plus 8.3% year-on-year, well above our midterm guidelines and demonstrating strong momentum across all our electrification businesses. The adjusted EBITDA amounted to EUR 728 million, representing an adjusted EBITDA margin of 11.9% of standard sales. Excluding other activities, which mainly consist of metallurgy, our electrification organic growth and EBITDA margin were even stronger with 11.6% organic growth and a 13.3% adjusted EBITDA margin. The cash generation was also very solid in 2025 with a cash conversion ratio of 47%, underlying the quality of earnings and strong cash discipline across the board. From a capital efficiency standpoint, ROCE reached 21.3%, confirming value creation power of our business model. And finally, we ended the year with a sound balance sheet with a leverage ratio of 0.36x. Vincent will come back on that later on. And at the same time, we continue our M&A activities with 2 major acquisitions, the one in Canada, Electro Cables, that we concluded in December last year and the one in Spain, that we also -- RCT, that we also concluded in June midyear 2025. Moving to Page 7. So this slide illustrates the consistency of Nexans' performance over time. The adjusted EBITDA has increased steadily, reaching EUR 728 million in '25, with a margin of 11%, as I just explained, compared to 10.3% in 2024. This result illustrates the group's strategic focus on operational excellence, selectivity and value growth driver. The free cash flow reached EUR 344 million, with a cash conversion ratio of 47%, up significantly compared to previous years and higher compared to our midterm guidelines. A strong performance that illustrates the cash generative nature of Nexans' business model as well as the strong cash discipline across all business units and the working capital favorable evolution. The ROCE also continued to improve, reaching 21.3% in 2025, compared to an 18% in '24 and reflecting disciplined capital allocation and a strong operational execution. In a consistent manner over the years, Nexans' transformation is delivering sustainable growth, improving profitability and strong cash generation year after year. Now moving to Page 8. So as a reminder, during our Capital Market Day in November 2024, we clearly stated our ambitions to become a global electrification pure player, fully focused on our 3 core businesses: Transmission, Grid and Connect. In '25, this year, marked the final step of our portfolio rotation. And as announced, we have entered into exclusive negotiation for the disposal of the last part of non-electrification, which is Autoelectric, our automotive wire harnesses activity. This transaction is expected to close midyear 2026. With this transaction, Nexans complete its strategic refocus and now is fully dedicated to electrification with a simpler, more focused and more resilient business profile. Moving to Page 9. So alongside with the divestment we just explained and you've seen in 2025, we continue to pursue targeted acquisition to strengthen our electrification footprint. In 2025, we completed 2 acquisitions, representing around EUR 260 million of cumulative full year sales. The first acquisition, Electro Cables in Canada, reinforced our positioning in low-voltage cable and high added solution. It brings attractive growth, a robust profitability profile and supported by a strong industrial footprint in Canada. This acquisition fits very well with our Connect strategy and offer clear opportunities to deploy our operational discipline. The second acquisition, RCT in Spain in Saragossa area, strengthens our expertise in flexible fire safety solutions, especially in data center and critical buildings, 2 fast-growing and high value-added segments that we are targeting. The newly industrial capacity that was announced at the time of the acquisition is now up and running and delivering profitable growth. And we are very proud and satisfied with the new team that have effectively put in place this new machine and capacity increase. What is critical in both cases, is not only the asset acquired, but how value is created after closing. In line with our approach, synergies are being deployed through the rollout of our proprietary SHIFT program, ensuring smooth integration, execution discipline and value creation. Taken together, this acquisition illustrates how Nexans used M&A to reinforce its electrification pure player positioning, expand selectivity in key geographies and replicate its value creation model in a disciplined and repeatable way. Now moving to Slide 10 regarding the sustainability. So let me focus on sustainability, which is fully embedded in Nexans' operating model and group strategy. In 2025, and especially on our decarbonization trajectory, Nexans pursued the same trend and exceeded its midterm target for Scope 1 and 2 with minus 49% of CO2 emissions, mainly driven by energy efficiency solutions implemented on site and significant level of renewable energy usage. In the meantime, the current performance on Scope 3 was reached following low carbon product innovations and circular material integration for our initiative like CableLoop that was launched in France and Spain with our platinum customers, enable us to reach 880 tonnes of cable collection during the year. We will explain in the deep dive session how we will expand these solutions. Through these initiatives, combined with the metallurgy project in Lens that will be commissioned in 2027 or another example on the partnership with RTE, the French TSO, where we have launched the first European closed-loop recycling system for aluminum, we are not only reducing our environmental footprint, but we are also reinforcing supply security and reinforcing a structural competitive advantage on the energy sector. Let's move to Slide 12 and go now deeper in the business overview regarding the year 2025 performance. So first, let me first focus on the fourth quarter, which was particularly strong. In Q4 2025, the group delivered an organic growth of 11.8% or even 18% excluding other activities, reflecting an exceptional high level of activity, notably in Transmission and in Power Connect. This Q4 performance was well above our normalized run rate, supported by a combination of strong demand, high project execution intensity and a favorable phasing effect. Of course, we anticipate a normalization of the first quarter 2026, reflecting a more balanced phasing of projects. Beyond Q4 dynamics, the strong finish of the year further supports the structural improvement of profitability with the group adjusted EBITDA margin reaching 11.9% and 13.3% excluding other activities, which was mostly driven by Power Transmission and Power Grid and supported by our selective approach on quality of execution. Overall, 2025 clearly demonstrates Nexans' ability to translate long-term electrification trends into profitable growth. Now let's now move business by business, and I will start by Power Transmission, which delivered an exceptional level of organic growth in 2025. Indeed, organic growth reached plus 29.8%, so almost 30% for the full year, accelerating at the 40% rate in the fourth quarter of 2025, reflecting a very high level of activity and a strong execution. Bear in mind that the last 2 years, we have registered an unusual high level of organic growth, thanks to capacity increase, and we should go now back to a normalized level in 2026. The standard sales of Transmission amounted to EUR 1.6 billion compared to EUR 1.2 billion in 2024. The adjusted EBITDA reached EUR 203 million, EUR 203 million with an adjusted EBITDA margin of 12.3%, up from 11% compared to the year before. This margin improvement was mainly driven by quality execution on projects and increased efficiency following the full year operations at the expanded plant in Halden in Norway. Finally, the adjusted backlog stood at EUR 7.7 billion at year-end and including EUR 1.2 billion of the GSI project still in phase of rescheduling with our customers. This adjusted backlog provides us a good visibility until 2028. Now moving to the Power Grid part. Our Grid business delivered a growth of 5.5% in 2025, in line with our midterm guidelines and confirming a favorable momentum. In the fourth quarter, organic growth was plus 3.5%, reflecting seasonal softness, particularly in winter sensitive activities and project phasing. Standard sales amounted to EUR 1.3 billion compared to the EUR 1.2 billion in 2024. The adjusted EBITDA increased to EUR 217 million, which is up by 19% year-on-year with an adjusted EBITDA margin of plus -- sorry, of an EBITDA margin of 16.4%, which is an improvement of 226 bps points. This strong performance reflects our focus on operational excellence with the continued strength of our accessories activities, increased selectivity in high demand environment as well as some one-off effect linked to some European renewable projects that we had in the last part of the year -- this strong performance reflects our focus on operational excellence, the continued strength of our accessories activity and increased selectivity in a high-demand inventory as well as some one-off effect linked to some European. Importantly, the business benefits with strong visibility supported by multiple long-term frame agreement wins with recent contracts such as Enedis, providing increased visibility going forward. And if you remember, we have communicated the wins in the contract of Enedis for coming 7 years. Now let's move to Slide 15. Finally, the Power Connect business, which grew organically by 3.6% year-on-year in line with our midterm guidelines. In the fourth quarter, organic growth accelerated by a plus 10.9% driven by delivery of large infrastructure and data center-related projects. Standard sales reached EUR 2.3 billion, which compared to EUR 2 billion in 2024. The adjusted EBITDA amounted to EUR 289 million compared to EUR 271 million in '24, and it stood at 12.3% compared to 13.1% last year. Margin performance reflects strong profitability in advanced offer on platinum customers, while the more conventional part of the business remained under pressure, particularly in Asia Pacific and in Oceania. Finally, the integration of La Triveneta Cavi in Italy and the rollout of the SHIFT program continue as planned, with a strong focus on operational and industrial excellence. Again, let me remind you that Power Connect is a contrasted segment where we have some very strong performer, both in top line and margin, and our objective is to make all business units catch up with the best-in-class. We will now move to the key financials, and Vincent, welcome on board, and over to you now for the financial part. Vincent Piquet: Thank you, Julien, and good morning, everyone. Before going into the details, let me take just a brief moment to say that I'm honored to be here today. I want to thank Julien and the Board for their trust. I've now been working closely with the teams for a few weeks, and I'm very excited about the fundamentals of the business and the road ahead. With that, let's start with the 2025 revenue bridge. As you can see, group standard sales increased by 10.1% year-on-year, reaching nearly EUR 6.1 billion. Growth was primarily organic with a strong 8.3% increase, reflecting a solid underlying momentum across the group. Scope effects contributed a further 5.1%, illustrating the growing contribution from our recent acquisitions over the year, mainly RCT and LTC full year contribution. These positive drivers were partly offset by an unfavorable foreign exchange impact of 3.3%, mainly related to the Turkish lira and the Canadian dollar. On the profitability side, adjusted EBITDA increased by 27.3% year-on-year, reaching EUR 728 million in 2025, with the margin improving from 10.3% to 11.9% of standard sales. This evolution reflects the contribution of our electrification businesses supported by growth and margin improvement. First, Transmission delivered both growth and higher profitability, making it a strong contributor to the group's EBITDA improvement last year. Grid also recorded a positive year with strong improvement in profitability year-on-year. And in Connect, performance was more contrasted across regions and business units as described by Julien. Asia Pacific and the Nordics were slower, and the process of improving LTC's performance is ongoing, and we also have the impact of the full year versus a few months in 2024. That said, we are confident in our ability to bring LTC up to Nexans' standards. Overall, within Connect, our structural drivers performed well, while we remain focused on enhancing the profitability of the rest of the portfolio. The Connect segment includes EUR 26 million of scope effect in the full year of LTC and only 7 months -- sorry, the full year of LTC versus only 7 months in 2024 and RCT with a 7-month contribution. In other activities, the variance is mostly driven by negative one-offs recorded in 2024. As expected, metallurgy was impacted by the U.S. tariffs effect in H2 after a strong H1 and accounts for a negative EUR 6 million of impact on a full year basis. Overall, this bridge illustrates strong operational leverage in 2025 with EBITDA growth clearly outpacing sales growth and translating into a meaningful margin expansion. Moving on to net income. As we've just seen, the starting point of the net income progression in 2025 is a very strong increase in adjusted EBITDA from EUR 571 million in 2024 to EUR 728 million in 2025, an increase of 27.3%, well above the 10.1% of growth of our top line and demonstrating our strong operational leverage. This EBITDA progression is also the main driver of the increase in net income from continuing operations, which reached EUR 219 million, up 31.1% compared to last year. Beyond EBITDA, a few additional elements are worth highlighting. First, financial expenses decreased significantly, mainly linked to hedging effects, in particular, the evolution of the forward spread on the Norwegian kroner. At the same time, depreciation and amortization increased to EUR 253 million in 2025 compared to EUR 175 million in 2024, mainly reflecting investments in our Norway transmission plant in Halden. Net income from discontinued operations increased to EUR 138 million, reflecting gains on disposals linked to AmerCable and Lynxeo as well as the operations -- operating performance of Industry & Solutions, partially offset by an impairment on Autoelectric as we moved it to discontinued operations. Overall, group net income reached EUR 358 million in 2025, up 26.6% year-on-year, illustrating the strong earnings conversion of the group's operational performance. Moving now to cash flow and net debt. 2025 was another year of solid free cash flow generation, which reached EUR 344 million compared to a restated amount of EUR 177 million in 2024, translating into a 47% cash conversion rate above our midterm guidelines. This level reflects, first, the strong performance of adjusted EBITDA, but also a strict cash discipline as shown by our working capital evolution and also helped by above-average down payments in Power Transmission. CapEx amounted to EUR 383 million, mainly driven by Power Transmission as we continue to execute on the capacity expansions decided in prior years in both Norway and Charleroi in Belgium. Dividend and others includes the cash impact of our employee share buyback program on top of the dividend payment. And the M&A column mainly reflects the contribution from the closed acquisitions of Electro Cables and RCT. It does not include the impact of Autoelectric as the closing of this transaction is expected mid-2026. Change in discontinued activities relates to the divestments of Lynxeo and AmerCable as well as the reclassification of our automotive activity under discontinued operations in compliance with IFRS 5 standards. As a result of these transactions, combined with strong cash generation, net debt decreased significantly from EUR 681 million at the end of 2024 to EUR 266 million at the end of 2025. As you can see, overall, the company is in great financial shape. Let me now spend a moment on our financial structure. At the end of 2025, Nexans benefits from a very solid liquidity position. We have significant cash on hand, complemented by committed and largely undrawn credit facilities. This gives the group ample headroom to operate comfortably. Our debt structure is well diversified and fully fixed rate, which protects us from interest rate volatility and provides good visibility on financing costs. And importantly, we have no material debt maturity before 2027. From a leverage perspective, Nexans remains very conservatively positioned with a low financial leverage ratio of 0.36x. This strength is also reflected in our credit profile with an S&P BB+ rating with stable outlook. It confirms that the group has the financial firepower to pursue targeted M&A, growth CapEx and continue to deliver shareholder returns. In fact, shareholder return is a core component of our value creation model. Over the past 3 years, Nexans has delivered a total shareholder return of 59% and 215% over the past 6 years. This performance reflects the consistency of our execution over time. As shown here, the dividend per share has increased steadily over the past years, reaching a proposed EUR 2.9 per share for 2025, an increase of 11.5% compared to 2024 and another historical record. This dividend growth is anchored in the group's improved profitability, strong cash generation and disciplined capital allocation. Our approach remains very clear. We aim to reward shareholders while preserving flexibility to invest in our growth and maintain a sound balance sheet. Looking ahead, this discipline remains a key area of focus. Our dividend policy is fully aligned with our financial trajectory with a target payout ratio of at least 30% by 2028, while remaining consistent with our leverage and investment priorities. And with that, I now hand over back to Julien. Julien Hueber: Thank you, Vincent. So let me now turn to outlook for 2026. So we expect the -- for 2026, the adjusted EBITDA for the full year to be between EUR 730 million to EUR 810 million and for our free cash flow to range between EUR 210 million and EUR 310 million. We expect the first half of 2026 to be softer than the second half, mainly due to project phasing across different segments. This guidance excludes the contribution of a non-complete acquisition and does not assume the execution of a GSI project in 2026. Overall and in conclusion, I think that you can see that from the combination of our '26 guidance and the dynamic nature of divisional overview that we are excited for the future. We have successfully transformed into a high-return business with a robust balance sheet focused on electrification as a global pure player. Nexans will continue to operate with a disciplined financial framework for the benefit of its shareholders, employees and the broader economy. So before moving to the Q&A, I would like also to remind you that we will host our business deep dive sessions today shortly after this session at 10:30 Paris time. We will go deeper into our value creation model, market and strategic priorities. We will provide you an additional insight into how we are executing on roadmap. So with that, thank you all for your attention. And with Vincent, we'll now be happy to take your questions. Operator: [Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I was hoping to ask 2 related things. But the first one, just can you clarify in the guidance on EBITDA between the bottom and the top end, you're very clear that you've taken off GSI from it. But do you have any contract mitigating the under-capacity that you would potentially have from not executing that? How much is included in the bottom end and in the top end of guidance? I'll start there, and then I'll ask the follow-up. Julien Hueber: Daniela, thank you for your question. So clearly, yes, GSI is not included into our guidance, even though we are -- as we have communicated early January that because this project is rescheduled, that we are at the same time launching specific actions, both industrially speaking, but as well commercially in order to offset partly the GSI element. So we are actually quoting different projects on MI on a part of it. Of course, I cannot display precisely because we are still quoting and we don't know precisely when it will start, but a part of it is inside the guidance. Daniela Costa: So just to be very clear, on the EUR 730 million at the bottom end of guidance, that includes part mitigation on things that are not yet in the backlog but in tendering? Julien Hueber: Exactly right. We are still quoting on some MI projects on those. We have considered that some of them, we have a good chance to succeed. But the timing element is not yet clear. So we will -- we have included some of it but not fully. Daniela Costa: And the top end of the guidance is the full compensation of GSI or not -- also not fully? Julien Hueber: So the guidance is not only about Transmission. It's also about different elements. Typically, the restart of the European business that you know has been relatively soft in 2025. We consider some elements of the restart of the activity, specifically in H2, softer in H1, stronger in H2 for the restart of the business, and that's mostly impacting the Connect business. Daniela Costa: Okay. Got it. And then just a follow-up also in Transmission. You mentioned that you will have, I guess, 2 other things, normalized level. Just wanted to clarify what should we interpret it as normalized? Do you think transmission business top line-wise can be up or given taking off GSI? And also, can you clarify your comment on the first half versus second half EBITDA? Do you -- how should we think about the first half margin for Transmission given that's potentially the mitigations, I would imagine if you're still tendering, fall more into the second half, what type of profitability should we think about for the -- between the 2 halves? Julien Hueber: Okay. So overall, we foresee an improvement of our EBITDA during the year 2026 in Transmission with indeed a stronger increase in second half due to the reason we just explained about, still quoting for the MI part. That's basically why we see a softer in H1, stronger in H2. That's basically -- and maybe Vincent, I don't know if you want to add anything? Vincent Piquet: No, I agree that the timing of the quoting makes it a bit second half loaded. And beyond transmission, also the other businesses, we feel very good about Grid and Connect is, as Julien mentioned, a bit dependent on the improvements of the European market, and we're being cautious in terms of what will happen in the second half. And then finally, I'll mention in terms of explaining the range of the guidance, there's a metallurgy, which is quite impacted potentially by tariffs volatility in the U.S. And so we're trying to take that into account in the range we're proposing today. Daniela Costa: Okay. And you can't comment on Transmission first half versus the second half of '25, for example, just to help us understand how much is underutilization in the first half could mean? Vincent Piquet: In '26, you mean? The underutilization of the MI line will be manageable in H1 as we're basically working to do some cost actions. And then in the second half, we are planning on winning a number of short orders and new orders that will fill the line. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: I have a few as well. The first one is on your cash flow bridge. So when I look at your full year cash flow bridge, you have minus EUR 371 million for M&A and disposals. And if I compare it with H1, you had EUR 613 million in inflows from divestments. So I wanted to ask this EUR 370 million -- EUR 371 million is only what you paid for 2 deals and not the disposals? So now the disposals have accounted separately? So that's the first one to ask what that EUR 371 million in the cash flow bridge is? Vincent Piquet: You got it right. We've separated the disposals from the acquisitions, and the way you explain it is the correct way. Akash Gupta: And then my second one is on M&A. Clearly, you have been quite vocal about your M&A ambition in the press release, but I wanted to ask what are the area of focus? Maybe you can talk about the regions and business areas. And can you also talk about the hurdle because some of the growth business could be quite expensive compared to where you trade. So do you have any hurdle rate that you would like to highlight on which acquisition you want to go ahead and which you will not? Julien Hueber: So we will deep dive a lot on the M&A on the second part in the deep dive session just after. But basically, our strategy remains very aligned to what we said end of last year. So there is -- it's based on 3 elements. One part -- pillar of the M&A strategy is linked to midsized companies -- small to midsized company in country where we already here to create industrial synergies in some markets we are already present. Second pillar of the strategy is based on slightly bigger size of M&As in new geographies. And the third one is based on, let's say, adjacent to cable, so basically could be anything like accessories. So that's our strategy, and we are fully in line with. This doesn't change. It's the same strategy. Having said that today, we are looking specifically some geographies like the North America, the example of Electro we did in December, is a good example. But we are looking for other type of target in North America as well as other part of the world, could be Middle East or the other parts. Akash Gupta: And lastly, a housekeeping question. Depreciation and amortization last year was EUR 253 million, and I believe it might be including some one-off there. It was EUR 175 million in 2024. Can you tell us what shall we expect in 2026 for D&A? Vincent Piquet: Yes, it will stay in line. We're continuing to see the impact of the investment we've made in Norway, especially, and that's hitting our P&L. And from a cash standpoint, the major outlays on par -- in line roughly with what we've had in 2025, are driven by the third vessel as well as the investments in Charleroi in Belgium, the land cable plant. Akash Gupta: So roughly EUR 250 million D&A in 2026? Vincent Piquet: Roughly. Operator: The next question comes from Lucas Ferhani from Jefferies. Lucas Ferhani: The first one will be on the free cash flow. Just can you give us an idea of what do you expect the conversion could get to? You're still investing quite a bit in '26, '27, and it's running at 30% plus at the moment. But what could you get to the EBITDA conversion of free cash flow in the next few years as the CapEx kind of comes down a little bit? And the second question was just on the grid margin. Obviously, it's very, very strong in the second half. Can you give us an idea of maybe what's the normalized level? You do talk about some kind of pull-forward of activity or some one-off effects in there. Kind of how should we think about that margin going forward? Is 17% something you can do again in H2 next year or maybe that should normalize a bit? Vincent Piquet: So thank you, Lucas, for your question. I'll take the first one on free cash flow conversion. So free cash flow conversion in general is improving on the flow businesses, but the Transmission business, as you can see, is obviously big and lumpy, and it depends a lot on down payments. So we had a bit of a strong year in 2025. We will continue to improve progressively as we grow all of our businesses, but it's a bit dependent on the down payments we'll get from the different deals in the Transmission business. And so we're committed to our 2028 guidance on the cash conversion, and we'll continue to drive that in '26 and '27 as well. And Julien? Julien Hueber: Regarding your second question, yes, indeed, you have seen the jump in the margin for Grid moving 2 points up 14% to 16% EBITDA margin. We are very pleased with this business. The demand is very strong. We expect to -- let's say, at the first stage to maintain this level of margin. And it's driven by innovation, driven by accessories that is still growing and at a higher margin even. So in order to continue to push, we need to continue to develop specific verticals. And I will explain at the deep dive just after the importance of data center, that are a big driver of margin increase for the Grid parts. But I would say, let's say, in the coming months, we should be at, let's say, similar level of margin before we acquire new capacity, and we are working on it currently in order to continue to grow and develop this business. But it's a very solid, resilient business and a big part of the result of Nexans. Operator: The next question comes from Sean McLoughlin from HSBC. Sean McLoughlin: Firstly, Vincent, taking maybe a fresh look at the margin progression in Transmission, how confident are you on the journey to high teens margins by 2027, 2028? And what in your view are the key steps to reaching that level? That's the first question. Vincent Piquet: Yes. Thank you, Sean. It's a very important question. It's something we spend a lot of time on with the team. We see significant improvement. You saw it between '24 and '25, and we're still committed to the direction we've given historically of continuous improvement. It's driven by a few things. First, much better quality of execution. We've invested a lot in the team to drive that quality of execution and not have bad surprises during the execution phase of the project. And we are seeing that investment pay off in 2025. The margin improvement is driven by this better quality of execution. Second thing, the selectivity we've applied to the deals that we've taken into the backlog is paying off as well. We're continuing to execute on historical bad cholesterol, if I can say, deals that are hurting our profitability. The new deals we see ahead of us, the ones we're starting to execute on now, are much better in terms of margin accretion, and that gives us very much strong confidence in our ability to get to the high teens in terms of profitability for the Transmission business. Sean McLoughlin: If I could touch also on Connect. You've talked about need for recovery in Europe. You've also talked down Asia Pac in Q4. Again, can you maybe just walk us through what are the main components of improvement in profitability in Connect in '26? Julien Hueber: Connect? Then I will take this question. So Connect, indeed, you've seen a lower margin in second half. It's -- I mean, we understand very clearly, and we are working on it precisely, it's coming from a few elements. First one is indeed pressure on price in Oceania, specifically in Australia, second half of the year. That has impacted us negatively, and we are currently changing things to come back to a normalized level of profitability in this part of the world. Second is that one of the high contributor of margin in Connect is the Nordics in the Northern Europe. I mentioned that in Q3, but it remains in Q3, the same, that the market there has been softer. So we have had less volume, not -- we didn't lose any market share. In fact, we even win market share, but the overall market has been very soft in this part of the world. And we expect to see hopefully an improvement, let's say, midyear second -- Q2 or midyear 2026. And the third element is, you know that our strategy, what we did in the M&A, is clearly to buy, make some acquisitions at a low multiple. And therefore, the margin level of the company that we bought are lower than our average. They are not yet at the maturity in terms of innovations, technology, verticalization. And when you -- on all our job is to transform them into a much higher level of profitability. In the case of 2025, specifically second half, we had a full year effect of LTC, which is not yet at the level we expect from them. They are working very hard. We're very satisfied what we do, but the size of this LTC business has an impact on the overall margin of Connect. Having said that, all the other -- and you know that we are clustering our businesses, different cluster, innovation drivers, profit drivers. This business, the top-end of our business, which is a large part of our Connect business, is doing very well, both in margin level, both in growth. Operator: The next question comes from Scott Humphreys from Berenberg. Scott Humphreys: I have 2 actually. I'll ask them one at a time. The first one on the high-voltage demand through the next decade. How have recent U.K. offshore wind auction results and some stronger pledges from the North Sea companies around offshore wind influence your view of supply and demand in high voltage into the next decade? That would be the first question. Julien Hueber: Okay. So I will start. So I guess you have seen in Hamburg a month ago, a big meeting with the politics, energy ministers from 7 countries, highlighting the need and the importance to deploy offshore wind businesses in -- from -- basically from 2030 to 2040, with an increase of capacity of offshore wind of 15 gigawatts per year for the coming 10 years. So the demand is there, and it's supported by the, let's say, different states in North of Europe. So we see that this business will continue to grow. So 15 giga per year, it's huge, because you need to keep in mind that currently in -- we have 34 gigawatts already installed. So the ramp-up of this business will be extremely important. Second, interconnections. Here again, there has been a very supportive, European Commission, to accelerate the interconnection links between countries, funded by the European Commissions, and they have committed if you -- I don't know if you have seen this but in December. So basically, both businesses, of our submarine, both wind offshore and interconnections are basically positive in the outlook in the next 10 years. Scott Humphreys: Great. And moving over to the metallurgy business in other activities. How is the continued rise in metal prices influence your view on kind of the pros and cons of vertical integration in bulk production? And maybe as a follow-up to that, why don't you think peers -- or why do you think peers might not be following your footsteps in this regard? Vincent Piquet: Yes. Thanks, Scott, for the question. The metallurgy business is strategic to us. We see a lot of advantages of this integration. It's security of supply, which is key. It's recyclability. We control prices much more. We have long-term agreements with mining firms that gives us a lot of stability in our supply. So we clearly think that strategically, it's really important for us to keep this metallurgy business, and we're driving it. And it's obviously quite impacted short term by the movements in the tariffs. It's adapted well. As I mentioned, after a very strong H1, it had a tough H2. But net-net, overall, it's been quite neutral. And so we're managing it strongly and investing in that business. We think it's very important for us. The rise in the copper price is obviously having an impact. We're quite protected. It actually -- we transmit that increase in price to our customers. We're protecting ourselves and protecting the financials very strictly. And we see maybe a long-term impact in terms of copper demand and evolution. But in total, for us, in the midterm and short term, it's really, really strategic, and having that integrated business actually gives us more levers to react and to adapt to the current volatility in the price and the tariffs. Julien Hueber: And I will add one point. If you remember that 4 years ago, Nexans has clearly mentioned that by '26, '27, there will be some kind of scarcity of copper supply. And now you start to see the impact on the basically tons of copper reaching $13,000 a ton. So we anticipate that a few years ago. That's why we have massively invested in our metallurgy and Rod Breakdown in Lens because it gives us a capability to recycle scrap of copper. This project is well ongoing. It should be in operation by 2027. And we will have access to the ability of scrap copper -- scrap cables already on site in Europe. So it will also give us an additional security of supply. Operator: The next question comes from Chris Leonard from UBS. Christopher Leonard: Could I maybe go with 2 questions to start with? And the first is digging in again on the Connect business. And maybe it would be helpful if you could give us, as you have previously, what the divisional margin might have been for 2025, if you were to exclude LTC. I believe you commented on that in first half results. And equally, could you also help us dig into how big the Asia exposure is or Oceania, which you commented on being weak? When we're trying to judge how the margin in the second half of the year, was 11%, so the weakest since 2021. Just trying to get a read if this is an aberration in the short term. And then the second question, actually, I'll wait for the second question. Julien Hueber: Okay. So for sure, if you exclude the M&A on LTC -- but, yes, it is the same, by the way, because it's just taking -- we are taking over this business. If you exclude the newly acquired businesses, which are ongoing in the transformation, the average of EBITDA would be much above, and we will not see any decrease of the percentage of EBITDA. So that's why we are putting a lot of effort and focus in order to, I'd say, the transformation of this business. We have launched in Q3 and Q4 some innovations for the Italian market with a brand Klaro and so on. So we are on the way to transform the business. But clearly, it has an impact on the overall businesses. On your second question regarding the businesses in Oceania, it's an important business for us, but it's not -- let's say, it's less than 10% of our overall activities in Connect. Vincent Piquet: And maybe I would say, Chris, also, if you take the -- a bit of a step back, we've taken the profitability of that business from mid-single-digit levels to strongly above in the double digits. And there are some ups and downs. We're integrating, as Julien mentioned, businesses that were improving as we're bringing them up to the Nexans level. So if you take a step back and look at the trend over time, clearly, it's very positive, and we know how to do this. We've done it in the past, and we'll continue to do it. Julien Hueber: And we will present to you just to this next session, an example of Reka, which basically we acquired 2.5 years ago, which is very -- exactly at the level we expect, above the average of Nexans in terms of profitability. Christopher Leonard: That's helpful. And the second question, Julien, is maybe related as well. But just looking at the 2028 EBITDA guidance range, that's remained unchanged. And I know that you guys are focusing industrially here and maybe there could be some further synergies that come through. And I just wonder, on your look at the portfolio, if there's been any view as to where you think the possibilities are on the industrial angle for you guys looking into 2028? And then as a follow-up, could you also comment as to how much of the GSI contract is currently factored into that 2028 EBITDA guidance for the group? Julien Hueber: Okay. So yes, you are a little bit on the industrial part. Already at the second session that I will describe just after. But basically, you're right. It's important for us. Our DNA, we are industrial people. Our DNA is industries. We will -- and we have launched already several actions on the industrial excellence and the operational excellence that will provide us some competitiveness in order to help our business to grow and to continue to grow our EBITDA margin. And that's -- Connect is clearly one element in this. Regarding the guidance for 2028, indeed, we maintain the same guidance of EBITDA, no change in this. We are clear that we will achieve these targets. We have in this guidance 2028, some utilization of the MI line, of course. So either it will be GSI if this project resume and we have good hope that it will come back or we will use unless other ongoing large projects to come in MI, as I think we have explained also recently, that could also replace. But we have the possibility to do either GSI or another one, but it's included in our numbers for 2028. Christopher Leonard: And just to clarify on that in terms of other projects you're looking at, should we view this as a sort of previously discussed plan B for GSI? Or should we view this more as like sort of the Malta-Sicily contract that you signed last year as a small extension and a book to ship within a year or within 12 months? How should we kind of look at these projects you're looking to sign currently for the Transmission business? Julien Hueber: So regarding MI specifically, it's nothing to do on the plan B, is in all, let's say, deepwater project requires MI technology. There are some project queuing today that we will be able to quote. Now that we have announced, and this is why basically I have taken a decision to make this communication early January, was to officialize the fact that we have an MI line available, and that triggered some opportunity and discussion with some customers that know that we have now this line available for some time. And therefore, we are now discussing with them to basically quote and win this project of MI. So MI will be loaded by 2028. I don't see any problem on that. Operator: The next question comes from Nabil Najeeb from Deutsche Bank. Nabil Najeeb: Just staying with GSI for a little bit. First off, and sorry if I didn't catch this, but what is the current status of GSI exactly? Is the rescheduling now done? And if so, what's the ultimate time line that you have settled on? And is the cable that has already been manufactured going to be stored until the customer then decides to restart work? And is there any compensation that Nexans gets for the idle capacity in such cases? Julien Hueber: Okay. So the situation -- again GSI is the same as what we have communicated early January, meaning that there's a rescheduling ongoing with customers. So we have some very close discussion with customers about a different date to restart the project. So this is what we call rescheduling. So there's not a date specific because there are things ongoing. And I'm sure you understand this discussion are more at a political level that I will not describe. What is for sure is that all the cable that we have produced on store today belongs to the customers. So Nexans has no financial impact on this matter. So today, we are talking with customers, [ the site meeting ]. So this is basically it. But there's been no specific news since the communication we did early January. Vincent Piquet: Yes. Just to be -- all the cable produced has been paid for. So financially, we're completely covered. It's being stored. The customer is obviously working through its own processes and decisions, and we're working with them and to see when it can be installed. But financially for us, it's fully neutral now. Nabil Najeeb: Got it. And my second question is on the mitigation measures. I wonder if you could give us a bit more color on the various mitigation measures that you're considering? Specifically, which, if any, projects are you hoping to bring forward from the backlog? And I realize you have started some discussions on new projects, but are there any specific new projects that you are looking to win? And finally, how would the margin profiles for repair work differ from those 4 large interconnected projects? Julien Hueber: So I would say the mitigation measure, they have 3 type of categories. The first one are purely industrial. So we are relocating the workforce. We are reducing some expenses. We are doing what needs to be done in the plant when you have a line which is basically not running. So that's done. That's ongoing and we are -- the reactivity of our teams in Norway has been at a great level. Second is that we have already win some small orders for repairs because the line is available. It's an important business of doing the repair. And what matters when you do repair is the speed. So you need first to have a cable available to do reparation as well as the vessel available. So we are setting in place an organization to be able to both produce, and we are producing some cable for repairs with our customers, basically, they own the cable. So this is ongoing. And we are, let's say, setting an organization in order to be extremely reactive in case a cut of cable appears under the sea. And third is the commercial activities. So we are -- I'm not going to give you a name of a project because I guess some of my competitors could hear what I'm saying. But indeed, we are currently quoting for some projects on MI, and we expect to have some answers during ahead of Q2 or during Q2 in order to see and hopefully win some of these projects. Nabil Najeeb: Understood. If I could squeeze in a short one. Just on the MI workshop that you have in Futtsu in Japan, what's the plan for that? Julien Hueber: We have communicated, if you remember, I think it was September, October, the fact that we have basically sold this workshop to a company. We can use it, but it does not cost anything. So when it's idle, when the loads are not -- when the machines are not loaded, it doesn't cost anything to us. It's -- we sold the land, the building on the machine, but we are -- it's available to us as soon as we have some load to do. So no cost for us in Futtsu. Operator: The next question comes from Eric Lemarie from CIC CIB. Eric Lemarié: I've got 2 small questions. Precision first, you mentioned -- when you talk about backlog, you mentioned an adjusted backlog in your press release. And I was wondering what kind of adjustment are you talking about here? And when I look to the backlog, should I consider that the projects within the backlog are 100% secured? Is there anything specific to know here? And the second question about the project you mentioned, you mentioned you are quoting on some new projects to mitigate GSI. Are you talking about similar -- are you talking about wind offshore or interconnection project or similar project in terms of profitability or the larger project you are currently quoting? Just to have an idea of the profitability difference between this potential new project and GSI profitability? Vincent Piquet: Thank you, Eric. I'll take the first one. So the adjusted backlog is basically due to the nature of the type of contracts we enter into the Transmission business. Everything that's in the backlog is executable. So it will convert into cash. That's why we put it into the backlog. But the time line and the exact call-offs by the customers in terms of when it happens have different levels of certainty. And so there are things that are extremely firm and certain. There are things where the time line can move a bit more, which is why we use this notion of adjusted backlog. But overall, what we report as adjusted backlog is, unless there's a major cancellation and change in contract, obviously, but it's convertible into cash in the future to drive our cash and profitability. Julien Hueber: And by the way, it's the same definition of the backlog like we always did, so there will be no change on that. I will take the second question regarding the, let's say, other MI projects. So to answer your question, it is interconnection type of projects. So specific to MI technology, so meaning deepwater type of projects. And in terms of profit, of course, we are quoting, so difficult for me to tell you a number, but we are in the similar type of profitability as GSI, yes, same technology, same type of margin. Eric Lemarié: Very clear. And regarding the backlog, how much is -- could be considered as extremely firm project within the backlog? Vincent Piquet: We don't really communicate on that. We just communicate on adjusted backlog. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Julien Hueber: Okay. So thank you all for your questions and for the discussion we had together. So we now look forward to continue this conversation with you in just a few minutes during our business deep dive, where together with Vincent Piquet and Vincent Dessale, we will go deeper into our value creation model, our markets and how we are intensifying execution across the group. Thank you again, and hope to see you very shortly. Vincent Piquet: Thank you.
Operator: Good day, everyone, and welcome to SkyCity Entertainment First Half 2026 Results. [Operator Instructions] Please note, this conference is being recorded. Now it's my pleasure to turn the call over to Jason Walbridge, Chief Executive Officer for SkyCity Entertainment Group. Jason Walbridge: [Foreign Language], everyone. I'm Jason Walbridge, Chief Executive Officer of SkyCity Entertainment Group. Welcome to SkyCity's presentation of our interim results for the financial year 2026 we announced to the NZX and ASX this morning. Before I begin, I'd like to acknowledge the tangata whenua of our SkyCity sites, Ng?ti Wh?tua ?rakei, Waikato Tainui, and Ngai Tahu, and acknowledge the Kaurna people, the traditional custodians of the land in Adelaide. With me today in Auckland is Peter Fredrickson, our Chief Financial Officer; and Callum Mallett, our Chief Operating Officer. On the call today, we will be going through the first half 2026 financial results presentation, and there will be time for questions at the end of the presentation. Let's move to Slide 5 for an overview of our results. The result is consistent with the full year 2026 guidance we provided in August 2025, and which we reiterated at our AGM in October. I'd like to call out some specific numbers. Visitation remained steady across the group, with the small reduction due in part to changes in the way we measure visitation and the introduction of Carded Play. Revenue was down 2.4% or $12.3 million, with total gaming revenue down 6.3%, or $19 million, with lower revenue across both gaming machines and tables. The lower gaming revenue was predominantly due to the introduction of Carded Play across our New Zealand casinos that went live in July 2025, and, pleasingly, is in line with our expectations and guidance. We also experienced a lower level of activity in premium play compared to the prior period. Growth in nongaming revenue, particularly in hotels and food and beverage, was a highlight for the half. The lower revenue flowed through to a reduction in both reported and underlying EBITDA. As we have reported previously, the difference between these 2 numbers for this half is the $13.4 million of B3 costs incurred in Adelaide. The increase in costs was in a number of areas, including increased investment across our AML and host responsibility areas, particularly in Adelaide, as I just mentioned, as well as costs associated with the opening of the NZICC and technology costs, some one-off legal fees, and higher costs of sale associated with the growth in nongaming revenue. Group cost-saving initiatives are being implemented, as previously advised, and our focus is on managing the cost base to the business conditions without compromising our customer offering. Underlying EBITDA of $85.5 million is just over 28% lower than the prior period, and we will provide further detail on these factors throughout the presentation. Underlying net profit after tax is also lower than the prior period, while reported net profit after tax is nearly double the prior period due to one-off adjustments made in both periods. Overall, the reduction in our first half 2026 earnings is not where we want to be, but reflects the transitional period and is in line with our expectations for the full year 2026 guidance we have provided, noting we expect to see a greater second half skew to our earnings than -- as previously outlined. Our debt metrics remain in line with our guidance and are below our covenant levels. Turning now to Slide 6. Since we spoke to you in August, we have been very focused on progressing the key initiatives we outlined in the financial year 2025 results presentation and the accompanying capital raise documents. The first half of financial year 2026 reflects a planned period of operational transition for the group, and the team has been working very hard on the key projects, and I'm happy with the progress that we're making. We've made good progress during the half identifying and implementing a range of cost-saving initiatives to partially offset cost increases, and we expect to deliver further savings in the second half in line with the targets provided in August. This is a significant focus of the organization. I will talk more on these initiatives shortly. We are progressing with our plans to monetize assets and have 99 Albert being marketed for sale. Work is also underway looking at further opportunities to release in the order of $200 million from asset monetization proceeds over the next 12 months. A significant event was the opening of the NZICC on the 11th of February, with the first live event held on the 12th of February. This is a major milestone for SkyCity, and indeed for Auckland and New Zealand, and we now have a truly world-class convention center. Whilst it has been a complicated and drawn-out project for everyone involved, to have it finally open is a wonderful achievement, and we now look forward to welcoming the large number of visitors coming to the many events already booked and in the pipeline. The initial feedback has been incredibly positive, and this gives us confidence about the opportunity for a meaningful increase in visitation across the precinct. We've spoken with you previously about the move to Carded Play across our New Zealand casinos. This is a very significant change for our business and was successfully rolled out in July last year. This involved an incredible amount of work by many members of the team, and the impact on our EBITDA is in line with our guidance. As part of the rollout, we've also launched a new loyalty program called SHOW by SkyCity, which has been well received by our customers, with many existing customers changing over to the new program, along with the many new customers that have signed up. Lastly, we are still awaiting the CBS outcome from the Martin Report released last year. Turning to Slide 7. This slide updates the key areas of focus for the group under the 6 key pillars we spoke about in August last year. I don't intend to speak to this slide in detail, but note we're making good progress against each of these pillars. Our strategic priorities are unchanged, optimizing the core business, focusing on our customers, and getting prepared for online gaming. The critical enablers within the business that will allow us to achieve these priorities are risk transformation, people and culture, and digital transformation. A key area of focus is the reset of our New Zealand and Adelaide operating models, ensuring we have the appropriate cost structures in place, having regard to the current operating environment now and into the future. Callum will provide further detail on some of the changes we are making in this area. We're also reviewing our spend on technology and have already implemented a number of cost-saving initiatives with more to come. We continue to look at further cost efficiencies where appropriate, whilst ensuring we don't compromise compliance, customer experience, or our long-term capabilities. These cost savings will support an improvement in our second half earnings and into financial year 2027 and beyond. Turning to the next slide. In August last year, we outlined an intention to target the release of $200 million of capital from the monetization of assets within 12 to 18 months. We had already identified the commercial office property at 99 Albert Street as a noncore asset, and real estate firm CBRE has formally commenced marketing the sale of this property. SkyCity holds a significant portfolio of assets on its balance sheet, and it's actively assessing monetization options across individual assets and potential combinations. External advisers have been engaged, and the program is well advanced, and we continue to target in the order of $200 million in monetization proceeds by February 2027. In evaluating the various options, we are carefully considering strategic alignment, the maximizing of value, transaction sequencing, and relevant external dependencies. The car park concession has not yielded any credible proposals to date. And whilst it's disappointing not to have progressed a transaction, we remain open to credible proposals going forward. We will keep the market updated as we progress these various initiatives and are focused on achieving the appropriate outcome for our shareholders. Turning now to Slide 9. As I mentioned earlier, Wednesday last week was a significant day for SkyCity as we formally opened the NZICC, with the New Zealand Prime Minister cutting the ceremonial red ribbon. As we've spoken about in the past, the NZICC is New Zealand's largest convention center and will allow us to attract major international conferences, previously unavailable to New Zealand, as well as being able to host numerous events, theater, and musical performances. Looking into the future, the level of bookings we have confirmed for the remainder of financial year 2026 is very positive, with over 110,000 visitations, with still more to potentially come. This gives us confidence in delivering an increase in revenue and earnings across the Auckland precinct in the second half of the year, particularly our hotels, food and beverage, Sky Tower, and car parking operations. Looking into financial year 2027, the combination of events confirmed, and in the sales pipeline, with visitation growing significantly, it's a very pleasing outcome and shows that we have a facility that is attractive to both domestic and international customers. The opportunity from this increase in visitation has the potential to be a significant driver of earnings growth for our Auckland precinct, and we are well advanced with our strategies to ensure we take full advantage of this opportunity. For example, our hotel reservations team can see the future event pipeline and the expected room night demand, and we'll manage booking activations to ensure we maximize the average room rate opportunity. We've put in place various playbooks for the different types of events that will be held in the NZICC, and how we will set up our food and beverage outlets. There's certainly going to be a steep learning curve in the early stages, but the teams are well prepared for this. I'd like to note that the total cost of the development, including the NZICC, the airbridges, the adjacent laneway, and the over 1,100 additional car parks and the Horizon by SkyCity Hotel, all remain in line with the previously provided guidance of approximately $750 million. This is a fantastic achievement for the team involved in the development of these assets. We also expect the financial year 2026 outcomes for the NZICC, provided in August last year, will finish moderately positive to our earlier guidance, again a testament to the great work done by the team involved in the preopening phase. Turning now to Slide 10 and the implementation of Carded Play. Now that we've had Carded Play in our New Zealand casinos for over 6 months, I'd like to share with you some of the insights we're now seeing. Pleasingly, we've been able to maintain high customer satisfaction levels throughout the implementation process, and this was a key focus for our team, recognizing the significant increase in potential friction we added to how our customers interact with us. We've continued to see a change in our customer mix, as previously unCarded Players have signed up for cards. And importantly, Carded Play is giving us much better visibility into who our customers are and how they engage with us. Pleasingly, we're still seeing a steady sign-up of new customers, with around 4,000 per week during December. We're also seeing strong take-up of the SHOW loyalty program, with a high proportion of Carded Players now participating in that program. As an example of the benefit of Carded Play in our Queenstown Casino, which is a very popular tourism destination and previously had a much lower level of Carded Play to our other properties, we now have much better visibility into the mix of domestic and international visitors, which allows us to be more targeted in our marketing. The increased level of host responsibility and AML requirements has seen an impact on the level of play from some of our VIP players. We are now looking to further refine the way we interact with our customers to ensure we meet our regulatory requirements and minimize the impact on the customer experience. Our loyalty programs include tiers, as with many loyalty programs, and we're looking to be more specific in how we manage the customer value proposition across those tiers, ensuring our customers understand what is available for them. As we progress our online opportunity, having account-based play across retail and online will be an advantage for us alongside our nongaming activities, we believe, will be a compelling offering to an already significant customer base. Turning now to Slide 11. As mentioned earlier, visitation has dropped marginally across the group, which in part reflects the way we are measuring visitation now that we have Carded Play in our New Zealand casinos. On this slide, we have shown the combined impact on EBITDA per visitation from a range of activities, including the implementation of Carded Play in New Zealand, preopening costs for the NZICC, preregulatory investment in our online business, and the increased cost base in Adelaide. Looking forward, we expect the NZICC to support increased visitation and spend across the Auckland precinct over time, which will support growth in earnings going forward. Our current focus is on addressing the cost base to minimize the margin impact while ensuring we maintain the service levels to provide the experience our customers expect. Turning now to Slide 12 and our online gaming business. The New Zealand government is progressing the process to enable the legislation and regulations required for the regulation of online gaming market in New Zealand. The time line has pushed out approximately 5 months since we last spoke, with the current expectation providing for licenses to be issued from the government from the 1st of December 2026, with licensed applicants only able to continue to operate from that point and all unlicensed operators having to cease operations by June next year. There is still a significant amount of detail to be worked through. As I mentioned before, the Online Casino Gambling Act is expected to be passed into law by the 1st of May this year. We are transitioning to our new platform partner, along with the application of a Malta gaming license. We have been continuing to build out our capability in Malta in a very measured way and managing the phasing of the investment giving delays -- given the delays in the government time line. The delay in that time line will likely defer the receipt of revenue until the latter part of financial year 2027 when compared to our previous expectations. The financial year -- excuse me, the financial results for our online operation in the current half continue to reflect the uneven playing field we have referred to in the past. The regulation of the online gaming market in New Zealand is necessary in the current gray market structure, as market participants failing to provide the protection and the support for customers as provided for under the proposed legislation. We see this as a significant opportunity for ourselves over time. But right now, our focus is on being market-ready, disciplined on our investment in this area, and aligned with the regulatory framework. I'll now hand over to Peter Fredricson to discuss the group financial results in more detail. Peter? Peter Fredricson: Thanks, Jason, and good morning, everybody. Jason's already commented in general on the P&L results for the group, and Callum will go through the operating results of each of the individual CGUs shortly. So in starting on Slide 14, I won't spend a lot of time on the results, per se. What I will highlight is the fact that the underlying EBITDA for the period is very much in line with where we expected it to be, with the outcome from MCP, again, very much in line with what we had expected. We will see an approximate 43%-57% half-on-half skew in FY '26, primarily driven by preopening costs for NZICC incurred in the first half, more than offset by revenue coming through from that business in the second half. We are also expecting to see Auckland precinct revenues positively impacted by visitation from the NZICC in the second half with at least 110,000 visitations in the half currently visible through our bookings. Increased hotel occupancy and ADR as a result of the NZICC operating from February through to June also provides its own increased contribution to that second half skew. In respect to those items below the EBITDA line, I did want to comment on 2 noncash significant tax adjustments that go through the profit and loss. First, with the recently identified and expert-confirmed increase in capital expenditure for the railway building in Adelaide over the next 10 to 15 years, we have taken a view that increased tax depreciation will put the full usage of tax losses in Australia out beyond 12 years. Whilst the $180-odd million of tax losses will remain available to the business to use against taxable profits going forward, we deemed it prudent to remove these from the balance sheet. So here, you will see a $32.5 million charge to tax expense in the P&L in that regard. On completion of the NZICC, accounting standards require us to credit the deferred license value of $246 million that you will have seen as a current liability in the June 2025 balance sheet against the building value in fixed assets. This has the further impact of delivering a credit to tax expense of $43.6 million, somewhat offsetting the impost of $129.6 million that was charged to tax expense in FY '24, reflecting the change in legislation at that time that removed the ability for companies to depreciate buildings for tax purposes. Effectively, these 2 noncash tax adjustments offset each other for the half year. Moving to Slide 15. What I wanted to touch on here is the balance sheet metrics post the equity raise in August of 2025. As noted then, the increased debt associated with the buyback of the car park concession and various fines paid in respect of our businesses would likely have driven our debt covenants dramatically higher in FY '26 and could have led to a potential ratings downgrade through the December half year. With covenant metrics of 2.83x for the half and expected to land around 2.7x at year end, we remain focused on the delivery of a minimum $200 million from asset monetization to ensure positive go-forward metrics, reduce debt, and to meet expectations of removing the negative outlook to our credit rating by February 2027. Whilst we have no debt maturing prior to May 2027 and whilst we retain appropriate levels of liquidity and ample covenant headroom, we will likely look at potential opportunities for refinancing the May 2027 retail bond in coming months. Moving now to Slide 16. We did want to point out that even with the first half delivering only 43% of what we expect to be full year underlying EBITDA, absent the final $39 million, including retentions paid for NZICC CapEx in the period, we were able to deliver positive operating cash flow of $56.1 million in the first half, funding some $36.5 million of BAU stay-in-business CapEx. With no more than $34 million -- no more than around $34 million of BAU CapEx expected in the second half against underlying EBITDA that we are guiding to be materially above first half actuals, we are confident of delivering significant real positive cash flow for the full year in FY '26 on a post-BAU and NZICC CapEx basis. With that, I'll hand over to Callum. Thank you. Callum Mallett: Thank you, Peter. Good morning, everyone. Turning to Slide 18 and our Auckland property. We were pleased to see overall visitation across our Auckland precinct was up 2% on the prior period, with growth in our food and beverage outlets and hotels leading the way. The implementation of Carded Play has impacted gaming visitation along with the ongoing AML and host responsibility enhancements we have been making. As Jason mentioned, we are pleased with how the rollout of Carded Play has gone across our New Zealand properties with the financial impact in line with our previously provided guidance. Auckland experienced a lower volume of premium play compared to last year, and we are reviewing our strategy with the small but important customer segment. We have not observed any noticeable change in customer spending behavior. Therefore, we have been active with promotions, sponsorships, and events to drive visitation. Initiatives, including Super Rugby sponsorship, Christmas at SkyCity, and food and beverage pop-ups have helped keep visitation strong. We remain very focused on ensuring our cost base responds to changes in our revenue, and the team is constantly looking at ways to further reduce costs, including operating hours, renegotiation of supplier contracts and staffing levels. We are wary of cutting costs such that our service levels are impacted, and we continue to monitor customer feedback very closely. We've also been preparing for the opening of the NZICC, ensuring we have a precinct-wide proposition for the anticipated growth in visitation. We know the NZICC guests will be looking for a wide variety of experiences depending on the type of event they are attending. Ensuring we attract these guests pre and post events to our hotels, food and beverage outlets, and gaming and attractions is critical to our objective to drive revenue and increase our operating margin across the broader Auckland precinct. Turning now to Slide 19. The Hamilton result was in line with our expectations. And pleasingly, Queenstown was ahead with both casinos completing the successful rollout of Carded Play in July. The visitation change in both gaming and food and beverage is primarily due to a change in how we measure our visitation across both casinos with the key driver being the introduction of Carded Play, allowing us to more accurately track player metrics. This does make a direct comparison with the prior period less relevant, but you will also see a corresponding increase in spend per visitation. The management teams are working hard to increase revenue, but also ensure we have the appropriate cost base to support the current market conditions. A highlight in Hamilton was the opening in December of an outdoor gaming balcony expansion. Whilst early days, we are pleased with this enhancement to our customer experience offering. Queenstown is benefiting from an increase in international visitors helped by strong Trans-Tasman aircraft capacity, plus an improvement in domestic tourist numbers also. The Queenstown casino license was successfully renewed for a further 15 years from December 2025, when we also celebrated its 25th birthday. We are in the early stages of completing the process for the Hamilton casino license renewal, which is due in 2027. Turning to Slide 20 and our Adelaide operations. It has been a difficult period for our Adelaide business. Within the gaming operations, we have seen a continuation of the churn in VIP customers, offset by the addition of lower value customers. The key issue in Adelaide was higher costs due to the increased investment in AML and host responsibility capability, some one-off costs, and the tax impact of higher main gaming floor revenue. Adelaide management is implementing a significant cost out program, including workforce reduction, with benefits expected to be seen in second half '26. The team has worked hard to ensure that the B3 program is operationally on track with some costs pulled forward from FY '27. Whilst gaming revenue has been relatively flat after adjusting for lower premium play volume, we have seen encouraging performance from the food and beverage and hotel departments. Eos Hotel benefited from citywide event visitation, which drove both occupancy and average daily rate higher with this impact flowing through to our food and beverage operations. The Adelaide team opened Huami in October, utilizing existing space to further increase visitation to the precinct, and we celebrated the Adelaide casino's 40th birthday during the half. We expect to implement mandatory Carded Play into Adelaide from December this year. Thank you. And I'll now hand back to Jason. Jason Walbridge: Thanks Callum. Turning now to the outlook for the remainder of financial year 2026 on Slide 22. We are reiterating the financial year 2026 guidance provided in August last year and confirmed in October last year for underlying EBITDA in the range of $190 million to $210 million, and reported EBITDA in the range of $170.6 million to $190.9 million, which includes the full year B3 costs. We're also broadly comfortable with current market consensus earnings expectations for the financial year 2026. It's also important to note that we have guided to a second half skew in earnings in financial year 2026. As I spoke about earlier, the opening of the NZICC provides a significant revenue growth opportunity for both the Auckland precinct in the second half, and we do expect to benefit from operating leverage due to the increase in revenue, delivering an improvement in our overall margin. Cost savings across the group, particularly in Adelaide, will also support an improvement in our second half earnings compared to the first half. I would note, we have not seen any noticeable change in customer spending habits in the January 2026 trading period. As Peter has spoken to, the financial year 2026 reported net profit after tax will reflect the impact of the recognition of the Australian tax losses and the tax adjustment relating to the NZICC deferred license value that were part of the first half result. We expect CapEx for the full year will be in the range of $100 million to $110 million. And just lastly, before we move on to the next slide, I'd like to acknowledge Peter Fredricson, who will be leaving SkyCity on the 1st of March. Peter has played an important role during a period of significant transition, and I'd like to thank him for his contribution. I'd also like to welcome Blair Woodbury, who will be joining us as Chief Financial Officer from the 9th of March. We're looking forward to working with Blair as we continue to progress the business through its next phase. Turning to the next slide. I'd like to finish this presentation by talking to the medium-term outlook for SkyCity and refer to the Future of SkyCity slide. We are making good progress working through the key initiatives that will determine the future of our business, a future that, in our view, has the potential to deliver a path to earnings growth, improved cash flow, and returns profile. We aspire to be a gaming leader, delivering connected customer experiences across entertainment precincts and online gaming. Most importantly, we expect to drive sustainable earnings and strong returns for our shareholders in the future. We're a business with high-quality assets and a strong market position that provide a solid foundation for future returns. We continue to make significant progress in creating an operating model that ensures we meet our regulatory obligations, has the appropriate level of invested capital, and delivers an acceptable return on that invested capital. Growth will come from the opening of the NZICC, recovery in customer spend per visit in New Zealand as the economy recovers, and the large opportunity presented by the regulation of the New Zealand online gaming market. Thank you for listening this morning, and we will now take questions. Operator: [Operator Instructions] Our first question comes from the line of Kieran Carling with Craigs Investment Partners. Kieran Carling: First question is just on the deterioration in Adelaide. Can you split out what drove the 9.5% increase in OpEx between AML costs, the gaming tax, and one-offs? And just give us a steer on the extent and the phasing of your cost-out program and what we should expect in the second half? Callum Mallett: Yes. Thanks Kieran. It's Callum here. So when we look at that bundle of costs in Adelaide, from a one-off perspective, there was about 30% of that was one-offs, and then the rest was a mixture between the tax changes from VIP gaming down to main gaming floor, and some cost of sales from the revenue, and then from the uplift to do with compliance and regulation there. So where we're at with the cost out is there's already a number of roles that the team there have made changes to. And the business is still looking now at what other operational changes can be made around the business to remove costs, whilst obviously making sure that we're focused on revenue. So the B3... Kieran Carling: Just as a follow-up... Callum Mallett: Sorry, Kieran. Kieran Carling: Just as a follow-on to that. That's helpful. But can you give a steer on what we should expect in that second half run rate with your cost-out in place? Callum Mallett: Look, we're still doing that work, Kieran. And it's a key focus for the team, but not something we can go into detail today on Kieran Carling: Next question, I just want to drill into the NZICC a bit more. So appreciate there's still a lot of uncertainty there. But I'm keen to understand how you're thinking about the cost base and the opportunity. So firstly, what criteria does an event have to meet to be included in your pipeline because we've gone from 250,000 events in the pipeline at your last result to potentially 500,000 now in FY '27? Also keen to understand what your fixed cost base is that you're expecting in FY '27? And then just finally, what level of visitations or events you think are needed to get the center to break even on a stand-alone basis? Jason Walbridge: Kieran, Jason here. I'll take the first part of it, and then I'll get Callum to talk more specifically to the operations. Look, we've got a tremendous pipeline ahead of us. The team have done a great job. We've got 110,000 visitations confirmed for this financial year. And as you'll see in the presentation, really good line of sight on FY '27. Last week with the official opening, as a consequence of the profile and attendance by a lot of existing and prospective customers, we were able to book 20-some events for groups of up to 250. So that gives you an idea of some of the types of events versus the Coral Reef Symposium, which is our largest event, that will be in town in July this year. And they're guiding us to attendance north of 2,500 delegates. So there's quite a range of different events that we're able to attract with the venue. Callum Mallett: Yes, Kieran, to your other question. So the first driver, obviously, we want all events to break even at least and make a profit within the box. But a really key driver, obviously, is visitation to the overall precinct. So the team have a very structured process with different events because obviously, all of the different events come with different revenue opportunities even within the box. And so that is key. As a good example, this weekend, we've got a public open day. We won't get any revenue from that, but the team have 5,500 people registered to come through. So obviously, the ability for us to leverage across the precinct and across Auckland is significant from that. And then from a breakeven metric perspective, as we've said before, our goal is to break even within the box. And that is an absolute goal the team have for FY '27, but obviously much too early for us to be able to confirm how we're tracking that. Kieran Carling: But when you say that an event is in the pipeline, what criteria does it have to meet to be in the pipeline as opposed to confirmed. Callum Mallett: Yes, sure. So the pipeline is where a customer has come in, obviously, generally done a site visit, the team have started planning for it and given a quote, and that is in the pipeline. As a good example for the pipeline in FY '27 -- sorry, in FY '26, we've confirmed around 75% of business so far. Kieran Carling: And yes, so I don't want to belabor the point, but back at the full year result, you said there were 250,000 events in the pipeline and you were forecasting, or you were assuming it would be breakeven on a stand-alone basis. You've now got up to potentially 500,000 events if you execute on the whole pipeline. So does that put you above breakeven on a stand-alone basis? Or you just think that all events will be roughly breakeven. I just want to understand what the fixed cost base is of the convention center. Jason Walbridge: Kieran, Jason here. Obviously, as we scale, I think the economics change. It's just too early to guide you on what we think could happen if we convert this full pipeline. We're just being very, very successful at the moment on growing the pipeline, which is great news for us. We've literally been open 7 days, and so we'd like to get some more operating time under our belt here, and we can certainly talk to you more about that when we do full year results later in the year. But right now, at the moment, our stated objective that we shared with you in August is breakeven for the box and then driving cross-precinct benefit, hotels, food and beverage, restaurants, and gaming Kieran Carling: I'll just squeeze in one last question on the asset monetizations. So you've alluded to the fact that the car park sale process hasn't gone as planned and you've got advisers engaged to review other assets. Can you give any more detail there as to what assets you're looking at? Or I guess, to phrase it differently, are there any assets that you're excluding or are not up for sale? Callum Mallett: Yes. We've previously shared that we've looked at all of our commercial property that we own in Auckland. So we've listed 99 Albert. We're obviously looking at our other commercial property. We've been focused on car parks. Our advisers have been working with us, and we're well advanced in looking at other options. Nothing more to share at this stage, and we'll certainly be back in touch if and when the Board makes decisions on what we will do there. But I just want to reiterate, we are committed to monetizing $200 million worth of assets in the next 12 months before this time next year Operator: Our next question comes from the line of David Fabris with Macquarie. David Fabris: I've got a couple of questions. So firstly, I know it's a short window, but can you just talk through trading in early second half '26 versus first half '26 in Auckland, so sequentially? And just with the NZICC, I know you touched on it in the prepared remarks, you made a couple of comments there in the Q&A just then. But can you show us or talk to some framework for how we think about hotel occupancy rates and room rates? You've got a lens on bookings there. And then can you share any insights on the flow-through revenue benefit to nongaming and gaming as the NZICC ramps up? Jason Walbridge: David, good morning. Jason here. I'll take the first couple, and I'll get Callum to fill out some of the hotel metrics for you. Look, in the first few weeks of the second half of FY '26, we've seen no discernible change in customer behavior or spend patterns. We've just opened the convention center in the last 7 days, as I mentioned before. So that's obviously going to have a big change to visitation for us over the next few months. So it's really just too early to tell if there's going to be any meaningful change there. We're really focused on getting that box open, lots of visitors, and then getting them across the sky bridge and into our hotels, restaurants, and onto the casino floor. Callum do you want to talk about expectations around hotel metrics and occupancy? Callum Mallett: Yes, sure. David, how are you? So the Auckland market, as we know, from a hotel perspective, has had excess inventory. Prior to COVID, obviously, the market was going well. Then obviously, a number of properties opened up on the back of NZICC opening. So Auckland occupancy has traded just below 70% as a market for the first half of the year. Our 3 hotels have traded in mid-70s. And we expect that in the next half to grow to above 80%. So we're expecting good growth in occupancy. We're also expecting our average rates to go up about 10% on the back, obviously, of what the NZICC will bring us. And outside of the NZICC, there's also a good number of events coming into Auckland now, more so than what we were seeing a few years ago. So things are building well. And obviously, as Jason has alluded to, there's quite a significant split in revenues from first half to second half. And certainly, hotels is one of those key drivers. As far as other areas that you asked on the NZICC impact, we are expecting to see an impact in food and beverage and the tower and car parking and then minimal impact, but still positive in gaming as well. As we've spoken to before, one of the key things that we need to drive from that extra visitation is our operating margin. So we know that our visitation has been reasonable across the last year, 2 years because we've had a visitation drive, which has meant we've kept that base of staff on. And now we see -- and what we hope is that we'll see that visitation increase without us needing to demonstrably change, in particular, our labor levels. David Fabris: And next question. I may have missed this in the documents released today, but with the one-off costs above the line in FY '26, can you walk through what was booked in the first half individually for the NZICC preopening costs, if there were any online readiness costs? And then can you just share what's expected in the second half for both of those, as this is going to be helpful to really understand the true underlying cost base? Peter Fredricson: Yes, David, look, we haven't got those numbers at that sort of level of detail for you. What we've said is that the NZICC, we probably have spent about a couple of million bucks in the first half on preopening costs that we weren't able to capitalize. And what we'll have in the second half is a significantly higher cost base because that will be driven by the 110,000 people that are going to visit us and have to be serviced. So the cost base goes up and the revenue comes as well. We think that we're probably another couple of million bucks negative in the second half in that regard. Online, as we said to you last year, we have an ongoing spend in the business that you'll see in the documents today, and that has shown us an outcome of $3.8 million of spend in the first -- in the second half -- sorry, in the first half versus last year's $3.2 million. That's primarily driven by the fact that we are quietly progressing towards a regulatory environment, and therefore, we're increasing expenditure, increasing our team in the online business. It's not -- we have not spent as much as we had expected to do in that first half because of the 6-month delay that was afforded us by the government pushing the legislation out. So you'll see those numbers there. They're slightly higher than last year. We expect them to be, again, slightly in line with the guidance that we gave for the full year, probably short by $1 million or so. David Fabris: And just one last question from me. Can you just talk about what the business is doing with AI at the moment and what's planned? I mean I'd assume that there's some significant efficiencies and cost benefits in time. It would be great to hear any of your thoughts or comments on this. Jason Walbridge: Yes. David, Jason here. Yes, we've got some initiatives underway with the utilization of AI with a number of our technology partners. I would say -- I would characterize it as we're at the early stages of that work, and we'll see more focus come this year and into next year. AI is a big part of the online world, and our platform partners are already quite advanced there. The slot analysis and marketing platforms that we're investing in at the moment have significant AI-enabled functionality that we'll be taking advantage of in the next few months as well. So it's certainly an area that we're putting more focus and effort on. But we're just -- we're investing very consciously and carefully given the capital constraints that we've got at the moment. So those are -- that's a couple of examples for you Operator: Our next question comes from the line of Adrian Allbon with Jarden. Adrian Allbon: Perhaps the first one's probably for Peter. Just in terms of the capitalized interest, was that about $16 million for the half? Peter Fredricson: Look, we'll come back to you. I don't have that number off the top of my head. I'll come back to you with it, Adrian. Happy to have Craig touch base with you on it. Again, it's -- the interest that was being capitalized is everything that's available to us or that's required of us by the standards. And given that we didn't -- we've capitalized interest up until the handover of the building to us in early November. Adrian Allbon: So maybe if I ask it slightly different. In the second half, are you expecting -- there should be hardly any capitalized interest presumably, right, because all the facilities are over. Peter Fredricson: None, none. And maybe I'll expand on that question further and say this. We've guided to between $100 million and $110 million of capital -- of CapEx in FY '26. We don't expect there to be any significant CapEx in the second half for NZICC at all. We effectively have -- apart from some retentions the final retentions that will be paid in FY '27, we've spent something in the order of $39 million of capital on NZICC prior to its opening on the 11th of February. Everything from here in terms of capital in respect of NZICC is de minimis. Adrian Allbon: Just on the 99 Albert Street, are you able to give us an indication of what the book value is of that asset? Peter Fredricson: Not really. We're not in that position. And clearly, the building is now in the hands of CBRE for marketing, and there's -- we'll see what we see. Adrian Allbon: Just -- maybe this is more for Jason on this point, and to follow on from what Kieran was asking. But I mean, like the whole investment properties, which include more of that commercial corner was sort of $84 million, I think, at the last -- at the full year accounts. Like in Albert -- 99 Albert is a subset of that. It's still a reasonable bridge until the -- for the $200 million, excluding -- if you exclude the car park concession. Are you able to color it in a bit more for us? Because it's obviously quite a key kind of metric for new people looking at the stock. Jason Walbridge: Adrian, yes, of course, more than happy to. Yes, we're -- as you say, we're sitting on a number of commercial properties here in Auckland, 99 Albert is one of 3 or 4. So we've listed that and that sales process is well underway. As I mentioned in my remarks, we've got external advisers engaged. So we're looking at obviously the rest of the commercial property, as we've indicated for some time now. We've got the car parks, albeit we haven't had any credible proposals to date. We still remain open to interest if it exists. But we've got our advisers looking at different options that we could potentially pursue that will maximize value for our shareholders and achieve that $200 million target that we've set. Transactional sequencing and external dependencies are part of the considerations at the moment. I expect in the coming months, we'll be able to share more as we make more progress on that. But we are well advanced. And we still -- we remain committed to achieving that $200 million by this time next year. Adrian Allbon: Just in terms of obviously, the retail bond at $175 million, I think it is, what sort of -- I mean, that's obviously a key liquidity event. I don't think it's due until May '27. But what sort of size are you looking at for renewing that? Peter Fredricson: Look, we've only just started talking to advisers in the market in respect of what might be available to us, Adrian. Clearly, we've got -- one option would be to roll that bond or to at least offer current investors in it an ability to roll into something that's a similar structure to that. At this point in time, how much it is, it will very much be dependent on the funding that we raise out of the $200 million in the coming months. And so again, as Jason said, there's a little bit of a process here that in terms of timing of various things. We would typically want to be in the market between 6 months and 12 months ahead of that redemption of that bond to refinance it. But we might not necessarily need to be if we bank proceeds from an asset sale in the next 3 to 6 months. So at this stage, it's not going to be more than $175 million, and it's likely to be less depending on how much money we bank because we just don't want debt instruments out there when we've got lots of cash sitting there on deposit. Adrian Allbon: No, I think that's understood. Just coming back to the spend levels. If I just sort of trace back across, I guess, the disclosures that you've been providing more recently on visitation and spend, it feels like the big drop down in spend was sort of the FY '24 to '25 year, and what you're sort of signaling is you haven't really seen any noticeable change in that, including across the first half and into January '26. Is that factually correct to start with? Jason Walbridge: I think when you adjust for Carded Play, it's been reasonably steady, stabilizing would be perhaps a word I would use to characterize it. Obviously, Carded Play has had an impact. We've seen signs of the New Zealand economy stabilizing, and there's obviously recoveries in different sectors across the country. And as of yet, we haven't seen any noticeable changes flowing through in consumer discretionary spend. Adrian Allbon: And just -- so as a follow-on to that then, when you start to look at that Carded Play analysis for the first half, are you saying -- can you comment on any of the trends? I think the business historically, certainly through the tables business, has been quite cyclical to small businesses and cyclical industries. Is that something that you're saying? Or can you comment on anything that you're seeing as you look through the layers, particularly for Auckland? Callum Mallett: Adrian, it's Callum. If we just look at Auckland, yes, there's the MCP impact. Yes, there's the continued regulatory uplift that continues. But you're right, as we look into particularly that local premium play, there's no question that across the 6-month period, feedback from customers was that some have pulled back as they spend more time in their businesses themselves. So to your point, hopefully, as the economy improves, obviously, we would to see that business return or that spend level return. But to Jason's point, as yet, haven't seen that. Adrian Allbon: And just -- so that -- but that would be mostly observable in the tables, would you say, that cyclicality around small businesses and cyclical industries? Jason Walbridge: No. I think it will be most likely in our more premium rooms off the main gaming floor, but I think it is tables and AGMs. Adrian Allbon: And just -- look, I noticed that the premium tables in Auckland have generated a negative revenue, which is lower volumes and negative hold. And you've commented in there that there's a segment strategy review underway. Can you share a little bit more detail as to what you think has caused that and what you're planning to do about it? Jason Walbridge: Yes, absolutely. So obviously, our regulatory uplift has had an impact on that segment. Secondarily, moving money internationally has got more challenging over the last couple of years, and so that has impacted our customers. But also, we have pulled back from that business as far as how proactive we have been, what table differentials we've been willing to offer, et cetera, really focused obviously on, a, our uplift; and b, as part of that, the implementation of Carded Play. So now as we've cycled through that and now as we see that aircraft capacity coming back, which is still only back to 90% international visitors into New Zealand from what it was pre-COVID, these are all things that we think we can just work a little harder in that space and be a little more proactive than we might have been. So that is the changes that we'll look at, without trying to signal that we see that as a significant growth area for our business. But obviously, when you look at the number, as you point out, we don't want to continue in that business delivering a negative EBITDA. Adrian Allbon: And maybe just while I've got you, Callum. Just I know -- I can't remember if it was you or Jason spoke about you've got this sort of well-etched playbooks for capturing the ICC different events as they come through. Are you able just to give us a couple of examples of that? Like I think we get the hotel side of it. But what are you doing -- because you've been relatively constrained in terms of operating hours on some of the F&B and stuff like that. So what are you doing? Maybe if you can give us a couple of different examples of the playbook. Callum Mallett: Yes. Perfect. Yes. So if we look at different examples of the playbooks, I'd say this on Friday night, just gone, we hosted 660. And so that playbook was let's make sure that Onyx Bar is staffed and ready for pre and post. Let's make sure that Federal Street, Depots, MASUs, et cetera, are ready for that influx at an earlier time, ideally for drinks, maybe even a meal. And then afterwards, how are we making sure that we push those customers, yes, to the Onyx, et cetera, but then to Flare Bar. So, for instance, the offer that was given to customers prior to an exiting was a 15% discount at Flare Bar, obviously, to the appropriate customers to push them onto the main gaming floor for a drink and then whatever other entertainment they might find when they're there. So that is one of the playbooks that we'll have for that nighttime event that's within the NZICC. When we go to this weekend, for example, it's a slightly different playbook as we'll have hopefully up to 5,500 people through. That playbook is very much how, in and around that activity, can we encourage them to go up the Sky Tower, how can we get them across F&B, -- all Black All Blacks Experience, et cetera. And so for this weekend, as an example, we have a passport that offers discounts across the wider precinct to obviously encourage those customers to do more activities than just visit the NZICC itself. So a couple of quick examples there, Adrian. Adrian Allbon: And do both of those get activated through their SHOW Card or do you e-mail them? Callum Mallett: Yes, SHOW Card is an option that they can use. But for some of those customers who may be visiting with a family, it's QR code and then a physical passport to allow them easy access across the site with offers. Operator: Our next question comes from the line of Paul Koraua with Forsyth Barr. Paul Koraua: Team just a few quick questions. I'm sorry to labor the point, but back on asset monetization. So you're talking about $200 million in the next 12 months. 99 Albert Street has been called out, but we know the sort of midtown office, not fully occupied market is going to be pretty tough. So say you get $30 million to $50 million for that, that's like a 0.25 turn on your net debt to EBITDA. Where is the rest of that going to come from? And obviously, you call out your other commercial property, but really the only thing of value left is the hotels. So is that what the strategy is going forward? It might not be an outright sale, but a monetization strategy of the Auckland hotels? Jason Walbridge: Paul, Jason here. We're really focused on the commercial buildings, as you've already called out. The car park sales, we haven't given up hope, but we acknowledge that it's been a process running for a period of time. And so we've got external advisers working with us around a range of different options. And it could or couldn't include some of the things that you've called out today. That's the work that we're doing. We do believe that we've got some very attractive assets that we can absolutely monetize in these next 12 months to deliver that $200 million of benefits. And I expect, if not before, we will definitely be able to provide some quite tangible updates at the full year. Paul Koraua: Yes. I guess the point is, it was ago at this result in the first half '25, we talked about asset monetization. And what's changed since then? Obviously, you're talking about a wider scope of assets you're looking to sell now. But is some of the price expectations a little bit more realistic now? Or has the market improved? It doesn't really feel it from a property standpoint. Jason Walbridge: Yes. We certainly have gone through a journey with the car parks. There's no doubt about that. In terms of valuations, we believe that we're trading into a stronger commercial market today than we were a year or 2 years ago. We've obviously just opened the convention center. We've got CRL opening right outside the door of 99 Albert later this year, and we've got an improving New Zealand economy. So we believe that all of those things increase the value of our assets going forward. And our goal here is to maximize value for our shareholders. And so we want to go about this in a very systematic manner, and our external advisers are helping us through that decision-making process. Paul Koraua: Yes. So then I guess maybe just the last point on that is the counterfactual is if you don't get $200 million of asset sales done in the next 12 months, what does that mean in terms of where Sky City? Does is does that mean your dividend gets delayed a little bit more? Or does that mean that other options have to be looked into? Jason Walbridge: I'm confident we will get some assets away. We've got some very attractive assets within our portfolio. We're well advanced on the work, as I mentioned before. So I think we're confident that we will deliver on that commitment around that monetization of $200 million. Paul Koraua: Maybe just moving on then. So in the second half of this year, you spoke to some of the factors, which means that it will be stronger than the first half, the 43%-57% skew. Is any of your thinking around the second half around change in spending behavior? Or have you expected that to be flat through Auckland? Jason Walbridge: If you're asking about any uplift from New Zealand economic improvement, we haven't factored that into our second half. And so -- and our guidance -- our guidance is based on the benefit from the New Zealand International Convention Centre and that cross precinct benefit into our hotels and our food and beverage and entertainment principally as well as continued operation of our core businesses, yes, just continuing to work hard on delivering customers what we know they want Paul Koraua: Yes. That makes sense. And then your NZICC visitations were 110,000 for the second half. You guys obviously make some assumptions in there about what you think the average spend of those visitors will be. Could you maybe just shed some light on where that sits versus the current spend per visitor or EBITDA per visitor in the Auckland precinct? Do you think it will be additive to that average? Or do you think it brings it down? Jason Walbridge: Yes, we certainly do think it will be additive. It's a different mix of visitation that the NZICC will bring to us in Auckland, both domestic and international, more business visitors than perhaps we normally get as a consequence of conferences and the likes and their spend levels typically are higher. Callum do you want to add anything else to that? Callum Mallett: Yes. Jason's bang on, Paul. So from a domestic, international delegates, a number of them have been with companies paying or associations paying to visit, they definitely have a higher spend per day than, for instance, a leisure holiday maker. That said, the majority of conferences of scale, both from an international perspective and a domestic perspective, start kicking in, in earnest in FY '27. The second half of FY '26 certainly has some conferences, but it's a number of events, shows, balls, and dinners. And we still expect those customers to have a higher spend per customer across our nongaming businesses than we might see today, but not to the same degree that we're expecting from FY '27 onwards Paul Koraua: That makes sense. And maybe just 2 final questions. First, are you guys concerned at all about the gaming visitation numbers in New Zealand? Obviously, you've changed the way that you're doing that in other New Zealand that category, but some of those visitation numbers were quite stark. Jason Walbridge: Yes. Gaming visitation in New Zealand was primarily impacted by Carded Play. So we anticipated with the introduction of Carded Play is that the revenue impact would come from a reduction in some players, either because they've chosen not to play with us because they don't want to have to go through the sign-up process. They may become more aware of their spend levels, and moderate their spend accordingly or through our compliance programs, we may determine that that customer is not a suitable customer for SkyCity. So that's really what the visitation -- the gaming visitation number is reflected. What we have seen positively is an overall growth in the number of customers that have an account with us. And most of those customers have been at the lower-mid tiers, and that's where we certainly have seen growth. But that growth hasn't necessarily offset those changes at the VIP tiers that we spoke about earlier Paul Koraua: And then final one. Adelaide, obviously, you touched on has been quite challenging. Cost-out process is obviously underway, but you also have mandatory Carded Play coming in December. That's going to have quite a big impact on a business that's already under pressure. How -- at what point is there potentially not a sustainable business there? Jason Walbridge: Yes. We're continuing to work very, very hard on that business. It is going through a challenging phase at the moment. The team are very, very focused on ensuring the compliance program progresses, and we are operationally on track at the moment, and at the same time, really managing costs. So there's some good work being done there to right size that cost structure. With respect to Carded Play, we've obviously gone through tremendous learnings here in New Zealand, and we're able to take those learnings and apply them into Adelaide. And we actually think we'll be better prepared, as you would expect, in Adelaide with the rollout with the introduction of the SHOW by SkyCity loyalty program. So we're working really hard to minimize that Carded Play impact at the end of this year. With respect to the commercial viability of that business, we look beyond June next year when the B3 program completes and those costs come out of that business is we certainly have a viable business. So the focus right now is getting through that compliance program, tightly managing costs, and providing a service for our customers that enables us to maintain visitation. Encouragingly, the South Australian government is very, very focused on tourism and events, and we've seen a very strong calendar of events over the last period and looking out into this year, more and more events. And in fact, LIV Golf, I think, is kicking off right at the moment. And things like that really drive visitation across our precinct, and we certainly benefit from that in the nongaming revenue area. Callum Mallett: And Paul, I'd just add to what Jason said as well. Yes, we expect an impact from the introduction of MCP, but we already have a manual process -- more manual process for mandatory carded in our VIP space. So the customers are used to that. And some of the feedback that we're getting, particularly in our Queenstown property, is that a number of Australian visitors have an expectation now that when they go into a casino, they need a card. So that's not to say that it won't have an impact. But certainly, there are some advantages to us not needing to roll out until December from a customer perspective. Operator: And our last question comes from the line of Tom Maclean with UBS. Marcus Curley: It's Marcus Curley speaking. Just 2 quick questions. Just extending that answer, if you can. Could you give us any color in terms of what you think the impact of Carded Play in Adelaide will be given the Auckland experience? Callum Mallett: Marcus, it's Callum. So if you remember for New Zealand, we guided to 15-rough percentage points of uncarded revenue. We expect because of what Jason and I just spoke about, but [indiscernible] and obviously, there being more competition in the Australian market than there may be in New Zealand. We think it's 15% to 20% of uncarded revenue is a fair guide. And today, we're tracking at about 65% Carded Play across the Adelaide business as a guide. Again, all of this, just like in New Zealand, these are assumptions, but pleasingly, our assumption for NZ was relatively accurate. So that's where we're at for Adelaide. Marcus Curley: And then secondly, I know you've probably sprinkled this answer through the call today. But if I look at the full year guidance relative to the first half result, let's leave seasonality to one side, you broadly need $30 million worth of extra EBITDA in the second half relative to the first half, if my numbers are right. Could you just bridge that at the high level? It sounds most of it's cost, but I'd just be keen if you could bridge it between revenue and cost and split that down where possible. Jason Walbridge: Yes, sure. Marcus, Jason here. Obviously, having the NZICC open for 4, 4.5 months, so there's the revenue there from those 110,000 visitations. There's an expectation that we benefit in hotels. So in our modeling, we've made an assumption of how many of those people stay with us. As a consequence of all of those visitors, occupancy levels will be higher. We expect that to put upward pressure on room rates, and we benefit from that as well. And then obviously, they're going to need somewhere to have some meals. So we expect them to join our food and beverage operations as well. And then there's a very small assumption there around gaming. So we've got clear line of sight on a bridge to those sorts of numbers that you talked about through the number of hotel rooms that we expect to sell, the number of covers in our restaurants that we expect to sell and how we believe we're going to be able to continue to tightly manage our cost structures in that environment to deliver the uplift to stay within our guidance range. Marcus Curley: Would you be able to... Jason Walbridge: Sorry, I was just going to add, it's not all in Auckland from the NZICC. Callum's spoken to the work that's going on in Adelaide as well. So we do expect some of that uplift in the second half to come from the hard work in Adelaide. Sorry, go ahead. Marcus Curley: So it sounds more than half -- let's just call it the midpoint, if you get to the midpoint, more than half of that would be Auckland driven as opposed to Adelaide cost out? Jason Walbridge: Yes, yes, definitely more than half. Yes, that's correct. Yes, the majority would be Auckland. The NZICC is the big driver for us. Operator: Thank you. And this concludes our Q&A session. I will turn it back to Jason for final comments. Jason Walbridge: Well, thank you very much for your questions today and your ongoing interest in SkyCity. Much appreciate it. And I look forward to catching up with some of you over the coming days and weeks. Thank you very much for your time. Operator: This concludes our conference. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the YETI Holdings, Inc. Q4 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, 02/19/2026. I would now like to turn the conference over to Arvind Bhatia, Head of Investor Relations. Please go ahead. Good morning, and thank you for joining us to discuss YETI Holdings, Inc. Fourth Quarter Fiscal 2025 Results. Leading the call today will be Matthew J. Reintjes, President and CEO, and Michael James McMullen, CFO. Following our prepared remarks, we will open the call for your questions. Before we begin, I would like to remind you that some of the statements that we make today on this call may be considered forward-looking, and such forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. For more information, please refer to the risk factors detailed in our most recently filed Form 10-K and Form 10-Q. We undertake no obligation to revise or update any forward-looking statements made today as a result of new information, future events, or otherwise, except as required by law. Unless otherwise stated, our financial measures discussed on this call will be on a non-GAAP basis. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release or in the presentation posted this morning to the Investor Relations section of our website at yeti.com. I would now like to turn the call over to Matthew. Thanks, Arvind, and good morning, everyone. I appreciate you joining today. Matthew J. Reintjes: The strong performance YETI delivered in Q4 is a direct result of growing brand strength and disciplined, consistent execution of our long-term strategy. Just as important, our Q4 results give us increasing conviction in the long-term trajectory of the brand, our ability to accelerate growth and profitability, and to generate strong returns for our shareholders. There are three themes I want to emphasize this morning. First, our strong finish to 2025 sets the stage for meaningful global growth and profitability in 2026 and beyond. Second, our product innovation engine is operating with more speed, breadth, and global capability than ever. Third, our expanding global brand combined with a broader, higher velocity product portfolio will be the driving force behind the next phase of YETI's growth. Beginning with our Q4 performance, we closed out 2025 with our strongest quarter of the year, delivering 5% net sales growth fueled by continued momentum across the YETI brand. Drinkware grew 6% and international delivered 25% growth, marking our best quarterly performance of the year for both. Gross margins exceeded expectations, even in an intense tariff and promotional holiday environment thanks to YETI's premium brand strengths, innovation across the portfolio, and operational execution. We once again delivered strong full-year free cash flow of $212,000,000, exceeding adjusted net income and underscoring the cash generating strength of our operating model. We executed a $125,000,000 in share repurchase during Q4, bringing the full year total to approximately $300,000,000. Across the business, demand remained solid, our portfolio is more diversified, more global, and more durable, with momentum across categories, channels, and markets. This performance is a result of deliberate multiyear actions. Grounding and broadening Drinkware, expanding bags and soft coolers within coolers and equipment, investing in our innovation footprint, globalizing the brand, and reinforcing supply chain diversification and resilience. These decisions have positioned us well for sustained multiyear growth. Looking ahead, we entered 2026 with stronger global brand momentum, and a broader product expansion opportunity than at any point in our history. While the consumer environment continues to be in debate, the fundamentals of our strategy remain sound, giving us conviction in our long-term opportunity. For 2026, we expect 6% to 8% net sales growth shaped by strength in our innovation pipeline and our brand, and expanding global reach. Over the long term, we continue to see the path toward high single digit to low double digit growth. We remain grounded in the same strategic growth priorities that have guided us through the past few years: driving product innovation, broadening our brand and addressable market, expanding our global presence. These pillars position us well as we enter 2026 with a higher capacity innovation engine, solid global demand signals, and a more diversified growth model. Product innovation anchored in durability, performance, and design remains the foundation of our long-term growth strategy. The portfolio is built on the strength of our two foundational categories, Drinkware and Coolers & Equipment, and 13 unique and scalable product platforms. Importantly, we entered 2026 with one of our strongest pipelines in years, Thailand, and Vietnam, supported by innovation teams across Austin, Bozeman, Denver, enabling a robust global innovation cycle allowing us to prototype faster, expand categories more efficiently, and bring a global scale to product development. Turning to Drinkware. We delivered 6% global growth in Q4, bolstered by innovation and expansion offsetting category cleanup discussed throughout 2025. While certain trend-driven styles in the category remained highly promotional, our broadening product platforms drove the business, and we entered 2026 with a refreshed assortment, stronger global traction, and clear line of sight to continued growth. In 2025, we further broadened our definition of the Drinkware category. Today, we innovate across four platforms: bottles and jugs; cups, mugs, and tumblers; tableware, coffeeware, barware, and containers; and finally, cookware. Let me share a few examples of recent expansion. We launched the Silo 40-ounce and half-gallon jugs built for the job site and the sidelines, broadened our health and wellness assortment with the Yonder shaker bottles, added new high-capacity leakproof products with travel straw mugs, expanded color and personalization capabilities including collegiate, NFL, and team-inspired designs, and recently extended our premium ceramic line formats in Drinkware. We also advanced our lineup through early limited release carbon steel cookware and grew our offering in vacuum sealed food jars and bowls. We have additional innovation waves planned for 2026, supporting the acceleration we expect during the year. These initiatives create broader uses for consumers, expanding our addressable market beyond traditional drinkware. Demand in Coolers & Equipment remains exceptionally healthy, with strong sell-through across DayTrip soft cooler bags and Camino totes. Camino continued to broaden consumer reach, while DayTrip remained a standout performer in soft cooler bags. In hard coolers, we lapped a tough comparison with the very successful 2024 innovation in key product transition from a year ago. Overall, hard coolers continue to be a core product platform with particular consumer demand for high performing, more personal sized coolers. We also saw strong interest in protective cases; the introduction of the GoBox One created a compelling entry price point into the platform, with more products to come in 2026. While overall category sell-through was strong, sell-in was constrained by supply limitations, most notably in DayTrip soft cooler bags and Camino. Importantly, we expect healthy growth in 2026 as new production capacity comes online in the first half of the year. We are combining improved supply with some of our most exciting C&E innovation, which continues at an up-tempo pace, including newly released DayTrip snack boxes, plus additional innovation across the DayTrip family coming later this year. Last week's launch of Scala, our first family of hike packs, deepening YETI's presence in bags and again showcasing the impact of high return, targeted inorganic innovation fuel rapid YETI-caliber expansion. The broadening in the Camino tote family, innovation within the Roadie family of hard coolers in a personal everyday use format, and continued expansion of the GoBox family with small to large format cases and storage. On Scala, it marks YETI's entry into the trail-focused women's and men's packs, combining the proven foundational DNA from our Mystery Ranch packs with a new design from our Denver design group in a category consumers have been asking us to enter. Built for durability, comfort, and easy access, Scala serves hikers and outdoor explorers, opening meaningful expansion in the core outdoor environment. Across the board, innovation delivered throughout 2025, and alongside upcoming 2026 launches, reinforces our product leadership and long-term category expansion opportunities. Our second strategic priority is expanding brand reach. During the 2025 holiday season, YETI delivered a broad campaign across some of the biggest moments in sports and entertainment, generating more than 240,000,000 high-impact impressions. Coming off the holiday momentum, our spring 2026 campaign, targeting 400,000,000 impressions, will continue to lean into the biggest and best cultural moments in sports, streaming, and entertainment. Our team executed more than 60 global activations across pursuits in Q4, such as sports, fitness, fishing, surf, equestrian, camping, motorsports, and culinary. These events strengthen brand presence across global markets, helping drive discovery, engagement, and long-term affinity. Our sports expansion strategy continues to gain momentum, supported by expanded licensing agreements and deeper partnerships across major leagues and college sports. Globally, our brand footprint expanded meaningfully through high-impact activations in the UK, deeper presence across European outdoor mountain, cultural, and festival events, and the debut of YETI's partnership with Land Rover's Defender, highlighted during the 2026 Dakar Rally. This partnership allowed YETI gear to support drivers, co-drivers, and crews across the two-week 5,000 kilometer desert race, reinforcing YETI's performance credibility in one of the world's harshest environments. Collectively, these brand building efforts, powered by local creative, on-site customization, and targeted retail partnerships, continue to deepen global awareness and relevance. Underpinning our momentum is a healthy consumer foundation. Across our markets, we continue to see strong advocacy among YETI owners and extensive opportunity for multi-category ownership. Our omnichannel strategy remains a competitive advantage, providing resilience across changing market conditions and ensuring a consistent premium brand experience. US wholesale showed ongoing buying caution, as inventory planning remains tight among many partners with our tracked channel inventory down significantly in 2025. Sell-through continued to outpace sell-in, supporting confidence in underlying demand for the brand and innovation, and sustained momentum heading into 2026. We are also encouraged by the opportunities we see with new strategic distribution partners, which broaden the brand's reach and support our expanding product portfolio. Across DTC, disciplined execution delivered balanced performance. YETI-owned ecommerce remains a key channel and focus for us. We saw strong engagement around innovation, limited editions, and customization offset by what we believe in the US is elevated cross-channel shopping impacting traffic and increased promotional activity. AI-driven improvements in product discovery, search, and UX are helping drive conversion on yeti.com. And our conversational shopping assistant, Ranger, continues to evolve as an important part of the consumer on-site journey. Amazon remains an effective reach engine driven by improved in-stock levels, targeted ad spend, and stronger product content; innovation like the Yonder shaker bottle quickly climbed the must-buy list. Corporate sales delivered another healthy quarter through reach, customization capabilities, and a broadening product assortment. Our retail stores continue to reinforce the importance of physical immersion and product discovery. We saw healthy conversion across our store footprint, strong interest in innovation, and great attachment within store customization. While the channel remains solidly profitable, driving traffic through continued enhancements in visual merchandising and localized assortments remained a key focus. Across all channels, our strategy is unchanged: maintain our premium position, protect channel integrity, and use our diversified footprint to drive reach and profitability when and where the consumer is. Our third strategic priority, expanding globally, continues to deliver strong results and represents one of YETI's compelling long-term growth drivers. We believe our international addressable market exceeds the US, and we expect international growth to continue to drive strong results. Since our IPO, international has grown from just 2% of sales to 21% today, and we see meaningful runway for that mix to continue rising. Europe has great momentum across core markets, with exceptional performance in the UK, and growing traction in Germany and the broader DACH region. Our strategy is clear: scale the UK, unlock DACH, extend across Europe. This is supported by a more powerful omnichannel model, improved wholesale fundamentals, an elevated localized ecommerce experience, and expanded Amazon presence. And we are amplifying brand with a more robust marketing mix: bigger event presence in the UK and the DACH region, more locally relevant content, deeper community engagement, and partnerships that anchor YETI as a premier active and outdoor brand across Europe. Asia continues to accelerate. In Japan, we built the infrastructure for multiyear growth and remain on track for our ecommerce debut in 2026 with a doubled SKU lineup. Broader Asia expansion remains on track, with strong progress toward other key markets, including Korea and China. Australia delivered its strongest quarter of the year, driven by disciplined execution, strong color and product moments like Cherry Blossom, and healthy sell-through. Canada closed the year with real momentum across wholesale, corporate sales, and customization, with what we believe is cautious but improved consumer sentiment entering 2026. Our global footprint continues to expand, and the momentum is real. Our international performance shows we are reaching more markets, winning more consumers, and building a long-term multimarket growth engine with significant runway. Turning to supply chain. While tariffs remain a meaningful margin headwind in the first half, as Mike will discuss, our supply chain transformation continues to be a major success story. With our China diversification strategy yielding a massive shift in our exposure there, we are now focused on optimizing our global footprint as we navigate an evolving and complex tariff environment. While we have completed this phase of our multicountry diversification strategy, with new factories live across multiple geographies, our attention now turns to optimization and the next expansionary moves to support our global business and cost efforts. The suppliers to date are delivering the cost, quality, and service we expect, while collaborating to drive further efficiency gains and improvements. Our innovation centers and distribution hubs are operating with greater speed and productivity than ever, based upon investments in automation and robotics, and we entered 2026 with a more resilient, global, and scalable supply chain model. Our capital allocation philosophy remains disciplined and balanced, anchored by a strong balance sheet and robust cash generation. We have tremendous flexibility to invest in innovation, brand building, and global growth while also returning capital to shareholders. As part of our growth strategy and disciplined approach to capital allocation, we are investing in foundational technology platforms, scalable digital and data infrastructure, and transformative capabilities, including artificial intelligence. These investments will strengthen the core of the business, helping us connect more meaningfully with consumers, and drive efficiency as we scale. This work will continue as we move forward. We are also advancing our work in AI across both consumer facing and internal workflow. Externally, AI enhances product discovery, content optimization, recommendation engines, and customer support, making the ecommerce experience more intuitive and personalized. Internally, we are applying AI to creative workflows, forecasting, marketing measurement, search optimization, operational automation. These initiatives improve precision, speed, and efficiency, and can also play a growing role in innovation, planning, and strengthening brand relevance and margin structure well beyond 2026. As we have shared before, we look forward to hosting our Investor Day in Austin, and we will be providing additional details on the event soon. This day will allow us to provide a deeper dive into our long-term vision, growth algorithm, product pipeline, and the significant opportunities ahead to drive profitable growth and margin expansion across global markets. Before turning the call over to Mike to walk through our financial results in more detail, I want to take a moment to discuss the leadership transition we announced earlier this morning. As we shared, Mike's last day in the CFO role at YETI will be February 22. We are grateful that Mike will continue to serve in an advisory capacity into May to support a smooth and seamless transition. It has been truly a privilege to work with Mike over the past decade, including the last three years as our CFO. He has played a meaningful role in the company's transformation, including helping lead YETI through our IPO in 2018. Mike's been a great partner to me, and the strong results we reported today mark an appropriate send off from his successful tenure at YETI. At the same time, we are pleased to announce that Scott Bomar has been appointed to serve as our next CFO. Scott joins us from The Home Depot where he most recently served as SVP of Finance, bringing decades of financial and operational leadership expertise across a large-scale, complex, and growing organization. Across his time at The Home Depot, and earlier as CFO of Deluxe, he has consistently driven cost discipline, operational efficiency, and margin improvement while focusing on long-term strategic priorities. He has also led data-driven teams responsible for building predictive insights and analytics. These experiences give us a lot of confidence as we continue to focus on scale and profitable growth at YETI. Scott will officially join us on February 23. We are excited to welcome him and look forward to his leadership as he builds on the strong foundation Mike helped to establish. To wrap up, the product engine is cranking, the global momentum of our brand is real, and the growth opportunities in the US and in the global markets are obvious. We have an exceptionally strong team operating with focus and purpose and a diversified commercial model that has proven powerful and scalable. Passion for YETI, across consumers, partners, and communities is as strong as ever. With disciplined execution on our strategic priorities, we are confident in the ability to continue unlocking the global potential of YETI. Thank you to our team, our partners, and our customers for your support and passion, leading to a strong finish to 2025 and a great setup for 2026 and beyond. With that, I will now turn the call over to Mike. Thanks for the kind words, Matt, and good morning, everyone. It has been an honor to serve as YETI's CFO, and over the past decade, I have had the privilege to work alongside an exceptional team through some of the most defining moments in the company's journey. Michael James McMullen: As Matt mentioned, I will remain with the company in an advisory capacity through May 31, and will work closely with Matt and Scott to ensure a successful transition. I have tremendous confidence in YETI's leadership, strategy, and long-term opportunity, and I am excited to continue supporting the company and to follow its continued success. With that, I will turn to our financial results for the fourth quarter and provide our outlook for 2026. We look forward to taking your questions after my prepared remarks. As always, the results we will discuss today are on a non-GAAP basis, unless otherwise noted. Let's begin with our top line performance. In the fourth quarter, we delivered adjusted net sales of $583,700,000, representing 5% year-over-year growth and our strongest quarterly performance of the year. Our growth in Q4 was well balanced across categories and channels, and with exceptional growth in our international business. Turning to our performance by category. In Drinkware, sales grew 6% to $380,000,000. As we have noted, 2025 was a challenging year for Drinkware, reflecting US market dynamics and the impact of our supply chain transformation. That said, we consistently communicated our expectations for improvement in Q4, and we were pleased to see that come through our results. Growth was driven by innovation, strong international demand, and continued positive consumer response to our broad assortment in this category. In the US, Drinkware sales were flat year over year, despite a promotional market and continued cautious wholesale buying. Coolers and Equipment sales grew 2% to $192,000,000, a solid finish given DayTrip and Camino supply constraints, and as we lapped exceptionally strong C&E growth of 17% in Q4 of last year. Soft coolers, bags, and cargo continued to perform very well, reinforcing the multiyear growth opportunity in these categories. The combined strength of Drinkware and C&E further demonstrates the impact of our innovation engine, the breadth of our product portfolio, and the significant global market opportunity in front of us. Looking at our performance by channel, direct-to-consumer sales grew 5% to $394,000,000. Growth was broad based across all DTC channels, including Amazon Marketplace, corporate sales, our YETI retail stores, and owned ecommerce. Wholesale sales increased 6% to $189,000,000 led by exceptional international performance across both Drinkware and Coolers & Equipment. In the US wholesale channel, sell-through continued to outpace our sales into the channel, once again driving a decline in inventory levels year over year. This cautious wholesale buying is a continuation of the trend we have seen throughout the year. Underlying consumer demand for our products remains strong, and is an important indicator of the health of our brand setting us up well for 2026. Moving to our international business. Sales outside the US grew 25% to $136,000,000, our strongest quarterly performance of the year. This represents 23% of Q4 sales as compared to 20% of sales in the prior year period. Europe continued to deliver exceptional growth, driven by rising brand awareness, deepening wholesale relationships, and increased engagement in key markets. Australia also contributed its strongest performance of the year with balanced growth across categories and channels. In Japan, momentum continues to build, and we see significant growth opportunities ahead after laying a strong foundation in 2025. Now moving down the P&L. Adjusted gross profit was $341,000,000 or 58.4% of sales, down 180 basis points versus last year. This includes a 310 basis point gross headwind from higher tariff cost partially offset by lower product costs and selective price increases implemented earlier in the year. Adjusted SG&A was $246,000,000, up 10% year over year. As a percentage of sales, adjusted SG&A grew 190 basis points to 42.2%, reflecting continued growth investments in marketing, technology, facilities, and our global teams, partially offset by distribution and fulfillment leverage on higher sales. Adjusted operating income declined 14% to $94,700,000 or 16.2% of adjusted sales, reflecting an approximately 250 basis point net impact from higher tariff costs. Adjusted net income decreased 15% to $71,800,000 or 12.3% of sales, and adjusted EPS declined to $0.92 from $1.00 inclusive of an unfavorable net tariff impact of approximately $0.15. Turning to our balance sheet. We ended the fourth quarter with $188,000,000 in cash, as compared to $359,000,000 in the prior year quarter. During the fourth quarter, we repurchased 3,100,000 shares of YETI's common stock in the open market for $125,000,000, bringing the year-to-date total to 8,200,000 shares for $298,000,000. As a reminder, over the past two years, we have returned approximately $500,000,000 to shareholders in the form of buybacks, repurchasing over 13,000,000 shares, which represents a 14% reduction in our shares outstanding over the period. Total debt, excluding finance leases and unamortized deferred financing fees, was $74,000,000 compared to $78,000,000 at the end of last year's fourth quarter. Our Q4 results clearly reflect the health of our brand and the strategic choices we have made to broaden our global reach, accelerate our product innovation engine, and strengthen our operational foundation. Now turning to our outlook for fiscal 2026. We expect full year sales to grow between 6% to 8% versus fiscal 2025 as we continue to build on the momentum we saw in Q4. From a quarterly phasing perspective, we expect total sales growth rates to be relatively consistent throughout the year. By category, we anticipate high single digit to low double digit growth in Coolers & Equipment, supported by broad based growth across all C&E categories, and with specific strength in bags, soft coolers, and cargo. From a phasing perspective, we expect Coolers & Equipment growth to be slightly stronger in the first half of the year compared to the second half. We expect Drinkware to grow at a mid single digit pace for the year, fueled by robust international demand, ongoing innovation, and a continued broadening of our portfolio. We expect growth each quarter this year with slightly stronger growth in the second half of the year compared to the first half. From a channel perspective, we expect wholesale to grow at a slightly faster rate than DTC in fiscal 2026. Geographically, we expect international growth in the high teens to 20% range for the full year. In terms of phasing, we expect international growth to be relatively consistent throughout the year, and we anticipate US growth to be in the low to mid single digit range for the full year with consistent growth across quarters. We expect 2026 gross margins of between 56% to 57%. At the midpoint of the range, this is down 90 basis points year over year, reflecting the annualization of a full year of tariffs, partially offset by continued supply chain cost reductions and selective price increases. Embedded in this guide is approximately 200 basis points of incremental impact from higher tariff costs in 2026, which will primarily impact us in the first half of the year. This headwind is on top of the 230 basis point gross tariff impact in 2025, which was concentrated in the back half of last year. Note, we are assuming that the tariffs that are in place today remain in place throughout 2026. Given these dynamics, from a phasing standpoint, we expect year-over-year gross margins to be down approximately 300 basis points in the first half of the year, with the year-over-year decline greater in Q1. As we lap the full impact of tariffs in 2026, we expect second half gross margins to expand year over year as compared to 2025. In terms of OpEx, we expect full year growth of between 3% to 7% versus 2025, reflecting operating leverage and cost discipline. From a phasing perspective, we expect higher OpEx growth in the first half of the year versus the back half of the year. More specifically, we expect approximately 200 basis points of deleverage in the first half. There are two discrete items that are driving this dynamic. First, our brand marketing spend will shift earlier in the year with the next phase of our campaign launching in the first half of 2026 versus a second half launch in 2025. Second, incentive compensation will return to a more consistent accrual pattern in 2026. In 2025, our incentive compensation accruals were reduced midyear following tariff announcements. We expect 2026 adjusted operating income margin to be approximately 14.4%, consistent with 2025, leading to adjusted operating income growth of 6% to 8% for the full year, driven by the timing dynamics in gross margin and operating expenses that I just mentioned, which again are the unfavorable year-over-year impact of tariffs in the first half of the year and the timing shift of brand marketing and incentive compensation from the second half into the first half of the year. We expect first half operating margins to decline approximately 500 basis points, but we expect this to be fully offset by an approximately 400 basis points increase in the second half, resulting in flat operating margins for the year. Before we move down the rest of the P&L, I wanted to take a minute to comment on our gross margins and operating expenses in 2025 and 2026 and then provide some thoughts on the opportunities in these line items beyond 2026. In 2026, tariffs will add roughly $80,000,000 to our cost of goods relative to 2024. That represents approximately 430 basis points of impact on our gross margins. Yet the midpoint of our 2026 gross margin guide, 56.5%, would imply only a 210 basis point decline over that same period. The difference represents our efforts to drive cost improvements and take pricing actions, which are helping to offset the impact of tariffs. As we move into the second half of 2026 and fully lap tariffs, we expect those actions to drive year-over-year gross margin improvement with continued opportunity beyond 2026. As for operating expenses, we have made targeted investments over the past several years to support product innovation, international expansion, and global brand growth. As these initiatives scale in 2026, we expect to begin realizing operating expense leverage and we expect that to continue beyond 2026 as well. In terms of the remaining P&L items in our guide, we expect an effective tax rate this year of approximately 24%. We expect full year 2026 diluted shares outstanding of approximately 76,600,000 compared to 81,600,000 in 2025. This reflects the full year impact of $298,000,000 in share repurchases during 2025 as well as an additional $100,000,000 in share repurchases planned for 2026. We expect adjusted earnings per diluted share of between $2.77 and $2.83 in 2026, reflecting growth of 12% to 14%. Our 2026 guidance includes an incremental $0.35 net unfavorable impact from higher tariff costs versus 2025. Capital expenditures are expected to be between $60,000,000 and $70,000,000 for the full year. Our capital spending remains focused on advancing our technology, launching innovative products, and strengthening our supply chain. We expect free cash flow of between $200,000,000 and $225,000,000 in 2026, which will be our fourth consecutive year of over $200,000,000 in free cash flow. Note that our planned share repurchases in 2026 of $100,000,000 represent approximately 50% of our free cash flow this year. We are proud of the strong finish to 2025 and the momentum we are carrying into the year ahead. Our performance reflects not only the strength of the brand, but the operational discipline and strategic execution of our teams around the world. With that, I will turn the call back to the operator for Q&A. 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. Should you wish to be removed from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. We request that our callers limit themselves to one question. One moment, please, for our first question. Your first question comes from Peter Sloan Benedict with Baird. Your line is now open. Zach Beck (Baird): Hey, good morning, guys. This is Zach Beck on for Peter. Thanks for taking our question. First one on pricing. Mike, you mentioned taking some select increases this year. You guys mentioned the select increases from Q2 of last year. Can you share any more details on that front? And then on tariffs, how are you thinking about potential relief in the event Supreme Court overturns any recent policy moves? Thank you. Michael James McMullen: Thanks for the question. So I will take the first part of it. On the pricing side, I think the simplest way to think about it is it is going to be similar to what we did last year, in terms of timing, in terms of scope, in terms of impact. So you know, last year, pricing had roughly a 40 basis point impact on our gross margin, and I would expect a similar level this year. I think and we announced the price moves last year in Q1, and timing will be similar this year as well. Matthew J. Reintjes: And when we turn to tariffs, so for avoidance of any confusion, any relief from tariffs is not contemplated right now in our guide. I think, obviously, there is a lot of unknowns, both on if, the timing, and the size of any potential relief. I think the way we would approach it is, as we have always done, be really flexible in the opportunity to flow through, and but also continue to invest in growth-focused initiatives, in particular, international growth, product expansion, brand expansion. And I think all those things are consistent with the way we run the business. And, you know, obviously, we are monitoring it closely. And you know, we will we will know when we know. But until that point, we are going to continue to drive the cost efficiency. We are going to drive the top line growth. We are going to drive the margin expansion opportunity over the short, mid, and long term. Zach Beck (Baird): Great. Thanks, guys. I will pass it on. Operator: Your next question comes from Randal J. Konik with Jefferies. Your line is now open. Randal J. Konik (Jefferies): Hey, guys. Thanks for taking my questions. I guess, Matt, first for you. You just kind of elaborate on just some of the foundational work you have been kind of working on for the international business from a, let’s say, from a distribution standpoint, supply chain standpoint. And then you know, you talked about some of the brand building efforts going on from a global perspective. Maybe give us some vantage point on where do you think we are from a brand awareness perspective in the different markets you are on and and all that would be very helpful. Thank you. Matthew J. Reintjes: Thanks, Randy. Good morning. So starting with the foundational work, I think, you know, we started our international expansion back in really 2017. And, you know, I mentioned on the call that 2018, it was 2% of our sales. This year, we just 25 we just wrapped. It is 21%. When it was 2%, people would ask how big could it be. Now that we are 21 and showing the momentum that we have behind that business, and we have established teams across Europe. We have established teams in Japan and expanding throughout Asia, and an incredible team in Canada and an incredible team in Australia. Feel like we really have a lot of the pieces and foundation to drive the kind of growth that we saw in 2025 and that we saw in Q4 in particular. So I think a lot of the elements are there. It is a really big focus for us, which is making sure we have the right structure, the right distribution. So a big focus of 2026 is building out our wholesale footprint, expanding our ecommerce capabilities in the regions in which we operate today, building out the kind of powerful corporate sales and partnerships piece. You know, I mentioned, Land Rover Defender is a great example of our team in the UK developing what ultimately was a global relationship. So I think those pieces are really, really falling into place, and 2026 is a year of accelerating that. In addition, looking at new markets, and I called out on the call both China and Korea as markets of interest for us and places where we are spending some energy and effort to get those established, in addition to some of the markets that I mentioned on the Q3 call. So feel, feel really good about, incredibly good about the team we have. Feel great about the strategy, and feel even more bullish on the opportunity. We think about the events and activations. We are running much of the playbook that was successful in the US, and we have seen translate to our most established international markets in Canada and Australia. We are seeing it play really well in the UK. And as recently as the last couple weeks, ran an incredible event in Japan, where we supported a mountain sports, snow event. And I think those things are what give us the conviction and confidence of the international opportunity and that it is, as I said on the call, we think it is a larger TAM for our product portfolio outside of the US than in the US. And that the playbook is working. Randal J. Konik (Jefferies): Super helpful. And then I guess my last question would be when you look at the international revenue guidance for '26 and the Drinkware guidance for '26, is that does that reflect a level of, like, you know, conservatism or status quo? Like because when you look at the exit rate of international in the fourth quarter, up 25%, you are adding obviously, it sounds like, new distribution. Seems like international will be, you know, will be firmly will be firm in this year. When I think about Drinkware, you have new products launching. I know that the wholesale channel has been conservative. But also give us maybe some perspective how lean those inventories are in wholesale such that the domestic market at least could potentially get a little bit better as we go through the year? Just want to get some perspective on, you know, what the guidance includes from a Drinkware perspective, and an international standpoint in particular? Michael James McMullen: Hey, Randy. This is Mike. Thanks thanks for the question. So I will take each one in turn. In terms of the guide, so, you know, we said international first. High teens to 20%. That is coming off a 25% growth in Q4. Obviously, when we put out a guide, we want to feel good we want to feel good about that. But at the same time, when we look at the opportunities we have in front of us, that we have talked about with you all consistently, consistently Europe, Asia, you know, we are we are super excited about what is happening there. As for Drinkware, we said mid single digit. That is coming off, you know, roughly 6% in in Q4. I mean, again, I would say the same thing holds. I mean, we are we are we are excited about innovation that we released. We are excited about the innovation we have coming. And we and we certainly think there is there is opportunity there when we look at just the global market as well as the US market. As for inventory levels, you know, we have we have now seen, I think it is, you know, two several quarters in a row, where inventory has been coming down year over year. Three quarters in a row where sell-through has been outpacing sell-in growth. You know, we we we feel like we have got a prudent guide in terms of you know, when we look at what the opportunity is. But our inventory levels, you know, down meaningfully year over year. We think there is just caution overall for within wholesale dealers and specifically the Drinkware category. So but but like I said, when we put a guide out, we want to feel good about it. Randal J. Konik (Jefferies): Super helpful. Thanks, guys. Operator: Your next question comes from Brooke Siler Roach with Goldman Sachs. Your line is now open. Brooke Siler Roach (Goldman Sachs): Matt, Mike, I was hoping you could contextualize the sequential improvement that you are expecting in your core US market to get to that low single to mid single digit range for the full year. How much of that improvement is driven by US Drinkware? How much of that is driven by international? And are there any new categories or new brand building investments that you are making that give you additional context in achieving and exceeding that expectation. Michael James McMullen: Yeah. Hey hey, Brooke. This is Mike. Thanks for the question. So, you know, I I correct. So when we gave the guide for the year, we said the US would be in the low to mid single digit range, coming off a year where we were down slightly, but we did see improvement in Q4. You know, I think that the biggest story in the US has been the Drinkware category. And I think we saw stabilization there in Q4, and, you know, we think there are opportunities to continue to drive growth across all of our categories. The other thing that I think, you know, impacted us in the US in Q4 was C&E had a relatively tough comp. I mean, globally, it was, you know, 17% growth. We had some new innovation we were lapping, but a product transition we were lapping. And so, you know, I I I think that, you know, again, similar to the last question. When we put a guide out, we want to feel good about it, but, you know, we certainly believe that, you know, we have opportunity in the US to continue to drive growth. Brooke Siler Roach (Goldman Sachs): And then just a follow-up for you, Mike. Can you help contextualize the inflection that you expect to get in operating expense leverage as you move into the back half of this year? And on a medium-term basis? What are the most important cost control and fixed cost expense opportunities that we should be looking out for. Michael James McMullen: Yeah. So, you know, I think the story around OpEx this year is two things. One, you know, we have made investments over the last, you know, in 2025 that we believe we will start to get leverage on for the year. There are some timing dynamics, however, related to two line items that we discussed in my prepared remarks. One is the timing of our brand campaign. It was in 2025. It will be in the first half of 2026. And the second is around our incentive compensation accruals. And, you know, given what happened last year with tariffs and when they were announced, there were some differences in timing of when those accruals took place. This year, we are planning for a more normal and consistent pattern. So, you normalize for those two things and that explains the first half/second half dynamic. But, you know, I think for the year, which is in our view the most important, but there is always going to be things that, you know, move dollars around from a quarter-to-quarter basis. But for the year, you know, the investments we have made in facilities in 2025, the number of offices and facilities and locations we have talked about with you all, getting leverage on those, getting leverage on some of the technology investments that we have made, you know, we we feel good about, you know, our SG&A and starting to get leverage on some of those going forward. Brooke Siler Roach (Goldman Sachs): Great. Thanks so much. I will pass it on. Matthew J. Reintjes: Thanks, Brooke. Operator: Your next question comes from Phillip Blee with William Blair. Your line is now open. Phillip Blee (William Blair): Mike, it is been a pleasure. Best of luck. You guys guided sales growth this year at 6% to 8%, but there are some easier comparisons with, believe, 300 basis point headwind that you guys called out related to supply chain constraints and delays in new product launches that impacted 2025, ramping up international in some new markets in Asia. So are there some other catalysts that maybe are not as impactful this year that could help us bridge to your longer-term targets in the high singles to low double digit range? Matthew J. Reintjes: Morning, Phillip. This is Matt. And thanks for the comment on Mike. I would echo. He is been a great partner for ten years, and we are really excited to get Scott on board and for this next phase of YETI growth. You know, specifically, there is a lot of things that move around in that 6% to 8%. You know, we talked about we talked about some wholesale caution and buying caution that impacted Q4 even with the strong result we delivered. I think the US market is one we are watching closely. We are seeing a lot of really interesting green shoots both across the product portfolio and the expansion, but also, as Mike mentioned, the stabilization in Drinkware. To a question earlier, the international growth, you know, we continue to see opportunity to accelerate international growth. We see new market opportunities, but those take some time to build into and to invest into. And so when you put all that together, it sums up and makes us feel great about the 6% to 8% guide, coming out of the gate. And what we were comparing against in 2025. Both in the products that were launched in 2025, the ones that were delayed. So I think, you know, as we go into this year and we see where the consumer is, how our domestic versus international markets develop, how our innovation comes to market, I think you know, we will obviously be talking about this every quarter throughout the year. But we feel like starting the year with a strong guide on the top line, feeling great with the momentum behind the brand, feeling really strong about the pipeline we have in the product. And as you have seen most recently, the continued expansion in Drinkware, expansion in DayTrip soft coolers, the most recent launch into our hike packs and our Scala packs. So a lot of good things that we think will both in the short, mid, and long term pay off really well for YETI. Phillip Blee (William Blair): Okay. Great. That is really helpful. And then just quickly, as you continue to expand into new products and categories, think about the opportunity to enter new points of distribution like TikTok Shop, potentially new national retailers or a new segment of local independent retailers? And then is that the bigger opportunity? Or is it more about expanding your shelf space with existing wholesale partners? Thank you, guys. Matthew J. Reintjes: Thanks, Phil. Great question. I would say it is a combination of both. We have incredible wholesale partnerships today, from some of the most passionate specialty, all the way up to what I believe are some of the best retailers in the country in the US and frankly, operators in the world. So we always believe there is opportunity to continue to bring products that are relevant to those channels to market, merchandise and assort them well for the consumers that shop in those places. And so as we launch new products, we think about what fits in the channels we have today. There are also things in the product portfolio as we expand that open up really natural new points of distribution that make sense and are complementary to the rest of the channels that we are in today. And those could be digital channels, and those could be brick and mortar. And that is really everything from as we have expanded more of our sport-oriented offering, as we expand our outdoor offering. There is lots of outdoor specialty and sports specialty that I think are really interesting places for YETI to expand and grow. I also think that our existing accounts have opportunity to continue to assort and manage the portfolio we have. And I think there are emerging, and some established digital channels that as shopping moves and agentic shopping becomes a bigger and bigger presence, I think there is an opportunity for YETI to play there. So we love the core of what we have. We will always continue to stoke and focus on growing that. I think there are complementary plays for us. Phillip Blee (William Blair): Excellent. Makes sense. Best of luck. Thank you, guys. Michael James McMullen: Thanks, Phil. Operator: Your next question comes from Peter Keith with Piper Sandler. Sarah (Piper Sandler): Hi, good morning. This is Sarah on for Peter. Thanks for taking our question. We just wanted to dig a little bit more into your advertising efforts. Had that campaign that was launched in November. So just wondering key learnings from that and how that is shaping your advertising focuses going forward. And then if there is any differences to call an international US strategy on the advertising front. Matthew J. Reintjes: Thanks, Sarah. Appreciate the question. You know, we were incredibly pleased, as we said in my remarks about the Q4 November campaign that we internally called “bad idea.” I think that what it showed us and what we believed going in is that live events, in particular live sports, is one of the last great places where you have highly concentrated, high-quality viewership and focus, and where there are sort of galvanizing moments. And I think that is only growing, and you are seeing with the passion around sports, the investment that is going behind sports. And so the opportunity to bring a YETI advertising, broad-based campaign into those moments and intercept the consumer with something that is very of YETI and feels very YETI, I think was we think was fantastic. And we saw that both in the high-impact impressions we got, but also the follow-up feedback we got on the campaign impact, which is what gives us the confidence as we go into 2026 and building upon that campaign. And we saw an opportunity to shift it from Q4, as Mike said, to the first half of this year, which is part of the OpEx SG&A conversation we just had. But we see those moments as we get into the moms, dads, and grad season, you know, and similarly, we are going to target sports, cultural events, activities where people are paying attention, and we can go hit really high-impact impressions. It keeps YETI top of mind, and I think that is an important thing. We have believe we have an incredibly deep-rooted, ground-connected game. And this gives us more of a halo around the brand as we expand the product portfolio, as we drive our channels to market, as we expand globally. So that is the sort of evolution of marketing, but it is connecting to what we have always done successfully. And I think internationally, there will be elements of that that will spill over and and manage internationally also. Sarah (Piper Sandler): Okay. Great. Thank you. And then just one on DTC. Any more insight on what drove the lower conversion rate in Q3, and then the improvement in Q4? And looking to 2026, is this something that we should expect to continue and help drive stronger conversion? Matthew J. Reintjes: Yeah. A few things there, and we commented on this. I think that the movements we have seen around conversion really, what we believe and what we have seen across our analytics and the privilege of having the diverse channels to market that we have is we get to see a good insight into consumer behavior. And what we saw is an increase, what we believe is an increase in cross-channel shopping. So people checking, which is really driven by, I think, price discovery and making sure that people are getting the best deal. Not necessarily a deal, but I think in a promotional environment, in promotional categories, you see consumers looking around and checking multiple places. So I think for us, the benefit is you move between our incredible wholesale partners, our Amazon Marketplace, yeti.com. There is a lot of opportunity for us to intersect and capture and convert a consumer. So I think that that conversion is really a dynamic that we saw start to play as we saw consumers being more promotional oriented and more cross-channel shopping. Sarah (Piper Sandler): Okay. Thank you. Operator: Your next question comes from Joseph Nicholas Altobello with Raymond James. Your line is now open. Joseph Nicholas Altobello (Raymond James): I guess, first question, I want to ask about tariffs. You mentioned it was $0.35 headwind last year, expect to be another $0.35 headwind this year, which was a little surprising at least to me because I know you guys have done a lot of work on the supply chain side try to, you know, get that number down. And I realized there is some annualization of last year, but I still would have thought it would have been a little bit lower given you moved a lot of Drinkware out of China that is coming over to the US. So maybe help us understand why that number is not getting a little bit better. Michael James McMullen: Joe, it is Mike. Thanks for the question. So, I mean, it really comes down to the annualization. I mean, we spent the first four months of the year at little to no tariff rates. In April, things, you know, increased. China went to first very high and then down to around 30%. The rest of world was roughly 10%. We had about four months of that. And then we had the final four months at China at roughly 30 and the rest of world at roughly 20. And that and so now when we look forward, we will have a we are planning, as Matt said, we are not planning for any change in tariff rate that is baked into our guide. But essentially, it is 20% in China and 20% in the rest of world. Roughly. There is some variation there by country, but that is roughly what it is. So it really just comes down to the annualization of a full month of 20% globally versus what we saw in 2025. Joseph Nicholas Altobello (Raymond James): Okay. That is helpful. And just to follow-up on the international side. I think you mentioned the addressable market is bigger than the US. Obviously, you have got a head start in the US. But is there anything structural about these markets, whether it is Japan or China, Korea, etcetera, that would make your penetration more difficult, whether competitive or cultural, fewer use cases, etcetera? Matthew J. Reintjes: Yeah. Joe, I would say, when we look at when we look at TAMs, obviously, we were basing that on the analysis of products in those markets and the opportunity for us to wrap those. So we know, point being, we know there is established markets, so then we think about what is the best route to access. And so I would say I do not think there is anything structural. You know, I think it is more what do you prioritize, how do you move into a market, your approach to the market. So some markets we have gone direct in those markets, and we have established teams. Japan is a good example of that. There are other markets where a two-step distribution makes more sense because of the nature of the market, other than size opportunity, the complexity of access, or just the priority. And so what I think you will see us do, and we have talked about this on past calls, we are being very thoughtful about where do we want to be direct, where do we want to leverage partners in almost a river guide type style to navigate some of those complexities of the markets. But I do not see anything structural that would say there are markets that are off limits to us today. Joseph Nicholas Altobello (Raymond James): Okay. Thank you. Operator: Your next question comes from Brian McNamara with Canaccord Genuity. Your line is now open. Brian McNamara (Canaccord Genuity): Mike, I wish you the best here. I just wanted to get a few clarifying points on your guidance. I think you called out strength in bags. Believe on Mystery Ranch and Butter Pat were acquired a couple of years ago, and they were expected to contribute about $35,000,000 sales. How big are bags today? Second is US Drinkware expected to grow in your mid single digit Drinkware guide? And then third, you mentioned sell-in being better than sell-through. I am sorry. Sell-in being being better. Throughout 2025, do you believe we are finished with the destocking? Michael James McMullen: Hey, Brian. Thank you for the words. I caught the first and third question. I may need you to repeat the second question. But bags. So we have not broken it out specifically. The one thing I wanted to clarify is that, you know, our bags business is broader than than Mystery Ranch. I mean, we now had two years of or we bought the we purchased Mystery Ranch in early 2024. We had a bag business before that. We have leveraged a lot of the things that we acquired with Mystery Ranch to help build out our bags portfolio on the YETI side, and you are seeing the results of that. So we have not broken it out, we have talked about it consistently being a driver of growth in 2025 and 2026. We think it is a significant global market opportunity for us. And it is certainly an element of the C&E guide that or the guide that we provided for C&E in 2026. The third question around sell-in versus sell-through. You know, like I said, we have had a couple quarters where sell-through has exceeded sell-in. You know, we do think, while we are not planning for a significant inflection, we do we do believe that there will be more aligned in 2026. You know, our inventory levels are well below where they were last year, as we have said. And so, you know, we will continue to work with our partners on making sure we have the right inventory. You know, as our product portfolio grows and becomes more broader, we are, you know, we are super excited about the opportunities both with, you know, partners where we have been for a long time as well as, you know, some of the newer ones that we have announced recently. So and, Brian, apologies. If you could repeat the second part of your question, I can address that as well. Operator: Your next question comes from Noah Zatkin with KeyBanc Capital. Your line is now open. Noah Zatkin (KeyBanc Capital Markets): I guess maybe just one on tariffs. As it relates to the, call it, $0.35 last year and the incremental $0.35 this year. Any way to quantify how much of that is related to AIPA versus other tariffs? Thanks. Michael James McMullen: Yeah. Hey, Noah. So what I would say is the vast majority of that is related to the AIPA tariffs, which as you all know, is currently what is under review at the US Supreme Court. But it is the majority of the cost that we talked about. Noah Zatkin (KeyBanc Capital Markets): Thanks. And then maybe just one more on the kind of competitive environment. Any changes that you have seen play out, you know, over the last year to call out, like, as you look into '26 maybe versus '25, and then any opportunity from a shelf space perspective related to that. And I guess related to all of that, any thoughts around the promotional environment and maybe industry inventory of '26 relative to last year would be helpful. Thanks. Matthew J. Reintjes: Yeah. Noah, I will hit sort of rapid fire those things. I would say as it relates to shelf, we continue to obviously expand our product portfolio and continue to have conversations, really productive conversations, with our wholesale partners on how we are going to merchandise the new things that YETI is seeing. And it is evidenced by, you know, if you go out if you go out today in the accounts where we have launched this into, the additional space we received for our Scala backpack where that product makes sense, and then the recent launches this year around or the expansion around sports jugs and colorways. So we continue to have really good productive conversations with our wholesale partners and have great relationships as it relates to our innovation and how we fit on the shelf. You know, I think the I think you and we talked about this all last year. I think we have seen a shift in the category and the allocation of total space to that category. And I think all those things create opportunities for the innovation that we continue to push. Now as far as it is early in the year to call the promotional environment, but I think it is safe to assume that you are going to see some tail on that as wholesalers, as brands continue to rotate out or down of their Drinkware inventory. And I think all that for us, because of the strategy of broadening our Drinkware category and expanding the product innovation there, is we continue to operate around that space and create product that we think has got a long standing shelf-stable opportunity. And changes in the competitive environment, I would not call out anything specific other than the promotional environment we talked about, the transition that is happening in that concentrated part of the Drinkware portfolio. But in the rest of the portfolio, I feel like the of our Drinkware portfolio and the rest of our C&E portfolio we continue to drive opportunity, which is what is driving and pacing the growth of the business. Michael James McMullen: Thank you. Operator: I will now turn the call over to Matt for closing remarks. Matthew J. Reintjes: Thanks everyone for joining us today. I want to conclude with thanking Mike for his partnership and welcoming Scott, and we look forward to seeing you all on our Q1 call. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Matt Capuzzi: Please standby. Your meeting is about to begin. Good morning, everyone. Welcome to the Wyndham Hotels & Resorts, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, participants have been placed on a listen only mode. Would now like to turn the call over to Mr. Matt Capuzzi, Senior Vice President, Investor Relations. Please go ahead, sir. Thank you, operator. Good morning, and thank you for joining us. With me today are Geoffrey A. Ballotti, our CEO and Kurt Albert, our Interim CFO. Before we get started, I want to remind you that our remarks today will contain forward looking statements. These statements are subject to risk factors that may cause our actual results to differ materially those expressed or implied. These risk factors are discussed in detail in our most recent annual report on Form 10 ks filed with the Securities and Exchange any subsequent reports filed with the SEC. We will also be referring to a number of non GAAP measures, Corresponding GAAP measures and a reconciliation of non GAAP measures to GAAP metrics are provided in our earnings release and investor presentation, which are available on our Investor Relations website at investors.wyndhamhotels.com. We are providing certain measures discussing future impact on a non GAAP basis only because without unreasonable efforts, we are unable to provide the comparable GAAP metric. In addition, last evening, we posted an investor presentation containing supplemental information on our Investor Relations website. We may continue to provide supplemental information on our website and on our social media channels in the future. Accordingly, we encourage investors to monitor our website and our social media channels in addition to our press releases, filings submitted with the SEC and any public conference calls or webcasts. With that, I will turn the call over to Geoffrey A. Ballotti. Geoffrey? Geoffrey A. Ballotti: Thanks, Matt. Good morning, everyone, and thanks for joining us today. We closed out a challenging year on a very strong note Geoffrey A. Ballotti: delivering net room growth of 4% and full year comparable adjusted EBITDA and adjusted EPS growth of 46% respectively all in line with the outlook that we shared back in October. Against this backdrop, we opened a record 72,000 rooms, the largest number of organic room additions in Wyndham's history and 13% more than last year. We also signed eight seventy deals, which was 18 more than twenty twenty four's all time high further increasing our global development pipeline by 3% to nearly 260,000 rooms and more than 2,200 hotels. We drove a 15% increase in ancillary fee streams and our highly cash generative business model produced $433,000,000 in adjusted free cash flow enabling us to return $393,000,000 to our shareholders. Across the board, where we could control the outcome, our teams delivered in 2025. Our record number of new signings and openings are increasing Wyndham's long term economics by securing franchise agreements that drive higher average royalty revenue. Our record development pipeline is now carrying an average fee par premium of 30% domestically and nearly 20% internationally compared to our existing system which will enhance our future growth. Domestically system growth was driven by strong conversion activity including the Balfour Miami Beach. A luxurious Registry Collection Art Deco Hotel On Ocean Drive and The Barley House, an upscale trademark collection boutique hotel on the marina in the heart of Fort Lauderdale along with so many high quality new construction prototype additions like the new Wyndham Garden in Ana, Texas. The La Quinta by Wyndham in Jackson, Tennessee, and the new Microtel by Wyndham Tooele the great state of Utah. Separately, developer excitement for our EcoSuites brand continues to build. With half a dozen Q4 openings in Round Rock and Pasadena, Texas Peoria, Arizona Springfield, Missouri Conyers, Georgia and Naples, Florida. We closed 2025 with 18 Echo Suites now operating, and with RevPAR and operating margins ramping in line with expectations. New hotels continue to break ground and development timelines are faster than ever as construction costs moderate. Following our introduction of Dazzler Select by Wyndham in the economy conversion lifestyle space back in October, we added another three highly rated Dazzler Select conversions. Allowing hotel owners to preserve their property's individuality while leveraging the power of our global distribution, loyalty, technology, and marketing platforms. And after a highly competitive RFP amongst our lodging peers, we were thrilled to be selected by the Choctaw nation in the fourth quarter to add the spectacular AAA four diamond Choctaw Casino and Resort and Durant, Oklahoma, to our Wyndham Grand brand along with the upscale resort additions of the Choctaw Landing Hocha Town, the Choctaw Pecola, and the Choctaw Grant to our trademark collection brand. This affiliate relationship adds 2,000 upscale rooms over 40 restaurants, bars, lounges, full service pools and spas, and over 100,000 square feet of state of the art conference and event space for our global sales teams to sell. All within easy reach of DFW International a getaway that our over 120,000,000 Wyndham reward members will want to book earn, and redeem at reinforcing why Wyndham Rewards continues to be the number one loyalty program in the industry. The affiliated rooms from these Choctaw resorts join us at an opportune time for our Wyndham reward members as we'll be saying goodbye in the first quarter to approximately 3,000 legacy affiliated rooms. The bulk of which were sourced from travel and leisure and related to the closure of a handful of Wyndham Vacation Resorts that they have previously reported. Along with rooms previously managed by Vacaza, which are being sold by CasaGo to its franchisees. While these terminations will not impact our ability to drive net room growth, on a full year basis, they will create headwinds in the first quarter from a timing perspective. We continue to work on adding more aspirational upscale hotels and resorts which expand opportunities for Wyndham Rewards members to earn and redeem to status match and to transfer benefits increasing Wyndham rewards membership enrollment which grew 13% in Q4, growing the share of direct Wyndham Rewards occupancy that our franchisees enjoy, which grew to a record 54% domestically this quarter and identifying new customer markets to drive credit card sales blue thread marketing and other ancillary revenue opportunities. Internationally, we increased net rooms by 9% EMEA grew rooms by 8% with spectacular new conversions like the Wyndham Corfu, an elegant beachfront retreat on the Ionian Sea in Greece. Along with several new construction additions like the Ramada Arnav Butkai in Turkey a country in which we now have a 130 direct franchise hotels open. With over 40 more in our development pipeline. Latin America and The Caribbean increased net rooms by 5% with new conversions like the oceanfront all inclusive Casa Marina Sosua, a new trademark collection hotel in The Dominican Republic, along with new construction openings like the Wyndham Natal Petangie Beach on the sands of Petangie Beach in Brazil's idyllic Northeastern tourist destination. In Southeast Asia, the Pacific Rim, we grew net rooms by 11%. With upscale conversions like the Avolo, Wallumolu an upscale Wyndham hotel located on the heritage listed Finger Wharf in Downtown Sydney Harbour along with several exceptional new construction additions like the oceanfront window, Go Sung, South Korea. And finally, in Mainland China, we again grew our direct franchising system double digits by an impressive 14%. Expanding our footprint across the country with conversions like our one hundred and thirty sixth Days Inn hotel in Changsha, and so many new construction additions like our twentieth Hawthorne Suites in Xi'an and our thirty first Microtel by Wyndham in Anxi Jianxi along with dozens of other luxurious new openings like the Wyndham Lachan in Sichuan province. Fourth quarter global RevPAR declined 6% in constant currency with domestic RevPAR down about six points, excluding hurricane impacts in 2024. And international RevPAR declined one point, While we continue to see strength in several important Midwest and industrial states for us like Missouri, Minnesota, Michigan, Wisconsin, and Oklahoma. Where we're seeing increasing infrastructure demand being contracted was more than offset by continued softness in our three largest states Texas, California and Florida, which account for one quarter of our U. S. Room count which excluding hurricane impacts declined 11%. Importantly, booking windows and cancellation rates both improved versus fourth quarter twenty twenty four And on a full year basis, U. S. RevPAR declined 4%, which was in line with our expectations. In a moment, Kurt will walk you through our expectations for the full year. Excluding hurricane impacts, the decline of 6% we saw in Q4 improved to down 4% in January and has further improved thus far in February. Leisure and corporate bookings are beginning to pick up as reflected in our booking backlog And as we approach the month of March, we'll lap the beginning of when our RevPAR significantly decelerated in 2025, and when our domestic comps become meaningfully easier. Internationally in the fourth quarter, we continue to see solid growth across our EMEA region, with RevPAR up 7% driven by considerable strength in Southern Europe and across The Middle East. Our Latin America region also delivered impressive RevPAR growth of 6% an 11 sequential improvement from the third quarter reflecting strong leisure demand and pricing power from our more upscale brands across The Caribbean. Performance in Asia continues to lag the rest of our international regions. Southeast Asia and The Pacific Rim was down 2% primarily due to weakness in Korea and China was down 10% with continued ADR declines their deflationary economy. We once again delivered outstanding growth in our ancillary revenues. New strategic partnerships and affiliations new technology initiatives and continued momentum in our co branded credit card program fueled a 19% growth in fourth quarter ancillary fees bringing full year growth to 15% slightly ahead of our expectations from the beginning of the year. After its launch in October, Wyndham Rewards Insider our travel rewards annual subscription program, saw its month over month paid membership double in November and then again double in December. As our teams work to fully integrate Wyndham Rewards Insider into our booking paths and digital platforms. We also recently signed an agreement with Mastercard to create our first international co branded credit card in Canada, which is expected to launch later this year. Like all of our US offerings, we will be including both no fee and premium card options. This is an exciting growth opportunity for us not only designed to bring more members into the Wyndham rewards ecosystem and drive incremental ancillary revenues in Canada, but also serving as a blueprint as we plan for expansion of our credit card platform into additional new international markets. On our third quarter call, we highlighted the success of our AI initiatives with nearly three fifty agentic AI agents handling millions of guest calls and reservation requests, driving hundreds of basis points of additional direct bookings and generating incremental revenue while reducing on property labor costs for our franchisees. With a track record of proven results, we're accelerating our Agencik AI capabilities on the data foundation that set our transformation in motion. Through our partnership with Salesforce, we created a first of its kind guest three sixty data product establishing a scalable AI factory that enables us to rapidly design and deliver advanced solutions that deepen engagement with both our guests and franchisees in ways we never imagined possible. We continue to work with public LLMs, including Google AI Mode, and ChatGPT to establish direct connections of our hotel data to eliminate the need for these models to scrape our sites. For example, in November, Google selected Wyndham as one of a handful of partners to take part in an agentic booking experience on AI mode in search. Soon, guests will be able to discover Wyndham properties through natural conversational interactions while our connected systems enable seamless direct bookings within AI mode. And we're very excited to share that we successfully connected to Anthropix Cloud, the family of LLMs known for its emphasis on safety and human like reasoning with over 30,000,000 monthly active users. It's an early glimpse of how AI native distribution will reshape the way guests find and book our hotels, which helps us rapidly improve the guest experience and increase direct booking capture. Before I wrap up, as you saw in our release last night, we recorded non cash charges in our fourth quarter results related to the recent insolvency filings of a large European franchisee Rivo Hospitality Group, While our balance sheet exposure to Rivo was secured by certain collateral and guarantees, the scope of these filings has unfavorably impacted the value of our security and our expected recovery. We've engaged an experienced team of advisers to assist us during this complex process and Kurt will walk through the impacts to our financial statements and reporting metrics in a moment. Geoffrey A. Ballotti: We want to Geoffrey A. Ballotti: extend our heartfelt appreciation to our team members around the world. Our resilience in 2025 would not have been possible without their dedication, and their support. Their commitment to our economy culture and to delivering the very best value to owners and guests in the face of what was considerable global RevPAR challenges remains the key to our continued success as the world's largest hotel franchisor. On behalf of our entire team, would also like to recognize Alexandra Young, who joined our Board of Directors in November. Alex is an accomplished leader who is recognized as an expert in global portfolio management international investment. And our expertise spans multiple sectors, including hospitality, and real estate. She serves on our corporate governance, and audit committees bringing valuable expertise to our board. And finally, we'd like to welcome Kurt Albert, our interim CFO, who continues to lead our global finance organization while we complete our comprehensive search for a permanent CFO we expect to conclude in the coming weeks. And with that, I'll now turn the call over to Kurt. Kurt? Kurt Albert: Thanks, Jeff, and good morning, everyone. Kurt Albert: Having spent more than fifteen years with Wyndham, I have a deep affinity for this organization and have truly appreciated the opportunity to increase my engagement and conversations with the investment community since stepping into this CFO position a few months ago. That said, I'll begin my remarks today with a detailed review of our first fourth quarter and full year results followed by an update on our cash flows and balance sheet. I'll then cover our 2026 outlook. Before we begin, let me remind everyone that the comparability of our financial results continues to be impacted by the timing of our marketing fund spend. In the fourth quarter of this year, marketing fund expenses exceeded revenues by $2,000,000 compared to revenues exceeding expenses by $5,000,000 in the fourth quarter of last year. During full year 2025, marketing fund expenses exceeded revenues by $3,000,000 while in 2024, marketing fund expenses exceeded revenues by 1,000,000 To enhance transparency and provide a better understanding of the results of our ongoing operations I'll be highlighting our results on a comparable basis, which neutralizes the marketing fund impact. As Jeff just mentioned, one of our large European franchisees Revo, filed for insolvency proceedings for most of its operating entities under self administration last month. Given collectibility concerns, we began deferring all Rebo related revenues starting in the fourth quarter. While these hotels continue to operate under our flags, they will remain in our system size RevPAR royalty rate metrics, and fees owed to us will continue to accrue. For the purposes of our 2026 outlook, we have taken the conservative steps of removing all Revo related revenue recognition from our expected results until such time that we have greater certainty on expected outcomes and collectability. We also recorded non cash charges of 160,000,000 within the operating expenses and impairment lines on our P and L. Which reflects a write down to the net realizable value of the loans outstanding accounts receivable and development advances with REVO as well as the carrying value of our Vienna House intangible assets. As Jeff said, we are continuing to work closely with a strong team of local advisors to pursue all available remedies to maximize the recoverability for our shareholders, and importantly this relationship represents a unique circumstance given Revo's concentration within our portfolio. In the fourth quarter, we generated $334,000,000 of fee related and other revenues and $165,000,000 of adjusted EBITDA. Fee related and other revenues declined 2% year over year primarily reflecting a 5% decrease in global RevPAR lower other franchise fees and the deferral of fees from Rebo. These headwinds were partially offset by a 19% increase in ancillary revenues and system growth of 4%. Despite a 5% decline in RevPAR, a $7,000,000 reduction in fee related and other revenues and increased cost associated with insurance, litigation defense and employee benefits fourth quarter adjusted EBITDA increased by 2% on a comparable basis. We'd like to thank and recognize our teams around the world who did a fantastic job this quarter helping to drive cost containment measures combined with operational savings aided by the realization of AI investments that drove efficiencies. Adjusted diluted EPS for the quarter was $0.93 down 4% on a comparable basis as a previously anticipated higher effective tax rate and higher interest expense was partially offset by comparable adjusted EBITDA growth and the benefits of share repurchase activity. For the full year, we generated approximately $1,430,000,000 of fee related and other revenues and $718,000,000 of adjusted EBITDA. Fee related and other revenues increased $25,000,000 year over year primarily reflecting a 15% increase in ancillary revenues and higher pass through revenues associated with our global franchisee conference in 2025 partially offset by lower royalties and franchisees and lower non conference related marketing reservation and loyalty revenue. The decline in royalties and franchise fees and non conference related marketing reservation and loyalty revenue primarily reflects a 3% decline in global RevPAR and the deferral of fees from Rebo partially offset by system growth of 4% and a seven basis point increase in our U. S. Royalty rate. The strength and efficiency of our business model in the face of declining U. And global RevPAR resulted in full year adjusted EBITDA increasing by 4% on a comparable basis. This increase primarily reflected our growth in ancillary revenues as well as cost containment measures, including onetime variable cost reductions, partially offset by lower royalties and franchise fees and increased costs associated with insurance, litigation, defense and employee benefits. Adjusted diluted EPS increased 6% on a comparable basis to $4.58 reflecting adjusted EBITDA growth share repurchase activity, partially offset by higher interest expense. Adjusted free cash flow was $168,000,000 in the fourth quarter and $433,000,000 for the full year. With a conversion rate from adjusted EBITDA of 60%. Slightly ahead of our expectations due to favorable working capital timing which will reverse out in Q1. Our adjusted free cash flow yield of 7.5% continues to be best in class within the lodging sector. Development advanced spend totaled $32,000,000 in the fourth quarter, bringing our full year investment to 105,000,000 in line with our expectations largely consistent with our spend full year 2024. Less than one third of our openings in 2025 included development advances. Room openings that are entering our system at a fee par premium nearly 40% above our current system. Over the course of 2025, we added hotels in CPAR accretive markets such as Miami Beach, Houston, Atlanta, Mexico City and Singapore, And we expect to continue improving per room EBITDA economics creating a compounding benefit over time. We returned $393,000,000 to our shareholders in '25, representing 5% of our market cap, $127,000,000 of common stock dividends and $266,000,000 in share repurchases. Over the past five years, we have returned 37% of our market cap to our Kurt Albert: shareholders, Kurt Albert: leading all lodging C corps in capital return. Earlier this month as part of our continued commitment to shareholder returns, our Board of Directors authorized a 5% increase to the quarterly cash dividend raising it to $0.43 per share, beginning with the dividend expected to be declared in the 2026 reflecting the Board's ongoing confidence in the strength of our business model and our ability to consistently generate strong cash flows. And as a result of the completed refinance of our revolving credit facility in the fourth quarter, we closed the year with approximately $840,000,000 in total liquidity, our net leverage ratio of 3.5 times remained as expected at the midpoint of our target range. Now turning to outlook for 2026. We expect full year global net room growth of between 44.5%. From a timing standpoint, in the first quarter, given the known termination of approximately 3,000 rooms that Jeff mentioned earlier, expect our global system to be largely flat sequentially before returning to growth in Q2. Additionally, our full year net room growth outlook excludes any potential termination impact associated with Revo's ongoing insolvency. We are projecting global RevPAR to finish between up zero five point to down 1.5 points. Our expectations reflect several key dynamics. While U. S. RevPAR performance trends have improved thus far in 2026, given the first quarter features our most challenging comps of the year, we expect first quarter U. S. RevPAR to range from between down 3% to down 2%. As we move into the second quarter, we expect U. S. Leisure demand to begin to improve aided by events such as the FIFA World Cup and the two hundred and fiftieth anniversary of America. As well as the potential for U. S. Government stimulus as we get closer to the midterm elections. However, and importantly in order to achieve our full year we would only need U. S. RevPAR from Q2 to Q4 to be approximately flat. Full year international RevPAR growth is expected to remain roughly in line with 2025 performance. While the strong performance we saw in EMEA Canada and Latin America in 2025 grow at a bit of a slower rate in 2026 we are anticipating the potential for offsetting benefits from an improvement across Asia Pacific as China's recovery continues. Moving on to the financials. Fee related and other revenues are expected to be $1,460,000,000 to $1,490,000,000 which includes low to mid teens year over year growth in our ancillary revenues. Adjusted EBITDA is expected to be between $730,000,000 and $745,000,000 growing year over year by 2% to 4%. Excluding the previously noted return of approximately 15,000,000 of one time variable cost savings, and the impact of the deferral of approximately $12,000,000 of royalties related to Revo our adjusted EBITDA would otherwise be expected to grow between 5% to 7%. While we expect our marketing funds to breakeven on a full year basis, will continue to see timing differences in our quarterly results. We expect to overspend the funds by approximately 15,000,000 to $20,000,000 in the first quarter and then underspend in each of the remaining quarters of the year. Additionally, including the impact of our marketing fund spend, we would expect to generate approximately 20% of our full year adjusted EBITDA in the first quarter. Consistent with the Q1 percentage of our full year 2025 adjusted EBITDA. Adjusted net income is projected to be $354,000,000 to $368,000,000 and adjusted diluted EPS is projected at $4.62 to $4.8 based on a diluted share count of 76,700,000.0. Which as usual assumes no share repurchase activity or incremental interest expense associated with any potential borrowing activity. Free cash flow conversion before development advances is expected to range from 55% to 60%. In addition to the cash we generate from operations, will also continue to benefit from a strong balance sheet. Combining our excess free cash flow and incremental capacity while maintaining leverage at 3.5 times, Based on our projected EBITDA growth, we would anticipate having up to $400,000,000 of available capital in 2026 to either invest in the business or return to shareholders. We expect approximately $110,000,000 of this available capital will be deployed as development advance spend roughly consistent with 2025. In closing, despite the challenges we face in 2025, our results continue to reflect the highly cash generative nature of our business. And a business model that has a proven ability to generate organic adjusted EBITDA and EPS growth amid macro uncertainty. We are entering 2026 with a strong balance sheet, and efficient operating cost structure prolific ancillary revenue growth, the potential for significant demand tailwinds. We will continue to invest in high return growth opportunities and digital technology in order to provide incremental profitability for our owners, while returning excess capital to shareholders in a consistent and sustainable manner. We are enthusiastic about building on our successes and capturing the opportunities that lie ahead in 2026. With that, Jeff and I will be happy to take your questions. Operator? Operator: You very much, Mr. Albert. Ladies and gentlemen, the floor is now open for questions. Go first this morning to Brandt Antoine Montour of Barclays. Brandt Antoine Montour: Good morning, everybody. Thanks for taking my question. So Jeff, I was hoping you could put a finer point on what you're seeing year to date in terms of RevPAR you're actually seeing occupancy build Geoffrey A. Ballotti: sequentially and where Brandt Antoine Montour: which segments and what type of demand Stephen White Grambling: segments that you're actually seeing that build in? And then sort of last follow-up to that same question would be how much of or are you putting any of these green shoots that you're seeing? I'm my words, shoots. Into your flat Q2 through Q4 average implied RevPAR growth in your guidance? Geoffrey A. Ballotti: Good morning, Brent. I'll let Kirk talk about the guidance, but I'll talk first about just how encouraged we are year to date. With a significant improvement in January. I mean, it to your question, it is the first real sign of green shoots that we've seen in a while. Overall, January US RevPAR was down 4% normalized And all of that RevPAR improvement was demand driven, is just for us so great to see. We saw very positive January trends as well in the three states that have dragged us down. We've been talking about over the last couple calls Texas improved by 600 basis points year over year in the quarter from down five to plus one in January, which is great to see. Florida, Improved 400 basis points from Q4. To what we saw in January. In California, we're seeing really no signs of any deterioration in the RevPAR. We had been all along last year. So we're seeing continued strength as we talked about in the Midwest. Wisconsin up 7%, Minnesota up, Oklahoma, Michigan all up. Mid to low single digits. And February continues to improve in line with what we saw in January, just just just great great news. And I I think as you've all seen in the STR and the economy set, which began improving as we all know in the late summer. It's continuing to improve. And if you look at the last four weeks, versus the last eight weeks, last four weeks are 200 basis points better than the last eight weeks. And, again, our normalized US occupancy here in The US has only continued to improve. October was down 4%, November was down 3%, December down 2%, January only down 1%. Geoffrey A. Ballotti: And Geoffrey A. Ballotti: going back to 2019, one of the things I think a lot of folks miss is occupancy has recovered more so in economy and mid scale. Than it has in any other segment. If we look at upper upscale and luxury occupancy, which were both down 8%, 800 basis points to 2019 for the fourth quarter, Economy and midscale performed 200 and almost 500 basis points better respectively. And it's it's starting to feel like demand is beginning to really improve, that that those green shoots are beginning to come. With the longer term opportunity for our franchisees and and small business owners, being rate. Mean, we know, upscale hotels have been able to price much more aggressively than our chain scales where the guest is obviously more price sensitive. Kurt Albert: ADR for economy was up 11% in 2019. Geoffrey A. Ballotti: But it was up 30% in the luxury segment And And that was the only segment that was able to outpace that 25%, 26% growth in inflation. So that's very good news. From a green shoots standpoint for our economy and mid scale owners from a pricing standpoint. With ADR still a good 1,500 basis points below inflation. And so as unemployment remains at historic lows and weighed growth, continues to outpace inflation, we think that's going to provide upside when consumer confidence does stabilize. And RevPAR returns which we know it will to its three percent thirty year CAGR. But Kirk, maybe you could Stephen White Grambling: tie that into the guidance. Kurt Albert: Yes. Brent, I think when we think about some of the green shoots that we touched on in the prepared remarks, we have not necessarily tried to build an individual level of opportunity directly into our guidance. Really two reasons. One, in isolation, some of these might end up being smaller and or harder to quantify. And two, really the ultimate impact to the year will really be determined by when we do start to see some of these benefits come to fruition. So way we're thinking about it is as the year progresses and we see how these tailwinds materialize, and start to maybe stack together, they could end up being how we get towards the higher end or maybe even above where our guidance is right now. Stephen White Grambling: Excellent. Thanks, everyone. Operator: Thank you. We'll go next now to David Brian Katz with Jefferies. Geoffrey A. Ballotti: Good morning, everybody. Matt Capuzzi: So Jeff, I could probably venture an educated guess what your kind of least favorite part of the whole report But you talked in your opening comments about a lot of different things. Geoffrey A. Ballotti: That are positive. Do you have sort of one aspect of this sort of whole earnings report that you would pull out as Michael Joseph Bellisario: sort of the most positive or your favorite Geoffrey A. Ballotti: David, that one thing would be development. If we look at net room growth acceleration, along with the acceleration in our executions and the growth of our pipeline, that would be the one thing that we're most excited about. I mean, to see the accelerated net room growth in these higher fee par segments continue as we did, a record 72,000 organic rooms almost 600 hotels. It was up 13% to what was last year our record. And it just continued to build throughout the year. 4,000 net rooms added in Q1 seven thousand in Q2, 9,000 in Q3 and nearly 14,000 in Q4. Kurt Albert: That was Geoffrey A. Ballotti: the one thing that I think really stands out for all of our teams. And and we are encouraged by both new construction and conversion. I know there's been a lot of talk across the industry that new construction pipelines are pressured. We're not seeing it. We're seeing growth in our new construction executions, which were up 15% the prior year. And new construction openings. Domestically, our new construction openings increased 50% year over year. And globally, they increased 7%. And over 30% of our openings this year were new construction. Conversion is still solid. It was up 16% with good growth across the board. Our prototype brands like Hawthorne Suites, Garden and La Quinta all saw solid growth both on the conversion and the new construction construction side. Our economy brands, Days Inn, Super eight, and Travelodge, all saw double digit growth economy opening. So I think the one thing we're really excited about, our franchise sales team have delivered a pipeline for us looking forward. That is larger and stronger than ever eight seventy deals signed. That was a record for the full year. Up 18% in really high fee par regions like across Latin America and Europe, Middle East, Eurasia. It was really encouraging for us to see, and that would be would be my highlight. Matt Capuzzi: Thank you. Operator: Thank you. We'll go next now to Dany Asad with Bank of America. Kurt Albert: Good morning, Jeff and Kurt. Just a demand question for you. So if we look at the 20% of bookings that are infrastructure related, how does the RevPAR from that demand segment compare to that of the leisure traveler? Geoffrey A. Ballotti: And should we expect the mix of the 20% infrastructure Kurt Albert: versus the 70% leisure? Should we expect that mix to change over time as you move into higher higher fee part rooms? Geoffrey A. Ballotti: Thanks, Danny. We will expect it to increase excluding the impact of the federal government, which was a considerable drag for us. Infrastructure performed a bit below leisure, think leisure was down something like six Infrastructure was probably down about eight. But infrastructure, we believe your question will continue to perform better than it did it did in 2025. And we expect it to continue to pick up. We still view that $1,000,000,000,000 infrastructure spend as a as a real multiyear tailwind for us. And additionally, it'll get back to driving that 150 basis points of additional RevPAR growth that it did for us in the '24. Pre Doge and pre government shutdown, which slowed us down. This year. And we're also very encouraged about hotels near so many private investment projects, infrastructure projects, especially data centers and semiconductor fabs which as we talked about, to outperform. From a RevPAR and RPI standpoint. Excluding the government and the Fed rooms, which were obviously down as I mentioned, infrastructure demand, it kept pace. It helped drive, we believe, our weak Economy occupancy improvement that we saw each month of Q4. Economy occupancy, which was down 7% in October, 5% November, 2.5% in December. That improvement just demonstrated a continued resilience and gradual pickup of our infrastructure demand. Our GSO teams did a fantastic job, consumed revenue for full year Kurt Albert: grew Geoffrey A. Ballotti: two twenty basis points with so much of that growth being infrastructure related. And our contracted room nights right now are up about two times what our consumed infrastructure room nights are. And our GSO year to date infrastructure booked and consumed is pacing well ahead. More so than it fell off about two forty basis points ahead of same time last year. So we think it will continue to pick up. Stephen White Grambling: Thank you very much. Operator: Thank you. We go next now to Charles Patrick Scholes of Truist Securities. Michael Joseph Bellisario: Thank you. Good morning. A question then a follow-up question. And the first one sorry if I missed it. Did you quantify what the RevPAR impact was in the fourth quarter from the government shutdown or another way of saying it, how much of it easy comp do you have from that in the upcoming April? Thank you. Matt Capuzzi: Yes. Kurt Albert: Patrick, in the fourth quarter of this year, government shutdown was not a significant headwind, but it was about 50 basis points, maybe a little bit less than that, that we'll have coming up till that next fourth quarter. Michael Joseph Bellisario: Okay. Thank you. So a little bit of a tailwind there from that coming up. Can Then, not to dwell on the negative, Rick, can you talk a little bit more about this bankruptcy and was this with the Revo exactly you know, what what what happened there And was this the same was this the $44,000,000 investment that you had made in this in 2022? Just to make sure I'm understanding Matt Capuzzi: what Michael Joseph Bellisario: what the original Kurt Albert: participation in that was. Thank you. Yep. Matt Capuzzi: Patrick, Kurt Albert: to your last question first, yes, it was tied to the of the loan investments we made earlier this year. As we noted in our prepared remarks, we learned about the insolvency during the preparation of our our year end financial statements in January. So this drove the timing of recording the charges that we did in our fourth quarter results. Since this filing, we've been working closely with our team of advisers to determine next steps in this process and ultimately understand what our plan looks like moving forward. Right now, it's really too early to speculate on what potential outcomes could look like. It's very early in the proceedings. And we believe while we both said they want to emerge from insolvency this year if possible, we also believe these proceedings could last months many months potentially. Matt Capuzzi: Thank you. We'll go next now to Daniel Brian Politzer with JPMorgan. Operator: Hey, good morning, everyone. Thanks for the question. I just wanted to follow-up on the Rivo topic. You had the Super eight MFA earlier this year. I mean are there other franchisees or agreements that we should be kind of thinking about or that are possibly in danger zone? Has there been any change to your underwriting standards? Have you you kind of saw these higher fee part deals? And then as we think about just kind of in terms of the overall program, what's the collection rate or the rate of this kind of stuff happening so we can gain a little bit more comfort with it? Thanks. Matt Capuzzi: Thank you. Kurt Albert: Good morning, Dan. I think what we touched on briefly in our prepared remarks is this circumstance was certainly an outlier on a number of levels. Given the size, the history of the relationship that we had with with the partner and then ultimately, the level of capital deployed. The way we think about it, when we look at our balance sheet right now and excluding anything that was on related to REVO, there's only about $20,000,000 of total additional loan expense across all of our other franchisees that we have around the world. And then similarly, when we look at our development advances that are outstanding, no more no franchise franchise Z has more than about five percent of that balance. So this was really the exception. Ultimately, it was a situation that we feel like was also very different than the Super eight situation earlier this year, which was a legacy mess relationship. So we do view it as an outlier. In terms of your second part of your question, how we're thinking about it moving forward, deployment of capital. So to support our business growth will remain and is and has always been our top priority. So short answer, we will absolutely continue to invest in the growth of our business, and we believe and we know we have ample capacity to do that. And so frankly, it does not change our position there. Matt Capuzzi: And what Kurt Albert: like we do with all of our deals that have capital tied to them, we always will look back and and evaluate, what what and anything that we can do moving forward to make sure that we put ourselves in the best position to succeed. Matt Capuzzi: Got it. Thanks so much. Operator: Thank you. We'll go next now to Stephen White Grambling. Of Morgan Stanley. Geoffrey A. Ballotti: Hey, thank you. Stephen White Grambling: In the presentation, highlighted a number of initiatives with AI partners. I was hoping you could just share maybe how to think about any costs or potential benefits from some of these initiatives. I know it's it's very early, but is this something that could eventually end up with Geoffrey A. Ballotti: new fee streams? And what are some of the initial tests revealed in terms of know, the benefit to the system and what KPIs we should be tracking to evaluate the success of some of these. Thanks, Steven. Yeah. Matt and Scott Strickland and and Mike Mahar, who, our chief technology officer, put in three great new slides. I'll take the first part of your question on on costs. I mean, there are nominal costs say, you know, less than a $100,000 to connect. Our MCPs to the LLMs. There are no transaction costs, however, In Claude today, the guest receives a link to complete the transaction on our brand.com site. ChatGPT works the same way. And, yeah, I mean, looking forward, you'll see ads that seek to monetize some of that I I think Claudio said they're not doing it, that they're not ever gonna do it, but we'll see. In terms of how we think about the benefits and and what it's doing for our franchisees, I mean, it is it is just massive opportunity for us on on so many different levels. And I think the exciting thing for us is is we're no longer piloting these. We're deploying them. On the second quarter call, we talked about Wyndham Connect, which is a trained large language model partnered with Canary Technologies. There's there's a quote in there on slide five. From Canary's CEO. That is allowing our over 5,000 of our hotels today to talk directly to all of their guests via AI. And it it's taking costs for our franchisees in small business owners. Out of their front offices. It it's allowing them to make extra money We talked about this. I think this was your question in the last call by selling early check ins and late checkouts and upgrades and amenities. And it's providing them with an economic platform free of charge that they did not have before to monetize that platform, small, and and large. We have a very engaged Howard Johnson's hotel. Outside of the main gates of Anaheim that's making over $10,000 a month in incremental fees that that are are going to that hotel's bottom line. That's a $120,000 a year. A typical select service economy hotel may generate quarter of $1,000,000, so it's a big, big deal. The Wyndham Connect Plus that we we outlined in also in the deck is leveraging Salesforce and Canary with 350 AI agents. We talked about this on our last call. That's handling hundreds of thousands of guest calls and and handling all the requests. Again, saving franchisee labor costs. But most importantly to your question, it's driving that direct contribution over 300 basis points direct contribution to franchisees who who are using it. And then this call in in in again, in the IP, laid out where we are with chat GPT with Gemini. Full AI and with Claude, seamless direct booking capabilities to really with Claude right now, it's live. Click to book through to windham.com. And and we're launching Wyndham apps on all of the emerging LLMs via either our MCPs or our APIs directly and that'll continue to add new capabilities to optimize most importantly how our brand.com sites appear in those searches to drive more direct bookings. Operator: Thank you. We'll go next now to Michael Joseph Bellisario with Baird. Thanks. Good morning, everyone. Charles Patrick Scholes: Just one question on net rooms growth. Operator: One, are you guys doing more affiliate deals like Chalk And then kinda help us understand what's the opportunity set there Stephen White Grambling: And I understand these are higher fee programs, but you're only getting paid on the direct contribution, if that's correct. And then just any numbers on what percentage of your rooms growth gross openings in '25 or '26 are are coming from these higher fee par affiliate deals, but where you're only getting say Matt Capuzzi: 20% of the bookings Stephen White Grambling: color there would be helpful. Thank you. Geoffrey A. Ballotti: Yeah. Mike, we we report on affiliate annually and their properties, as we've talked about under agreement either our former Wyndham Worldwide parent T and L as we talked about, or or new third party partners like our recent affiliation with Choctaw, which was a very competitive process, and and we were thrilled to be selected. In terms of what percentage to your question of affiliate ads in 2025, I think it it will be consistent to what we've been reporting on for the last several years. And and the first part of your question, I mean, we will always look to add more aspirational hotels and resorts where where they make sense as as Choctaw does. Where they are providing our guests access to something unique that we don't have upscale vacation experiences. Importantly, where our Wyndham reward members often most want to redeem and vacation. And I'd I'd also add they're very accretive and very helpful in driving our credit card and our ancillary fee pro our ancillary fee Charles Patrick Scholes: fee Operator: Been shaken at Mizuho. Stephen White Grambling: Hey, good morning. Thanks for taking my question. Jeff or whoever wants to take this, how do you envision the ranking system within AI, how do you Operator: envision the ranking system working as consumer search for hotels to the extent you have a view Alex Brignall: do you think this will be a traditional kind of CPC auction model? Or do you have a sense that will be determined? Purely on relevancy in the search? Obviously, it's early, but would all be your opinion on how that plays out? And and kind of related, you've talked about the MCP server. You know, maybe you could talk about how you're using this to this opportunity to differentiate the attributes associated with your with your assets to make them more relevant? And, you know, am I thinking about that in the right way? Thanks. Geoffrey A. Ballotti: Yeah. I think you are. I mean, we we've, you know, one of the one of the things that our our investment in our tech foundation allowed us to do is is working with best in class partners like AWS and Oracle and taking a very data driven approach with with a really mature and an established Salesforce Data three sixty product. We've been able to personalize agentic guest three sixty experiences all in one place. It centralized our res, our loyalty, our CRM data. And I mean, the way we're thinking about it is is in terms of how that is allowing our guests, in real time to answer questions and book direct. And check-in and check out. I we we we, to your point, it's, it's early days. But in terms of how we're communicating with our guests, and delivering for them, answering these voice calls and messages and most of that volume through voice right now, through the AI completing the booking, driving significant cost reductions for our call centers and and freeing up resources to redeploy in the marketing fund and and sending the guests all of our availability, all of our rates, all of our inventory which they were already getting by scraping our brand.com sites. But by connecting direct, ensure that the data is the most accurate, the most current it could be, that our rates are are always in parity for a guest who who's shopping. And so our our focus is really on driving more direct bookings and and and it's early days to your point, and that's what we're seeing. Operator: Thank you. We go next now to Isaac Arthur Sellhausen with Oppenheimer. Hey, good morning. This is Isaac Salazen on for Ian. Could you touch on the Alex Brignall: drivers of the ancillary fee growth in 2025? And then maybe some of the factors that enable you to grow in the low to mid teens this year? Kurt Albert: Sure. Isaac, I think our biggest driver, like we've touched on a number of our previous calls, and will continue to be our U. S. Co brand card. We had the benefit in 2025. Of renewing that that partnership with Barclays on a long term deal, and that provided some significant tailwinds, not just for 2025, but also in the early part of 2026. And in conjunction with that, it will and it has allowed us and our teams over at Barclays to work specifically on freshening up the program and the suite of products and the value proposition on those cards. And so we see that to continue to be a big opportunity we get into the second half of this year and then beyond. But that's not our only lever, of course, and our teams are hard at work We've announced over the and now in the last twelve months a debit product in The U. S. We just announced this morning. You heard Jeff talk about our co brand card that will be coming later this year in Canada. And of course, we're not going to stop there. We are evaluating other opportunities around the world and and we'll update you when when those are available. And the same thing holds true with our different partnerships and and affiliate relationships. And and, of course, then then Wyndham Insider, which we we do believe is is a will be a a unique game changer for us as we think about an opportunity to really engage with our our members in a way that that we have not yet been able to. Operator: We'll go next now to Meredith Prichard Jensen with HSBC. Matt Capuzzi: Good morning. Thanks. Kurt Albert: I was hoping you could speak a little bit more about China. Meredith Prichard Jensen: And perhaps unpacking a little bit what you saw at the end of the year. And how the demand trends figure into the guidance that you gave? And maybe add on a little bit about development there and chain scale strategy. I know you mentioned the Baymont launch, so that would be great. Thank you. Geoffrey A. Ballotti: I'll start and then I'll let Kurt touch on guidance. Our brands in China were Meredith much like here in The U. They were the first to recover coming out of the lockdown. And and looking at our overall RevPAR today versus versus where it was back in '19, we're in line with Smith Travel, and we're actually ahead of the industry by about 400 basis points. Our China direct RevPAR, which was down 19% still to 2019 versus STR down 23% In the quarter overall, China ADR, which was good to see improved by 100 basis points from down eight to down six. And we all know is a deflationary economy, which is the longest deflation streak in China since the nineteen sixties. And likely to soon turn. There there is just a tremendous occupancy opportunity and and tailwind at only 83% of '29 levels. And we think that has the opportunity to come back as ADR is already coming back for us and for our hotels over there after having been the first to recover. From a development standpoint, gosh, our our room growth in China was spectacular. And the deals that we're signing now have royalty rates approaching 4%. And an overall royalty rate approaching our international royalty rate which is great to see. And and the bottom line for us is that every China room we add add incremental revenue and an annuity like vStream to our business. We grew rooms 10% overall. And delivered a 14% net room growth in the direct vPAR accretive rooms. We executed 49 new deals in Q4. We a lot of those were baymounts to your point. And it brought the year to a 182 signings, which was up 10% So we're feeling really, really good about our long term prospects in China. As the country recovers. We do want to add new brands like Baymont like we have with Hawthorne Suites and and La Quinta. To capture those guests who are trading up, who want a reliable international name at a domestic price point. But Kurt, maybe you could touch upon the guidance. Kurt Albert: Yes, Meredith. I think the way we're thinking about China is we know that 2025 was a tougher year for our brands in the market. But overall, when you look at how we are stacked up with the industry compared to 2019, basically in about the same place. And so moving forward, we're not expecting to see the same type of year over year declines in the market. I think the industry is projected to be about flat for 2026. And since that's where our brands are right on top of where the industry is, that's one of what's driving our underlying assumption is a performance much closer to flat in 'twenty six. And that will be be a significant improvement from what we saw in 2025. Operator: Thank you. We go next now to Lizzie Dove with Goldman Sachs. Meredith Prichard Jensen: Good morning. Thanks for taking the question. I wanted to go back Elizabeth Dove: to U. S. Rooms growth, if possible. Obviously, some moving pieces in Q1 that you called out. But curious how to think about U. S. Rooms growth just for the rest of the year and even just longer term. It feels like some of the operators are going into more of these conversion friendly type brands in that kind of premium economy segment, which might overlap with you. But then you also have nice momentum happening right now at midscale and above. So just curious how to think about those puts and takes long term. Geoffrey A. Ballotti: Yeah. I mean, we're encouraged, obviously, by by the pipeline, Lizzie, that US continues to pick up. Really encouraged with with, obviously, the conversion rooms, which were just so solid. And, you know, we we continue to have, an opportunity with, with our economy openings. I mean, we we have we we opened 10,000 economy rooms domestically this this year in 2025 versus 5,000. In 2024. 2,000 of those were Echo Suites but just that was a 90% growth in economy opens, which drove a 4% US gross adds to our economy system, we we haven't seen in a while with the best in class economy retention rate of of over 94%. And you couple that domestically with how we're growing, at over 2% net room growth in the domestic mid scale brands that you just mentioned. 2025 was the most opens in nine years. Conversions are picking up and the pipeline continues to grow. We're feeling really good about The US. Operator: Thank you. And we'll take our final question today from Trey Bowers with Wells Fargo. Geoffrey A. Ballotti: noticeable that economy rooms Hey, guys. I guess just building on that, it was Michael Joseph Bellisario: had the lowest declines I think we've seen in many years, but mid scale rooms Stephen White Grambling: slowed a little bit. Just on that mid scale and above, Michael Joseph Bellisario: you just dig in on some of the brands that are getting you guys excited and feel like further accelerate that domestic pace? And then I guess a last piece of that I'm not sure if I missed this, but should we kind of expect to see a similar level of domestic NUG growth this year to last year or should we model for some level of acceleration? Stephen White Grambling: Thank you. Geoffrey A. Ballotti: Yeah. I think similar, Trey, is fair. And in terms of the brands, you know, I just mentioned Days, Super, Travelol showing double digit growth. Mid scale brands were our prototype brands. On both the new construction and the and the conversion side. We we domestically signed 30 new construction deals. David Wilner and his team just did a great job for our La Quinta new construction, Hawthorne Suites new construction. Obviously, extended stay is, is really really hot right now. Our Microtel by Wyndham is is doing really well. And on the new construction side, the number of projects, the percentage of projects in the ground I think we talked about this increased 300 basis points. We have a great new leader Keith Harris, of our architecture design and construction team, and and we're really excited about what we're doing on the new construction side. But, you know, extended stay is obviously hot for us. Across all scales. We've a great economy extended stay brand, Echo Suites, which we talked about in our script. Midscale with Hawthorne Suites, and an upscale with WaterWalk. All three of those are exciting and doing well. But I I think it's, it's, you know, great to see the acceleration and looking for that to continue. Operator: Thank you. And that will conclude our question and answer session this morning. Mr. Blodi, back to you, sir, for any closing comments. Geoffrey A. Ballotti: Well, thanks as always, Bo, and thanks, everyone, for your questions and your interest in Wyndham Hotels & Resorts, Inc. We look forward to talking to and seeing many of you in the months ahead at many of the upcoming investor conferences that we'll be attending. The mean time, have a great weekend ahead everybody, and thanks again for joining us. Operator: Thank you, mister Blodi, and thank you, mister Albert. Again, ladies and gentlemen, this does conclude Wyndham Hotels & Resorts, Inc. fourth quarter full year 2025 earnings conference call. Please disconnect your line at this time, and have a wonderful day. Matt Capuzzi: Goodbye.
Operator: Welcome to Oncopeptides' Year-end Earnings Call for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Sofia Heigis; and CFO, Henrik Bergentoft. Please go ahead. Sofia Heigis: Hello, everyone, and welcome to the presentation of Oncopeptides' Year-end Report for 2025. My name is Sofia Heigis, and I'm the CEO of the company. Before we begin, I would like to direct your attention to our standard disclaimer regarding forward-looking statements. I am joined by our CFO, Henrik Bergentoft. And today, we will review a highly transformative year for the company and outline a 2026 that brings exciting potential. Let's look at where we stand today. As we have already communicated, we delivered strong commercial progress in 2025, with full year net sales more than doubling to SEK 71.1 million, representing a 125% increase compared to 2024. For the fourth quarter, net sales reached SEK 18.6 million, an 88% increase compared to the same period in 2024. We have today also announced a rights issue of up to SEK 200 million, allowing us to invest in the first step to expand our PDC platform into the high unmet need of glioblastoma patients, an opportunity that comes with the potential to unlock significant value for both patients and Oncopeptides in the future. The rights issue will furthermore bridge our commercial operations towards our goal of positive cash flow in 2027. Henrik will discuss this in more detail shortly. The fourth quarter was shaped by a diverse performance in our key markets. The demand for Pepaxti in Italy exceeded our expectations. Our positive growth trajectory during the first half on European level was, however, muted during the second half of the year by a slower-than-expected growth in Germany and the medical doctor strike in Spain during Q4. Looking at events post period, we have completed a strategic review of our German as well as R&D operations to sharpen our focus and optimize our business model. As many of the facts and figures for the fourth quarter has already been communicated, I will spend much of this presentation focused on our pipeline and the exciting opportunities that comes with the potential to completely transform Oncopeptides. Before that, I will hand over to Henrik to provide a closer look at our financials and the rationale behind today's capital raise. Henrik Bergentoft: Good morning, and thank you all for joining today's call. Let me begin with the rights issue announced today. Based on the mandate received from the AGM in 2025, the Board has decided to launch a rights issue of SEK 200 million, of which SEK 190 million is guaranteed through underwriting and subscription commitments. Our main shareholder, HealthCap, together with members of management and the Board intend to participate in the rights issue. The purpose of the rights issue is to support the continued commercialization of Pepaxti in Europe. While the launch efforts have been focused and diligent, external market factors have negatively impacted the acceleration of our sales trajectory. Hence, the company has assessed the additional liquidity required for our commercial operations to reach cash flow positivity in 2027 based on the European commercialization of Pepaxti. In addition, we have promising development projects within our pipeline, particularly related to the indication glioblastoma. Part of the proceeds will be used to enable a window of opportunity study in man for glioblastoma, an important step in clinical advancement of the assets. Turning to the quarter's financial performance. Net sales for the fourth quarter increased to SEK 18.6 million, nearly doubling compared to the same quarter last year. For the full year, net sales more than doubled to SEK 71.1 million. Gross profit for the year came in at SEK 68.7 million, corresponding to a strong gross margin of 97%, which continues to demonstrate the scalability and robustness of our business model. Operating expenses decreased by 16% in the quarter and 7% for the full year, reflecting disciplined cost control across the organization. EBIT for the year improved to minus SEK 224.7 million from SEK 283 million minus last year. The full year financial items were impacted by a noncash fair valuation of warrants amounting to minus SEK 12.2 million. All in all, the year showed strong revenue growth, stable gross margin and reduced operating expenses, all key pillars supporting our path towards a positive cash flow in 2027. Looking more closely at our operating expenses. Sales and marketing expenses for the full year amounted to SEK 137.2 million, in line with last year. Already during 2024, we finalized our commercial organization in Spain and Germany. And in 2025, we established our Italian organization, all key markets for the launch of Pepaxti in Europe. General and administrative costs decreased to SEK 57.4 million from SEK 60.8 million, while R&D expenses decreased to SEK 103 million from SEK 121.2 million, reflecting a more focused R&D structure. We currently have no ongoing clinical studies, but we have made meaningful progress in our preclinical portfolio, particularly with glioblastoma. The chart illustrates the quarterly development of our operating expenses over time, showing a steady and disciplined cost trend that supports our financial targets. Finally, a look at liquidity. Cash at year-end amounted to SEK 82 million. Our liquidity position will be significantly strengthened through the announced rights issue of approximately SEK 200 million. With the proceeds from the rights issue, we will be well positioned to continue executing our strategy and drive value creation. The proceeds will enable us to maintain momentum in our European launch while accelerating the development of our PDC platform towards indications beyond multiple myeloma, where we particularly look forward to initiating our clinical trial in glioblastoma in 2026, where we have the potential to address a significant unmet medical need. And by that, I conclude the financial update and hand over back to you, Sofia. Sofia Heigis: Thank you, Henrik. Let's turn to the business update and our strategic priorities. Oncopeptides rests on 3 strong pillars. We are building the company from our commercial base in Europe. We are looking to add revenue streams by partnerships for the rest of the world, and we do have a potential in our pipeline that can transform Oncopeptides. So why invest in our business at this time point? We have a fully approved product with SEK 1.5 billion European market potential. We have demonstrated a strong European growth momentum year-over-year, and we are working on strategic partnerships. And we do have an exciting pipeline targeting global multibillion-dollar markets like glioblastoma. Our preclinical efforts have really paid off as the data generated demonstrates a strong scientific rationale to advance the PDCs into clinic for glioblastoma. To ensure you all get a good understanding of this exciting opportunity, I will today talk about our scientific findings and do a deep dive into our pipeline. But let's start with our Pepaxti business with focus on European sales first. This graph illustrates our sales trajectory. While we faced some external headwinds in Q4, the fundamental fact remains. Our sales have more than doubled year-over-year, providing the scalable demand for Pepaxti in Europe that will support a strong growth during 2026. This map shows our European footprint in 2025. We have successfully transitioned from the market access phase into the full commercialization across our key territories. Looking back at how we built this throughout the year. In Q1, we negotiated price in Italy, which secured that we now have the solid foundation of 3 key markets. In Q2, we saw momentum building rapidly, especially as we unlocked regional access in Spain and started to unlock regional access in Italy. Q3 was, as we anticipated, hit by the vacation period, but still demonstrated our ability to grow and expand our prescriber base and deepen our engagements. Our Q4 map shows the full robust picture of our current European footprint with the 3 key markets with close to full market access. Behind those data points are more than 600 patients treated since our EMA approval. We have a clear inclusion in the EHA/EMN guideline, and Pepaxti is increasingly recognized as an important treatment option for triple-class refractory patients. Germany remains a critical market. We now have 2 full years of experience, and our analysis tells that the fully innovative late-stage myeloma market is facing slow growth. Germany is a scattered market with few patients per HCP. This in combination with that, in particular, the office-based physicians have restricted access for pharma, some not allowing visits at all in their clinic and majority only allowing 1 to maximum 2 visits per year, results in that it takes longer time than anticipated to unlock new prescribers and identify new patients. In Q4, we did demonstrate double-digit growth in Germany, but at lower levels than we accounted for in our projections. To ensure we stay realistic about our investment versus the growth pace, we aim to -- and we do aim to reach country level profitability in Germany during 2026. We are streamlining the organization and focusing our resources strictly on high potential areas and areas with a positive momentum where we do have access to the physicians. In Italy, 2026 is the first year with full or close to full access down to hospital level. Italy has been a standout performer, exceeding its targets for the first year. This is due to an excellent team built in a timely manner, a centralized prescriber base with recent experience of Pepaxti just ahead of launch. 2026 is the first year of full regional access in Spain. The full Spanish late-stage myeloma market was hit by the HCP strike in Q4. The strike was clearly affecting the number of patients reaching their hematologists on time to get a new treatment initiated. This is partly still a big concern, not least for patients as the strike is continuing. Having said that, our team is very active. We are working with the KOLs in Spain and have initiated both national and regional projects together with them to catch up. Insights tells us that despite decreased sales in Q4, our position remains clear and the experience generated is positive, which is the foundation we are building from in 2026. And then we, of course, truly hope that the strike situation will be solved for soon to allow patients to visit their HCPs in a timely manner and in addition, allowing time for the HCPs to properly interact with the pharma industry. Even though our investment is currently focused on our key markets, we are looking into how to capture the full European potential. We do have market exclusivity until 2037, meaning there is still time to both gain access and reach peak year sales in more countries across Europe. We are committed to find the most value-generating business model for the company and to make this happen as soon as possible. We will, of course, keep you posted on progress. Let's now move from Europe and look into the rest of the world. Outside of Europe, our strategy is straightforward: grow geographically and partner smartly. Our greatest focus is on Japan, but we do, in addition, have a partner in South Korea and opportunistic partnerships with the World Orphan Drug Alliance for more complex geographies. We have all the time known these geographies will be slow. But based on recent insights from our partners, we do hope to see progress in the MENA region this year. For Japan, we have a good foundation to stand on with formal positive advice from the regulatory authorities. We are currently focused on one well-established pharmaceutical company that has become our preferred partner option. The contemplated transaction features an upfront payment, milestone payments and a double-digit royalty. The time line for the deal is currently at large out of our control, which means it is difficult to estimate when a potential deal can be closed. We will, of course, keep you posted. Now let's move into our pipeline, which I am very excited about. We have, over the last quarter, made some significant progress generating data that has given us a better understanding of why our PDCs are so unique. The data is validated by external experts and supports us to take the first step on the journey to expand our PDC platform into indications with very high unmet needs. If we manage to generate clinical data in line with what we see in the preclinic, we will be able to transform Oncopeptides into a company with global potential reaching far beyond our current opportunity with Pepaxti in multiple myeloma. As a recap, Oncopeptides holds 2 proprietary technology platforms, the PDC and the SPiKE. The pipeline includes OPD5 offering a global opportunity for additional indications in difficult-to-treat tumors with high unmet needs and OPDC3 designed for enhanced selectivity in solid tumors. OPSP1 is the first candidate drug selected from our innovative immunotherapy platform focused on NK cell engagement. To facilitate the shift from preclinical research into clinical development that we will make during 2026, we are reallocating our resources. To stay cost conscious and focused, we are reducing our internal R&D efforts in preclinic and will rely more on external strategic collaborations to advance these platforms. I am very excited about us being able to move into a new and more advanced phase for our PDCs, targeting large patient populations with high unmet needs. Our European commercialization of Pepaxti serve as an important foundation for Oncopeptides, and it is the real-world proof of concept for the PDC platform. The majority of the future value, however, lies in our pipeline as we expand into addressing global markets with high unmet needs, serving us with the opportunity to create shareholder and patient value far beyond where we are today. As I have indicated in the past, we believe that through the commercialization of Pepaxti, we have achieved a strong clinical validation of our science. Lately, we have also gained an even better understanding of why PDCs can support patients with aggressive and resistant disease. So we are now aiming to deploy the same mechanisms to new indications. Let me tell you more about our latest findings. What we have realized is that our PDCs enhance alkylation through dual targeting of both nuclear and mitochondrial DNA, which results in that we can support patients with very aggressive tumor types that has developed resistance to other treatments. So what does this really mean? And how does this really work? Let's start with the basics and what we have known for a long time. The idea behind the PDC platform is that by conjugating peptides to an alkylating or cytotoxic payload, the PDCs becomes very lipophilic, fat-loving, which means they are entering cells freely without the need of transporter proteins. This is due to that the cell membrane is built of lipids or to put it simple, fat. Once inside the PDCs are quickly hydrolyzed or cut into pieces by peptidases and esterases that act as small scissors. Certain tumor cells like, for example, multiple myeloma cells have an overexpression of these scissors. The pieces are active and cytotoxic metabolites that are more water loving and now trapped inside of the sick cell, which are filled with fluid. This process happens rapidly, which triggers a concentration gradient that is drawing more of the PDCs into the sick cells. So the result is a high concentration of alkylating or cytotoxic agent inside of the cell that leads to cell death. What we have realized is that the cell is most likely not only killed due to double-strand DNA damage inside of the cell nucleus, like with conventional alkylators. But we have lately generated evidence suggesting that the PDCs have a dual killing mechanism, also damaging the mitochondrial DNA. This is a critical finding and super exciting as the mitochondria is acting as the powerhouse of the cell. The ability to damage the mitochondria means the ability to overcome resistant and kill aggressive tumor cells. This finding suggests an explanation to why we have seen in clinic that our PDCs are so powerful and can support patients that are refractory to other alkylators and why the PDCs can support patients that has developed resistance. Let me take some time to explain this in more detail as this is important for you to understand and to get how valuable the full PDC platform can be. One example is that patients with multiple myeloma and p53 deficiency hardly respond to any treatment but do respond to Pepaxti. Now let me explain this more in detail. The p53 is a tumor suppressor gene and normally acts as a safety guard. It checks for DNA damage. It stops damaged cells from dividing, and it can kill damaged cells to prevent them from growing a tumor. When p53 is deficient, that is not working, damaged cells don't stop growing, cells with DNA errors can survive and multiply and this increases the risk of cancer growth. Because many cancer treatments works by damaging only the nucleus DNA and not the mitochondrial DNA, p53 deficiency can make cancer cells resistant to treatment, such as conventional chemotherapy or radiation, and this is happening by upregulating the repair mechanisms of the DNA in the nucleus. With our dual mechanism of action, we can address the barrier of resistance developed by the upgrade of DNA repair in the cell nucleus and support patients with no treatment options. This has already been proven with Pepaxti in multiple myeloma, and we are now looking to further prove this in glioblastoma, but there are also other high unmet need indications like, for example, acute myeloid leukemia, where we have interesting preclinical data generated. To summarize all of this in brief, the PDC platform is now a validated scientific breakthrough, and we now understand why we can overcome treatment resistance, which opens the door for us to developing PDCs into supporting patients with very aggressive tumors and very high unmet need indications such as glioblastoma, meaning we can target multibillion-dollar global market potentials. We now do have multiple opportunities, but our financial reality tells us we need to focus, which we will do on the opportunity of glioblastoma. And let me tell you a bit more why. Glioblastoma is a very aggressive brain cancer with no cure and poor survival rates. It is a rare disease with high unmet need. And if there are new treatment options approved, there is an estimated global market opportunity going from today's around USD 3 billion to around USD 8 billion in 2035. There are a number of challenges in treating glioblastoma. The tumors are sturdy. Most agents exhibit no activity at pharmacological concentrations inside the brain. The first challenge is treating -- in treating this disease is, however, the blood-brain barrier, which blocks most of the drugs from even reaching the tumor. Glioblastoma is a typical tumor where upregulation of DNA repair mechanism commonly happens and resistance is being developed. And finally, the tumor is cold, meaning the opportunity for immunotherapy is limited without making the tumor hot, which means that you have to ensure the immune cells that can support cell death actually reaches the tumor. The current standard of care is an alkylator, temozolomide, which can partly support patients, but it is well known that it has no efficacy in patients with upregulated DNA repair mechanism. And if we look at how temozolomide can support patients, we can conclude that alkylating agents do have activity in glioblastoma cells. But in the case of temozolomide, there is limitation due to both only 30% bioavailability as well as that temozolomide is a single-arm alkylator, meaning it breaks only one of the DNA strands, which is why upregulating or repairing the DNA is commonly developed and the tumor becomes resistant. It is also important to note that temozolomide is not damaging the mitochondrial DNA. With our unique PDC platform and the unique mode of action I just described with the dual killing mechanism, we believe we have the potential to provide a better response to this incurable disease that has proven really difficult to find new treatment options for. Our focus on glioblastoma actually originates from external findings in 2020, which was published in 2022 and eventually led to a research grant from Sweden's Innovation Agency to explore our PDC platform in what we call the GLIOPEP project. The data published in 2022 demonstrates that the PDC was the most efficacious compound in killing glioblastoma cells, clearly outperforming the standard of care. So this graph is showing the viability of glioblastoma cells. The lower you find the dots, the more cell killing. And in this panel, melflufen was used. And as you can see, the dots in the yellow box are much lower than most other drugs. Today's standard of care is circled in the red box. The GLIOPEP project consists of 4 collaboration partners and the grant was received to explore the potential of the PDC platform in preclinic. The data from this project confirms that the PDCs and in this case, OPD5 can address some of the most evident barriers for drug development in glioblastoma cells and in animal models. OPD5 has shown promising preclinical data with good activity at pharmacological concentrations and OPD5 has shown an efficient blood-brain barrier penetration and strong tumor reduction in preclinical models. Stay tuned for more data to be published from this project. These findings are logical based on the PDC mode of action as it's also well known that mitochondrial function is critical for glioblastoma growth. This aligns perfectly with the mode of action to target mitochondrial DNA in addition to a double-strand break of the nucleus DNA. The last 2 quarters, we have generated evidence that altogether provides a very strong and logic scientific rationale, suggesting that we can address all the most common glioblastoma barriers. In summary, our preclinical data demonstrates that our alkylating PDCs have low sensitivity to DNA repair upregulation due to both being a double-armed alkylator and damaging the mitochondrial DNA, concluding a dual mode of action and crucially demonstrated near 100% bioavailability in the brain, which translates into strong tumor reduction in animal. As we have an alternate mode of action, we are not dependent on the immune system like all the immunotherapy that is making great breakthroughs for other cancer types, but has not managed to address the unmet need of glioblastoma patients. So we believe we have an answer to a very high unmet need. What is then our next step? Historically, glioblastoma trials have 1% to 2% success rate, partly due to the difficulty to get drugs over the blood-brain barrier. So we ask the experts within the field, what is the most clever approach to enter the clinic? The conclusion is to initiate a capital-efficient window of opportunity study. Using our approved drug melflufen as a clinical probe in approximately 10 patients, we will generate human proof-of-concept data with the aim to confirm that PDCs passes the blood-brain barrier also in humans. This cost is a fraction of a full Phase I trial and can inform if we are to move and invest into the development of our next-generation asset, OPD5, which is an excellent PDC candidate for glioblastoma patients. Bringing this all together, we enter 2026 with an optimized business model and a clear focus on the most value-driving activities. With the rights issue we have announced today, we expect our commercial operations to be funded to profitability, which, of course, is contingent upon revenue growth. Furthermore, we are excited to initiate a clinical trial for glioblastoma to generate proof-of-concept data of blood-brain barrier passage in humans. Our mission remains unchanged. We are bringing hope through science to patients with difficult-to-treat cancers. Thank you for your attention today, and we will now open the floor for any questions you might have. Operator: [Operator Instructions] The next question comes from Richard Ramanius from Redeye. Richard Ramanius: I have 2 questions. Let's start with Pepaxti. Could you give us some more details about how the situation is in Spain in Q1 versus Q4 and similar comments for Italy? Sofia Heigis: Thank you, Richard. When it comes to -- so we refrain from commenting on sales already now for the first quarter. When it comes to the situation in Spain, the strike, and you can read this in media is unfortunately continuing. It's less intense than it was in December because in December, it was a full week that was where doctors were basically out of office also due to bank holidays. And that, together with the Christmas holiday period, concluded very few days for patients to visit doctors throughout all of December. Of course, the situation has improved somewhat from that in January, which is not so crowded with bank holidays, but it is a fact that the strike continues, which is influencing patients to get new treatments initiated and which is influencing all of the pharma industry to interact with the HCPs. As I said, we are working with the top experts in the field to understand how we can catch up during the year, of course, and in effective ways, be able to communicate with the HCPs and ensure that more new patients get Pepaxti prescribed. When it comes to Italy, it's -- I mean, we have a very successful launch in Italy, and that is based on that we have excellent team members that have managed to really capture the prelaunch experience and build on that. And I would argue that there are no changes to that kind of dynamic in Italy. Richard Ramanius: All right. Could you say something more about the clinical development in glioblastoma? So what's the medium-term plan for clinical development? Sofia Heigis: Yes. So what we are doing, as I said, is that we are initiating a window of opportunity study. You can also name it Phase 0, if you want to, because you do such a study ahead of Phase I. And we are currently working to, of course, prepare for this study. We are interacting with investigators. We are interacting with regulatory authorities. And our aim is to initiate this study during the year. As said, it's 10 patients, and we will be able to monitor these patients one by one because what you are doing to get a bit detailed is that you are giving one dose of a PDC in this case, melflufen ahead of surgery. And then you examine the tumor post surgery to see that you have been able to pass the blood-brain barrier. And you can also as secondary objectives, look into the cells, the tumor cells as well. So stay tuned for more information, and we will, of course, keep the market updated on any progress we are making here. Richard Ramanius: Okay. I have a last question about the rights issue. How much of the proceeds are intended for Pepaxti and how much for other uses? Henrik Bergentoft: So thank you, Richard, for that question. And we have not expressed any exact numbers, but we are stating that the purpose of the rights issue is to support the continued commercialization of Pepaxti in Europe and also advancing our very exciting opportunity with glioblastoma. But the majority of the funds is still directed towards the commercialization of Pepaxti in Europe. Operator: [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Henrik Bergentoft: Thank you. We have a few written questions. First one, you communicated cash flow positivity by the end of 2026 as recently as the Q3 report in November. What specifically changed during Q4 that caused the target to shift? Sofia Heigis: Thank you, [ Simon ], for the question. So first half of last year, we had a really positive momentum, and we did deliver on our kind of projected growth of 30% to 40% and even more in Q2. In Q3, we were hit by the vacation period, in particular in August. So Q3 came with lower growth, but we anticipated that we will be able to catch up in Q4 based on the first half of the year and that you commonly see this effect in the third quarter. What happened in the fourth quarter, I mean, as I said, different dynamic in the different markets. But if you take kind of the countries one by one. So Italy did exceed expectations in the fourth quarter, which was very positive and it kind of proves the unmet need of Pepaxti continuously. But the other markets, we had some issues. So Spain, there was this doctor strike in December. It took some time, we should admit for Spain to recover from the vacation period. But just when we started to recover and we saw a positive momentum, this strike completely disrupted our sales. We basically had very, very few new patients in December in Spain. And as our sales and our business model is built on that you get new patients that are treated for 4 to 5 months, it really kind of disrupted and decreased sales in Spain. What should be mentioned and what's important to understand is that Pepaxti is injected or infused once a month, but which is good for patients and physicians. It is possible to delay the administration if needed. And the physicians really took advantage of this given that they had so few slots to treat patients during December because of the strike and bank holidays and other things that are happening in December. So we saw a lot of postponed treatments, and we saw very few new patients coming in, in Spain. And we have, of course, been analyzing the market, and this is true also for all our competitors. All the myeloma late-stage drugs decreased during December. So that was a big hit because we, of course, should have and have had ambitious targets and such a decrease in one of our key markets really affected us, also kind of built on the lower-than-anticipated growth in Q3. Germany is important to understand because we did see very good speed in Germany in the first half of the year, but with increased volume, the kind of growth rates start to slow down. And this has to do with that the German market has changed in the way that -- our prescriber base is large. It consists to the majority of office-based physicians. And during the second half of last year, 2 more companies launched into multiple myeloma. This means that there are many companies currently that want to speak to the office-based physicians about myeloma. They are treating around 20 different tumor types. So -- and they are overall restricting visits to pharma. Some of them are saying that we can't allow pharma anymore in our clinics because we need to meet patients because that is, of course, generating their business. So some are seeing us maybe once or twice a year because they only have so much time to speak about myeloma when they also need to speak about lung cancer and breast cancer, et cetera. So this dynamic with a crowding market when it comes to share of voice, together with kind of the scattered market, has made us realize that based on where we are now and the volumes that we are at now, it takes longer than anticipated to grow Pepaxti. So we did have a double-digit growth and a fair growth, but not to the level of 30% to 40%. And this, together with that we actually had very limited orders from Greece in the fourth quarter. It's a small market, but it's a volume market. So we count on getting some volumes every quarter. And the volumes in Greece, they were pushed at large into 2026 because of budget constraints from the authority that is actually ordering and paying Pepaxti from Germany to Greece. So all of this together concluded decreased sales and made us realize that we will not be able to reach the cash flow positive target in 2026, but we have pushed it to 2027. So I hope that, that was a detailed answer enough for you to get a better understanding. And then if we look at 2026, we are obviously working very hard and we are very active in all of our markets to ensure that we grow as fast and as strong as possible. Henrik Bergentoft: Thank you. Can you give an accurate description of what your go-to-market and sales strategy is beyond working with partnerships, considering the weak results from the partnerships, one would expect Onco to be more hands on in the sales process considering you know the product best? Sofia Heigis: Thank you for that question. So I would say that we have different types of partnerships, and I would like to describe them. We have a partnership in Greece that is working very well. That is a commercial partnership. The Greek team is very close to Oncopeptides team and the market was very well prepared because the investigators or the physicians in Greece had experience from Pepaxti. We have a similar situation in South Korea, where the investigators or the clinicians have had experience from Pepaxti and they are actually currently using Pepaxti in early access. But in South Korea, we have the regulatory process to pull through, both to kind of apply for orphan drug designation as well as pulling through the regulatory process and market access process. And that is what our partner is working on currently, and that's a lengthy process and why you don't see any sales from South Korea at this time point. When it comes to the rest of the world, I would agree that I would have hoped to see more demand even if we have complex geographies like Africa or Middle East. But it has taken time for our partners to kind of convince and get a good understanding for their experts that had no understanding of the PDCs whatsoever. We are starting to work up an interest, in particular in the Middle East. There is an interest in Africa, but in Africa, the payer situation is very difficult. So several patients have kind of been rejected in Africa from a payer perspective. So -- and the reason why we are not doing this alone, but we have chosen to go for a partner in the rest of the world. And of course, to your point, we will assess your partner to see if it's the right partner over time. But for us, it would take a lot of resource and effort to build that kind of prelaunch understanding and demand. And then we rather focus those resources based on the size of the company to the markets in Europe where we actually do have price negotiated and can drive sales. Henrik Bergentoft: Thank you. Two questions on the same topic, and you addressed it in your presentation, but can you say something else about the partnership with Japan potentially? Sofia Heigis: Well, I think I said what I can say. The time line is a bit longer than we had anticipated. Usually, you kind of aim to close a deal like this in a year, but it's at large out of our control on our partner side. So we can't control their internal processes, their internal decision-making and their internal strategic kind of priorities. So we do believe we have a very good partner that we are discussing with. But I wish I could give you a time line, but I unfortunately can't because it's really out of our control. But we are, of course, doing everything we can to push this and supporting them with all the information they need to have from us. Henrik Bergentoft: Thank you. And with that, back to you, Sofia, for concluding remarks. Sofia Heigis: Thank you so much. So thank you to everyone who has been attending this investor conference. I know there has been a lot of information shared today as we are entering 2026 with focus on Europe, of course, on our geographic expansion, but we also see very exciting pipeline advancement that I really wanted you to get a better understanding of because these opportunities can really take Oncopeptides from being, in a sense, a quite niche player with the European commercialization to becoming a big player with several indications for the PDC platform beyond multiple myeloma. So thank you for your patience, for listening in all this time. And of course, should you have any more questions, just reach out to us. And by that, I wish you a very nice day.
Operator: Good morning, and welcome to the Air France-KLM Full Year 2025 Results Presentation. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Benjamin Smith, CEO; and Steven Zaat, CFO. Please go ahead, sirs. Benjamin Smith: Okay. Thank you very much for your introduction, operator. So good morning, everyone, and thank you for joining us for the presentation of Air France-KLM's Full Year 2025 Results. I'm joined today by Steven Zaat, Group CFO; Anne Rigail, CEO of Air France; and Marjan Rintel, President and CEO of KLM, whose mandate has just been renewed for another 4 years. Congratulations to Marjan. I'll start with the key highlights on the year followed by Steven, who will walk you through our financial performance and outlook for 2026. I'll then wrap up with closing remarks on our 2028 ambitions before opening the floor for Q&A. Okay. Moving on to Slide 3. Let me begin by recalling that we are executing our strategy in a consistent and disciplined manner across all the pillars of our strategy, and this execution is translating into tangible and encouraging results. We are reinforcing our market position, notably through the proposed increase of our state in Scandinavian Airlines System, strengthening our footprint in the Nordics and enhancing connectivity to key North American and Asian markets. We continue to improve profitability with our operating margin reaching 6.1%, reflecting stronger revenue generation and rigorous cost control. Customer satisfaction and brand value remains strong, as reflected by multiple international distinctions across the group, including Air France being named Best Airline in Western Europe by Skytrax for the fifth consecutive year. Employee engagement continues to improve, our Employee Promoter Score up 33%, reflecting the strong commitment and professionalism of our teams, supported by targeted action plans. We are also accelerating technological simplification, retiring more than 200 legacy applications to improve efficiency and agility. Finally, the sustainability stays fully embedded in our strategy, fleet renewal remains a cornerstone of our transition plan with next-generation aircraft now representing over 35% of the fleet alongside SAF blending, significantly above regulatory requirements. Now moving on to Slide 4. Let me now turn to our full year 2025 performance. In a demanding environment, Air France-KLM delivered strong execution translating into positive results on multiple fronts. We carried nearly 103 million passengers, which is up 5% year-over-year and the first time since COVID that we have surpassed the 100 million passenger marks. Group revenues reached EUR 33 billion, up 4.9% year-on-year, an all-time high for our group. We delivered an operating result of EUR 2.0 billion, an improvement of EUR 400 million compared with 2024, marking the highest operating results in our history. At the same time, we generated EUR 1 billion in recurring adjusted operating free cash flow up EUR 800 million year-on-year, reflecting solid cash conversion. Our balance sheet continues to strengthen with net debt to EBITDA stable at 1.7x well within our target range and equity increasing by EUR 1.6 billion to EUR 2.4 billion. Overall, 2025 demonstrates how disciplined execution is translating into structurally stronger financial performance. Yes, beyond the numbers, it was also a year defined by significant commercial achievements. Slide 5. Modernizing our fleet remains a top priority for value creation. The integration of new generation Airbus A320neo family aircraft at Transavia and KLM delivers a superior customer experience while significantly reducing our environmental footprint and operational costs. At the apex of the market, we continue to redefine luxury travel. Air France unveiled its new La Premiere experience, the ultimate expression of comfort and sophisticated service and further enhanced the onboard offering. We strengthened our inflight entertainment through new partnerships between Air France and Canal+ and Apple TV+, bringing premium content to our long-haul customers and enriching the onboard experience. KLM is now among the first European airlines to offer free Internet on flights within Europe and simultaneously both Air France and KLM continue to expand and enhance their high-speed WiFi offering to meet growing customer expectations. Our pursuit of excellence is equally reflected on the ground with the opening of our new Air France Chicago O'Hare lounge and refurbishment of our Boston Logan lounge, we are offering an elegant environment anchored in French hospitality. Collectively, these initiatives demonstrate our unwavering commitment to strengthening the prestige and appeal of our brands at every touch point of the customer journey. Turning on to Slide 6. Last year, Flying Blue, our loyalty program celebrated its 20th anniversary, a milestone that highlights the enduring strength of our loyalty program. Over 2 decades, Flying Blue has evolved into one of Europe's leading airline loyalty platforms, now surpassing 30 million members worldwide. Growth has been particularly strong in recent years with membership doubling since 2022. Today, Flying Blue connects customers across 40 partner airlines, more than 100 commercial partners and over a dozen co-branded credit cards, embedding the program into members everyday lives well beyond travel. This scale translates into both engagement and impact. In 2025 alone, 1.2 billion miles were donated by members to NGOs, representing roughly 2.5% of annual miles issued. Importantly, Flying Blue has been recognized by point.me as the best airline loyalty program for the second consecutive year, a distinction that underscores the strength of our value proposition and the trust of our customers. More than a loyalty program, Flying Blue is a cornerstone of our commercial strategy, driving customer retention, premium engagement and long-term value creation. Moving on now to Slide 7. We continue to advance our premiumization strategy through targeted investments across the entire customer journey. Since 2018, our focus on cabin renewals, high-speed connectivity and upgraded global lounges has significantly strengthened our value proposition. These efforts are now driving a structural shift toward a more premium revenue mix. In 2025, our top-tier cabins La Premiere and Business accounted for 28.1% of total revenue, up from 26.9% the previous year. Meanwhile, our premium economy offerings branded premium at Air France and premium comfort at KLM have surged to reach 8% of revenue, showing significant growth over the last 2 years. Collectively, premium cabins now generate more than 36% of group revenue. This evolution is underpinned by strong commercial momentum. In 2025, La Premiere revenues grew by 17% and business revenues by 9%. Our premium economy segments saw even more dynamic growth with revenue up 18%. Crucially, this expansion was achieved while maintaining stable load factors, demonstrating the robustness of demand for our midterm premium offering. Additionally, our direct online revenue grew by 9%, further enhancing our distribution efficiencies. This continued shift toward a higher value mix remains a key driver of profitability and long-term value creation. Our focus on a more personalized customer experience continues to drive exceptional growth in ancillary revenue across all our airlines. In 2025, ancillary revenue reached EUR 2.1 billion, up 23% year-on-year, following a 26% increase in 2024. Air France and KLM generated EUR 1.2 billion in ancillary revenue, while Transavia contributed EUR 800 million reflecting solid momentum and continued expansion of revenue stream beyond traditional ticket sales across the group. Growth was broad-based across all segments. Seat selection delivered double-digit growth for the second consecutive year supported by more dynamic and personalized options. At the same time, hand luggage performance strengthened further, particularly at Transavia, supporting continued revenue growth. This sustained expansion remains an important contributor to margin improvement and revenue diversification. Moving now to Slide 9. We continue to make significant strides in our sustainability journey underpinned by disciplined investments in fleet renewal and staff. As highlighted earlier, new generation aircraft now represent 35% of our fleet. These aircraft are the primary lever of our decarbonization strategy, more fuel efficient and contribute to reducing both CO2 emissions and noise footprint. In parallel, our SAF blend reached approximately 2.9% total fuel consumption, significantly above current regulatory requirements. Our efforts are also recognized externally. We received a gold medal from EcoVadis, placing the group in the top 98 percentile and our CDP Climate rating improved from a B rating to an A rating. Collectively, these achievements demonstrate measurable progress and reinforce Air France-KLM's position among the leaders in sustainable aviation. Moving on now to Slide 10. In cargo, more than 90% of bookings are now made through digital channels, powered by our myCargo portal, which has evolved into a comprehensive end-to-end service platform. The global rollout of our CRM360 system has been completed across our network, enabling more consistent, efficient and customized customer support while opening the door to AI-enabled services. We were particularly proud to receive the airline of excellence in Europe Award from the World Air Cargo Awards, recognizing the quality of service delivered by our teams. Turning to engineering and maintenance. We secured more than 30 new contracts, bringing our total order book to EUR 10.7 billion. We also continue to advance next-generation technologies, including LEAP industrialization and new test cell capabilities and expanded our industrial footprint with the opening of a new APU facility in Amsterdam, and our expertise was further recognized by the European MRO of the Year Award from Airline Economics. These achievements highlight how innovative and customer centricity are strengthening our long-term competitiveness across both cargo and MRO businesses. With that, I'll now hand it over to Steven, who will walk you through further detailed financial results. Over to Steven. Steven Zaat: Yes. Thank you, Ben, and good morning, everybody. As you can imagine, despite all the rain, which we have the last days, I'm very happy to announce that we have broken the EUR 2 billion ceiling in terms of current operating income. I think getting the margin up by another percent closer to the 8% margin in a very difficult geopolitical context is really an achievement. If we go to Page 12, you see that our revenues are going up by 5%, so growing to EUR 33 billion. That led also to the 6.1% margin, which we currently have. And if you look at the operating result, you see, of course, we had a big tailwind of our fuel price. But at the same time, we could increase our unit revenue by 1% especially by our premiumization strategy on which I come back and which was explained by Ben. And then at the same time, we have really, really, really a strict cost control in the company. We are now at a unit cost of 1.2% year-over-year. That is at the low end of guidance where we started at the beginning of the year, which was between 1% to 3%. So we are very satisfied by getting our efficiency up and also to getting, let's say, all the transformation really finding it back now in our results. On the net result, we have a record here with EUR 1.8 billion. We have to be honest, there's EUR 700 million related to unrealized foreign exchange results, but still EUR 1.1 billion driving net results, driving up our equity and that gives us more leverage also to take out this hybrid equity out of our balance sheet. If we go to Page 13, you see the results per business. So very strong performance on the network. I come back later also on Q4, but we see on the yield. This is driven especially by premiumization and a very strong North Atlantic and South American market. That is on the passenger side. On the cargo, it's a little bit a mixed bag. So it is more or less flattish. But don't forget, in Q1, we had a plus 16% related to, let's say, all the discussions in the U.S. about tariffs and we ended Q4 with a minus 11% because the Q4 in 2024 was up 20% by the election. So there is a lot of impact quarter -- year-over-year. But all in all, despite all the tariffs and all the challenges over there, we were able to keep the unit revenues stable in our cargo segment. Then on Transavia. Transavia, we grew by 15%. We had a size unit decrease of 1.7%. The results are down EUR 52 million, which is split between Transavia Netherlands and Transavia France of 50-50. There are several reasons. First, we take over the slots in Orly. So we grew significantly our capacity and these routes needs to mature before it become, let's say, profitable. Then second, we have a lot of transition costs related to that we move from the 737 to the A320s, which is not an easy transition and may be more difficult than what we expected ourselves. And last but not least, we had a very difficult summer and it was very hot, and there is less appetite to actually fly in to other places where the sun is shining -- if the sun is already shining in your backyard. So all in all, I think it was a complicated year for Transavia, but we keep ongoing. And I think we are -- also, if you look at the Q4 results, we see that we're getting a better momentum in place. And at the end of March, all the slots are transferred to Transavia and Orly and we get to a more stable picture over there. On the maintenance, we are getting closer to the 5.6% margin, which we had in 2019. We grew our revenues externally by more than 10%. This is fully driven by our engine activity. It's really, really, really doing very strong. The communication is still on the components business where we should grow further our margins and there's still an opportunity to go in the coming years. So all in all, the 6.1% I'm pretty happy and also, of course, with the 2004 results on the operating results, it's not 2005, which is my favorite [indiscernible], but we are getting -- we were getting close to that fund. If we then go to the picture between Air France and KLM. So KLM -- sorry Air France benefited from the premiumization. And of course, we had the Olympics impact last year. So we grew our operating result by close to EUR 400 million. On KLM, it is stable. We have more benefits actually from back on track. So it's at least EUR 450 million, but we had a lot of headwinds. We had a Schiphol increase of the tariffs, which costed us EUR 100 million in landings and takeoff charges and around EUR 150 million also on the revenues because we have to charge higher charges towards Schiphol. The whole Schiphol environment profit is EUR 250 million. I don't know if you saw the results of Schiphol, but they should be very happy with it. They have a margin of 26%. But unfortunately, it's over the back of our airline. And then on top, we have, let's say, more connecting passengers on KLM and especially lower connecting traffics from Africa and from Asia. There was a yield pressure in the low-yielding segment, which is bigger at KLM than it is at Air France. If we then go to Flying Blue, I think it grows and it growth, as Ben already explained, the program is very successful. We grew another EUR 18 million despite the fact that the dollar is weaker and that has a significant impact on our Flying Blue profitability, but we grow our volumes over there. So it's good to see that we get more and more positive results from this business segment. And there's more to come in 2026 because then we also fully implemented our P&L, the new American Express deal. If we then move to Page 15. So if you look at the cash flow, we are very happy that we are now having a recurring adjusted operating free cash flow above EUR 1 billion. We still have these exceptionals which are coming in, which cost us around EUR 500 million related to the deferred social charges and the wage tax. But if you take all -- if you take that out and you take all the cash out, which we have, we have EUR 1 billion, which we generate by the business. Then if you look at the net debt, then you see that it's still going up with EUR 1 billion. There's EUR 300 million, which is related to this hybrid convertible. And there is, again, the EUR 500 million of these deferred social charges and the wage tax. So that's EUR 800 million. And then you see that especially the new and modified lease that is quite high that has to do with the introduction of the A320s and the A321s because we needed a lot of direct leases to start up and to transfer quickly the 737 transfer at Transavia and at KLM towards the A320. That has an impact of around EUR 800 million on this net debt. And then on top of it, we renewed our 787-9 operational leases, which had an impact of more than EUR 300 million. So this is an exceptional high number. We know that it will come down in the coming years, and we are more or less, let's say, in the range of the EUR 1.4 billion, EUR 1.5 billion for the years to come. So on Page 16, you see that our strengthening of the balance sheet and also the simplification is working. We have now a cash at hand of EUR 9.4 billion, significant above our targeted liquidity level. We had the lowest credit again with the new issue of the bonds, which we did in January, which was very successful with the coupon below the 4%. And with that, we are continuing the simplification of the balance sheet. So we paid the Apollo bond. We paid the hybrid convertible. We did one issue of a hybrid, and we will pay the next Apollo bond, which is due in July 2026. And then we are simplifying our balance sheet, having less of the hybrid quasi equity in. And at the same time, the strong net result generation, which you have seen over last year will strengthen the balance sheet to do that. So it's good to see that we have now an equity level of EUR 2.4 billion, which is exactly at the pre-COVID level, and we will support that further with our net results. Let's then go to the quarter. So if we go to Page 18, you see that we have, let's say, more or less a stable results. We already indicated the impact on the cargo unit revenue. So we spoke about double-digit decline in cargo unit revenue terms, and we are let's say, at a minus 11%. Don't forget, again, that we had an uptick of 21% in Q4 2024 in the unit revenues of the cargo. So the cargo unit revenues are still very strong. But of course, there is these impacts of these tariffs and these elections in the U.S. So if you take that out, you see that we have improved further our results. First, on the unit revenue, again, I come back that is driven fully by the cargo. On the unit cost, you see that we reached a minus 1.1%, which is very promising, but we had some positive incidentals year-over-year. And then if you look at the net results, EUR 600 million better. Again, there was this unrealized foreign exchange of EUR 300 million. And also we benefit from the tax assets we have on our balance sheet. So we don't pay the full tax to, let's say -- we don't pay the full income tax because we still can use 50% every time of our tax asset. If we then go to Page 19, you see that the network, still the unit revenue going up with 2.2%, excluding currency, and then there is the minus 11% on the cargo. So that stabilized the network result for this quarter. Transavia, despite the fact that they grew with 22% and a unit revenue decrease of 6%, you see that the operating results at least improved, which is not very easy in, let's say, in the winter months of October, November, December. So we are happy with the Transavia result, but we need to improve that further to make sure that we are getting to our profitability target of 8% in 2028. If we then go to maintenance. So I think in Q4 '24, we had a big benefit of delivering a lot of engines in Paris and in Amsterdam. So we are now actually stabilizing the results, but there is still room to improve in the coming quarters because we still have components contracts, which we should make more profitable as we used to before the COVID. Then on Page 20, so Air France, slightly down, mainly driven by a higher fuel price and a high ETS cost. And we should not forget that we had a very high unit revenue last year on the passenger business side over there. On KLM, we see that we improved our results. It's good to see that the unit cost reductions are really coming in now with the Back on Track program and it's promising also to see forward in the years to come to get KLM at a better result in terms of operating margin than they are today. And then on Flying Blue, 24% margin, EUR 40 million, again coming in. So very strong result also in Q4 on our Flying Blue, and it's promising also to see that for the quarters to come. If we then take a step back and we look at the world map, so it becomes a little bit like a broken record, to be honest. But you see the premium, the premium and North America and Latin America are driving up actually this unit revenue. So in the first and business class, you see that the load factor is up close to 1% and the yields are up 4%. On the premium economy, we have 8% growth in capacity. There's a little bit of a mix impact, which drives the load factor down, but still the yield is up 6.8%. So we see a unit revenue increase over there of 4%. And then the economy, that's more and more difficult. You see a 1.4% gap. We see -- if you look at the map, and we come back on it later, you see that it is more difficult with all the traffic towards the U.S. to fill, let's say, the connecting traffic towards the U.S. The point-of-sale U.S. is doing very strong. So there's a lot of passengers coming from North America to Europe. But the other side, it's getting a bit more difficult. But all in all, I think if you look at the North America with a load factor reduction of 0.5% and an increase of yield of 6%, it's still very, very strong. Latin America, 91% load factor, a 10% capacity increase and a yield increase of more than 2%. So also still very, very strong. And then if we move to the East, it's also good to see that the East is doing better. So we grew our capacity with 6%, but we see also that we have strong yields over there. And we see the yields which are strong in China. They are strong in Japan. They are strong in Korea. So everything what's Asia related is very strong. On the Middle East, we took back capacity. So that has an impact, of course, on the yield. So we could also drive up the yield. So Asia is really, let's say, promising if you see where we were in the fourth quarter. And then in the middle of the picture, you see Africa. Africa is getting more difficult. It's more, let's say, less attractive for people from that region to go to North America. And you see that also if you look at the point of sale mix. So Africa is actually not a big part of those flows on the North Atlantic, but they are down year-over-year. And if you look at their percentage with 23%. So all this growth of the U.S. is actually coming from the U.S. point of sale, which is up 3%. Europe, you see down with 2% and also Asia and India are down with 4% to 5%. So this connecting traffic towards U.S. is getting more difficult if you compare it with a year ago. And then last but not least, at Transavia, I already spoke about that the short and the medium haul, still difficult. We have flattish yields, but we know that the costs are going up there. We have the increase of the soft cost. We have the increase of the ETS cost because we are losing ETS rights, and you see also that the load factor is down 1.5%. Then let's go to the unit cost. So you can imagine that we -- after a long, long, long, long period, we had, for the first time, unit cost decrease. So that is that was very good. Let's first start at the left side. You see the productivity brings in 2%. So that is really a strong indicator that our transformation and all the programs we have in our companies are working. You see also that the fleet renewal brings 0.6% in fuel efficiency. And then you see what we call other, 0.6%. And we had a lot of -- and I don't know if you remember, in Q4 '24, our unit cost went up with 4%. We had a lot of incidentals in that period. So I think if you take it all together, it was EUR 60 million. And we have a lot of good news this year actually in our unit cost. So that I think if you take them all together, you talk about a range of EUR 100 million, which is impacting actually this unit cost performance. But all in all, I think the left side shows that we are doing very strong in keeping the transformation going and delivering the unit cost improvements, which we see in our company. And then, of course, there's the premiumization, but that drives also the unit revenue. So that has an impact of 0.6%. And we still have these charges in ATC and airport charges, which are hurting us for 0.7%. Let's then go to the year 2026. So it started not very good. We had a terrible weather in Amsterdam that had an impact of EUR 90 million in the first quarter. If you look at that EUR 90 million, around, let's say, 80% is related to KLM and Transavia and the other part is related to Transavia France and Air France, so especially a high impact on KLM. We -- if you look at the unit revenues, which we have, you see that the unit revenues in the first quarter, excluding ancillaries, et cetera, so it's the NTR is down 0.4%. Air France is still up 1.5%, less impacted also by the snow. But if you take KLM, they had a unit revenue of minus 3.8%. If you take out the snow, you come to plus 0.5%. And if you would apply that also to the total unit revenue, we are up 1.1%. So still, the demand is there. We had a hiccup, let's say, in the operations in Amsterdam, which costed us quite some money. But it's good to see that the, let's say, the underlying trend is still very positive. And if you look at the forward bookings, it's more or less in sync what we have seen in the last quarters, we are below what we were the year before. But on the long haul, you see that we already -- there's only a 1% differential. And there's always for us, let's say, a trade-off between yields and load factor. And we have a very aggressive revenue management manager to driving up the yields in our system. Let's then go to Page 25. So the fuel bill, EUR 6.9 billion in 2025, EUR 6.9 billion in 2026. So nothing is really happening. But the jet fuel price because we grow our capacity, I will come back on that later, is still coming down, and it's good to see that we have already hedged 62% of that volume. And then you see on '26, we are increasing the tenor of our hedges. So instead of hedging 6 quarters ahead, we are hedging 8 quarters ahead if you start at the quarter. And that brings that we are now have a total exposure hedged of close to 90% of a 1-year consumption. I think this is giving us robustness in this very, let's say, dynamic world, you could say, also in terms of fuel price. So we are getting closer to our European competitors, and I think we are very close to the ones which their head office is in London. If we then go to the capacity outlook, you see that we are reducing, I think, compared to what we initially thought during the Investor Day. We are now at 3% to 5%. We still will grow the long haul, which is our, let's say, backbone of our profitability with 4%. The short and the medium haul, we keep that stable. We are not growing there anymore. We are trying actually to improve our results, and we are keeping the capacity stable for the next year. And then Transavia still going up with 10%, mainly coming from upgauging of the fleet. And at the same time, we still have a quarter to transfer the activities in Orly from Air France towards Transavia. So that results in a capacity outlook between 3% to 5%. On Page 28, you see our total outlook. So the unit cost is guided at 0.0% to 2%. So there is the premiumization in which is 0.5%. We still have higher ATC cost, by the way. We still see high cost on Schiphol for another quarter. So that drives us that our unit cost despite the fact that we had a very good unit cost even down in the fourth quarter that we are between 0% to 2% for the year to come. And as we are disciplined as we were this year, we were getting more to the left than to the right side of that picture. But it all depends on the completion factor and of course, all the things which we need to further implement on our transformation because there is still inflation in the system. But it's good to see we have the CLAs actually now in. We closed [indiscernible] for Air France, and we have the CLAs in place for KLM for the majority of the stuff. And then on the net CapEx, you see a EUR 3 billion, which is in line what we had last year. So we are moving and we are still disciplined on our CapEx, although we still want to renew our fleet. And then on our leverage between 1.5 and 2, and we are now at 1.7. So we are quite comfortable with that, which drives me to our outlook. So we keep the same ambition. So we want a margin above 8%. We want a significant positive adjusted operating free cash flow, which you see that we're already realizing in 2025 if you take out this prepayment of the wage tax and the social charges in France. We keep on focusing on reducing our unit cost. It is not easy in this inflationary environment. We will keep on going to reduce that because that will improve our robustness in our business. And we are aiming on our leverage to have an investment grade for Fitch, we already have it, and we are very much in the safe zone over there. And we see that on S&P, we are moving really on the right track towards that investment grade. So we guide for 2028. We never guide in the year where we live because the circumstances are too uncertain to guide for. So that is a nice trajectory from the current 6% towards the 8% in 2028. With that, I give the floor to Ben. Benjamin Smith: Okay. So final slide here. Thank you, Steven. 2025, I'll say again, was a solid performance. We're quite pleased in a very demanding environment, in particular with the unique charges and taxation and airline focus in the Netherlands and in France. But the execution was well disciplined, and we've delivered both revenue growth and improved margins as we've just been outlining. Premiumization is clearly gaining traction. Our robust cash generation reflects improved profitability and strict investment discipline, and we're also delivering on our sustainability commitments via both fleet modernization and increasing SAF adoption. Looking ahead, we will continue to execute our road map with rigor and consistency with priorities on accelerating KLM's transformation, playing an active role in European consolidation and advocating for a level playing field. So these are the 3 main focus areas for us looking forward to 2026. Our ambition is to build a future-proof European champion, one capable of competing globally in a fair and transparent environment. So with these strong foundations and disciplined execution, we're carrying the momentum into 2026 with full confidence. So thank you for your attention, and we're now happy to take any questions you might have. Operator: [Operator Instructions] The next question comes from Harry Gowers from JPMorgan. Harry Gowers: A couple of questions, if I can. First one, Steven, can I just confirm what you said on the unit revenue going in Q1? I think you said to date that Q1 network total unit revenues are down minus 0.4%, but excluding the Schiphol impact it's up plus 1%. Was that correct? And then also, are you talking about network specifically and also ex currency? Second question just on the ex-fuel unit cost guidance for 2026, the range is obviously flat to plus 2%. Maybe you can give us a little bit of color on what scenario you're kind of baking in, which would lead you to being towards low end and flat? And then what sort of scenario would lead you to being at the higher end of plus 2%? Kind of what are you building into your guidance at both ends? And then final question, just on your EBIT margin guidance of over 8% by 2028, I mean anything you can say so in terms of progression to get there? I mean, will it be a linear journey from the 6% that you reported in 2025? Steven Zaat: So first, it was not Q1, what I said it was January, just to make sure. It is indeed the network ex currency and just our net ticket revenue, so excluding ancillaries. And you're right, let's say, if you take the January numbers, it is minus 0.4%. But if you take out the snow you get to plus 1.1% in terms of unit revenue in January. So it's not the full quarter. But to be honest, the first weeks of February were also not too bad. But I don't want to guide on weeks because then we get because then we get -- because there's always a week over week comparison, which is difficult. So I give you the number for January. Then on the unit cost, I think it is fully driven by the operations. So as long as we keep the completion factor and the operations going well, then we get more to the left side of our range. Of course, if we don't make the completion factor and we have a lot of compensation costs due to the fact as we have seen also in January, then of course, it drives up our unit cost. So I think it's all about execution. I think on the transformation, we have the programs in place. That is a journey which is not a one-day journey. So we -- it's just an ongoing procedure or operation, but the real unit cost difference comes from the execution in our operation. And for the long-term guidance, I'll give the floor to Ben. Benjamin Smith: So look, in 2018, where we were -- if I go back to 2018, where we were with Air France sitting at 1%, 2% margin and the very difficult transformation we went through with a clear strategy, and we're quite happy to see the results and how that's been panning out, and that was a linear sort of straight line. And KLM was starting the transformation or a new transformation effort from a much higher position. I'm not sure how close you are following, what's going on specifically in the Netherlands, but we've had an enormous increase in cost of operating at Schiphol. There's been a sharp increase in taxes related to transportation that have been imposed by the Dutch State and with a relatively high level of inflation, the pressure on cost with our staff has also gone up. So we've got some very good plans in place. We have to relocate the -- how the network is set up to make sure it's sized correctly for the new environment, which we're operating in. But I'm confident that we can get the margins up at KLM to ensure that, that contributes to our ambition of at least an 8% margin in the near term. Operator: The next question comes from Alex Irving from Bernstein. Alexander Irving: Two for me, please. The first is on the Air France medium-haul fleet. Now you've still got A220 deliveries for the next 2 and a bit years, then those are done. By when do you need to place the next order given the aging Seals you have? Is the main trigger for that an A220-500 program? Or if not, then what are you looking for to make that decision? The second question is on distribution and specifically how you're approaching the decision about whether and how to sell through large language models. Are you planning to engage directly with LLMs using an API or to rely on GDSs and travel agents continuing to pay commissions? When do you think you'll sell your first trip through a large language model? Benjamin Smith: Okay. Alex, so on the fleet front, we've decided to go exclusively with the Airbus A220s for -- to fly the entire medium-haul mainline fleet at Air France. We hope to have between 90, 95 examples in place before the end of the decade, replacing the entire Airbus Seal fleet. We are going to also look probably sooner rather than later at a replacement for our long-haul Boeing 777-300ER aircraft when you look out at how the order book looks at both Airbus and Boeing. So there's -- there are 2 options there. So on the fleet side, that's what we're looking at. At KLM, the decisions have been made and the 777-300ERs are much newer. And as you know, Transavia, we've made the decision. On distribution, we're still not 100% clear on which way we're going to go. We have some very unique markets in Africa, which don't fall into the categories that a lot of North American airlines deal with and some of our European competitors. We have a big exposure to Western Africa. And these are -- this requires a specific type of distribution, which we need to fit into our overall distribution strategy. Operator: The next question comes from Stephen Furlong from Davy. Stephen Furlong: It's more of an overview question to Ben. I mean I would have thought my view is that 2026 is a very important year for the group to get you -- set you up for the greater than 8% margins in 2028. I think, Ben, you called it in New York earlier in the -- in January, a pivotal year. You might just go through if we look to the end of the year, what would be your wish list at the end of the year, both organically or inorganically in terms of the group? And then what would be the biggest challenge you think this year or anything that would worry you in terms of operationally or anything else, restructuring, et cetera? Benjamin Smith: Okay. Thanks, Stephen. The strategic plan that we started out in 2019 at Air France has not changed. We've done the bulk of the domestic overhaul, which will be -- the plan will be completed in the next month. So that looks like we're in good shape to complete that. Of course, this was the biggest money-losing region of our network in 2019. So that is panning out as we'd hoped. The introduction of the replacement of the slots at Orly from being used by our regional operator HOP! and Air France by Transavia activity that takes some time to adjust. We were flying on average smaller gauge airplanes and we're replacing those with high-capacity or higher-capacity densified A320, A321 aircraft. So that adjustment and transition hoping goes as quickly as possible so that we're able to take advantage of the slot-constrained Orly airport and the cost structure we have at Transavia. So on that side, if I look at domestic France and the Orly operation and the ability to take some of those slots that we're operating today at Orly and move those to more of a European focused network and have something more comprehensive at Orly that we can offer to customers, that would be a big win for us. So we've got a time line over the next 2 or 3 years from a profitability perspective on what our ambitions are for Transavia. But as I've said many times before, the Transavia results, particularly in France, have to be looked at in context with what we've been able to restructure at Air France. So we are saving a couple of hundred million by pulling Air France out. Of course, it's Transavia that has to cover those flights, simultaneously reducing capacity in France and redeploying the use of those slots to European destinations and then going up against some very tough low-cost competitors. However, with the cost structure of Transavia being pretty much in line with our main low-cost competitors at Orly and with the advantage of the 50% slot portfolio and the Flying Blue affiliation, we've got a very good customer offering. So that's the -- that's on the Orly front. At CDG, continued simplification and -- both from an operational and maintenance perspective with reducing the types of fleets. We'll have the last of the Airbus A330-200s out of the fleet. The standardization of the cabins and the modernization of the existing fleet will almost be complete, so we can continue to drive pricing premiums, which we're seeing are working quite well. And that's why you're seeing the increased performance in the revenue -- on the revenue side at Air France. And if we can continue to improve the relationship with Aeroports de Paris, the airport operator that handles the -- or is responsible for both CDG and Orly Airport, which is much, much better now. So we're aligning our CapEx -- or their CapEx plan with our needs. So the operating environment at CDG should bring down cost significantly because it is a very difficult airport to operate a hub from. So that's at the -- on the airport front, and we can maintain the competitive cost structure of that airport and the taxes that the French state imposes on the airline industry, which we've been able to do so far despite the unstable government environment here. So on France, there's quite a few difficult items or elements that we've got to navigate through. But so far in 2025, the team under Anne Rigail have been able to do so and the result is, as you've seen, has been above expectations. So for 2026, it's pretty much the same. At KLM, we have a few more headwinds with also an unstable government, which has put in place a lot of incremental taxes that we were not expecting. So Marjan Rintel and her team are doing their best to temper those and even reduce these taxes. We're lucky that we have a new Minister of Finance and the Minister of Infrastructure, which is much more friendly to aviation. So we're reasonably optimistic that we can get some improvements. And the Schiphol Airport charges, this is our #1 objective at KLM to help reduce costs. If we're not able to significantly do that, we're going to have to seriously look at the operation and the hub that we operate there and what we're able to do profitably with the assets and the network that we have. So it'd be very -- I'd be very happy if through 2026, we could get some more clarity on what we can and can't do at Schiphol and that we've got more, I'd say, more assurance that our situation at Paris remains as it is today. And then also last point here is with SAS that we're pretty much completed our transaction and the takeover by the end of the year. So long answer there, but those are the 3 elements we're looking at amongst our carriers. Operator: The next question comes from Jarrod Castle from UBS. Jarrod Castle: Three as well. Are there any negotiations which are worth highlighting during the next 12 months for any of the airlines? And any concerns around that? Secondly, just coming back to AI. You signed an agreement with Accenture. I wonder, Ben or Steven, if you could just go through the buckets of where you see the use cases internally. I'm not necessarily talking distribution, but what makes it exciting for you? And then -- okay, I guess thirdly, the ETS price of carbon has been very volatile. So just an update on hedging. And then just related an update on how you see CORSIA developing, and all these environmental headwinds coming your way? Benjamin Smith: Okay. On the on the CLA labor agreement front, at Air France, there are no significant negotiations that are planned to take place in France. However, things do come up. But as we see today, things are relatively stable in France. And as I said, we don't have anything scheduled next year. There are some big agents that do come up in 2027, which we're laying the groundwork. And hopefully, we can get those agreed to earlier rather than towards the deadline. At KLM, we have constant CLA negotiations that are continuing. But with the situation at Schiphol and with the cost structure that we have at KLM today relative to the unit revenue, we've got to work with the union there to come up with a model that can get us back to the profitability levels that we need at KLM. So there's -- I would say they're not necessarily scheduled, but they must have -- they must -- these are new negotiations that are part of the transformation model that needs to take place. Steven Zaat: And then on the AI. I think AI is everywhere. So we will use it in our administrative process. We will use it in revenue management where we have a big project running. So it is not to say that we have only one part where we will use AI. So it is -- we have an approach where we have a discussion on, let's say, at the total group level, where we are going to invest in AI, but it is very also decentralized in all the executions within the operations. So it is -- I could say it is in every domain where you can talk to if you talk about customer management, if you talk operations, if you talk about commercial. I think it's not one domain, and therefore, we explore with Accenture further where we can implement further our AI. On ETS, we are, let's say, rebuying the ETS rights 1.5 years ahead. So we are fully hedged on that fund for 1.5 years. And then if you talk about CORSIA, CORSIA is a little bit -- it's a very difficult, how can I say, system. There are not a lot of projects. So we are just looking which projects where we can invest the money, but there are not that many. So we are a little bit skeptical about the execution, but it is there. I don't know what will happen in the U.S. So that is also important to see. But all in all, we have the, let's say, the provisions for it to invest in it. And we need more projects actually which are really helping this planet. All in all, the cost levels are not that high at the moment, it is not the same as putting sustainable aviation fuel in, which is, let's say, the first trigger together with the fleet, how we decarbonize let's say, our operation. But it should be there at a certain moment coming, but we need to have the projects where we have full confidence in that it is helping our planet. Operator: The next question comes from James Hollins from BNP Paribas. James Hollins: Two for me, please. Just picking up on your comments there, Steven, on U.S. outbound, U.S. inbound, is it a case that U.S. outbound from Europe is getting worse? I think you were talking about some softness there. Is it just a late bit difficult? And maybe a comment also on U.S. inbound. Is that potentially getting stronger as we head into or heading through 2026? And a slightly annoying question, but do you expect to reduce your Q1 losses year-on-year even with that weather issue costing you EUR 90 million? Steven Zaat: James, let's first start at the -- your last question. So I don't guide on anything. But of course, we are -- the ambition is to go to 8%. So that also means that we are trying to reduce our losses in the Q1, but don't forget that the seasonality is getting bigger in our industry. So -- but of course, it is not that on itself, we have an ambition to grow our losses in the first quarter. The situation in the U.S., let's say, if I look at the point of sale and I come back on what has happened in Q4. So the total revenues in the U.S. were up 9%. Then there was a 12% growth from the point-of-sale USA. So really, really strong and only 7% in Europe. So you see that Europe and especially Northern Europe. So if you look at Scandinavia, Germany and also the Netherlands, I think you see, if you look at the how popular the U.S. is currently in those countries, it is at a very, very low level. And that impacts, of course, also the appetite to go to the U.S. But there's another element on the U.S. It's extremely expensive to go there. So the inflation is very high over there despite the fact that the dollar is coming down, it's still much cheaper to get in a hotel in Europe than if you go to a hotel in the U.S. for the same quality. Then on Africa, so if you look at the -- 9% up, we are in revenues and Africa point of sale is down 16%. So you see really a significant impact over there, but we should also be modest on it. The share of, let's say, the point of sale of Africa on our U.S. is only 1.8%. It's not very big. And then we see, indeed, also India and Asia a little bit in the same way, so only 4% up in terms of sales, but with the growth of 9%. So that's a little bit of mixed bag. So we still see a stronger point of sale U.S. both in corporate and both in leisure, and we see a declining demand in Europe. But as you can see, at the end of the day, our unit revenue is up 6% year-over-year -- or sorry, the yields are up 6% year-over-year. So it is still very strong. And we all know that the point of sale of USA has the strongest price. So by definition, it's more favorable to move to the U.S. point of sale than the point of sale in Europe or elsewhere. And then the -- yes, I think that's it. Yes. So I hope you're happy with my answer, James. More I cannot say. James Hollins: No worries. Just given you mentioned it, maybe just some general trends on corporate travel, if you could, please? Steven Zaat: Corporate travel is just holding like it was. So it is not getting stronger year-over-year, but it still is the same share of percentage. So corporate travel is doing well, in line with all the other revenues, but not stronger than leisure. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can I ask -- you gave us in the deck, the advanced loads for Q1, I know it's obviously early days, but how does it look for the summer for Q2 and Q3? Is that level of lag, obviously, on lower numbers? Is that stable? Or is there a bigger gap this year? Second question might come to SAS. Is there any information you can give us on the progress through the competition policy process to take SAS on? And also, whilst I see you don't want to give us guidance on what it would cost. But can you just remind us of how that process works and also whether your leverage guidance that you gave us, is that inclusive potentially of having SAS on the books at the end of the year? And the third question, with Dutch airport policy, I think I read that there are plans to open a reliever airport for Amsterdam. Petrus Elbers always used to laugh at me because I couldn't pronounce it probably, but it's Lelystad or something like that, isn't it? Do you think that's going to happen? And is that good or bad for you guys? Steven Zaat: Yes. The summer Andrew is very far away, especially for French people and Dutch people. They are just thinking about their skiing holidays so not so much in into, let's say, the holidays of the summer. But if I look at the summer period and I look at the booking load factor, let's say, July, for instance, is close to where we were last year. So that's not even a gap, but we talk about numbers of what is it, just 20% of our planes, which is filled so it is very low. We are late bookers in our home countries due to, let's say, our relative good schedule in terms of holidays. Then on SAS. So we had the first discussions with the EU so it's going on, and we are still aiming to get it done at the end of 2026. So we had more than 100 questions. We are very nicely answering them, and we are discussing with the EU. It's more an information session at the moment that is any other discussion. They need to get a full picture what is the competitive landscape in Europe? And specifically, what is the competitive landscape in Scandinavia together with Air France and KLM. Then what is the cost? So what we have a formula, which is actually that we pay for the shares what is actually the EBITDA multiple in the market. So that is our EBITDA multiple, the one of IAG, the one of Lufthansa and the one of Finnair. And then we have an EBITDA, which we multiply and then we deduct the net debt, the same as you do in your modeling actually. And indeed, if you look at the leverage, we take into account also as it will not have a big impact on the leverage because the results of SAS are not that bad at all. I cannot disclose them, but in total, it will not have a significant impact on our leverage. And then the question on Lelystad, I give to... Benjamin Smith: Andrew. So as you know, in 2019, Schiphol was saturated in net capacity and Lelystad was planned to open, and there were discussions of even raising the cap at Schiphol. So Schiphol was at 500,000 movements and there was a discussion to go to 525,000 movements, and discussions about opening Lelystad airport, which was built and laid. So now we're sitting at 478,000 cap movement at Schiphol. We'd like that pretty much locked in stone so we have some visibility. We have much higher cost at Schiphol than we had in 2019. We do believe that Lelystad will open with 10,000 movements so we're not looking at a lot of movements today at a lower cost operation. So to answer your question, is it good or is it bad for us? I think when you look at the whole picture, we want visibility on both the number of slots at Schiphol will be available in the short to medium term? And what is it going to cost us to operate at Schiphol in the short to medium term. I think once we have that, we'll be able to take a position on Lelystad whether it's good or bad. Operator: The next question comes from Marc Zeck from Kepler Cheuvreux. Marc Zeck: I try to get answers to 2 questions. First is really on Airbus. Airbus today said they will scale back deliveries somewhat due to engine issues, and at least judging by Airbus share price reaction that came as a surprise to the market. So what do you currently factor into your unit cost guidance for 2026 and the margin guidance for 2028. In terms of Airbus deliveries, do you kind of already have today's Airbus announcement in that? Or might there be a bit of headwind if there's less planes deliver and there's maybe more what type of sedation in the engine market? And the second question really would be on the EU point-of-sale Atlantic traffic, you kind of said you already answered or said everything you could say. But I was looking for any signs maybe of improvement from the very depressed levels of EU point of sale. I believe Q4 last year, there was not yet really an impact from U.S. politics that only kind of emerged in Q1 2025, really. So if you are now looking at bookings, EU point of sale into the U.S. especially from France and Netherlands. Do you see an improvement compared to the depressed level we see in -- we saw in 2025? Or is it still very much unchanged or even a deterioration on that one? That's my 2 questions. Benjamin Smith: Okay. Marc, so a couple of things. We were lucky that we have quite a number of unencumbered planes, older generation airplanes, which gives us some flexibility for delays that we may incur from Airbus or Boeing. We took a very lengthy delay with the deliveries of our last Boeing 787 aircraft. We just received our last 787-10 at KLM a couple of years late. So we're pleased that we've now got the entire 787, both -9-10 order book now completed for Air France and KLM. For the -- on the Airbus side, Airbus A320s, we ordered the airplane with the CFM LEAP motor, CFM LEAP engine, the Pratt GTF. So that is one of the big road blocks for Airbus to deliver. Here again, we have 737s at KLM and A320ceos at Air France that are either owned or unencumbered that we can continue to fly should we encounter any delivery delays on the 320neos powered by CFM LEAP engines. We have taken some delays over the last 2, 3 years. So we have been managing. So it's not new. We have to take a few extra months. It's not the end of the world for us. We have been on a big fleet renewal for the last 5 years and so we've got some good experience in managing either engine delays or the airframe delays and also difficulties in integrating new technologies such as -- we've got some challenges on the Airbus A220 fleet and how that impacts the operation and how we can handle it. So I think -- so far, we don't see any change in our assumptions for 2026 on the fleet front. And then point of sale Europe on the transatlantic, our position on that. And what we've seen has not evolved in the recent weeks. It is -- we do see some softness, but it is being offset by stronger point-of-sale U.S. Operator: The next question comes from Axel Stasse from Morgan Stanley. Axel Stasse: So I want to come back on this, but how much is your U.S. point of sales for the transatlantic routes? Is it fair to assume it's close to 50%, asking this just to make sure we understand how much of the headwinds Europe represents for the group right now? And maybe a follow-up on this is what are the yield differences for the U.S. and the European point of sale for the transatlantic routes? That's my first question. And then my second question is about the cost benefits can you quantify how much of the KLM cost benefits you guys benefit in 2026 versus 2025? And should we see more of this cost benefits in the first part of the year or in the second part of the year? Steven Zaat: So let's say, the point of sale U.S. is around 56%, already, really a strong foothold. The yield difference, I don't know by heart. So I don't want to mislead you by that, but I know from the past, it was quite significant. And we have also seen that the U.S. pricing has gone up. So I don't have the answer on that one, to be honest. And on the cost benefits, we will see that, let's say, it will gradually go -- you have seen in this year we have -- it started actually more in Q3 and Q4, but we also expect that the cost benefits will probably more. I think it will be more evenly spread as what we have seen last year. But we have a [ triple ] specifically, which is still charging again an increase year-over-year in the first quarter, which we will not have in Q2 to Q4. So there is maybe more the difference than what we have seen this year. Operator: The next question comes from Ruairi Cullinane from RBC Capital Markets. Ruairi Cullinane: Yes. I found the comments on the level playing field for airlines globally, pushing that. Interesting given you are using more tax mandates. Is that something we should expect you to continue to do? And then secondly, just because it is such a substantial impact on the quarter. Is the tax impact purely a function of the DTAs that were mentioned in the prepared remarks? Steven Zaat: Ruairi, welcome to our group of analysts. We are very happy that you follow us from now. So thanks for that. Yes, RBC, yes. Yes, we are very happy with you, Ruairi. Just one quick, can you repeat your last question, please, because we could not fully understand the question. Ruairi Cullinane: Yes. Yes, it was just on the EUR 354 million sort of income tax impact in the quarter. Is that -- I mean you mentioned the DTAs in your prepared remarks, but I wondered if there's anything else notable there? Steven Zaat: Okay. So first on the SAF, let's say, we have a mandate. So we -- of course, we fulfill our mandate because that is automatically more or less done. Then on top of it, we will sell SAF to the markets to our corporate customers and to our, let's say, directly to the passengers. And then, of course, also on the cargo, we sell our SAF. We consumed, especially in the Q4, a high level of SAF in the Netherlands, because there were HBE credits. So jet fuel was more or less the same price as SAF. So that is why we had a very high volume at KLM in the fourth quarter on sustainable aviation fuel. If you look at the income tax, so it is driven actually by the fact that we are making more profits in France so we can make more use of the tax asset. And at the same time, we revalue the tax asset based on our, let's say, profitability trajectory, which we have agreed with the Board. So those 2 elements, which is driving up that tax. We still have, let's say, every time we have to pay tax there is a 50% credit, then you know that there is an additional tax in France, which they say it's temporary, but it has now been extended again, but that has a very marginal impact at around EUR 11 million impact in 2025, but it will grow because our profitability will grow, and they also take 2 years into account so we have more profitable years to take into account. But it is mainly coming from revaluating the tax asset and the use, of course, in the year 2025. Operator: [Operator Instructions] The next question comes from Jack Rayburn from Bank of America. Unknown Analyst: Standing in for Muneeba this morning. A couple of questions, please. Maybe picking up on the U.S. point of consumer or point of sale again. What gives you confidence on the strength of the U.S. consumer continuing in 2026? And how are you viewing transatlantic industry capacity and potential yield implications? And maybe touching on TAP Portugal, if there's any late developments on that? And if you have any issue with the minority stake. Thank you. Steven Zaat: Yes, why are we confident? Let's say, I don't say that we are confident or anything, but still every time we are surprised by the strong foothold of the point of sale of U.S. Of course, it's a very dynamic market. There's a lot of things happening over there. Of course, some people are worried about recession, et cetera. But still, the prices are much different in Europe than over there. And as already said, probably the lower dollar at a certain moment will also help a bit of traffic towards the U.S. especially in countries like the Netherlands, where they look very carefully at pricing and to make use of that. So all in all, I think, let's say, the booming on the North Atlantic even exceeding our own expectations, and we still see very strong bookings coming in out of the U.S. Then on TAP, now you know that there were 3 parties qualified for the process, one of them is us. And we are working on a nonbinding offer, which we will bring in before the deadline, which is at the beginning of April. So that is where we are, not any further, and it takes time to, let's say, get a real offer on the table. Operator: There are no more questions at this time. So I hand the conference back to the speakers for closing remarks. Benjamin Smith: Thank you, operator. And thank you, everyone, for your questions, and we look forward to speaking to you at the end of Q1. Operator: Thank you for your participation. The call is now over. You may now disconnect.
Operator: Good morning, and welcome to the Quanta Services, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow management's prepared remarks, and we ask that you please hold all questions until that time. I will then provide instructions for the question and answer session. As a reminder, this conference call is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Kip A. Rupp, Vice President, Investor Relations, for introductory remarks. Kip A. Rupp: Thank you, and welcome, everyone, to the Quanta Services, Inc. fourth quarter and full year 2025 earnings conference call. This morning, we issued a press release announcing our fourth quarter and full year 2025 results, which can be found in the Investor Relations section of our website at quantaservices.com. This morning, we also posted our fourth quarter and full year 2025 operational and financial commentary and our 2026 outlook expectation summary on Quanta’s Investor Relations website. While management will make brief introductory remarks during this morning's call, the operational and financial commentary is intended to largely replace management's prepared remarks, allowing additional time for questions from the institutional investment community. Please remember that information reported on this call speaks only as of today, 02/19/2026, and, therefore, you are advised that any time-sensitive information may no longer be accurate as of any replay of this call. This call will include forward-looking statements and information intended to qualify under the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements reflecting expectations, intentions, assumptions, or beliefs about future events or financial performance or that do not solely relate to historical or current facts. You should not place undue reliance on these statements as they involve certain risks, uncertainties, and assumptions that are difficult to predict or are beyond Quanta's control, and actual results may differ materially from those expressed or implied. We will also present certain historical and forecasted non-GAAP financial measures. Reconciliations of these financial measures to their most directly comparable GAAP financial measures are included in our earnings release and operational and financial commentary. Please refer to these documents for additional information regarding our forward-looking statements and non-GAAP financial measures. Lastly, please sign up for email alerts through the Investor Relations section of quantaservices.com to receive notifications of news releases and other information, and follow Quanta IR and Quanta Services on the social media channels listed on our website. With that, I will now turn the call over to Earl C. “Duke” Austin, Quanta's President and CEO. Duke? Thanks, Kip. Earl C. Austin: Good morning, everyone, and welcome to the Quanta Services, Inc. fourth quarter and full year 2025 earnings conference call. I would like to begin by thanking our exceptional employees for their continued absolute performance mindset, dedication to safety, operational excellence, and delivering mission-critical infrastructure solutions to our customers. Your commitment has once again driven outstanding results and positioned Quanta for sustained success. 2025 was another year of significant achievement and advancement for Quanta. We again delivered record results as we generated double-digit growth in revenues, adjusted EBITDA, and adjusted earnings per share along with record free cash flow and backlog. Quanta has produced record revenues eight of the last nine years, eight consecutive years of record adjusted EBITDA, and nine consecutive years of record adjusted diluted earnings per share. Quanta has clearly established itself as a compounder of profitable growth. These results reflect the strength of our diversified solution-based business model and our portfolio approach, enabling us to adapt to evolving industry dynamics while consistently delivering execution certainty and profitable growth across varied market conditions. Throughout 2025, we continued to enhance our capabilities through strategic, disciplined capital deployment. We completed eight acquisitions during the year, including three significant transactions in 2025. We acquired Dynamic Systems, a premier turnkey mechanical and process infrastructure provider that strengthens our presence in the attractive and growing technology, semiconductor, healthcare, and load center markets. And in the fourth quarter, the acquisitions of Tri City Group and Wilson Construction Company expanded our craft skill platform to deliver critical path solutions for load-centered facilities and electric utility programs. In the aggregate, the acquisitions we completed in 2025, along with our organic growth, added approximately 11,100 employees, bringing our total workforce to approximately 69,500 at year-end, reinforcing our self-perform capabilities that provide certainty and differentiate Quanta as a solutions provider. Looking ahead, we see substantial momentum building across our end markets, evidenced by our total backlog of $44,000,000,000. The convergence of the utility, power generation, and large load industries combined with accelerating load growth demands is driving unprecedented infrastructure investment requirements. For example, in October, we announced Quanta’s selection by NiSource to design, procure, and construct generation and infrastructure resources capable of producing approximately 3 gigawatts of power for a large data center campus in Indiana, a project that showcases the breadth of our total solutions platform as well as our support of customer affordability objectives. Additionally, we continue to advance our vertical supply chain solutions through strategically investing approximately $500,000,000 to $700,000,000 over the next several years in our power transformer manufacturing facilities vertical supply chain strategy. The majority of this investment will build out production for the 345-kilovolt through 765-kilovolt power transformers and breakers, which we believe will create a significant differentiated solution for Quanta and our customers in the high-voltage transmission market. These programs are just a couple of examples of Quanta's ability to provide total solutions across converging markets that are designed to deliver speed and certainty. In many ways, we believe we are just getting started. We are confident in Quanta's ability to deliver innovative, craft-based, and supply chain solutions that are designed to meet our customers' need for certainty and for their success. As we said last quarter, we believe we are well positioned to achieve record backlog and another year of double-digit earnings per share growth in 2026, and our full-year guidance reflects that conviction. Our strategy remains grounded in craft labor excellence, execution certainty, and disciplined investment. We believe Quanta is uniquely positioned at the center of a multidecade infrastructure transformation, and we are confident in our ability to generate attractive compounding returns and deliver long-term stakeholder value. I will now turn the call over to Jayshree S. Desai, Quanta’s CFO, to provide a few remarks about our results and 2026 guidance, and then we will take your questions. Jayshree? Jayshree S. Desai: Thanks, Duke, and good morning, everyone. We are pleased to report another quarter of strong execution. Jayshree S. Desai: Capping a year in which Quanta delivered record results across virtually every key financial metric. For the full year, revenues reached $28,500,000,000, an increase of 20% compared to 2024. Adjusted EBITDA was a record $2,900,000,000, and adjusted diluted earnings per share grew 20% year over year to $10.75. We also generated record cash flow from operations of $2,000,000,000 and record free cash flow of $1,700,000,000. In the fourth quarter specifically, revenues were $7,800,000,000 with adjusted EBITDA of $845,000,000 and adjusted diluted EPS of $3.16, all records for Quanta. Cash flow from operations in the quarter was $1,100,000,000, and free cash flow was $946,000,000, both fourth quarter records. During the fourth quarter, we completed three acquisitions, Tri City Group, Wilson Construction Company, and Billings Flying Service, for aggregate upfront consideration of approximately $1,700,000,000 funded through a combination of cash and Quanta common stock. These businesses complement our strategies and expand our power delivery capabilities for large load center facilities and utility capital programs. Even after deploying this level of capital following the third quarter acquisition of Dynamic Systems, we maintained a leverage ratio below two times, a testament to the strength of our cash generation and our commitment to balance sheet discipline. Looking ahead, this morning, we provided our full year 2026 financial expectations, which reflect continued double-digit growth in revenues, net income, and adjusted EBITDA, as well as the opportunity to deliver over 20% growth in adjusted EPS. These financial expectations are supported by record backlog at year-end of $44,000,000,000, the strength of which is broad-based, driven by ongoing investment in grid reliability and resilience, growing demand for power generation, and the long-term infrastructure investment required to meet rising electricity consumption across the economy. These are multiyear structural demand drivers that provide us with meaningful visibility heading into 2026 and beyond. Additionally, we expect free cash flow of $1,800,000,000 at the midpoint of our range, which includes $250,000,000 to $350,000,000 of expected capital expenditures related to the vertical supply chain solutions that Duke described. Our range of free cash flow also contemplates the collection of the remaining balance associated with the large Canadian renewable transmission project discussed in prior calls. Additional details and commentary about our 2026 financial guidance can be found in our operational and financial commentary and outlook expectation summary, both of which are posted on our IR website. In summary, 2025 was a year in which Quanta continued to deliver on its commitments, providing certainty to our stakeholders and compounding earnings. We enter 2026 with record backlog and a strengthening outlook. The convergence of utility modernization, power generation expansion, and large load growth continues to accelerate, and Quanta's workforce, breadth of solutions, and execution capabilities position us well to serve our customers' most critical infrastructure needs. We remain focused on disciplined growth, operational excellence, and creating long-term value for our shareholders. With that, we are happy to answer your questions. Operator, Operator: Thank you. We will now move to our question and answer session. For today's session, we will be utilizing the raise hand feature via the webinar. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. If you have dialed in, please press star 9 to raise your hand and star 6 to unmute your line. Once you have been called on, please unmute yourself, and please begin to ask your question. Again, that is star 9 to raise your hand and star 6 to unmute if you have dialed in. We ask that all participants limit themselves to one question. If you have an additional question, you may requeue, and those questions will be addressed, time permitting. Thank you. We will now pause a moment to assemble the queue. Our first question is from Julien Dumoulin-Smith from Jefferies. Please unmute your line and ask your question. Earl C. Austin: Hey. Good morning, team. Thank you guys very much. Nicely done. Truly, kudos. Julien Dumoulin-Smith: Maybe just coming back to the Analyst Day coming up here and a little bit of a preview if I can. How do you think about this setting the tone for a high-teens earnings growth, if you will, the back half of the decade? And specifically within that, can you talk about what is embedded in '26 guidance as it pertains to data center contracts? And also, obviously, Jayshree, you have just announced or you closed on a number of acquisitions again. Where are you positioned with respect to capturing the data center opportunity? And the, you know, internal versus still needing further external acquisitions to really achieve the scope that you are desiring. Earl C. Austin: Yeah. Good morning, Julien. So on the data center kind of how we are thinking through it, it is roughly, like, 10% of the business at this point, and then that would be a go-forward basis. Backlog is certainly growing. It is our fastest growing piece of backlog. There is a lot of opportunity there. I continue to see us booking significant backlog this year and beyond. It is a multidecade, probably, the way I see it, at least a decade of growth in that area. So, you know, we are having success there, and I do believe the company is well positioned to, you know, take that growth. And I forgot the other four questions. What was the other one? Jayshree S. Desai: Just how do you see the several years? Oh, the several years. Yeah. Look. Earl C. Austin: I think when we see it, you know, the company has put up, management team has put up a decade of type results. Same management team, same philosophy. Better markets, larger TAMs. I like our chances to continue what we have done in the past. Operator: Thank you. Our next question is from Steven Michael Fisher from UBS. Please unmute your line and ask your question. Thanks. Kip A. Rupp: Congratulations on the deals. Just wanted to ask Steven Michael Fisher: you a little bit about the electric margins. Kind of steady for the last few years. Wonder if you could just bridge some of the puts and takes between 2025 and '26. I imagine there are some things underlying there, you know, in terms of SunZia, and perhaps other things. And maybe just more broadly, about the margin initiatives that you have. I know you have got a number of them. Can you just talk about how you see some of those things coming through in terms of vertical integration, improved resource sharing, mix, etcetera. Thanks. Earl C. Austin: Yeah. Thanks, Steve. I think when we look at the company, you know, there are large projects that we are continuing to see. But, you know, '26, we do not anticipate starting any 765 type work. We do not see any major large projects in it. It is really just solid growth across a broad spectrum of markets. There is nothing, there is no SunZia. I got you with the company at $33.5 billion. SunZia is really not going to move the needle at this point. I think you are seeing broad-based type growth that you will continue to see. You know, I think the difference is we are in two verticals. You have the technology TAM that is well over $1,000,000,000,000 and the utility TAM over $1,000,000,000,000 and growing. So as we look at both those markets and take those opportunities, the company has a significant portfolio of ways to grow well beyond what we should be talking about in SunZia. I think that is past, and we have done a nice job there, commending the team that put that together. But, again, we are happy to build SunZias, and we are happy to do the baseload work of everyday programmatic spend with both our technology and our utility customers. And that is what you see the company focus on. The large project dynamic comes with that, but, you know, the initiatives of 765, again, like, we talk about it a lot. It is not in backlog yet, and it is not something that we see in 2026. Operator: Thank you. Our next question is from Jamie Lyn Cook from Turs Securities. Please unmute your line and ask your question. Jayshree S. Desai: Good morning. Nice print. I guess just Steven Michael Fisher: to Jayshree S. Desai: question, since the announcement with NiSource last quarter, Jamie Lyn Cook: I am just wondering what the path towards doing more CCGT, you know, projects. I am just wondering if additional customers are coming to you now that you sort of dipped your foot in this. As you do this, should we continue to see joint ventures as a path? Then I guess just my follow-up question, margins in Electric Infrastructure, 10.3% at the midpoint, similar to the past couple of years. I am just wondering if investors should think of this as sort of the new margin target and why would there not be opportunities for margin expansion with 765 coming online soon and, you know, just bigger, larger projects should be favorable to margins. Earl C. Austin: Yeah. Thanks, Jamie. I will go backwards. I think when we look at margins and margins improvement, yes, I mean, we have opportunities to improve that. You know, I think we took a prudent approach to the midpoint of the guidance. And, you know, there are certainly things within it that we can improve. We do, organically we will grow around 6,000 employees. That is pressure on those margins as we have talked about in the past, and we continue to kind of have the same ratios. So that tempers some of the margins about, you know, still 50% plus of the business is under a regulated environment with our utility customers, and we look more at compounding that over multidecades versus trying to enhance margins a percentage point Jayshree S. Desai: here or there. Yeah. I do think we can operate better. Earl C. Austin: We certainly have a mindset to do so. It is also about risk. I mean, I think the company is really working on the quality of earnings and the risk profile. We are unwilling to take the risk you may have seen in the past, but the margins are. And so it is really a compounding story, Jamie. I do not think you are going to see any of these outward margins, and especially in our regulated business. And even in our addressable market with technology, we are working hard with the technology customers to have more of a programmatic look to this. And that is the company. That is who we are. We want to collaborate and a multidecade look. We are not trying to do anything other than enhance our customers' ability and the stakeholder. They are a customer from affordability to everything else, we have to be a part of the solution of the industries that we serve. And what I would say, Steve asked something on margins. I want to just go back to that. Sorry. I do think the company has initiatives internally that, from vertical supply chains and all the things that we are doing, sorry, Steve. I did not catch you. That will help us. Also, but you also have healthcare and all kinds of things that are pressing, including Jayshree S. Desai: what I just discussed with Jamie. So Earl C. Austin: sorry I missed that part. Operator: Thank you. Our next question is from Sherif Abdul-Fattah El-Sabbahy from Cantor Fitzgerald. Please unmute your line and ask your question. Kip A. Rupp: Thank you so much and congrats on a strong quarter. Sherif Abdul-Fattah El-Sabbahy: Strong year, and obviously, a strong outlook. The question I have, Duke, again, pertains to what is happening in the marketplace. Maybe if you can just give us a sense of, you know, the pricing discipline that is holding in the marketplace combined with potential supply chain dynamics that might be also a potential headwind, as we look at the growth opportunities that you have? Earl C. Austin: Yeah. I mean, I think when you look at supply chain, you know, you see our announcement this morning. It is really around trying to derisk the supply chain as well as take advantage of what we see in the marketplace. I mean, you know, the $300,000,000 to $500,000,000, probably up in the $700,000,000 over the next three years, is derisking us. If the transformers, breakers, the things that we are building do not show up, we have issues, significant issues. So I think, you know, part of that was a collaboration with the industry and our client AEP on building transformers to their spec. And that is something that we take very seriously, and we know that our clients want certainty. This company is built on certainty, and building transformers, all the things that you may not think, why are they doing that? We are doing that to derisk this company long term and allow us to be certain as we look at it while addressing affordability to our clients. I think that is a big thing, is affordability. And we are working on those things with our vertical supply chain, which allows us a great sense of certainty. And when we guide, when we tell our customers that we can do something on time, on budget. And as far as craft, we have invested in craft for two decades. That is who we are. Anytime you have a tight craft labor market, Quanta does very well. Sherif Abdul-Fattah El-Sabbahy: Thank you. Our next question Sherif Abdul-Fattah El-Sabbahy: The other question I had was on pricing dynamics in the marketplace. Earl C. Austin: Yeah. I mean, I think we look at it more in a collaboratory manner, Steven Michael Fisher: where Earl C. Austin: you know, we were bidding on a one-year type, two-year type things. Now we are not bidding at all. We are negotiating five-, ten-year type programmatic spends. And that is the difference. It is more longevity, more risk-adjusted type look at the business, solution providing, pull-through, ROIC goes up in these environments. Our return on invested capital because of things that we can do and offer in a solution base. So I really see just a longer Steven Michael Fisher: term Earl C. Austin: It is not a margin story. I will say it again. Operator: Thank you. Our next question is from Mark Strouse from JPMorgan. Please unmute your line and ask your question. Steven Michael Fisher: Yes. Good morning. Thank you very much Mark Bianchi: for taking our questions. Duke, I just wanted to follow up on Jamie's earlier question on gas power generation. Can you just talk about what you are seeing in the pipeline there? How you are expecting that backlog to trend in 2026? And then are you planning to expand beyond the Zachry JV going forward? Thank you. Earl C. Austin: Yeah. Thanks for reminding me. I missed that. So I do think when we look at our gas generation business, we are certainly looking at the market, listening to the market. They are asking us to build these types of combined cycles, single cycles, all types of generation. And we put together a great team, a great platform, super excited about what we have booked. The opportunities, yes, I do believe when you look at the opportunities, we will book more generation. We will book it both in a JV setting. We will book it with just us. I mean, we are certainly capable internally of building generation and will. So it is really around the risk where, you know, that is something that we are not going to deviate on. Mark Bianchi: It is Earl C. Austin: part of it, and our customer base and anyone that calls asking for generation. It is risk adjusted. We are not getting in a position where, of the past, where we firm fixed price generation, not doing it. So if people want us to build it, it will be risk adjusted. Yes, I believe we will book backlog throughout the year. There is no shortage of inbound calls wanting to build generation. So I am confident you will continue to see that backlog growth, which is not in backlog yet. So the first one is not in backlog. I suspect we will have multiple in backlog before the end of the year. And, you know, I think it is more of a 2027, 2028, 2029 type build where that is the ramp on it. And it will continue on out. We built a nice platform. I am excited about it. Operator: Our next question is from Atidrip Modak from Goldman Sachs. Atidrip Modak: Hey, good morning, team. Duke, in your prepared comments, you talked about strategic initiatives to Atidrip Modak: programmatic customer relationships. Can you talk about that a little bit more? Give us any color on what you are thinking of and what we should expect there? Earl C. Austin: I think when we look at the utilities and we look at the technology customers, it is our job to, you know, certainly help with their builds and make them successful. That is how this company views it. And as we do that, you know, look. People want certainty. They have to have it. And I think what we are known for is execution certainty. And construction risk is not something that we are concerned with primarily on the regulated utilities except gas-fired. So we really think we are just in a good spot there, and the discussions we are having are solution-based discussions, and they have issues with labor, labor constraints, vertical supply chain issues. We have done a nice job seeing out five, ten years, and putting ourselves in great positions here to take advantage of those things that may have looked funny to Wall Street five years ago, and they are showing up today as something that looks visionary, and I think that is what we are trying to accomplish. Operator: Thank you. Our next question is from Michael Stephan Dudas from Vertical Research Partners. Please unmute your line and ask your question. Sherif Abdul-Fattah El-Sabbahy: Yes. Thanks. Good morning, Duke. Mark Bianchi: Kip, and Jayshree. Steven Michael Fisher: Morning. Michael Stephan Dudas: Oh, yeah. Good. Just checking to make sure I am, like, hey. Hey, Duke. Nice decade. Sherif Abdul-Fattah El-Sabbahy: You. So Michael Stephan Dudas: looking at the news flow and the demand expectations appear to be off the charts and getting bigger. Any sense of how real the market is with your discussion with utilities on the load factor side? Are there a lot more fluff? Is there reality? And what are some of the hurdles? Are the hurdles becoming less important or more important to execute what the plans of your customers are over the next several years, you know, maybe regulatory or some of those issues there? Thank you. Earl C. Austin: I mean, anytime you are Michael Stephan Dudas: really Earl C. Austin: contemplating doubling the size of, you know, the largest human infrastructure project in the world, I would tell you, like, it is hard. And there are stops and starts and all kinds of different things that you can find out in the, and certainly on social media. Yeah. I think some of it is hype, but even if you discount it 50%, it is still doubling the size of the largest infrastructure project in the world. And I do not see any demand slowdown at all. I do not. And we can see out kind of five years, maybe longer. I mean, we are probably in 2032 now, kind of looking at things and booking things. So I think it is, you know, way out there. We have to build generation in this country, all forms. And I think it is something that our customer base, our utility customers are, certainly they are regulated in many ways. But I will speak for them. They have a great business, and it goes unnoticed of how the energy business is growing substantially. It is a growth business. And, you know, we are right in the middle of it with them. You are going to get some political windfall, you know, kind of rhetoric here with what I would consider unfounded things that go on with data centers and things like that. You know, when you look at the Indiana project, it is $7 a month, you know, rebate basically to every ratepayer in NiSource. Jayshree S. Desai: Maybe more. Earl C. Austin: So I just think we have to do a better job as an industry promoting how good this industry is. We are trying to do the right thing for the stakeholders while advancing the system and generation capabilities to double the size of what it is today. And I, you know, I am super excited about it. These utilities are super excited about it. They are doing a great job managing through all this political rhetoric, but underneath, I can tell you legs are moving fast, and people are doing things. Operator: Our next question is from Sangeetha Jain from KeyBanc Capital Markets. Please unmute your line and ask your question. Jamie Lyn Cook: Good morning. Thank you for taking my question. Sangeetha Jain: Duke, it looks like the hyperscalers and colos are increasingly looking for financing partnerships for their large projects as the project sizes get bigger. Would you ever consider becoming an investor in a large infrastructure project if the scope of the award measures up against your risk profile? Earl C. Austin: Yeah. I mean, Sangeetha, we have looked at those things in the past. I would say we never compete with our customer on those type of things. So you get in a situation where if you invest significantly with a colocator, hyperscaler, and things like that, you run the risk of competing with who our client is, and we do not do that. So can we help with supply chain? Can we do some things to help move things along? Sure. We have not taken outside money for any of our expansions. We just have not. I mean, we have been offered, you know, on transformers, all kinds of different things. Do not need capital. Need capital, but we do not need anyone else's. We want to control our own destiny. And I think it is extremely important that we have the balance sheet where we can do those things and enhance their ability to accomplish. But as far as at this point, us putting in capital into, you know, an asset such as a data center, I cannot see it. We do, we can do things in other ways. And the company, what we see going forward based on our ability to deploy capital in the core business, I like what I see there much more than trying to invest in something that we do not, you know, that is not core to us. That is how I see it. Operator: Thank you. Our next question is from Brian Daniel Brophy from Stifel Nicolaus. If you would like to unmute your line and ask your question. Steven Michael Fisher: Thanks. Good morning, everybody. Nice quarter. Appreciate you taking the question. Duke, you mentioned previously you are seeing a tight craft labor market. I guess, can you talk about some of the areas of your business where you are seeing more or less tightness currently? Thanks. I mean, it is across the board. You know? I think, you know, we have got to do a good job of getting pipelines of craft in here. I was in DC yesterday with Veterans in Energy, and I can only say, like, Earl C. Austin: we are working hard at building these pipelines into the company. And we have got to get out and promote it and make sure that we stay in front of it. Our colleges and campuses and all the things, working with our unions and nonunions, everything that we are doing, I think, will help us, but it is tight. I would say anything around the data center stuff is probably the tightest market at this point. You know, utility-type transmission, big transmission, things like that has not really started yet. You will see that in the back half. Distribution is kind of, you know, modest growth in that. Telecom is moving the right direction. I think you will start to see fiber splashers, things like that, get tight. But in general, it is good. We know where it is going. We see it. We are investing in the right spots, and we will take advantage of those markets. Operator: Our next question is from Nicholas Amicucci from Evercore. Please unmute your line. Mark Bianchi: Good morning, guys. Steven Michael Fisher: Good morning. Just a quick one for me. As Nicholas Amicucci: we kind of saw at the end of last week, just wanted to get a sense of kind of the ability to kind of push the button on more of the renewables projects, just given that we have now some guidance, preliminary? But on the, on the FIT side, have you guys seen kind of, have the conversations kind of picked up, you know, granted over the past week just with regards to those and just kind of getting those things moving forward? Earl C. Austin: Yeah. I mean, I will let Jayshree comment as well. But from what I see, you know, we continue and have continued to stay, you know, kind of double-digit type growth plus in our renewable business, and we can see out, you know, through 2030. I am not concerned with that business. It is, you know, there is always going to be a FIT. There is always going to be something in that business that is noisy. And we have to operate through it. When you think about solar and batteries, it is the very fastest thing we can put on the grid right now, in many areas. So we can build it fast. We do not have to wait on turbines or anything like that. So I do think there is opportunity there, and you will continue to see. And it will be a form of energy for the foreseeable future. Right? You know, wind is getting some bad press, but you will still see wind get built. And not under some sort of political pressure and all kinds of different things, but it is still getting built underneath, and it is needed to fill the generation gap. And, Jayshree, I will let you comment on your Jayshree S. Desai: No. The only thing I would add is the customers we have been working with, as you know, have been very, very strategic about getting ahead of a lot of these political dynamics with safe harboring and the projects in which they are working and having a robust enough pipeline to deal with some of these things that are just endemic to the renewables industry. So we have continued to work with them on a multiyear basis, and so it has allowed us to be comfortable with where we sit in our renewables expectations. We will, of course, continue to work with them over the next several years as the dynamics around the FIT and other things become more clear. But as of now, it is, as Duke said, it is just business as usual. We continue to see good growth there. There will be times, of course, where our customers will have to deal with certain political dynamics, but these are customers that are comfortable doing so, and we have intentionally stayed with customers who can do so and who have a track record over a long period of time of managing these things. And the demand continues to be very, very strong for those projects our customers are working on. So it is just business as usual on the renewable side. Operator: Our next question is from Adam Robert Thalhimer from Thompson Davis and Co. Please unmute your line and ask your question. Steven Michael Fisher: Hey, good morning, guys. Great quarter. Julien Dumoulin-Smith: Hey, there was a comment in the prepared remarks about large transmission projects becoming increasingly visible? Can you just compare what is in backlog for large transmission to what you see out there in the bidding environment? Earl C. Austin: Yeah. I am not sure how to define it. Atidrip Modak: You know, what is large now? Earl C. Austin: These days. So I would just say we have no significant 765, no 765, which I consider those large projects, in the backlog. I do not, there is not a lot of large dynamics in there. It is more programmatic spend more so than any kind of main project that I am aware of. It is minimal. I mean, look. We see it coming. We see it stacking. We have talked about it. I think you will see us book later half 2027 significant amount of 765 and other types of work. It is not just 765. It is 345, 500. Data centers, I do not know, generation. It is stacking. I feel confident that there will be some chunky awards all the way through the next three to five years. Right? We are just getting started. I know the backlog is growing. I see it too. We are taking market share. We are doing the right things. We are focused on the base business. We are not letting off of it, and the management team is highly focused on not giving up on that base business and back growing it. Operator: Our next question is from Justin P. Hauke from Baird. Please unmute your line and ask your question. Jayshree S. Desai: Great. Mark Bianchi: Morning, everybody. I wanted to ask about Justin P. Hauke: the custom fab capabilities that came from this acquisition this morning, I guess at Tri City. Is that, I guess, is that all new to you, or did you have some fabrication capabilities from Cupertino or elsewhere before this? And maybe just talk about, you know, the capacity you have there and also, is that all being done for self-performed construction work, or is that something where you are selling those prefabs to others to use? Thank you. Earl C. Austin: No. Thanks. Yeah. We did have some fab capabilities come in with Tri City, a great group there that, you know, we like what they were doing. That just adds to the 3,000,000 square feet we already have. So we have a significant amount of fabrication prefab. We call it premanufactured because it is manufactured. So I do think when we look at it, it is a little different. Everybody's specs a little different, so we are fabricating really from a manufacturing-capable engineer-type fabrication. So it is a little unique. I would go back and tell you Cupertino over a decade ago was first mover in this, and we have a lot of experience with fabrication and prefabrication, what goes wrong and what goes right. And we will continue to work with our customers, whoever the customer may be, we are certainly willing to bat for others if that is what the market is. We say it all the time. It is fungible. In many ways, those facilities are fungible, but there is no shortage of people wanting to shore up capacity for, you know, three-, five-, decade-type arrangements. So we are happy to do that as well. Operator: Our next question is from Chad Dillard from Bernstein. Please unmute your line and ask your question. Mark Bianchi: Hey, good morning, guys. So my question is Justin P. Hauke: on the architecture shift. Chad Dillard: From 54-volt to 800-volt DC for data centers. Just curious how that changes Quanta’s TAM and, you know, maybe you can talk about whether you see any impacts on front of meter, but probably more so behind the meter. And then secondly, you know, as you reengage in the power generation side for natural gas, can you talk about the opportunities you are seeing, in mix between, you know, front versus behind the meter? Earl C. Austin: Yeah. So voltage going to DC, some of the architecture that NVIDIA has put out, you know, that is a lot of the learning chips. You can see anyone using NVIDIA going to those type architectures. I believe we are in front of that. I do not see it changing our TAM at all. You may get more medium-voltage type arrangements in there. Still a lot of low-voltage type things. We have done a lot of research on it. We feel good. We work with NVIDIA and others to make sure that we see where they are going, make sure we have the craft that is necessary. So I feel comfortable with that. But I do not think, like, when you think through it, there is still a lot of the older architecture that will be used throughout. It is something that will have both when we think through it. So both are growing significantly. In front of that architecture, I do think that when you look through the intermittency of the chips, much better to put it on the utility. Let the utility take that intermittency. It is smarter. It is better. It is just the amount of, you know, you have got constraints in the queues and things like that. People are trying to go behind the meter simply because you cannot get to the meter. So that is, it will be both sides of this. There are some, you know, good things and bad things on both in regulatory environments. We have to get the regulations right and make sure that the ratepayer is not the one that has got the bill, that is, you know, got the tab. That is not happening today. I think the utilities, you can commend them. They have done a fantastic job of regulatory, making sure that the technology is paying their way, and technology wants to pay their way. So all the nonsense around that is just, you know, what I consider verbiage that is out there today on social media, wherever it is, and normally around some political aspect of it, it is not reality. So, look. We see opportunities on both sides. We will participate either side. I do think most off-grid, a lot of off-grid will be used for your backup power as you move generationally. You will start with 100, 200 max, and then back up for a bit, then come on with utility-type solutions. Mhmm. So that is what I see. As far as natural gas, we have been in natural gas, you know, we are still in there. We have never left. It will be a part of the business. We see it, and, you know, it is certainly backing up some of these. We are getting involved in them where they are backing up some of the hyperscalers and data centers. Atidrip Modak: So yeah. Operator: Our next question is from Liam Dalton Burke from B. Riley. Please unmute your line and ask your question. Julien Dumoulin-Smith: Thank you. Good morning. Liam Dalton Burke: In 2026, on the M&A pipeline, are you seeing sufficient to either add to your base business or large enough to actually make a difference as the business continues to get critical mass here. Earl C. Austin: Yeah. I would say every acquisition makes a difference, but when I think about it, yes, we see opportunities as far out as we can see, as far as good business. I cannot tell you the cadence. Both businesses that I did not, you know, we have known, I have known the Wilson family my whole career, and super family. Happy to have them here. They fit here culturally. Very excited. They give us some underground capabilities out in the East, which I think is fantastic, as well as shore up some things in the West. Some of these things you do not see coming. We have a good reputation, I believe, culturally. We want a certain type of company. There is no shortage of people wanting to sell their businesses on any given day. I promise. Like, they are out there. How we look at it, we are very selective. And we will follow our strategies. We will lay it out in April. March, I guess, Kip will not let me talk about it much. But, in general, pretty excited about that as well, talking about kind of what we see. And I see it the same type of cadence. It may be lumpy along the way. We may not do a deal in a year. I do not. So I just think we will continue to be selective and follow the path that provides the solutions to our clients. When we are looking at this, someone is asking us to do something typically. And we need the platform to provide the solutions. You saw us invest organically in our vertical supply chain. It is needed. We need to do it. We are going to do it. It is something that, you know, I feel like the demand is coming in and we have to make sure that we can meet the demand. So that said, we are taking opportunities to both organically invest as well as look at acquisitions from platforms to bolt-ons. Atidrip Modak: They all add up. Sangeetha Jain: Our next question Operator: is from Philip Shen from Roth Capital Partners. Please unmute your line and ask your question. Steven Michael Fisher: Good morning, Duke, Jayshree. Thanks for taking my questions. Philip Shen: You are building so much of the infrastructure for AI. Can you talk through any initiatives you guys have to take advantage of AI to lower your OpEx? Can AI meaningfully change your outlook for OpEx in the coming year or two? And then as it relates to, you know, bidding and booking dynamics, you know, I do think you were sharing that you guys are booked out through 2030 for renewables. Was wondering if you might be able to share kind of similar color for the other segments. And then ultimately, how much work are you guys turning down? Sangeetha Jain: Yeah. I want to clarify. I do not think I said Earl C. Austin: we are booked out. I said we are booking through. Just to make sure that we get on the same page there. We will certainly take advantage of, we can stock, and we are not booked by any means. We will take all comers on renewables. What was the other question? Sorry. You got me off. No. Oh, yeah. So AI. Yeah. Look. We would have our head in the sand if we were not looking at AI, what it can do for the company. We are already seeing ways to, you know, I think when we look at M&A, we are not looking at engineering anymore. Because I think AI is going to be significant there. And it is going to really affect the way we, we have 2,000 plus engineers. And we will definitely incorporate AI into it. And so I just think there is a lot of things that will change, and we are in front of that. It is something I am highly focused on both from cost and the way that we get more productive in the field. You know, there is a social aspect to this as well. I think, you know, when you really look at what the impacts are on these companies, it is, there are hard decisions to make, and, you know, we are trying to make sure we are a growth company. Michael Stephan Dudas: I Earl C. Austin: do not really fire people. We grow people, hire people. So we have got to make sure as we displace that we have avenues for people to move into different skill sets, and that is what we are doing here. So I think every bit of savings you get, we are pouring back into AI initiatives. Operator: That was our final question. I will now hand back to Kip A. Rupp, Vice President, Investor Relations, for closing remarks. Michael Stephan Dudas: I will be Kip. Earl C. Austin: I want to thank our men and women in the field. They are the very best in the world. They have an absolute performance mindset. And they are Quanta. I want to thank you for participating in our conference call. Appreciate your questions and ongoing interest in Quanta Services, Inc. Thank you. This concludes our call.